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Renewable Fuels in Minnesota

Renewable Fuels in Minnesota. Commissioner Gene Hugoson Minnesota Department of Agriculture. Renewable Fuels in Minnesota. State Government and the Rise of Ethanol in Minnesota Goals for program: Boost the farm and rural economy Reduce dependence on foreign fossil fuels

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Renewable Fuels in Minnesota

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  1. Renewable Fuels in Minnesota Commissioner Gene Hugoson Minnesota Department of Agriculture

  2. Renewable Fuels in Minnesota • State Government and the Rise of Ethanol in Minnesota • Goals for program: • Boost the farm and rural economy • Reduce dependence on foreign fossil fuels • Improve urban air quality

  3. Renewable Fuels in Minnesota • The MDA’s Role: • Public education • Increasing ethanol production • Encouraging farmer-owned developments

  4. Renewable Fuels in Minnesota • Increasing Production: • Goal: boost from 1.5 million gallons to 200 million gallons (later increased to 550 million) • Key elements • Per gallon producer payments • Financial, technical and organizational support • Producer payments, 10% mandate give assurance to lenders

  5. Renewable Fuels in Minnesota • State producer incentive payments: • 20 cents per gallon • Limited to first 15 million gallons produced each year • 10-year limit for payment eligibility

  6. Renewable Fuels in Minnesota • Lenders’ concerns during ramp-up phase: • Will the ethanol industry take root? • Can new farmer coops deal with the many management challenges? • Can small plants compete with large wet mills? • Will we get interest and principal payments?

  7. Renewable Fuels in Minnesota • The results: July 2006 • 16 ethanol plants, 10 farmer-owned • Production capacity reaches 550 million gallons • 20% of corn crop used for industrial processing • $300 million in value added to commodities • 1,000 new jobs in the plants, 4,800 external jobs supported by plants

  8. Renewable Fuels in Minnesota

  9. Renewable Fuels in Minnesota • Impacts of farmer-owned processing: • Corn-to-ethanol adds average of $1.74 in value per bushel • Each 15-million gallon plant adds up to $10 million in value to 5.5 million bushels of corn each year • Money pumped into local communities

  10. Renewable Fuels in Minnesota • Benefits of ethanol as an investment: • Hedge on corn prices • Farmers capture more of total profit • Diversifies farm income, smoothing out peaks and valleys typical for commodity prices

  11. Renewable Fuels in Minnesota • Goals achieved: • Boost farm and rural economy  • Value added to corn crop • 10 farmer-owned value-added cooperatives • Reduce reliance on foreign energy  • Each gallon of ethanol cuts oil import needs by 7 gallons • Clean up environment  • Twin Cities in attainment for carbon monoxide

  12. Renewable Fuels in Minnesota • Governor Pawlenty takes Minnesota to the next level • Rolls out plan to make Minnesota the “Saudi Arabia of renewable energy” • May 2005: Signs legislation to move to 20% ethanol content in state gasoline by 2013 • Boosts number of E-85 vehicles in state fleet • September 2005: Minnesota becomes first state to mandate use of 2 percent biodiesel

  13. Renewable Fuels in Minnesota • Biodiesel in Minnesota • Annual production capacity is 63 million gallons • Minnesota is the second largest biodiesel producer in the country after Texas

  14. Renewable Fuels in Minnesota • Minnesota’s status in July 2006 • 225 E-85 stations • 16 ethanol plants with 550 million gallons of production capacity • Minnesota leading the nation in per-capita consumption of renewable energy

  15. Renewable Fuels in Minnesota • Minnesota’s status in July 2006 • New 50-million gallon ethanol plant under construction at Heron Lake • 5-6 expansions of existing plants, with more on the way • Winnebago plant burns DDGs syrup, replaces half of natural gas needs for process energy

  16. Renewable Fuels in Minnesota • Minnesota’s status in July 2006 • Little Falls opening a gassification plant, using wood chips and DDGs to replace all gas • CVEC plant in Benson to produce syn-gas, opening door to cellulose-to-energy technology

  17. Renewable Fuels in Minnesota • Other states joining the movement • Hawaii implemented 10% ethanol requirement in April 2006 • Montana passed 10% requirement contingent on 40 million gallons of in-state production • Washington State passed 2% ethanol and biodiesel requirements • Missouri passed 10% ethanol requirement by 2008, contingent on ethanol price

  18. Renewable Fuels in Minnesota • Federal activity • Congress moves on RFS legislation • President calls for broadening of renewable fuel efforts in State of the Union

  19. Renewable Fuels in Minnesota • External Drivers • Oil prices surge to $70/barrel in 2005 and again in 2006 • Oil industry drops MTBE as oxygenate option • U.S. auto makers step up promotion efforts for E-85 vehicles

  20. Renewable Fuels in Minnesota

  21. Renewable Fuels in Minnesota • External Barriers • Resistance to E-85 pumps • Limited consumer awareness of benefits of flexible fuel vehicles • Lingering misconceptions about ethanol • That it causes engine problems • That ethanol plays role in gas price hikes • That it takes more energy to produce than it yields

  22. Renewable Fuels in Minnesota Minnesota Department of Agriculture Gene Hugoson, Commissioner 651-201-6219 Gene.hugoson@state.mn.us

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