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End of biofuel payments prompts questions

ST. PAUL -- The state of Minnesota continues to provide subsidies to about a dozen corn-based ethanol plants, but policymakers soon will begin discussing how else to spend that money.

Thirteen ethanol plants receive ethanol fuel subsidies - a payment based on gallons produced - but those payments will tail off in the coming years, an Agriculture Department official told a legislative panel Tuesday.

Beginning in 2010, plants will not receive per-gallon producer payments, but some still will receive state dollars to make up for subsidies that were promised over the past four years but trimmed because of tight state budgets, said Steve Ernest, a financial management director with the Minnesota Department of Agriculture.

Ernest said part of the reasoning behind state payments was to get the ethanol industry going in Minnesota. That has happened.

"I guess that would indicate the program has been successful," he said.

Lawmakers said the gradual elimination of ethanol payments by 2013 could lead to a fight over whether the $15 million a year that has been approved for the program should stay in the agriculture budget.

Rep. Al Juhnke, who leads the House agriculture committee that received Ernest's report, said lawmakers will look for other areas that need help. That could include programs to promote livestock agriculture, agricultural research or the next generation of biofuels, known as cellulosic ethanol.

"That's a real possibility," said Juhnke, a Willmar DFLer.

Some believe there will be competition from spending areas outside agriculture for the funds.

"That's going to be a tough battle to keep it there," Rep. Bud Heidgerken, R-Freeport, said.

There are at least 16 Minnesota ethanol plants in operation, Ernest said. No new ethanol facilities are eligible for state subsidies.

Critics of the ethanol program have argued the state should not subsidize a booming industry that has posted significant profits in recent years.

Many ethanol plants were not making money in their early years, Juhnke said, and the state vowed to help the fledgling industry.

"When we put something in place and guarantee the payments, I don't think we should renege on that," he said.