1.1                          A bill for an act 
  1.2             relating to agriculture; modifying ethanol production 
  1.3             goals and producer payments; amending Minnesota 
  1.4             Statutes 1996, section 41A.09, subdivision 1a; 
  1.5             Minnesota Statutes 1997 Supplement, section 41A.09, 
  1.6             subdivision 3a; Laws 1997, chapter 216, section 7, 
  1.7             subdivision 3. 
  1.8   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.9      Section 1.  Minnesota Statutes 1996, section 41A.09, 
  1.10  subdivision 1a, is amended 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 220,000,000 244,000,000 gallons.  
  1.14     Sec. 2.  Minnesota Statutes 1997 Supplement, section 
  1.15  41A.09, subdivision 3a, is amended to read: 
  1.16     Subd. 3a.  [PAYMENTS.] (a) The commissioner of agriculture 
  1.17  shall make cash payments to producers of ethanol, anhydrous 
  1.18  alcohol, and wet alcohol located in the state.  These payments 
  1.19  shall apply only to ethanol, anhydrous alcohol, and wet alcohol 
  1.20  fermented in the state and produced at plants that have begun 
  1.21  production by June 30, 2000.  For the purpose of this 
  1.22  subdivision, an entity that holds a controlling interest in more 
  1.23  than one ethanol plant is considered a single producer.  The 
  1.24  amount of the payment for each producer's annual production is: 
  1.25     (1) except as provided in paragraph (b), for each gallon of 
  1.26  ethanol or anhydrous alcohol produced on or before June 30, 
  2.1   2000, or ten years after the start of production, whichever is 
  2.2   later, 20 cents per gallon; and 
  2.3      (2) for each gallon produced of wet alcohol on or before 
  2.4   June 30, 2000, or ten years after the start of production, 
  2.5   whichever is later, a payment in cents per gallon calculated by 
  2.6   the formula "alcohol purity in percent divided by five," and 
  2.7   rounded to the nearest cent per gallon, but not less than 11 
  2.8   cents per gallon. 
  2.9      The producer payments for anhydrous alcohol and wet alcohol 
  2.10  under this section may be paid to either the original producer 
  2.11  of anhydrous alcohol or wet alcohol or the secondary processor, 
  2.12  at the option of the original producer, but not to both. 
  2.13     (b) If the level of production at an ethanol plant 
  2.14  increases due to an increase in the production capacity of the 
  2.15  plant and the increased production begins by June 30, 2000, the 
  2.16  payment under paragraph (a), clause (1), applies to the 
  2.17  additional increment of production until ten years after the 
  2.18  increased production began.  Once a plant's production capacity 
  2.19  reaches 15,000,000 gallons per year, no additional increment 
  2.20  will qualify for the payment. 
  2.21     (c) The commissioner shall make payments to producers of 
  2.22  ethanol or wet alcohol in the amount of 1.5 cents for each 
  2.23  kilowatt hour of electricity generated using closed-loop biomass 
  2.24  in a cogeneration facility at an ethanol plant located in the 
  2.25  state.  Payments under this paragraph shall be made only for 
  2.26  electricity generated at cogeneration facilities that begin 
  2.27  operation by June 30, 2000.  The payments apply to electricity 
  2.28  generated on or before the date ten years after the producer 
  2.29  first qualifies for payment under this paragraph.  Total 
  2.30  payments under this paragraph in any fiscal year may not exceed 
  2.31  $750,000.  For the purposes of this paragraph: 
  2.32     (1) "closed-loop biomass" means any organic material from a 
  2.33  plant that is planted for the purpose of being used to generate 
  2.34  electricity or for multiple purposes that include being used to 
  2.35  generate electricity; and 
  2.36     (2) "cogeneration" means the combined generation of: 
  3.1      (i) electrical or mechanical power; and 
  3.2      (ii) steam or forms of useful energy, such as heat, that 
  3.3   are used for industrial, commercial, heating, or cooling 
  3.4   purposes. 
  3.5      (d) The total payments under paragraphs (a) and (b) to all 
  3.6   producers may not exceed $34,000,000 $39,000,000 in a fiscal 
  3.7   year.  Total payments under paragraphs (a) and (b) to a producer 
  3.8   in a fiscal year may not exceed $3,000,000. 
  3.9      (e) By the last day of October, January, April, and July, 
  3.10  each producer shall file a claim for payment for ethanol, 
  3.11  anhydrous alcohol, and wet alcohol production during the 
  3.12  preceding three calendar months.  A producer with more than one 
  3.13  plant shall file a separate claim for each plant.  A producer 
  3.14  shall file a separate claim for the original production capacity 
  3.15  of each plant and for each additional increment of production 
  3.16  that qualifies under paragraph (b).  A producer that files a 
  3.17  claim under this subdivision shall include a statement of the 
  3.18  producer's total ethanol, anhydrous alcohol, and wet alcohol 
  3.19  production in Minnesota during the quarter covered by the claim, 
  3.20  including anhydrous alcohol and wet alcohol produced or received 
  3.21  from an outside source.  A producer shall file a separate claim 
  3.22  for any amount claimed under paragraph (c).  For each claim and 
  3.23  statement of total ethanol, anhydrous alcohol, and wet alcohol 
  3.24  production filed under this subdivision, the volume of ethanol, 
  3.25  anhydrous alcohol, and wet alcohol production or amounts of 
  3.26  electricity generated using closed-loop biomass must be examined 
  3.27  by an independent certified public accountant in accordance with 
  3.28  standards established by the American Institute of Certified 
  3.29  Public Accountants. 
  3.30     (f) Payments shall be made November 15, February 15, May 
  3.31  15, and August 15.  A separate payment shall be made for each 
  3.32  claim filed.  The total quarterly payment to a producer under 
  3.33  this paragraph, excluding amounts paid under paragraph (c), may 
  3.34  not exceed $750,000.  If the total amount for which all 
  3.35  producers are eligible in a quarter under paragraphs (a) and (b) 
  3.36  exceeds $8,500,000, the commissioner shall make payments in the 
  4.1   order in which the portion of production capacity covered by 
  4.2   each claim went into production.  If the total amount of ethanol 
  4.3   or wet alcohol production reported for a quarter under paragraph 
  4.4   (e) equals or exceeds 55,000,000 61,000,000 gallons: 
  4.5      (1) payments under this subdivision do not apply to the 
  4.6   amount produced in excess of 55,000,000 61,000,000 gallons; 
  4.7      (2) the commissioner shall make payments to producers in 
  4.8   the order in which the portion of production capacity covered by 
  4.9   each claim began production; and 
  4.10     (3) only those producers that receive payments for the 
  4.11  quarter, or received payments under paragraph (a) or (b) in an 
  4.12  earlier quarter, will be eligible for future ethanol or wet 
  4.13  alcohol production payments under this subdivision. 
  4.14     (g) If the total amount for which all producers are 
  4.15  eligible in a quarter under paragraph (c) exceeds the amount 
  4.16  available for payments, the commissioner shall make payments in 
  4.17  the order in which the plants covered by the claims began 
  4.18  generating electricity using closed-loop biomass. 
  4.19     (h) After July 1, 1997, new production capacity is only 
  4.20  eligible for payment under this subdivision if the commissioner 
  4.21  receives: 
  4.22     (1) an application for approval of the new production 
  4.23  capacity; 
  4.24     (2) an appropriate letter of long-term financial commitment 
  4.25  for construction of the new capacity; and 
  4.26     (3) copies of all necessary permits for construction of the 
  4.27  new capacity. 
  4.28     The commissioner may approve the additional capacity based 
  4.29  on the order in which the applications are received.  The 
  4.30  commissioner shall not approve production capacity in excess of 
  4.31  the limitations in paragraph (f).  Existing plants are not 
  4.32  eligible for new capacity beyond planned expansions reported to 
  4.33  the commissioner by February 1997. 
  4.34     Sec. 3.  Laws 1997, chapter 216, section 7, subdivision 3, 
  4.35  is amended to read: 
  4.36  Subd. 3.  Agricultural Marketing and Development
  5.1        3,475,000      3,210,000
  5.2                  Summary by Fund
  5.3   General              3,219,000    3,069,000
  5.4   Special Revenue        256,000      141,000
  5.5   Notwithstanding Minnesota Statutes, 
  5.6   section 41A.09, subdivision 3a, the 
  5.7   total payments from the ethanol 
  5.8   development account to all producers 
  5.9   may not exceed $49,651,000 $56,479,000 
  5.10  for the biennium ending June 30, 1999.  
  5.11  If the total amount for which all 
  5.12  producers are eligible in a quarter 
  5.13  exceeds the amount available for 
  5.14  payments, the commissioner shall make 
  5.15  the payments on a pro rata basis.  In 
  5.16  fiscal year 1998, the commissioner 
  5.17  shall first reimburse producers for 
  5.18  eligible unpaid claims accumulated 
  5.19  through June 30, 1997.  
  5.20  $100,000 the first year and $100,000 
  5.21  the second year are for ethanol 
  5.22  promotion and public education. 
  5.23  $71,000 the first year and $71,000 the 
  5.24  second year are for transfer to the 
  5.25  Minnesota grown matching account and 
  5.26  may be used as grants for Minnesota 
  5.27  grown promotion under Minnesota 
  5.28  Statutes, section 17.109. 
  5.29  $141,000 the first year and $141,000 
  5.30  the second year are from the 
  5.31  commodities research and promotion 
  5.32  account in the special revenue fund. 
  5.33  $115,000 is from the Minnesota 
  5.34  conservation fund, established in 
  5.35  Minnesota Statutes, section 40A.151, to 
  5.36  the commissioner of agriculture to 
  5.37  provide a match to the $100,000 
  5.38  appropriation from the future resources 
  5.39  fund to evaluate the effectiveness of 
  5.40  Minnesota's agricultural land 
  5.41  preservation programs, make 
  5.42  recommendations for statutory and 
  5.43  programmatic improvements, and identify 
  5.44  and quantify fiscal impacts of urban 
  5.45  sprawl. 
  5.46  $76,000 the first year and $77,000 the 
  5.47  second year are for development and 
  5.48  promotion of integrated pest management 
  5.49  in an urban environment.  The urban 
  5.50  integrated pest management development 
  5.51  and promotion program must be 
  5.52  coordinated with Metropolitan State 
  5.53  University. 
  5.54  $80,000 the first year and $80,000 the 
  5.55  second year are for grants to farmers 
  5.56  for demonstration projects involving 
  5.57  sustainable agriculture.  If a project 
  5.58  cost is more than $25,000, the amount 
  5.59  above $25,000 must be cost-shared at a 
  5.60  state-applicant ratio of one to one.  
  5.61  Priorities must be given for projects 
  6.1   involving multiple parties.  Up to 
  6.2   $20,000 each year may be used for 
  6.3   dissemination of information about the 
  6.4   demonstration grant projects.  If the 
  6.5   appropriation for either year is 
  6.6   insufficient, the appropriation for the 
  6.7   other is available. 
  6.8   $200,000 is for grants under Minnesota 
  6.9   Statutes, section 17.101, subdivision 5.