Hanna Schutt
Legislative History
Environmental Policy
3/2/11
A Legislative History of Minnesota Ethanol Policy
Overview
Ethanol production has been a highly discussed issue in Minnesota politics since the 1980’s because of the prevalence of corn production in Minnesota state agriculture. Since ethanol is one of the early biofuels, advocates of ethanol production propose it in place of gasoline to reduce carbon emissions. Minnesota has a large capacity for corn production, and therefore had large potential for ethanol production when the state began passing laws to support the ethanol industry in 1980. In 2005, Minnesota’s ethanol production capacity was 550 million gallons per year (Minnesota Department of Agriculture). Legislative promoting ethanol over the past 30 years has utilized several incentives to promote ethanol production and consumption including tax credits and producer payments. Much of the cost of these government programs was taken from highway construction and maintenance. (Minnesota House of Representatives)
The piece of legislature that this history addresses is an act that would repeal Minnesota’s producer payment program and the minimum ethanol content requirement. This proposed law addresses both the problems with the current legislature in place and the problems with ethanol production as a whole. The debate over government tax credit for ethanol plants centers around whether or not the plants actually need government support. The ethanol industry is arguably profitable on its own and government support may be an unnecessary burden on the state. Some environmental problems with ethanol surrounding the proposed bill are the low fuel economy of ethanol (35% less energy per gallon than gasoline), more gallons of fuel for fuel blends (NCPA) and the incapatability of ethanol with current cars and storage facilities. In addition, ethanol production requires increases in land use for corn growth, and subsequently an increase in use of fertilizer. Due to high demand, ethanol production raises price of corn. Since displacing 5% of the demand for gasoline with ethanol uses over 21% of US cropland, the cost in land of ethanol production may overcome the benefits in reduced carbon emissions (NCPA). Finally, the ethanol distilling process requires increases in carbon emissions that could offset emissions reductions from using ethanol instead of gasoline. While ethanol production makes increasing economic sense, the environmental benefits are increasingly subject to debate. The proposed law addresses these issues by reversing the current government support for ethanol.
Proposed Bill
86th Legislature
HF 0591: This bill repeals the ethanol producer payment program and minimum ethanol content requirement. The bill is a response to current government policy that grants about 19 cents to producers per gallon of ethanol produced. It also repeals the 20 percent ethanol mandate that requires all gasoline in Minnesota to consist of at least 20 percent ethanol by 2013. The bill addresses the issue of whether or not ethanol producers need government support. It also addresses the issue that a minimum ethanol content requirement of 20 percent would increase the environmental impacts of ethanol production in such a way that could offset the environmental benefits of ethanol.
Related Bills
86th Legislature
HF 0507: This proposed bill repeal only the producer payment program. Thus, it primarily addresses the problems with supporting an industry that is already profiting.
History
71st Legislature
In 1979 congress eliminated the fuel excise tax for 10% by 4 cent per gallon for 10 percent ethanol blends. This tax reduction increased to 6 in 1990 and slowly decreased since then to about .051 in 2005 (MN House of Representatives) This policy was the first government initiative to promote ethanol production as an alternative to gasoline. It aimed to encourage ethanol production and set the precedent for a minimum ethanol content in ethanol blends.
74th Legislature
Ethanol development fund
In 1986 congress put in place an act that would pay producers of ethanol per gallon produced. The original payment was 15 cents per gallon. The payment rose over then next eighteen years, then was mandated to stay at 19 cents from 2004 to 2010 (MN House of Representatives). This policy was the first producer payment program and was set to last until 2010. This piece of legislature directly supports ethanol plants by paying them for the ethanol they produce, thus creating an incentive for the plants to produce more ethanol. This policy is structured to help small ethanol facilities recover from dept and become competitive.
75th Legislature
Minnesota Ethanol Commission
In 1987 the state allocated $100,000 annually from to the Department of Agriculture for ethanol education.
77th Legislature
Oxygenated Gasoline Regulation
This law was enacted after the EPA ordered the use of oxygenated gasoline in eight Minnesota counties during the wintertime. The law mandated the use of oxygenated gasoline in certain counties and further made the mandate statewide in 1997. The law mandated a 2.7% oxygen requirement. This law further promoted ethanol production.
78th Legislature
Ethanol Production Facility Loan Program
In 1993 congress allocated up to $500,000 help in initial start up costs for new ethanol plants. This law encouraged the growth of ethanol production by helping new plants in the start-up process. In total, seven ethanol plants began operating using these loans. (MN Department of Agriculture)
In 1994 the state approved the Rural Finance Authority to make loans for stock in agricultural facilities. These could be up to 45% of the price of the stock. This policy encouraged investment in ethanol plants.
83rd Legislature
Minimum Ethanol Content Required
This act stated that the ethanol content of gasoline must be at least 9.7 percent. Requirement. This regulation replaced the oxygenation requirement. In addition, ethanol production was mandated to increase to 480 million gallons by 2008 (MN Department of Agriculture). These acts further promoted the grown of the ethanol industry.
84th Legislature
Minimum Ethanol Content Increased
In response to the rising corn prices and lower ethanol prices, congress enacted a law requiring a 20% ethanol content in all gasoline by 2013. This increased the minimum ethanol content to twice as much as it was previously, taking drastic steps to increase ethanol production. The act is structured to assist smaller farm owners.
Other Relevant Policies
Another policy that is important in the growth of the ethanol industry is the Environmental Protection Agency’s waiver of ethanol plant emission restrictions, increasing the limit to 250 tons per year (NCPA). This act allows ethanol plants to meet the ethanol production requirements mandated by the state.
Sources:
Sam Rankin, The Ethanol Industry In Minnesota. House Research Department, Minnesota House of Representatives.
http://www.house.leg.state.mn.us/hrd/bs/84/hf0223.html
Minnesota Department of Agriculture
http://www.mda.state.mn.us/renewable/ethanol/about.aspx
NCPA, “The Environmental Costs of Ethanol” http://www.ncpa.org/pub/ba591
Legislature Sources:
Minnesota Legislature. 71st Congress, 1st session (1979), HF 1495 :Minnesota Office of Revisor of Statutes.
Minnesota Legislature. 74th Congress, Special Session (1986), HF 0001. An act…reducing the ethanol credit and providing payment to ethanol producers. Minnesota Office of Revisor of Statutes.
Minnesota Legislature. 75th Congress, 1st session (1987), HF 0303: Minnesota Office of Revisor of Statutes.
Minnesota Legislature. 77th Congress, 1st session (1991), SF 0559: Minnesota Office of Revisor of Statutes.
Minnesota Legislature. 78th Congress, 1st session (1993), HF 1060: An act…authorizing an ethanol development program: Minnesota Office of Revisor of Statutes.
Minnesota Legislature. 78th Congress, 2nd session (1994), HF 2275: Minnesota Office of Revisor of Statutes.
Minnesota Legislature. 83rd Congress, 1st session (2003), SF 0990: Minnesota Office of Revisor of Statutes.
Minnesota Legislature. 84th Congress, 1st session (2005), SF 0004: Minnesota Office of Revisor of Statutes.