1.1                          A bill for an act 
  1.2             relating to agriculture; suspending ethanol producer 
  1.3             payments to certain producers after majority ownership 
  1.4             of a plant is transferred; amending Minnesota Statutes 
  1.5             2002, section 41A.09, subdivision 3a, by adding a 
  1.6             subdivision. 
  1.7   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.8      Section 1.  Minnesota Statutes 2002, section 41A.09, 
  1.9   subdivision 3a, is amended to read: 
  1.10     Subd. 3a.  [PAYMENTS.] (a) Except as provided in 
  1.11  subdivision 3b, the commissioner of agriculture shall make cash 
  1.12  payments to producers of ethanol, anhydrous alcohol, and wet 
  1.13  alcohol located in the state.  These payments shall apply only 
  1.14  to ethanol, anhydrous alcohol, and wet alcohol fermented in the 
  1.15  state and produced at plants that have begun production by June 
  1.16  30, 2000.  For the purpose of this subdivision, an entity that 
  1.17  holds a controlling interest in more than one ethanol plant is 
  1.18  considered a single producer.  The amount of the payment for 
  1.19  each eligible producer's annual production is: 
  1.20     (1) except as provided in paragraph (b), for each gallon of 
  1.21  ethanol or anhydrous alcohol produced on or before June 30, 
  1.22  2000, or ten years after the start of production, whichever is 
  1.23  later, 19 cents per gallon; and 
  1.24     (2) for each gallon produced of wet alcohol on or before 
  1.25  June 30, 2000, or ten years after the start of production, 
  1.26  whichever is later, a payment in cents per gallon calculated by 
  2.1   the formula "alcohol purity in percent divided by five," and 
  2.2   rounded to the nearest cent per gallon, but not less than 11 
  2.3   cents per gallon. 
  2.4      The producer payments for anhydrous alcohol and wet alcohol 
  2.5   under this section may be paid to either the original producer 
  2.6   of anhydrous alcohol or wet alcohol or the secondary processor, 
  2.7   at the option of the original producer, but not to both. 
  2.8      No payments shall be made for production that occurs after 
  2.9   June 30, 2010. 
  2.10     (b) If the level of production at an ethanol plant 
  2.11  increases due to an increase in the production capacity of the 
  2.12  plant, the payment under paragraph (a), clause (1), applies to 
  2.13  the additional increment of production until ten years after the 
  2.14  increased production began.  Once a plant's production capacity 
  2.15  reaches 15,000,000 gallons per year, no additional increment 
  2.16  will qualify for the payment. 
  2.17     (c) The commissioner shall make payments to producers of 
  2.18  ethanol or wet alcohol in the amount of 1.5 cents for each 
  2.19  kilowatt hour of electricity generated using closed-loop biomass 
  2.20  in a cogeneration facility at an ethanol plant located in the 
  2.21  state.  Payments under this paragraph shall be made only for 
  2.22  electricity generated at cogeneration facilities that begin 
  2.23  operation by June 30, 2000.  The payments apply to electricity 
  2.24  generated on or before the date ten years after the producer 
  2.25  first qualifies for payment under this paragraph.  Total 
  2.26  payments under this paragraph in any fiscal year may not exceed 
  2.27  $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 $35,150,000 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 $2,850,000. 
  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) 19 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 2002, section 41A.09, is 
  4.33  amended by adding a subdivision to read: 
  4.34     Subd. 3b.  [TRANSFER OF OWNERSHIP.] (a) If, after June 30, 
  4.35  2003, the person or other entity that owned more than 50 percent 
  4.36  of the equity or ownership interest in an ethanol plant eligible 
  5.1   to receive ethanol producer payments under this section no 
  5.2   longer owns more than 50 percent equity or ownership interest, 
  5.3   then the provisions of paragraphs (b) and (c) apply. 
  5.4      (b) The commissioner shall suspend the disbursement of 
  5.5   ethanol producer payments to the plant for all ethanol produced 
  5.6   more than 30 days after the effective date of the ownership 
  5.7   transfer. 
  5.8      (c) The commissioner shall resume payments to the producer 
  5.9   only in response to an enactment authorizing the payments. 
  5.10     (d) This subdivision does not apply to a transfer of more 
  5.11  than 50 percent equity ownership to a farmer-owned cooperative 
  5.12  organized under chapter 308A. 
  5.13     Sec. 3.  [EFFECTIVE DATE.] 
  5.14     Sections 1 and 2 are effective the day following final 
  5.15  enactment.