Ethanol Production Incentives – North Dakota

Date: 21 Nov 2008 | posted in: agriculture, Energy, environment | 0 Facebooktwitterredditmail

In April 2003, North Dakota’s Governor signed into law an Ethanol Production Incentive bill (Senate Bill 2222). The legislation implements the first program in the nation to create a market-based support system for the growing ethanol industry. The ethanol incentive operates on a counter cyclical feature that is market-based. It is not a fixed payment, but is provided to a facility when the price of ethanol drops or the price of corn increases to levels that make ethanol less profitable. Incentives are based on a combination of a$1.80/bushel price for corn and a $1.30/gallon rack price for ethanol(price at the terminal).

While the incentives on a per gallon basis could be large, annual distribution of ethanol incentives cannot exceed $1.6 million and that limits payments to around 4 million gallons per year. Each ethanol facility is limited to a cumulative total of $10 million in state incentive payments.

Thenew Ethanol Production Incentive program provides financial incentives for the production of ethanol in any newly constructed ethanol production plants. The New Rules Project believes that the provision allowing any type of ethanol plant to receive incentives was a missed opportunity for North Dakota to promote farmer-owned ethanol production facilities. Minnesota’s ethanol rules are a good example of a state ethanol program designed to encourage not only renewable fuels production but also local, farmer ownership.

Aportion of farm vehicle registrations will finance the ethanol incentive fund. The fund is expected to accumulate about $3 million each biennium. In the upcoming biennium $1.2 million is reserved specifically for newly constructed ethanol production plants. The remaining money will be provided to the two existing ethanol plants in Grafton and Walhalla to phase out their reliance on the state incentive. The new law stipulates that in future bienniums, the entire$3 million will be devoted to new ethanol.

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