1.1                          A bill for an act 
  1.2             relating to energy; providing incentives for 
  1.3             electricity generated from crop residue biomass; 
  1.4             amending Minnesota Statutes 2000, section 41A.09, 
  1.5             subdivisions 3a, 5a; Minnesota Statutes 2001 
  1.6             Supplement, sections 216C.41, subdivisions 1, 2, 3, 4. 
  1.7   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.8      Section 1.  Minnesota Statutes 2000, section 41A.09, 
  1.9   subdivision 3a, is amended to read: 
  1.10     Subd. 3a.  [PAYMENTS.] (a) The commissioner of agriculture 
  1.11  shall make cash payments to producers of ethanol, anhydrous 
  1.12  alcohol, and wet alcohol located in the state.  These payments 
  1.13  shall apply only to ethanol, anhydrous alcohol, and wet alcohol 
  1.14  fermented in the state and produced at plants that have begun 
  1.15  production by June 30, 2000.  For the purpose of this 
  1.16  subdivision, an entity that holds a controlling interest in more 
  1.17  than one ethanol plant is considered a single producer.  The 
  1.18  amount of the payment for each producer's annual production is: 
  1.19     (1) except as provided in paragraph (b), for each gallon of 
  1.20  ethanol or anhydrous alcohol produced on or before June 30, 
  1.21  2000, or ten years after the start of production, whichever is 
  1.22  later, 20 cents per gallon; and 
  1.23     (2) for each gallon produced of wet alcohol on or before 
  1.24  June 30, 2000, or ten years after the start of production, 
  1.25  whichever is later, a payment in cents per gallon calculated by 
  1.26  the formula "alcohol purity in percent divided by five," and 
  2.1   rounded to the nearest cent per gallon, but not less than 11 
  2.2   cents per gallon. 
  2.3      The producer payments for anhydrous alcohol and wet alcohol 
  2.4   under this section may be paid to either the original producer 
  2.5   of anhydrous alcohol or wet alcohol or the secondary processor, 
  2.6   at the option of the original producer, but not to both. 
  2.7      No payments shall be made for production that occurs after 
  2.8   June 30, 2010. 
  2.9      (b) If the level of production at an ethanol plant 
  2.10  increases due to an increase in the production capacity of the 
  2.11  plant, the payment under paragraph (a), clause (1), applies to 
  2.12  the additional increment of production until ten years after the 
  2.13  increased production began.  Once a plant's production capacity 
  2.14  reaches 15,000,000 gallons per year, no additional increment 
  2.15  will qualify for the payment. 
  2.16     (c) The commissioner shall make payments to producers of 
  2.17  ethanol or wet alcohol in the amount of 1.5 cents for each 
  2.18  kilowatt hour of electricity generated using closed-loop biomass 
  2.19  in a cogeneration facility at an ethanol plant located in the 
  2.20  state.  Payments under this paragraph shall be made only for 
  2.21  electricity generated at cogeneration facilities that begin 
  2.22  operation by June 30, 2000 2005, at an ethanol plant on which 
  2.23  construction began after July 1, 2002.  The payments apply to 
  2.24  electricity generated on or before the date ten years after the 
  2.25  producer first qualifies for payment under this paragraph.  
  2.26  Total payments under this paragraph in any fiscal year may not 
  2.27  exceed $750,000.  For the purposes of this paragraph: 
  2.28     (1) "closed-loop biomass" means any organic material from a 
  2.29  plant that is planted for the purpose of being used to generate 
  2.30  electricity or for multiple purposes that include being used to 
  2.31  generate electricity; and 
  2.32     (2) "cogeneration" means the combined generation of: 
  2.33     (i) electrical or mechanical power; and 
  2.34     (ii) steam or forms of useful energy, such as heat, that 
  2.35  are used for industrial, commercial, heating, or cooling 
  2.36  purposes. 
  3.1      (d) Payments under paragraphs (a) and (b) to all producers 
  3.2   may not exceed $37,000,000 in a fiscal year.  Total payments 
  3.3   under paragraphs (a) and (b) to a producer in a fiscal year may 
  3.4   not exceed $3,000,000. 
  3.5      (e) By the last day of October, January, April, and July, 
  3.6   each producer shall file a claim for payment for ethanol, 
  3.7   anhydrous alcohol, and wet alcohol production during the 
  3.8   preceding three calendar months.  A producer with more than one 
  3.9   plant shall file a separate claim for each plant.  A producer 
  3.10  that files a claim under this subdivision shall include a 
  3.11  statement of the producer's total ethanol, anhydrous alcohol, 
  3.12  and wet alcohol production in Minnesota during the quarter 
  3.13  covered by the claim, including anhydrous alcohol and wet 
  3.14  alcohol produced or received from an outside source.  A producer 
  3.15  shall file a separate claim for any amount claimed under 
  3.16  paragraph (c).  For each claim and statement of total ethanol, 
  3.17  anhydrous alcohol, and wet alcohol production filed under this 
  3.18  subdivision, the volume of ethanol, anhydrous alcohol, and wet 
  3.19  alcohol production or amounts of electricity generated using 
  3.20  closed-loop biomass must be examined by an independent certified 
  3.21  public accountant in accordance with standards established by 
  3.22  the American Institute of Certified Public Accountants. 
  3.23     (f) Payments shall be made November 15, February 15, May 
  3.24  15, and August 15.  A separate payment shall be made for each 
  3.25  claim filed.  Except as provided in paragraph (j), the total 
  3.26  quarterly payment to a producer under this paragraph, excluding 
  3.27  amounts paid under paragraph (c), may not exceed $750,000.  
  3.28     (g) If the total amount for which all producers are 
  3.29  eligible in a quarter under paragraph (c) exceeds the amount 
  3.30  available for payments, the commissioner shall make payments in 
  3.31  the order in which the plants covered by the claims began 
  3.32  generating electricity using closed-loop biomass. 
  3.33     (h) After July 1, 1997, new production capacity is only 
  3.34  eligible for payment under this subdivision if the commissioner 
  3.35  receives: 
  3.36     (1) an application for approval of the new production 
  4.1   capacity; 
  4.2      (2) an appropriate letter of long-term financial commitment 
  4.3   for construction of the new production capacity; and 
  4.4      (3) copies of all necessary permits for construction of the 
  4.5   new production capacity. 
  4.6      The commissioner may approve new production capacity based 
  4.7   on the order in which the applications are received.  
  4.8      (i) The commissioner may not approve any new production 
  4.9   capacity after July 1, 1998, except that a producer with an 
  4.10  approved production capacity of at least 12,000,000 gallons per 
  4.11  year but less than 15,000,000 gallons per year prior to July 1, 
  4.12  1998, is approved for 15,000,000 gallons of production capacity. 
  4.13     (j) Notwithstanding the quarterly payment limits of 
  4.14  paragraph (f), the commissioner shall make an additional payment 
  4.15  in the eighth quarter of each fiscal biennium to ethanol 
  4.16  producers for the lesser of:  (1) 20 cents per gallon of 
  4.17  production in the eighth quarter of the biennium that is greater 
  4.18  than 3,750,000 gallons; or (2) the total amount of payments lost 
  4.19  during the first seven quarters of the biennium due to plant 
  4.20  outages, repair, or major maintenance.  Total payments to an 
  4.21  ethanol producer in a fiscal biennium, including any payment 
  4.22  under this paragraph, must not exceed the total amount the 
  4.23  producer is eligible to receive based on the producer's approved 
  4.24  production capacity.  The provisions of this paragraph apply 
  4.25  only to production losses that occur in quarters beginning after 
  4.26  December 31, 1999. 
  4.27     (k) For the purposes of this subdivision "new production 
  4.28  capacity" means annual ethanol production capacity that was not 
  4.29  allowed under a permit issued by the pollution control agency 
  4.30  prior to July 1, 1997, or for which construction did not begin 
  4.31  prior to July 1, 1997. 
  4.32     Sec. 2.  Minnesota Statutes 2000, section 41A.09, 
  4.33  subdivision 5a, is amended to read: 
  4.34     Subd. 5a.  [EXPIRATION.] This section expires June 30, 
  4.35  2010, and the unobligated balance of each appropriation under 
  4.36  this section on that date reverts to the general fund, except 
  5.1   that the provisions for biomass-generated electricity under 
  5.2   subdivision 3a, paragraph (c), expire on June 30, 2015. 
  5.3      Sec. 3.  Minnesota Statutes 2001 Supplement, section 
  5.4   216C.41, subdivision 1, is amended to read: 
  5.5      Subdivision 1.  [DEFINITIONS.] (a) The definitions in this 
  5.6   subdivision apply to this section. 
  5.7      (b) "Qualified hydroelectric facility" means a 
  5.8   hydroelectric generating facility in this state that: 
  5.9      (1) is located at the site of a dam, if the dam was in 
  5.10  existence as of March 31, 1994; and 
  5.11     (2) begins generating electricity after July 1, 1994, or 
  5.12  generates electricity after substantial refurbishing of a 
  5.13  facility that begins after July 1, 2001. 
  5.14     (c) "Qualified wind energy conversion facility" means a 
  5.15  wind energy conversion system that: 
  5.16     (1) produces two megawatts or less of electricity as 
  5.17  measured by nameplate rating and begins generating electricity 
  5.18  after December 31, 1996, and before July 1, 1999; 
  5.19     (2) begins generating electricity after June 30, 1999, 
  5.20  produces two megawatts or less of electricity as measured by 
  5.21  nameplate rating, and is: 
  5.22     (i) located within one county and owned by a natural person 
  5.23  who owns the land where the facility is sited; 
  5.24     (ii) owned by a Minnesota small business as defined in 
  5.25  section 645.445; 
  5.26     (iii) owned by a nonprofit organization; or 
  5.27     (iv) owned by a tribal council if the facility is located 
  5.28  within the boundaries of the reservation; or 
  5.29     (3) begins generating electricity after June 30, 1999, 
  5.30  produces seven megawatts or less of electricity as measured by 
  5.31  nameplate rating, and: 
  5.32     (i) is owned by a cooperative organized under chapter 308A; 
  5.33  and 
  5.34     (ii) all shares and membership in the cooperative are held 
  5.35  by natural persons or estates, at least 51 percent of whom 
  5.36  reside in a county or contiguous to a county where the wind 
  6.1   energy production facilities of the cooperative are located. 
  6.2      (d) "Qualified on-farm biogas recovery facility" means an 
  6.3   anaerobic digester system that: 
  6.4      (1) is located at the site of an agricultural operation; 
  6.5      (2) is owned by a natural person who owns or rents the land 
  6.6   where the facility is located; and 
  6.7      (3) begins generating electricity after July 1, 2001.  
  6.8      (e) "Anaerobic digester system" means a system of 
  6.9   components that processes animal waste based on the absence of 
  6.10  oxygen and produces gas used to generate electricity. 
  6.11     (f) "Qualified crop residue biomass generation facility" 
  6.12  means an electric power generation or cogeneration facility 
  6.13  located in the state that is designed to use crop residue 
  6.14  biomass for at least 75 percent of its thermal input. 
  6.15     (g) "Crop residue biomass" means vegetative matter that is 
  6.16  the byproduct of a crop farming operation in the state.  "Crop 
  6.17  residue biomass" includes, but is not limited to, corn stalks 
  6.18  and cobs, straw from the harvest of small grains, sunflower 
  6.19  stalks and shells, and similar byproducts.  "Crop residue 
  6.20  biomass" does not include short rotation woody crops as defined 
  6.21  in section 41B.048, subdivision 4.  
  6.22     Sec. 4.  Minnesota Statutes 2001 Supplement, section 
  6.23  216C.41, subdivision 2, is amended to read: 
  6.24     Subd. 2.  [INCENTIVE PAYMENT; APPROPRIATION.] (a) Incentive 
  6.25  payments must be made according to this section to: 
  6.26     (1) a qualified on-farm biogas recovery facility,; 
  6.27     (2) the owner or operator of a qualified hydropower 
  6.28  facility or qualified wind energy conversion facility for 
  6.29  electric energy generated and sold by the facility,; 
  6.30     (3) a publicly owned hydropower facility for electric 
  6.31  energy that is generated by the facility and used by the owner 
  6.32  of the facility outside the facility, or; 
  6.33     (4) the owner of a publicly owned dam that is in need of 
  6.34  substantial repair, for electric energy that is generated by a 
  6.35  hydropower facility at the dam and, provided the annual 
  6.36  incentive payments will be are used either (i) to fund the 
  7.1   structural repairs and replacement of structural components of 
  7.2   the dam, or (ii) to retire debt incurred to fund those repairs; 
  7.3   or 
  7.4      (5) the owner or operator of a qualified crop residue 
  7.5   biomass generation facility.  
  7.6      (b) Payment may only be made upon receipt by the 
  7.7   commissioner of finance of an incentive payment application that 
  7.8   establishes that the applicant is eligible to receive an 
  7.9   incentive payment and that satisfies other requirements the 
  7.10  commissioner deems necessary.  The application must be in a form 
  7.11  and submitted at a time the commissioner establishes.  
  7.12     (c) There is annually appropriated from the general fund 
  7.13  sums sufficient to make the payments required under this section.
  7.14     Sec. 5.  Minnesota Statutes 2001 Supplement, section 
  7.15  216C.41, subdivision 3, is amended to read: 
  7.16     Subd. 3.  [ELIGIBILITY WINDOW.] Payments may be made under 
  7.17  this section only for electricity generated: 
  7.18     (1) from a qualified hydroelectric facility that is 
  7.19  operational and generating electricity before December 31, 2005; 
  7.20     (2) from a qualified wind energy conversion facility that 
  7.21  is operational and generating electricity before January 1, 
  7.22  2005; or 
  7.23     (3) from a qualified on-farm biogas recovery facility from 
  7.24  July 1, 2001, through December 31, 2015; or 
  7.25     (4) from a qualified crop residue biomass generation 
  7.26  facility that is operational and generating electricity before 
  7.27  July 1, 2005. 
  7.28     Sec. 6.  Minnesota Statutes 2001 Supplement, section 
  7.29  216C.41, subdivision 4, is amended to read: 
  7.30     Subd. 4.  [PAYMENT PERIOD.] (a) A facility may receive 
  7.31  payments under this section for a ten-year period.  No payment 
  7.32  under this section may be made for electricity generated: 
  7.33     (1) by a qualified hydroelectric facility after December 
  7.34  31, 2015; 
  7.35     (2) by a qualified wind energy conversion facility after 
  7.36  December 31, 2015; or 
  8.1      (3) by a qualified on-farm biogas recovery facility after 
  8.2   December 31, 2015; or 
  8.3      (4) by a qualified crop residue biomass generation facility 
  8.4   after June 30, 2015.  
  8.5      (b) The payment period begins and runs consecutively from 
  8.6   the first year in which electricity generated from the facility 
  8.7   is eligible for incentive payment or after substantial repairs 
  8.8   to the hydropower facility dam funded by the incentive payments 
  8.9   are initiated.