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Posted on  

January 15, 2003

Agriculture: Ethanol producers let off steam

Published Jan. 15, 2003

Minnesota's ethanol subsidies would be wiped out for the rest of this fiscal year under the proposed budget cuts, which would eliminate $26.8 million in payments to 13 plants.

"This is drastic and could have severe consequences for a number of the ethanol producers in the state," said Bill Lee, general manager of Chippewa Valley Ethanol Co. in Benson.

Tuesday, he and other ethanol plant managers said volatile markets, combined with the loss of subsidies, might force some smaller plants out of business. They also said the proposed cuts fly in the face of Pawlenty's pledge to help rural economies.

"The impact is not only on the businesses themselves, but it reduces the credibility of the state with lending institutions and certainly with future business that might be attracted to Minnesota," said Richard Eichstadt, general manager of the Pro-Corn ethanol plant in Preston.

"Granted, this will be money taken away from rural Minnesota -- there's no doubt about it," said Gene Hugoson, state agriculture commissioner. "But on the other hand, there was a risk of money being taken away from rural schools, too. People all over the state are going to feel the pinch on this."

The subsidies provide 20 cents per gallon of ethanol produced -- up to $3 million to each plant annually.

A 2002 analysis by the state Agriculture Department found that expanding the ethanol industry could give Minnesota a net gain of $259 million to $295 million a year.

Since 1987, the state has paid out nearly $215 million in ethanol subsidies to 14 plants, one of which is no longer subsidized. Nearly 8,000 farmers invested and banks lent money believing the plants would be subsidized.

Officials of the Gopher State Ethanol plant in St. Paul declined to comment until they can review the proposed cuts.

The Agriculture Department also faces $829,000 in operating budget cuts, as well as trims to programs for sustainable agriculture, for county fair prizes and for fast-growing tree crops used for paper and renewable energy.

The Agricultural and Utilization Research Institute could lose a quarter of its $3.6 million budget, spokesman Dan Lemke said. It develops uses and markets for agricultural commodities.

A proposed $103,070 cut to the Minnesota Board of Animal Health would curtail programs to fight some livestock diseases, spokeswoman Malissa Fritz said.

 

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