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.