1.1                          A bill for an act 
  1.2             relating to agriculture; changing provisions governing 
  1.3             ethanol payments; appropriating money; amending 
  1.4             Minnesota Statutes 1994, sections 41A.09, by adding 
  1.5             subdivisions; and 296.02, by adding a subdivision; 
  1.6             repealing Minnesota Statutes 1994, sections 41A.09, 
  1.7             subdivisions 2, 3, 5, and 6; and 296.02, subdivision 7.
  1.8   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.9      Section 1.  Minnesota Statutes 1994, section 41A.09, is 
  1.10  amended by adding a subdivision to read:  
  1.11     Subd. 1a.  [ETHANOL PRODUCTION GOAL.] It is a goal of the 
  1.12  state that ethanol production plants in the state attain a total 
  1.13  annual production level of at least 220,000,000 gallons. 
  1.14     Sec. 2.  Minnesota Statutes 1994, section 41A.09, is 
  1.15  amended by adding a subdivision to read: 
  1.16     Subd. 2a.  [DEFINITIONS.] For purposes of this section the 
  1.17  terms defined in this subdivision have the meanings given them. 
  1.18     (a) "Ethanol" means fermentation ethyl alcohol derived from 
  1.19  agricultural products, including potatoes, cereal, grains, 
  1.20  cheese whey, and sugar beets, forest products, or other 
  1.21  renewable resources, including residue and waste generated from 
  1.22  the production, processing, and marketing of agricultural 
  1.23  products, forest products, and other renewable resources, that: 
  1.24     (1) meets all of the specifications in ASTM specification D 
  1.25  4806-92; and 
  1.26     (2) is denatured with unleaded gasoline or rubber 
  2.1   hydrocarbon solvent as defined in Code of Federal Regulations, 
  2.2   title 27, parts 211 and 212, as adopted by the Bureau of 
  2.3   Alcohol, Tobacco and Firearms of the United States Treasury 
  2.4   Department. 
  2.5      (b) "Wet alcohol" means agriculturally derived fermentation 
  2.6   ethyl alcohol having a purity of at least 50 percent but less 
  2.7   than 99 percent.  
  2.8      (c) "Anhydrous alcohol" means fermentation ethyl alcohol 
  2.9   derived from agricultural products as described in paragraph 
  2.10  (a), but that does not meet ASTM specifications or is not 
  2.11  denatured and is shipped in bond for further processing. 
  2.12     Sec. 3.  Minnesota Statutes 1994, section 41A.09, is 
  2.13  amended by adding a subdivision to read: 
  2.14     Subd. 3a.  [PAYMENTS FROM ACCOUNT.] (a) The commissioner of 
  2.15  agriculture shall make cash payments from the account to 
  2.16  producers of ethanol, anhydrous ethanol, or wet alcohol located 
  2.17  in the state.  The payments shall apply only to ethanol, 
  2.18  anhydrous ethanol, or wet alcohol fermented in the state and 
  2.19  produced at plants that have begun production by June 30, 2000.  
  2.20  For the purpose of this subdivision, an entity that holds a 
  2.21  controlling interest in more than one ethanol plant is 
  2.22  considered a single producer.  The amount of the payment for 
  2.23  each producer's annual production is: 
  2.24     (1) except as provided in paragraph (b), for each gallon of 
  2.25  ethanol or anhydrous alcohol produced on or before June 30, 
  2.26  2000, or ten years after the start of production, whichever is 
  2.27  later, 20 cents per gallon; and 
  2.28     (2) for each gallon produced of wet alcohol on or before 
  2.29  June 30, 2000, or ten years after the start of production, 
  2.30  whichever is later, a payment in cents per gallon calculated by 
  2.31  the formula "alcohol purity in percent divided by five," and 
  2.32  rounded to the nearest cent per gallon, but not less than 11 
  2.33  cents per gallon. 
  2.34  The producer payment for wet alcohol or anhydrous alcohol under 
  2.35  this section may be paid to either the original producer of wet 
  2.36  alcohol or anhydrous alcohol or the secondary processor, at the 
  3.1   option of the original producer, but not to both.  
  3.2      (b) If the level of production at an ethanol plant 
  3.3   increases due to an increase in the production capacity of the 
  3.4   plant and the increase production begins by June 30, 2000, the 
  3.5   payment under paragraph (a), clause (1), applies to the 
  3.6   additional increment of production until ten years after the 
  3.7   increased production began. 
  3.8      (c) The commissioner shall make payments to producers of 
  3.9   ethanol in the amount of 1.5 cents for each kilowatt hour of 
  3.10  electricity generated using closed-loop biomass in a 
  3.11  cogeneration facility at an ethanol plant located in the state.  
  3.12  Payments under this paragraph must be made only for electricity 
  3.13  generated at cogeneration facilities that begin operation by 
  3.14  June 30, 2000.  The payments apply to electricity generated on 
  3.15  or before the date ten years after the producer first qualifies 
  3.16  for payment under this paragraph.  Total payments under this 
  3.17  paragraph in any fiscal year may not exceed $750,000.  For the 
  3.18  purposes of this paragraph: 
  3.19     (1) "closed-loop biomass" means any organic material from a 
  3.20  plant that is planted for purposes of being used to generate 
  3.21  electricity or for multiple purposes that include being used to 
  3.22  generate electricity; and 
  3.23     (2) "cogeneration" means the combined generation of: 
  3.24     (i) electrical or mechanical power; and 
  3.25     (ii) steam or forms of useful energy, such as heat, that 
  3.26  are used for industrial, commercial, heating, or cooling 
  3.27  purposes. 
  3.28     (d) The total payments under paragraphs (a) and (b) to all 
  3.29  producers may not exceed $30,000,000 in a fiscal year.  Total 
  3.30  payments under paragraphs (a) and (b) to a producer in a fiscal 
  3.31  year may not exceed $3,000,000. 
  3.32     (e) By the last day of October, January, April, and July, 
  3.33  each producer shall file a claim for payment for ethanol, wet 
  3.34  alcohol, and anhydrous alcohol during the preceding three 
  3.35  calendar months.  A producer with more than one plant shall file 
  3.36  a separate claim for each plant.  A producer shall file a 
  4.1   separate claim for the total production capacity of each plant 
  4.2   and shall include a statement of the producer's total ethanol 
  4.3   production indicating the length of time each additional 
  4.4   increment of production has received payment under the program.  
  4.5   A producer that files a claim under this subdivision shall 
  4.6   include a statement of the producer's total ethanol production 
  4.7   in Minnesota during the quarter covered by the claim including 
  4.8   wet alcohol or anhydrous alcohol produced or received from an 
  4.9   outside source.  A producer shall file a separate claim for any 
  4.10  amount claimed under paragraph (c).  For each claim and 
  4.11  statement of total ethanol production filed under this 
  4.12  subdivision, the volume of ethanol or anhydrous or wet alcohol 
  4.13  production or amounts of electricity generated using closed-loop 
  4.14  biomass must be verified by a certified financial audit 
  4.15  performed by an independent certified public accountant using 
  4.16  generally accepted accounting procedures. 
  4.17     (f) Payments shall be made November 15, February 15, May 
  4.18  15, and August 15.  A separate payment shall be made for each 
  4.19  claim filed.  The total quarterly payment to a producer under 
  4.20  this paragraph, excluding amounts paid under paragraph (c), may 
  4.21  not exceed $750,000.  If the total amount for which all 
  4.22  producers are eligible in a quarter under paragraphs (a) and (b) 
  4.23  exceeds $7,500,000, the commissioner shall make payments on a 
  4.24  pro rata basis among all eligible claimants.  If the total 
  4.25  amount for which all producers are eligible in a quarter under 
  4.26  paragraph (c) exceeds the amount available for payments, the 
  4.27  commissioner shall make payments in the order in which the 
  4.28  plants covered by the claims began generating electricity using 
  4.29  closed-loop biomass. 
  4.30     Sec. 4.  Minnesota Statutes 1994, section 41A.09, is 
  4.31  amended by adding a subdivision to read: 
  4.32     Subd. 5a.  [EXPIRATION.] This section expires July 1, 2010, 
  4.33  and the unobligated balance of each appropriation under this 
  4.34  section on that date reverts to the general fund. 
  4.35     Sec. 5.  Minnesota Statutes 1994, section 296.02, is 
  4.36  amended by adding a subdivision to read: 
  5.1      Subd. 7a.  [TAX CREDIT FOR AGRICULTURAL ALCOHOL GASOLINE.] 
  5.2   Until October 1, 1997, a distributor shall be allowed a credit 
  5.3   on each gallon of denatured ethanol commercially blended with 
  5.4   gasoline or blended in a tank truck with gasoline on which the 
  5.5   tax imposed by subdivision 1 is due and payable.  Denatured 
  5.6   ethanol is defined in section 296.01, subdivision 13.  The 
  5.7   amount of the credit for every gallon of denatured ethanol 
  5.8   blended with gasoline to produce agricultural alcohol gasoline 
  5.9   is: 
  5.10     (1) until October 1, 1995, 15 cents; 
  5.11     (2) until October 1, 1996, ten cents; and 
  5.12     (3) until October 1, 1997, five cents. 
  5.13     The credit allowed a distributor must not exceed the total 
  5.14  tax liability under subdivision 1.  The tax credit received by a 
  5.15  distributor on denatured ethanol blended with motor fuels must 
  5.16  be passed on to the retailer. 
  5.17     Sec. 6.  [REPEALER.] 
  5.18     Minnesota Statutes 1994, sections 41A.09, subdivisions 2, 
  5.19  3, 5, and 6; and 296.02, subdivision 7, are repealed. 
  5.20     Sec. 7.  [EFFECTIVE DATE.] 
  5.21     Sections 1 to 6 are effective July 1, 1995.