Minnesota bills repeal ethanol subsidies, state RFS

By Erin Voegele | February 04, 2009
Web exclusive posted Feb. 26, 2009, at 1:46 p.m. CST

Three legislative bills currently pending in the Minnesota Legislature have the potential to severely impact the state's ethanol industry. Two of the bills would repeal both the state's ethanol producer payment program, also known as ethanol subsidy program, and the state's minimum ethanol content requirement, more commonly known as the state's renewable fuels standard. A third bill would repeal just the ethanol producer payment program.

Minnesota House Bill HF0311, authored by Rep. Joyce Peppin, R-Rogers, Minn., and Rep. Tina Liebling, DFL-Rochester, Minn., would repeal Minnesota's ethanol producer payment program and the minimum ethanol content requirement. The bill was introduced Jan. 26 and referred to the House Agriculture, Rural Economies and Veterans Affairs Committee.

A companion bill introduced in the Minnesota Senate on Feb. 12, SF0591, has been referred to the Senate Agriculture and Veterans Committee. The Senate bill was coauthored by Sen. David W. Hann, R-Eden Prairie, Minn., and Sen. Geoff Michel, R-Edina, Minn.

A third bill introduced Feb. 5, HR0507, is currently pending in the Minnesota House. This bill seeks to repeal only the state's ethanol producer payment program. The bill has been referred to the House Agriculture, Rural Economies and Veterans Affairs Committee. HR0507 was coauthored by Rep. Michael Paymar, DFL- St. Paul, Minn.; Rep. Will Morgan, DFL-Burnsville, Minn.; Rep. Erin Murphy, DFL-St. Paul, Minn.; Rep. Mindy Greiling, DFL-Roseville, Minn.; Rep. Bev. Scalze, DFL-Little Canada, Minn.; Rep. Julie Bunn, DFL-Lake Elmo, Minn.; Rep. Tim Kelly, R-Red Wing, Minn.; Rep. Denise Dittrich, DFL-Champlin, Minn.; Rep. Linda Slocum, DFL-Richfield, Minn.; Rep. Tina Liebling, DFL-Rochester, Minn.; and Rep. Maria Rudd, DFL-Minnetonka, Minn.

At press time, Peppin, Leibling and Paymar were not available for an interview. According to a March 2008 press release issued by Peppin, increased ethanol production in the state of Minnesota comes at a huge cost to the state in the form of ethanol subsidies. For 22 years the state of Minnesota has typically paid ethanol plants 20 cents per gallon of produced ethanol. From 2004 through 2007, these payments were set at 13 cents per gallon with a pledge to make up the remaining 7 cents as funds became available. "For the 2007-'08 biennium alone, producer payments to 13 of the 17 plants totaled $30.3 million, with almost $53 million still due to producers," the press release stated. "This subsidy may have made sense at one time, when it was believed ethanol production would lead us to energy independence and would be gentler on the environment than regular gasoline. But back then, the cost of ethanol wasn't fully understood."

In April 2008, Peppin and Paymar coauthored an Op/Ed Column. "While we don't necessarily agree with subsidizing any industry, we understand the sentiment to assist a fledgling business with huge potential," the representatives said in the column. "But twenty years later, how can we possibly justify continuation of the subsidy to an industry that is making a handsome profit? How is it possible the now defunct Gopher State Ethanol Co. that was located in St. Paul continues to receive deficiency payments? Something stinks and it's more than the foul emissions that were emitted from that plant...Continuing to subsidize a profitable ethanol industry without looking at the negative budgetary considerations and environmental impact is misguided and should stop. If ethanol has merit, the industry should be able to stand on its own without subsidies from the federal or state government."