Minnesota Biofuels Programs and the E20 initiative. Perry Aasness – Deputy Commissioner Minnesota Department of Agriculture

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

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 $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 target Minnesota’s 2 percent biodiesel requirement will become effective September 29 th –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