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Posted on  

January 16, 2003

Proposed Ethanol Cuts Spark Rally In St. Paul, Minnnesota

Star Tribune

Minnesota farmers plan to rally at the State Capitol today against Gov. Tim Pawlenty's proposed elimination of $26.8 million in subsidies for 13 ethanol plants this year.

Expected to take part are at least 10 busloads of farmers who have invested in rural plants; rural bankers; Main Street businesspeople; city administrators; county commissioners, and others, said Doug Peterson, president of the Minnesota Farmers Union.

Meanwhile, rural legislators, many of them Pawlenty's fellow Republicans, are starting their own fight against the proposed cut, the largest to any state subsidy program.

But some St. Paul officials are hoping the plan will speed a shutdown of Gopher State Ethanol, whose noise and odor have angered its West End neighbors.

Several House GOP members from southern Minnesota on Wednesday described Pawlenty's proposal as a mistake and expressed confidence that the Legislature will restore at least some of the money. They also hope to meet with the governor as early as today.

"This is the first time he's been through this," said Rep. Dan Dorman, R-Albert Lea. "We're going to go help him see the error of his ways."

One of the largest plants that would be affected is in Albert Lea. Dorman and others said that too many of Pawlenty's top advisers may be Twin Cities suburbanites like the governor and not from the farm belt, which relies on value-added agricultural enterprises such as distilling corn into fuel.

"I'm not sure where the governor got his advice on this one, but we're going to find out," said GOP Rep. Greg Davids of Preston, site of another ethanol plant.

Economic impact

But others say the ethanol industry shouldn't be publicly subsidized. Some plants are making a profit even without the state payments of 20 cents per gallon of ethanol, although the business fluctuates with prices of corn, gasoline and the livestock feed that is a byproduct of ethanol, legislators said.

Peterson said Minnesota's ethanol plants provide 890 jobs at average salaries of nearly $39,000. They pay $15.9 million a year in taxes and buy $633 million in goods and services from communities, he said.

Peterson, a former DFL legislator who was chief sponsor of the 1996 law requiring a 10 percent blend of ethanol in most gasoline sold in Minnesota, said the cuts will affect more than 5,000 farmer-investors, as well as local governments that contributed tax-increment financing. Electric cooperatives also have supported the plants, he said.

"The state set up the current subsidy structure as a public-private partnership for these plants in 1996 based on a 10-year plan, and now the state is backing out of that deal," Peterson said. "It's wrong, shortsighted and just plain unfair to the people of rural Minnesota."

Ethanol's share

Pawlenty's plan to erase a $356 million deficit projected through June calls for $77 million in cuts to state agency grants and programs. Ethanol subsidies account for more than a third of that total.

"Farmers do understand they have to do their part," said Eugene (Pucky) Sandager, treasurer of the Minnesota Corn Growers Association. "But this is above and beyond. . . . The strategy here is somewhat ridiculous."

The ethanol program has been successful for farmers and rural economic development, said Al Christopherson, president of the Minnesota Farm Bureau. "Now is not the time to stop it," he said.

Legislators expected some cuts to the ethanol subsidies, but not a wipeout, Davids said. While some have suggested that Pawlenty's plan is only the opening move to renegotiate the subsidies, Davids said: "That doesn't start a negotiation. That starts rallies at the Capitol."

Of Minnesota's 14 ethanol plants, only one, the former Minnesota Corn Processors plant in Marshall, now owned by Archer Daniels Midland, exhausted its subsidies, in 2000. It got $33 million over 13 years.

The law calls for the remaining 13 plants to receive up to $3 million a year for 10 years. Twelve of the plants are owned by farmer cooperatives. Six are gearing up for expansion. And more plants are on the drawing board in rural areas.

Sandager, of the Corn Growers Association, said farmer-investors need state backing to compete with oil companies and with other states that better promote the livestock industry, which buys feed from ethanol production.

St. Paul plant

St. Paul officials see Pawlenty's plan as a step toward permanently pulling the plug on state subsidies for Gopher State Ethanol, on W. 7th Street.

"I haven't heard anything official from them, but I don't know how they can survive without these credits," said City Council Member Chris Coleman, who represents the Second Ward, which includes Gopher State. "Short of closure, I don't think there's anything that can be done to solve the problems."

Reps. Michael Paymar and Carlos Mariani and Sen. Sandy Pappas, all St. Paul DFLers, plan to introduce legislation to prohibit ethanol subsidies for plants in large cities such as St. Paul.

"The plant is clearly a nuisance to the neighborhood," Paymar said. "The fumes and smells are noxious. We should never have allowed that plant to be built in an urban area."

Company officials couldn't be reached for comment Wednesday but said Tuesday that they are assessing the proposed cuts' effect on them.

-- The writers are at jpowell@startribune.com



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