1.1                          A bill for an act 
  1.2             relating to agriculture; expanding opportunities for 
  1.3             the development of rural economic infrastructure; 
  1.4             establishing an annual appropriation; amending 
  1.5             Minnesota Statutes 2002, section 41A.09, subdivisions 
  1.6             1, 2a, 3a; repealing Minnesota Statutes 2002, section 
  1.7             41A.09, subdivisions 1a, 5a, 6. 
  1.8   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.9      Section 1.  Minnesota Statutes 2002, section 41A.09, 
  1.10  subdivision 1, is amended to read: 
  1.11     Subdivision 1.  [APPROPRIATION.] ~~A sum sufficient to make~~ 
  1.12  ~~the payments required by this section~~ $35,000,000 is annually 
  1.13  appropriated from the general fund to the commissioner of 
  1.14  agriculture ~~and all money so appropriated is available until~~ 
  1.15  ~~expended~~ for purposes of developing ethanol production and other 
  1.16  rural economic infrastructure in Minnesota. 
  1.17     Sec. 2.  Minnesota Statutes 2002, section 41A.09, 
  1.18  subdivision 2a, is amended to read: 
  1.19     Subd. 2a.  [DEFINITIONS.] For the purposes of this section, 
  1.20  the terms defined in this subdivision have the meanings given 
  1.21  them. 
  1.22     (a) "Ethanol" means fermentation ethyl alcohol derived from 
  1.23  agricultural products, including potatoes, cereal~~,~~ grains, 
  1.24  cheese whey, and sugar beets; forest products; or other 
  1.25  renewable resources, including residue and waste generated from 
  1.26  the production, processing, and marketing of agricultural 
  2.1   products, forest products, and other renewable resources, that: 
  2.2      (1) meets all of the specifications in ASTM specification D 
  2.3   4806-88; and 
  2.4      (2) is denatured as specified in Code of Federal 
  2.5   Regulations, title 27, parts 20 and 21. 
  2.6      (b) "Wet alcohol" means agriculturally derived fermentation 
  2.7   ethyl alcohol having a purity of at least 50 percent but less 
  2.8   than 99 percent. 
  2.9      (c) "Anhydrous alcohol" means fermentation ethyl alcohol 
  2.10  derived from agricultural products as described in paragraph 
  2.11  (a), but that does not meet ASTM specifications or is not 
  2.12  denatured and is shipped in bond for further processing. 
  2.13     (d) "Ethanol plant" means a plant at which ethanol, 
  2.14  anhydrous alcohol, or wet alcohol is produced. 
  2.15     (e) "Rural economic infrastructure" means the development 
  2.16  of processing and marketing facilities that will enhance the 
  2.17  value of agricultural crop or livestock commodities or 
  2.18  by-products or waste from farming operations. 
  2.19     (f) "Commissioner" means the commissioner of agriculture. 
  2.20     Sec. 3.  Minnesota Statutes 2002, section 41A.09, 
  2.21  subdivision 3a, is amended to read: 
  2.22     Subd. 3a.  [ETHANOL PRODUCER PAYMENTS.] (a) The 
  2.23  commissioner ~~of agriculture~~ shall make cash payments to 
  2.24  producers of ethanol, anhydrous alcohol, and wet alcohol located 
  2.25  in the state.  These payments shall apply only to ethanol, 
  2.26  anhydrous alcohol, and wet alcohol fermented in the state and 
  2.27  produced at plants that have begun production by June 30, 2000.  
  2.28  For the purpose of this subdivision, an entity that holds a 
  2.29  controlling interest in more than one ethanol plant is 
  2.30  considered a single producer.  The amount of the payment for 
  2.31  each producer's annual production is: 
  2.32     (1) except as provided in paragraph (b), for each gallon of 
  2.33  ethanol or anhydrous alcohol produced on or before June 30, 
  2.34  2000, or ten years after the start of production, whichever is 
  2.35  later, ~~19~~ 20 cents per gallon; and 
  2.36     (2) for each gallon produced of wet alcohol on or before 
  3.1   June 30, 2000, or ten years after the start of production, 
  3.2   whichever is later, a payment in cents per gallon calculated by 
  3.3   the formula "alcohol purity in percent divided by five," and 
  3.4   rounded to the nearest cent per gallon, but not less than 11 
  3.5   cents per gallon. 
  3.6      The producer payments for anhydrous alcohol and wet alcohol 
  3.7   under this section may be paid to either the original producer 
  3.8   of anhydrous alcohol or wet alcohol or the secondary processor, 
  3.9   at the option of the original producer, but not to both. 
  3.10     No payments shall be made for ethanol production that 
  3.11  occurs after June 30, 2010.  Nonetheless, catch-up payments may 
  3.12  be made after June 30, 2010, for production prior to June 30, 
  3.13  2010, if payments in the earlier quarters were reduced because 
  3.14  appropriated money was insufficient to make timely payments to 
  3.15  all eligible producers. 
  3.16     (b) If the level of production at an ethanol plant 
  3.17  increases due to an increase in the production capacity of the 
  3.18  plant, the payment under paragraph (a), clause (1), applies to 
  3.19  the additional increment of production until ten years after the 
  3.20  increased production began.  Once a plant's production capacity 
  3.21  reaches 15,000,000 gallons per year, no additional increment 
  3.22  will qualify for the payment. 
  3.23     (c) The commissioner shall make payments to producers of 
  3.24  ethanol or wet alcohol in the amount of 1.5 cents for each 
  3.25  kilowatt hour of electricity generated using closed-loop biomass 
  3.26  in a cogeneration facility at an ethanol plant located in the 
  3.27  state.  Payments under this paragraph shall be made only for 
  3.28  electricity generated at cogeneration facilities that begin 
  3.29  operation by June 30, 2000.  The payments apply to electricity 
  3.30  generated on or before the date ten years after the producer 
  3.31  first qualifies for payment under this paragraph.  Total 
  3.32  payments under this paragraph in any fiscal year may not exceed 
  3.33  $750,000.  For the purposes of this paragraph: 
  3.34     (1) "closed-loop biomass" means any organic material from a 
  3.35  plant that is planted for the purpose of being used to generate 
  3.36  electricity or for multiple purposes that include being used to 
  4.1   generate electricity; and 
  4.2      (2) "cogeneration" means the combined generation of: 
  4.3      (i) electrical or mechanical power; and 
  4.4      (ii) steam or forms of useful energy, such as heat, that 
  4.5   are used for industrial, commercial, heating, or cooling 
  4.6   purposes. 
  4.7      (d) Payments under paragraphs (a) and (b) to all producers 
  4.8   may not exceed $35,150,000 in a fiscal year.  Total payments 
  4.9   under paragraphs (a) and (b) to a producer in a fiscal year may 
  4.10  not exceed ~~$2,850,000~~ $3,000,000. 
  4.11     (e) By the last day of October, January, April, and July, 
  4.12  each producer shall file a claim for payment for ethanol, 
  4.13  anhydrous alcohol, and wet alcohol production during the 
  4.14  preceding three calendar months.  ~~A producer with more than one~~ 
  4.15  ~~plant shall file a separate claim for each plant.~~  A producer 
  4.16  that files a claim under this subdivision shall include a 
  4.17  statement of the producer's total ethanol, anhydrous alcohol, 
  4.18  and wet alcohol production in Minnesota during the quarter 
  4.19  covered by the claim, including anhydrous alcohol and wet 
  4.20  alcohol produced or received from an outside source.  A producer 
  4.21  shall file a separate claim for any amount claimed under 
  4.22  paragraph (c).  For each claim and statement of total ethanol, 
  4.23  anhydrous alcohol, and wet alcohol production filed under this 
  4.24  subdivision, the volume of ethanol, anhydrous alcohol, and wet 
  4.25  alcohol production or amounts of electricity generated using 
  4.26  closed-loop biomass must be examined by an independent certified 
  4.27  public accountant in accordance with standards established by 
  4.28  the American Institute of Certified Public Accountants. 
  4.29     (f) Payments shall be made November 15, February 15, May 
  4.30  15, and August 15.  A separate payment shall be made for each 
  4.31  claim filed.  Except as provided in paragraph ~~(j)~~ (i), the total 
  4.32  quarterly payment to a producer under this paragraph, excluding 
  4.33  amounts paid under paragraph (c), may not exceed $750,000.  
  4.34     (g) ~~If the total amount for which all producers are~~ 
  4.35  ~~eligible in a quarter under paragraph (c) exceeds the amount~~ 
  4.36  ~~available for payments, the commissioner shall make payments in~~ 
  5.1   ~~the order in which the plants covered by the claims began~~ 
  5.2   ~~generating electricity using closed-loop biomass.~~ 
  5.3      ~~(h)~~ After July 1, 1997, new production capacity is only 
  5.4   eligible for payment under this subdivision if the commissioner 
  5.5   receives: 
  5.6      (1) an application for approval of the new production 
  5.7   capacity; 
  5.8      (2) an appropriate letter of long-term financial commitment 
  5.9   for construction of the new production capacity; and 
  5.10     (3) copies of all necessary permits for construction of the 
  5.11  new production capacity. 
  5.12     The commissioner may approve new production capacity based 
  5.13  on the order in which the applications are received.  
  5.14     ~~(i)~~ (h) The commissioner may not approve any new production 
  5.15  capacity after July 1, 1998, except that a producer with an 
  5.16  approved production capacity of at least 12,000,000 gallons per 
  5.17  year but less than 15,000,000 gallons per year prior to July 1, 
  5.18  1998, is approved for 15,000,000 gallons of production capacity. 
  5.19     ~~(j)~~ (i) Notwithstanding the quarterly payment limits of 
  5.20  paragraph (f), the commissioner shall make an additional payment 
  5.21  in the eighth quarter of each fiscal biennium to ethanol 
  5.22  producers for the lesser of:  (1) ~~19~~ 20 cents per gallon of 
  5.23  production in the eighth quarter of the biennium that is greater 
  5.24  than 3,750,000 gallons; or (2) the total amount of payments lost 
  5.25  during the first seven quarters of the biennium due to plant 
  5.26  outages, repair, or major maintenance.  Total payments to an 
  5.27  ethanol producer in a fiscal biennium, including any payment 
  5.28  under this paragraph, must not exceed the total amount the 
  5.29  producer is eligible to receive based on the producer's approved 
  5.30  production capacity.  The provisions of this paragraph apply 
  5.31  only to production losses that occur in quarters beginning after 
  5.32  December 31, 1999. 
  5.33     ~~(k)~~ (j) For the purposes of this subdivision "new 
  5.34  production capacity" means annual ethanol production capacity 
  5.35  that was not allowed under a permit issued by the pollution 
  5.36  control agency prior to July 1, 1997, or for which construction 
  6.1   did not begin prior to July 1, 1997. 
  6.2      (k) The commissioner may make direct payments to producers 
  6.3   of rural economic infrastructure with any amount of the annual 
  6.4   appropriation in subdivision 1 that is not required for ethanol 
  6.5   producer payments or for catch-up payments if timely payments 
  6.6   for eligible production were delayed. 
  6.7      Sec. 4.  [REPEALER.] 
  6.8      Minnesota Statutes 2002, section 41A.09, subdivisions 1a, 
  6.9   5a, and 6, are repealed.