SF 517

2nd Engrossment - 89th Legislature (2015 - 2016) Posted on 08/20/2015 02:08pm

A bill for an act
relating to agriculture; creating an advanced biofuel production incentive
program; establishing a renewable chemical production incentive program;
establishing a biomass production incentive program; appropriating money;
proposing coding for new law in Minnesota Statutes, chapters 41A; 103F.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

new text begin [41A.13] DEFINITIONS.
new text end

new text begin (a) For the purposes of sections 41A.13 to 41A.17, the terms defined in this section
have the meanings given them.
new text end

new text begin (b) "Advanced biofuels" has the meaning given in section 239.051, subdivision 1a.
new text end

new text begin (c) "Biomass thermal production" means the generation of energy for commercial
heat or industrial process heat from a cellulosic material or other material composed of
forestry or agricultural feedstocks for a new or expanding capacity facility or a facility that
is displacing existing use of fossil fuel after the effective date of this section.
new text end

new text begin (d) "Cellulosic biomass" means material primarily made up of cellulose,
hemicellulose, or lingnin, or a combination of those ingredients.
new text end

new text begin (e) "Cellulosic sugar" means sugar derived from cellulosic biomass from agricultural
or forestry resources.
new text end

new text begin (f) "Commissioner" means the commissioner of agriculture.
new text end

new text begin (g) "Cover crops" means grasses, legumes, forbs, or other herbaceous plants that are
known to be noninvasive and not listed as a noxious weed in Minnesota and that are either
interseeded into living cash crops or planted on agricultural fields during fallow periods
for seasonal cover and conservation purposes.
new text end

new text begin (h) "MMbtu" means one million British thermal units.
new text end

new text begin (i) "Perennial crops" means agriculturally produced plants that are known to be
noninvasive and not listed as a noxious weed in Minnesota and that have a life cycle of at
least three years at the location where the plants are being cultivated. Biomass from alfalfa
produced in a two-year rotation shall be considered a perennial crop.
new text end

new text begin (j) "Renewable chemical" means a chemical with biobased content as defined in
section 41A.105, subdivision 1a.
new text end

Sec. 2.

new text begin [41A.14] ADVANCED BIOFUEL PRODUCTION INCENTIVE.
new text end

new text begin (a) A facility eligible for payment under this program must source at least 80 percent
raw materials from Minnesota. If a facility is sited 50 miles or less from the state border,
raw materials may be sourced from within a 100-mile radius. Raw materials must be from
agricultural or forestry sources or from solid waste. The production facility must be
located in Minnesota, must begin production at a specific location by June 30, 2025, and
must not begin operation above 95,000 MMbtu of annual biofuel production before July 1,
2015. Eligible facilities include existing companies and facilities that are adding advanced
biofuel production capacity, or retrofitting existing capacity, as well as new companies
and facilities. Production of conventional corn ethanol and conventional biodiesel is not
eligible. Advanced biofuel facilities must produce at least 30,000 MMbtu a year to be
eligible for the program.
new text end

new text begin (b) The commissioner shall make payments to eligible producers of advanced
biofuel. For the purpose of this section, an entity that holds a controlling interest in more
than one advanced biofuel facility is considered a single eligible producer. The amount
of the payment for each eligible producer's annual production is $2.1053 per MMbtu
for advanced biofuel production from cellulosic biomass, and $1.053 per MMbtu for
advanced biofuel production from sugar or starch at a specific location for ten years after
the start of production. Cellulosic biofuel facilities utilizing crop residues, other than
cellulosic biofuel using corn kernel fiber, or biogas, shall derive at least ten percent of total
energy production from perennial crops or biomass from cover crops in the first year of
receiving production incentives, and in the third year, at least 30 percent of total energy
production shall be derived from perennial crops or biomass from cover crops, and in the
fifth year, at least 50 percent of total energy production shall be derived from perennial
crops or biomass from cover crops and maintain at least 50 percent for the remainder of
the production incentive payment period. All forestry-derived cellulosic biomass must
be produced using Minnesota state biomass harvesting guidelines or the equivalent. All
biomass from brushlands must be produced using Minnesota brushland harvesting biomass
harvest guidelines or the equivalent. Forestry-derived cellulosic biomass that come from
land parcels greater than 160 acres must be certified by the Forest Stewardship Council,
Sustainable Forestry Initiative, or American Tree Farm System. Uncertified land from
parcels of 160 acres or less and federal land must be harvested by a Minnesota-certified
master logger or the equivalent and have a forest stewardship plan.
new text end

new text begin (c) An eligible producer who utilizes agricultural cellulosic biomass must submit a
responsible biomass sourcing plan for approval by the commissioner prior to applying for
payments under this section. The commissioner shall make the plan publicly available.
The plan must:
new text end

new text begin (1) provide a detailed explanation for how agricultural cellulosic biomass will be
produced and managed in a way that preserves soil quality, does not increase soil and
nutrient runoff, avoids introduction of harmful invasive species, limits negative impacts
on wildlife habitat, and reduces greenhouse gas emissions;
new text end

new text begin (2) include the producer's approach to verifying that biomass suppliers are following
the plan;
new text end

new text begin (3) discuss how new technologies and practices that are not yet commercially viable
may be encouraged and adopted during the life of the facility, and how the producer will
encourage continuous improvement during the life of the project;
new text end

new text begin (4) include specific numeric goals and timelines for making progress;
new text end

new text begin (5) require agronomic practices that result in a positive NRCS Soil Conditioning
Index score for acres from which biomass from corn stover will be harvested; and
new text end

new text begin (6) include biennial soil sampling to verify maintained or increased levels of soil
organic matter.
new text end

new text begin (d) An eligible producer who utilizes agricultural cellulosic biomass and receives
payments under this section shall submit an annual report on the producer's responsible
biomass sourcing plan to the commissioner by January 15 each year. The report must
include data on progress made by the producer in meeting specific goals laid out in the
plan. The commissioner shall make the report publicly available. The commissioner
shall perform an annual review of submitted reports and make a determination whether
the producer is following the plan and meeting the criteria in paragraph (c) based on the
reports submitted. The commissioner may take appropriate steps, including reducing or
ceasing payments until the producer is in compliance with the plan.
new text end

new text begin (e) No payments shall be made for advanced biofuel production that occurs after
June 30, 2035, for those eligible biofuel producers under paragraph (b). An eligible
producer of advanced biofuel shall not transfer the producer's eligibility for payments
under this section to an advanced biofuel facility at a different location.
new text end

new text begin (f) Total payments under this section to an eligible biofuel producer in a fiscal year
may not exceed the amount necessary for 2,850,000 MMbtu of biofuel production. Total
payments under this section to all eligible biofuel producers in a fiscal year may not
exceed the amount necessary for 17,100,000 MMbtu of biofuel production.
new text end

new text begin (g) By the last day of October, January, April, and July, each eligible biofuel producer
shall file a claim for payment for advanced biofuel production during the preceding three
calendar months. An eligible biofuel producer that files a claim under this paragraph shall
include a statement of the eligible biofuel producer's total advanced biofuel production in
Minnesota during the quarter covered by the claim. For each claim and statement of total
advanced biofuel production filed under this paragraph, the volume of advanced biofuel
production must be examined by an independent certified public accountant licensed under
chapter 326A, in accordance with Statements on Standards for Attestation Engagements
established by the American Institute of Certified Public Accountants.
new text end

new text begin (h) Payments must be made November 15, February 15, May 15, and August 15.
A separate payment must be made for each claim filed.
new text end

new text begin (i) Any producer that ceases production for any reason is ineligible to receive
payments under the program until they begin producing again.
new text end

new text begin (j) Renewable chemical production for which payment has been received under
section 41A.15, and biomass thermal production for which payment has been received
under section 41A.16, is not eligible for payment under this section.
new text end

Sec. 3.

new text begin [41A.15] RENEWABLE CHEMICAL PRODUCTION INCENTIVE.
new text end

new text begin (a) A facility eligible for payment under this program must source at least 80
percent biobased content, as defined in section 41A.105, subdivision 1a, clause (1),
from Minnesota. If a facility is sited 50 miles or less from the state border, biobased
content may be sourced from within a 100-mile radius. Biobased content must be from
agricultural or forestry sources or from solid waste. The production facility must be
located in Minnesota, must begin production at a specific location by June 30, 2025, and
must not begin production of 3,000,000 pounds of chemicals annually before January
1, 2015. Eligible facilities include existing companies and facilities that are adding
production capacity, or retrofitting existing capacity, as well as new companies and
facilities. Renewable chemical facilities must produce at least 3,000,000 pounds per year
to be eligible for the program. Renewable chemicals produced through processes that are
fully commercial before January 1, 2000, are not eligible.
new text end

new text begin (b) The commissioner shall make payments to eligible producers of renewable
chemicals located in the state. For the purpose of this subdivision, an entity that holds a
controlling interest in more than one renewable chemical production facility is considered a
single eligible producer. The amount of the payment for each producer's annual production
is $0.03 per pound of sugar-derived renewable chemical, $0.03 per pound of cellulosic
sugar, and $0.06 per pound of cellulosic-derived renewable chemical produced at a specific
location for ten years after the start of production. All forestry-derived cellulosic biomass
must be produced using Minnesota state biomass harvesting guidelines or the equivalent.
All cellulosic biomass from brushlands must be produced using Minnesota brushland
harvesting biomass harvest guidelines or the equivalent. Forestry-derived cellulosic
biomass that come from land parcels greater than 160 acres must be certified by the Forest
Stewardship Council, Sustainable Forestry Initiative, or American Tree Farm System.
Uncertified land from parcels of 160 acres or less and federal land must be harvested by a
Minnesota-certified master logger or the equivalent and have a forest stewardship plan.
An eligible facility producing renewable chemicals using agricultural cellulosic biomass
is eligible for a 20 percent bonus payment for each MMbtu produced from agricultural
biomass that is derived from perennial crops or from acres where cover crops are used.
new text end

new text begin (c) An eligible producer who utilizes agricultural cellulosic biomass must submit a
responsible biomass sourcing plan to the commissioner prior to applying for payments
under this section. The plan must:
new text end

new text begin (1) provide a detailed explanation for how agricultural cellulosic biomass will be
produced and managed in a way that preserves soil quality, does not increase soil and
nutrient runoff, avoids introduction of harmful invasive species, limits negative impacts
on wildlife habitat, and reduces greenhouse gas emissions;
new text end

new text begin (2) include the producer's approach to verifying that biomass suppliers are following
the plan;
new text end

new text begin (3) discuss how new technologies and practices that are not yet commercially viable
may be encouraged and adopted during the life of the facility, and how the producer will
encourage continuous improvement during the life of the project; and
new text end

new text begin (4) include specific numeric goals and timelines for making progress.
new text end

new text begin (d) An eligible producer who utilizes agricultural cellulosic biomass and receives
payments under this section shall submit an annual report on the producer's responsible
biomass sourcing plan to the commissioner by January 15 each year. The report must
include data on progress made by the producer in meeting specific goals laid out in the
plan. The commissioner shall make the report publicly available. The commissioner
shall perform an annual review of submitted reports and is authorized to make a
determination that the producer is not following the plan based on the reports submitted.
The commissioner may take appropriate steps, including reducing or ceasing payments
until the producer is in compliance with the plan.
new text end

new text begin (e) No payments shall be made for renewable chemical production that occurs after
June 30, 2035, for those eligible renewable chemical producers under paragraph (b). An
eligible producer of renewable chemicals shall not transfer the producer's eligibility for
payments under this section to a renewable chemical facility at a different location.
new text end

new text begin (f) Total payments under this section to an eligible renewable chemical producer in
a fiscal year may not exceed the amount necessary for 99,999,999 pounds of renewable
chemical production. Total payments under this section to all eligible renewable chemical
producers in a fiscal year may not exceed the amount necessary for 599,999,999 pounds of
renewable chemical production.
new text end

new text begin (g) By the last day of October, January, April, and July, each eligible renewable
chemical producer shall file a claim for payment for renewable chemical production
during the preceding three calendar months. An eligible renewable chemical producer
that files a claim under this paragraph shall include a statement of the eligible producer's
total renewable chemical production in Minnesota during the quarter covered by the
claim. For each claim and statement of total renewable chemical production filed under
this paragraph, the volume of renewable chemical production must be examined by an
independent certified public accountant licensed under chapter 326A, in accordance
with Statements on Standards for Attestation Engagements established by the American
Institute of Certified Public Accountants.
new text end

new text begin (h) Payments must be made November 15, February 15, May 15, and August 15.
A separate payment must be made for each claim filed.
new text end

new text begin (i) Any producer that ceases production for any reason is ineligible to receive
payments under the program until they begin producing again.
new text end

new text begin (j) Advanced biofuel production for which payment has been received under section
41A.14, and biomass thermal production for which payment has been received under
section 41A.16, is not eligible for payment under this section.
new text end

Sec. 4.

new text begin [41A.16] BIOMASS THERMAL PRODUCTION INCENTIVE.
new text end

new text begin (a) A facility eligible for payment under this program must source at least 80 percent
raw materials from Minnesota. If a facility is sited 50 miles or less from the state border,
raw materials may be sourced from within a 100-mile radius. Raw materials must be from
agricultural or forestry sources. The production facility must be located in Minnesota and
must not begin before July 1, 2015. Eligible facilities include existing companies and
facilities that are adding production capacity, or retrofitting existing capacity, as well as
new companies and facilities. Biomass thermal production facilities must produce at least
1,000 MMbtu per year to be eligible for the program.
new text end

new text begin (b) The commissioner shall make payments to eligible producers of biomass thermal
located in the state that have begun production at a specific location by June 30, 2025.
For the purpose of this subdivision, an entity that holds a controlling interest in more than
one biomass thermal production facility is considered a single eligible producer. The
amount of the payment for each producer's annual production is $5.00 per MMbtu of
biomass thermal production produced at a specific location for ten years after the start of
production. All forestry-derived cellulosic biomass must be produced using Minnesota
state biomass harvesting guidelines or the equivalent. All biomass from brushland must
be produced using Minnesota brushland harvesting biomass guidelines or the equivalent.
Forestry-derived cellulosic biomass that come from land parcels greater than 160 acres
must be certified by the Forest Stewardship Council, the Sustainable Forestry Initiative,
or American Tree Farm. Uncertified land from parcels of 160 acres or less and federal
land must be harvested by a Minnesota-certified master logger or the equivalent and
have a forest stewardship plan. An eligible facility producing biomass thermal using
agricultural cellulosic biomass is eligible for a 20 percent bonus payment for each MMbtu
produced from agricultural biomass that is derived from perennial crops or from acres
where cover crops are used.
new text end

new text begin (c) An eligible producer who utilizes agricultural cellulosic biomass must submit a
responsible biomass sourcing plan to the commissioner prior to applying for payments
under this section. The plan must:
new text end

new text begin (1) provide a detailed explanation for how agricultural cellulosic biomass will be
produced and managed in a way that preserves soil quality, does not increase soil and
nutrient runoff, avoids introduction of harmful invasive species, limits negative impacts
on wildlife habitat, and reduces greenhouse gas emissions;
new text end

new text begin (2) include the producer's approach to verifying that biomass suppliers are following
the plan;
new text end

new text begin (3) discuss how new technologies and practices that are not yet commercially viable
may be encouraged and adopted during the life of the facility, and how the producer will
encourage continuous improvement during the life of the project; and
new text end

new text begin (4) include specific numeric goals and timelines for making progress.
new text end

new text begin (d) An eligible producer who utilizes agricultural cellulosic biomass and receives
payments under this section shall submit an annual report on the producer's responsible
biomass sourcing plan to the commissioner by January 15 each year. The report must
include data on progress made by the producer in meeting specific goals laid out in the
plan. The commissioner shall make the report publicly available. The commissioner
shall perform an annual review of submitted reports and is authorized to make a
determination that the producer is not following the plan based on the reports submitted.
The commissioner may take appropriate steps, including reducing or ceasing payments
until the producer is in compliance with the plan.
new text end

new text begin (e) No payments shall be made for biomass thermal production that occurs after June
30, 2035, for those eligible biomass thermal producers under paragraph (b). A producer of
biomass thermal production shall not transfer the producer's eligibility for payments under
this section to a biomass thermal production facility at a different location.
new text end

new text begin (f) Total payments under this section to an eligible thermal producer in a fiscal year
may not exceed the amount necessary for 30,000 MMbtu of thermal production. Total
payments under this section to all eligible thermal producers in a fiscal year may not
exceed the amount necessary for 150,000 MMbtu of total thermal production.
new text end

new text begin (g) An eligible facility may blend a cellulosic feedstock with other fuels in the
biomass thermal production facility, but only the percentage attributable to cellulosic
material listed is eligible to receive the producer payment.
new text end

new text begin (h) By the last day of October, January, April, and July, each producer shall file a
claim for payment for biomass thermal production during the preceding three calendar
months. A producer that files a claim under this paragraph shall include a statement of
the producer's total biomass thermal production in Minnesota during the quarter covered
by the claim. For each claim and statement of total biomass thermal production filed
under this paragraph, the volume of biomass thermal production must be examined by
an independent certified public accountant licensed under chapter 326A, in accordance
with Statements on Standards for Attestation Engagements established by the American
Institute of Certified Public Accountants.
new text end

new text begin (i) Payments shall be made November 15, February 15, May 15, and August 15. A
separate payment shall be made for each claim filed.
new text end

new text begin (j) Biofuel production for which payment has been received under section 41A.14,
and renewable chemical production for which payment has been received under section
41A.15, is not eligible for payment under this section.
new text end

Sec. 5.

new text begin [41A.17] REPORT; INCENTIVE PROGRAMS.
new text end

new text begin By January 15 each year, the commissioner shall report on the incentive programs
under Minnesota Statutes, sections 41A.14, 41A.15, and 41A.16, to the legislative policy
and finance committees with primary jurisdiction over environment and agriculture. The
report shall include information on production and expenditures for incentives under
the programs.
new text end

Sec. 6.

new text begin [103F.519] WORKING LANDS WATERSHED RESTORATION
PROGRAM.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) For purposes of this section, the following terms
have the meanings given.
new text end

new text begin (b) "Advanced biofuel" has the meaning given in section 239.051, subdivision 1a.
new text end

new text begin (c) "Agricultural use" has the meaning given in section 17.81, subdivision 4.
new text end

new text begin (d) "Board" means the Board of Water and Soil Resources.
new text end

new text begin (e) "Perennial crops" means agriculturally produced plants that are known to be
noninvasive and not listed as a noxious weed in Minnesota and that have a life cycle of at
least three years at the location where the plants are being cultivated. Biomass from alfalfa
produced in a two-year rotation shall be considered a perennial crop.
new text end

new text begin Subd. 2. new text end

new text begin Establishment. new text end

new text begin The board shall administer a perennial feedstock program
to incentivize the establishment and maintenance of perennial agricultural crops. The
board shall contract with landowners and give priority to contracts that implement water
protection actions as identified in a completed watershed restoration and protection
strategy developed under section 114D.26.
new text end

new text begin Subd. 3. new text end

new text begin Eligible land. new text end

new text begin Land eligible under this section must:
new text end

new text begin (1) have been in agricultural use or have been set aside, enrolled, or diverted under
another federal or state government program for at least two of the last five years before
the date of application; and
new text end

new text begin (2) not be currently set aside, enrolled, or diverted under another federal or state
government program.
new text end

new text begin Subd. 4. new text end

new text begin Contract terms. new text end

new text begin (a) The board shall offer a contract rate of no more
than 90 percent of the most recent federal conservation reserve program payment for the
county in which the land is located. The board may make additional payments to assist
with the establishment of perennial crops.
new text end

new text begin (b) Contracts must be at least ten years in duration.
new text end

new text begin (c) Perennial crops grown on lands enrolled under this section may be used for
advanced biofuel feedstock or livestock feed. Perennial plants may be processed in a
manner that utilizes a portion of the plant for livestock. Mechanical harvest is not allowed
before July 1 in any year.
new text end

new text begin (d) The board shall prioritize lands with the highest potential to leverage federal
funding.
new text end

new text begin (e) The board may establish additional contract terms.
new text end

new text begin Subd. 5. new text end

new text begin Pilot watershed selection. new text end

new text begin The board may select up to two watersheds in
which to conduct an initial pilot program of up to 100,000 total acres. Project watersheds
must have, as determined by the board:
new text end

new text begin (1) a completed watershed restoration and protection strategy developed under
section 114D.26, or a hydrological simulation program model approved by the Pollution
Control Agency;
new text end

new text begin (2) multiple water quality impairments resulting primarily from agricultural practices;
new text end

new text begin (3) a viable proposed advanced biofuel production facility located within 50 miles
of the perennial feedstock grown under this section; and
new text end

new text begin (4) sufficient additional acres of cropland available for perennial crop production to
adequately supply the proposed advanced biofuel production facility.
new text end

Sec. 7. new text begin WORKING LANDS WATERSHED RESTORATION
IMPLEMENTATION PLAN.
new text end

new text begin (a) The board shall develop a detailed plan to implement Minnesota Statutes, section
103F.519, that includes the following:
new text end

new text begin (1) selection of pilot watersheds that are expected to best demonstrate water quality
improvements and exhibit readiness to participate in the program;
new text end

new text begin (2) an assessment of the quantity of agricultural lands that are expected to be eligible
for the program in each watershed;
new text end

new text begin (3) an assessment of landowner interest in participating in the program;
new text end

new text begin (4) an assessment of the contract terms and any recommendations for changes to
the terms;
new text end

new text begin (5) an assessment of opportunity to leverage federal funds through the program and
recommendations on how to maximize the use of federal funds in the future;
new text end

new text begin (6) an estimate of water quality improvements resulting from implementation;
new text end

new text begin (7) an assessment of potential groundwater quantity use of the proposed advanced
biofuel production facilities;
new text end

new text begin (8) an assessment of how to best integrate implementation with existing conservation
requirements and practices;
new text end

new text begin (9) a timeline for implementation, coordinated to the extent possible with the
proposed advanced biofuel production facilities; and
new text end

new text begin (10) a projection of funding sources needed to complete implementation.
new text end

new text begin The board shall coordinate development of the plan with the commissioners of
natural resources, agriculture, and the Pollution Control Agency. The implementation plan
shall be submitted by October 1, 2016, to the chairs and ranking minority members of the
legislative committees and divisions with jurisdiction over agriculture, natural resources,
and environment policy and finance and to the Clean Water Council.
new text end

Sec. 8. new text begin APPROPRIATION; WORKING LANDS WATERSHED RESTORATION.
new text end

new text begin $750,000 in fiscal year 2016 is appropriated from the general fund to the Board of
Water and Soil Resources for purposes of Minnesota Statutes, section 103F.519. This
appropriation is onetime and is available until June 30, 2017.
new text end

Sec. 9. new text begin APPROPRIATION; BIOFUEL INCENTIVES.
new text end

new text begin $2,500,000 in fiscal year 2016 and $2,500,000 in fiscal year 2017 are appropriated
from the general fund to the commissioner of agriculture for incentive payments under
Minnesota Statutes, sections 41A.14, 41A.15, and 41A.16. If the appropriation exceeds
the total amount for which all producers are eligible in a fiscal year, the balance of the
appropriation is available to the commissioner for the agricultural growth, research, and
innovation program under Minnesota Statutes, section 41A.12, for NextGen energy grants.
These appropriations do not cancel and are available until spent. Up to 4.5 percent of the
appropriation may be used for administration of the incentive payments.
new text end