Minnesota Biofuels Programsand the E20 initiative.

Perry Aasness – Deputy Commissioner

Minnesota Department of Agriculture

RGrosche

Biofuels in Minnesota

• State Government and the Rise of Renewable fuels in Minnesota

– Goals for program:1. Boost the farm and rural economy

2. Reduce dependence on foreign fossil fuels

3. Improve urban air quality

Biofuels in Minnesota

• Minnesota responds:– 1980 Minnesota Legislature creates “Blender’s

Credit”• Blenders get tax credit of 4 cents/gallon for gas

blended with 10 percent ethanol

• Leads to over 40% market share for E10

Biofuels in Minnesota

• Problems arise:– Pump credit reduced from 4 to 2 cents– Gasoline marketers resist– By 1986, ethanol’s market share down to 7

percent– State production capacity stalled at 1 million

gallons

Biofuels in Minnesota

• Farm crisis gives ethanol new life:– Minnesota loses 8,000 farms between 1984 and

1986– Two-thirds of corn crop exported as low-priced

raw commodity– Virtually no in-state corn processing– Policy-makers make ethanol a priority

Biofuels in Minnesota

• Air quality emerges as third driver:– Federal Clean Air Act requires Minneapolis-St.

Paul Area to include oxygen in all gas sold in winter months staring November, 1992

– State requires year-round in use 1995– State requires statewide use in 1997

Biofuels in Minnesota

• Increasing Ethanol Production:– Statutory Goal: boost from 1.5 million gallons

to 220 million gallons (later increased to 450 million)

– Key elements• 20 cent per gallon producer incentive payments

• Financial, technical and organizational support

• 10% mandate gives market assurance to lenders

Biofuels in Minnesota• State producer incentive payments:

– 20 cents per gallon– Limited to first 15 million gallons produced by

a plant each year– 10-year limit for payment eligibility– Eligibility requires local equity & financing

partner – Payments follow documentation of quarterly

production

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7

9

11

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1986 1988 1991 1994 1995 1996 1997 1998 1999 2005

Year

Number of Ethanol Plants in Minnesota

Biofuels in Minnesota

• The results:– 14 ethanol plants of which 12 were built as farmer-

owned coops and LLCs - two more under construction

– Production capacity surpasses 450 million gallons by June 2005

– 20 percent of corn crop used for industrial processing

– $200 million in value added to commodities

– 750 new jobs in the plants, 5,000 external jobs supported by plants

Biofuels in Minnesota

• Impacts of farmer-owned processing:– Corn-to-ethanol adds $2 to $2.50 in value per

bushel– Each 15-million gallon plant adds up to $14

million in value to 5.5 million bushels of corn each year

– Money pumped into local communities

Biofuels in Minnesota• Goals achieved:

– Boost farm and rural economy • Value added to 20 percent of corn crop

• 12 farmer-owned value-added coops & LLCs

– Reduce reliance on foreign energy • Each gallon of ethanol cuts import needs by 7

gallons

– Clean up environment • Twin Cities in attainment for carbon monoxide

Biofuels in Minnesota

• September 2004: Governor Pawlenty takes Minnesota to the next level– Rolls out plan to make Minnesota the “Saudi

Arabia of renewable energy”• Move to 20 percent ethanol content in state gasoline

• Boost E-85 fuel use in state fleet

• As chair of Governors’ Ethanol Coalition, advocate for other states to adopt E-10

Biofuels in Minnesota

• Minnesota legislature approves with bi-partisan support– E-20 bill signed into law in May 2005, passed by

House (91-43 vote) and Senate (54-12 vote)– E-20 ethanol requirement will take effect in 2013

unless ethanol has already replaced 20 percent of the state’s motor vehicle fuel by 2010

- $500,000 allocated to assist stations in converting to E-85—over 150 stations online.

- $200,000 to study ethanol combustion (E20)

Biofuels in Minnesota

• Biodiesel Mandate reaches targetMinnesota’s 2 percent biodiesel requirement will become effective September 29th

– FUMPA-Redwood Falls –3 million gallons– Soymor-Albert Lea—30 million gallons, operating– MSP- Brewster—30 million gallons, in production – Minnesota has 32,000 farmers growing soybeans– Minnesota is the third largest producer of soybeans

U.S. Oil Production vs. Imports