1.1                          A bill for an act 
  1.2             relating to motor fuels; requiring that diesel fuel 
  1.3             sold in the state contain biodiesel fuel oil; 
  1.4             requiring the use of B5 or B20 diesel fuel in certain 
  1.5             vehicles and equipment; reducing the special fuel tax 
  1.6             rate on biodiesel fuel; appropriating money; amending 
  1.7             Minnesota Statutes 2000, sections 296A.08, subdivision 
  1.8             2, and by adding a subdivision; and 297A.71, by adding 
  1.9             a subdivision; proposing coding for new law in 
  1.10            Minnesota Statutes, chapters 41A; and 239. 
  1.11  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.12     Section 1.  [41A.12] [BIODIESEL DEVELOPMENT.] 
  1.13     Subdivision 1.  [DEFINITIONS.] (a) The definitions in this 
  1.14  subdivision apply to this section. 
  1.15     (b) "Biodiesel" or "biodiesel fuel oil" has the meaning 
  1.16  given in section 239.77, subdivision 1. 
  1.17     (c) "Biodiesel plant" means a facility located in Minnesota 
  1.18  at which finished biodiesel fuel oil is produced. 
  1.19     (d) "Biodiesel producer" means an entity that owns or has 
  1.20  primary control over the production of biodiesel fuel oil in one 
  1.21  or more biodiesel plants. 
  1.22     Subd. 2.  [PRODUCER PAYMENTS.] (a) For the first ten years 
  1.23  of production of biodiesel by a biodiesel producer, the 
  1.24  commissioner of agriculture shall make annual fiscal year cash 
  1.25  payments to each biodiesel producer as provided in this 
  1.26  subdivision. 
  1.27     (b) Except as provided in paragraph (d), for each gallon of 
  1.28  biodiesel fuel oil produced, up to a maximum of 2,000,000 
  2.1   gallons per producer in each fiscal year, the payment is $0.20. 
  2.2      (c) By August 15 of each year, each biodiesel producer 
  2.3   shall certify to the commissioner of agriculture eligible 
  2.4   biodiesel fuel oil production in the previous fiscal year on 
  2.5   forms provided by the commissioner. 
  2.6      (d) If total claims from biodiesel producers for eligible 
  2.7   production exceed the fiscal year appropriation for biodiesel 
  2.8   fuel oil producer payments, the payment must be prorated among 
  2.9   producers based on their eligible production. 
  2.10     Sec. 2.  [239.77] [BIODIESEL CONTENT MANDATE.] 
  2.11     Subdivision 1.  [DEFINITION; BIODIESEL FUEL OIL.] As used 
  2.12  in this section, "biodiesel fuel oil" means nontoxic, 
  2.13  biodegradable, combustible mono alkyl ester liquid fuel derived 
  2.14  from vegetable oil, recycled cooking oil, tallow, animal fats, 
  2.15  or a combination of them that is suitable for blending with 
  2.16  petroleum oil for use in internal combustion diesel engines or 
  2.17  as a heating fuel oil.  Diesel fuel containing 2.0 percent of 
  2.18  biodiesel fuel oil is commonly referred to as "B2" diesel fuel.  
  2.19  Diesel fuel containing 20.0 percent of biodiesel fuel oil is 
  2.20  commonly referred to as "B20" diesel fuel. 
  2.21     Subd. 2.  [CONTENT REQUIREMENTS.] (a) From January 1, 2002, 
  2.22  through December 31, 2003, all diesel fuel sold or offered for 
  2.23  sale in Minnesota must contain not less than 2.0 percent 
  2.24  biodiesel fuel oil by weight. 
  2.25     (b) On and after January 1, 2004, all diesel fuel sold or 
  2.26  offered for sale in Minnesota must contain not less than 5.0 
  2.27  percent biodiesel fuel oil by weight. 
  2.28     Subd. 3.  [B20 BIODIESEL FUEL OIL REQUIRED FOR CERTAIN 
  2.29  PORTABLE OR TEMPORARY EQUIPMENT.] After July 1, 2002, all diesel 
  2.30  fuel used to power portable or temporary electric generators, 
  2.31  air compressors, refrigeration units, and similar equipment, as 
  2.32  determined by the commissioner of commerce, must contain not 
  2.33  less than 20.0 percent biodiesel fuel oil by weight. 
  2.34     Subd. 4.  [B5 BIODIESEL FUEL OIL REQUIRED FOR PUBLIC 
  2.35  TRANSIT BUS FLEETS.] After July 1, 2002, all diesel fuel used to 
  2.36  power vehicles owned, operated, or contracted by a public 
  3.1   entity, other than a school district, for purposes of public 
  3.2   transit as defined in section 174.22, subdivision 7, must 
  3.3   contain not less than 5.0 percent biodiesel fuel oil by weight. 
  3.4      Subd. 5.  [B5 BIODIESEL FUEL OIL REQUIRED FOR STATE-OWNED 
  3.5   VEHICLES.] To the extent practicable, after July 1, 2002, all 
  3.6   diesel fuel purchased by the state and used to power diesel 
  3.7   vehicles owned or contracted by the state must contain not less 
  3.8   than 5.0 percent biodiesel fuel oil by weight. 
  3.9      Sec. 3.  Minnesota Statutes 2000, section 296A.08, 
  3.10  subdivision 2, is amended to read: 
  3.11     Subd. 2.  [RATE OF TAX.] The special fuel excise tax is 
  3.12  imposed at the following rates: 
  3.13     (1) Liquefied petroleum gas or propane is taxed at the rate 
  3.14  of 15 cents per gallon. 
  3.15     (2) Liquefied natural gas is taxed at the rate of 12 cents 
  3.16  per gallon. 
  3.17     (3) Compressed natural gas is taxed at the rate of $1.739 
  3.18  per thousand cubic feet; or 20 cents per gasoline equivalent, as 
  3.19  defined by the National Conference on Weights and Measures, 
  3.20  which is 5.66 pounds of natural gas. 
  3.21     (4) Diesel fuel containing a blend of not less than two 
  3.22  percent biodiesel fuel oil, as defined in section 239.77, 
  3.23  subdivision 1, by weight is taxed at the rate of 15 cents per 
  3.24  gallon.  The reduction in tax rate on biodiesel fuel must be 
  3.25  passed on to the retail customer.  
  3.26     (5) All other special fuel is taxed at the same rate as the 
  3.27  gasoline excise tax as specified in section 296A.07, subdivision 
  3.28  2.  The tax is payable in the form and manner prescribed by the 
  3.29  commissioner. 
  3.30     Sec. 4.  Minnesota Statutes 2000, section 296A.08, is 
  3.31  amended by adding a subdivision to read: 
  3.32     Subd. 7.  [TRANSFERS FROM GENERAL FUND.] The commissioner 
  3.33  shall notify the commissioner of finance once each week of the 
  3.34  total number of gallons of biodiesel fuel taxed at the rate 
  3.35  provided under subdivision 2, paragraph (4), in the previous 
  3.36  week.  Within two days of receiving the notice from the 
  4.1   commissioner, the commissioner of finance shall transfer from 
  4.2   the general fund to the highway user tax distribution fund an 
  4.3   amount calculated by multiplying the gallons reported by $0.05. 
  4.4      Sec. 5.  Minnesota Statutes 2000, section 297A.71, is 
  4.5   amended by adding a subdivision to read: 
  4.6      Subd. 23.  [BIODIESEL FUEL OIL PROCESSING 
  4.7   FACILITIES.] Building materials and supplies used for the 
  4.8   construction, improvement, or expansion of a biodiesel plant as 
  4.9   defined in section 41A.12, subdivision 1, are exempt. 
  4.10     Sec. 6.  [APPROPRIATION; BIODIESEL PRODUCER PAYMENTS.] 
  4.11     $....... is appropriated from the general fund to the 
  4.12  commissioner of agriculture for the fiscal biennium ending June 
  4.13  30, 2003, for biodiesel producer payments in fiscal years 2002 
  4.14  and 2003.  This appropriation is available until August 31, 2003.
  4.15     Sec. 7.  [APPROPRIATION; BIODIESEL TRANSFER FROM GENERAL 
  4.16  FUND.] 
  4.17     $....... is appropriated from the general fund to the 
  4.18  commissioner of finance for transfers to the highway user tax 
  4.19  distribution fund as provided in section 4. 
  4.20     Sec. 8.  [EFFECTIVE DATE.] 
  4.21     Section 5 is effective for sales made after June 30, 2001.