MISSISSIPPI LEGISLATURE

2002 Regular Session

To: Agriculture; Appropriations

By: Representative Whittington, Fleming, Miles, Reynolds

House Bill 1130

(COMMITTEE SUBSTITUTE)

AN ACT TO AUTHORIZE THE COMMISSIONER OF AGRICULTURE AND COMMERCE TO MAKE CERTAIN CASH PAYMENTS TO PRODUCERS OF ETHANOL, ANHYDROUS ALCOHOL AND WET ALCOHOL; TO PROVIDE DEFINITIONS; TO PROVIDE DATES BY WHICH EACH PRODUCER MUST FILE A CLAIM FOR PAYMENT; AND FOR RELATED PURPOSES.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:

SECTION 1. It is the goal of this state that ethanol production plants in the state attain a total annual production level of two hundred forty million (240,000,000) gallons.

SECTION 2. For the purposes of this act, the following terms shall have the meanings ascribed to them herein unless the context clearly indicates otherwise:

(a) "Ethanol" means fermentation ethyl alcohol derived from agricultural products, including potatoes, cereal, grains, cheese whey and sugar beets; forest products; or other renewable resources, including residue and waste generated from the production, processing and marketing of agricultural products, forest products and other renewable resources, that:

(i) Meets all of the specifications in ASTM specification D 4806-88; and

(ii) Is denatured as specified in Code of Federal Regulations, Title 27, parts 20 and 21.

(b) "Wet alcohol" means agriculturally derived fermentation ethyl alcohol having a purity of at least fifty percent (50%) but less than ninety-nine percent (99%).

(c) "Anhydrous alcohol" means fermentation ethyl alcohol derived from agricultural products as described in paragraph (a), but that does not meet ASTM specifications or is not denatured and is shipped in bond for further processing.

(d) "Ethanol plant" means a plant at which ethanol, anhydrous alcohol or wet alcohol is produced.

SECTION 3. (1) The Commissioner of Agriculture and Commerce is authorized to make cash payments to producers of ethanol, anhydrous alcohol and wet alcohol located in the state. These payments shall apply only to ethanol, anhydrous alcohol and wet alcohol fermented in the state and produced at plants that have begun production by June 30, 2003. For purposes of this section, an entity that holds a controlling interest in more than one (1) ethanol plant is considered a single producer. The amount of the payment for each producer's annual production is:

(a) Except as provided in subsection (2) of this section, for each gallon of ethanol or anhydrous alcohol produced on or before June 30, 2003, or for ten (10) years after the start of production, whichever is later, Twenty Cents (20) per gallon; and

(b) For each gallon produced of wet alcohol on or before June 30, 2003, or for ten (10) years after the start of production, whichever is later, a payment in cents per gallon calculated by the formula "alcohol purity in percent divided by five (5)," and rounded to the nearest cent per gallon, but not less than Eleven Cents (11) per gallon.

The producer payments for anhydrous alcohol and wet alcohol under this section may be paid to either the original producer of anhydrous alcohol or wet alcohol or the secondary processor, at the option of the original producer, but not to both.

No payments shall be made for production that occurs after June 30, 2013.

(2) If the level of production at an ethanol plant increases due to an increase in the production capacity of the plant, the payment under subsection (1)(a) of this section applies to the additional increment of production until ten (10) years after the increased production began. Once a plant's production capacity reaches thirty million (30,000,000) gallons per year, no additional increment shall qualify for the payment.

(3) The commissioner is authorized to make payments to producers of ethanol or wet alcohol in the amount of One and One-half Cents (1-1/2) for each kilowatt hour of electricity generated using closed-loop biomass in a cogeneration facility at an ethanol plant located in the state. Payments under this subsection shall be made only for electricity generated at cogeneration facilities that begin operation by June 30, 2003. The payments apply to electricity generated on or before the date ten (10) years after the producer first qualifies for payment under this subsection. Total payments under this subsection in any fiscal year may not exceed Seven Hundred Fifty Thousand Dollars ($750,000.00). For the purposes of this subsection:

(a) "Closed-loop biomass" means any organic material from a plant that is planted for the purpose of being used to generate electricity or for multiple purposes that include being used to generate electricity; and

(b) "Cogeneration" means the combined generation of:

(i) Electrical or mechanical power; and

(ii) Steam or forms of useful energy, such as heat, that are used for industrial, commercial, heating or cooling purposes.

(4) Payments under subsections (1) and (2) of this section to all producers may not exceed Thirty-seven Million Dollars ($37,000,000.00) in a fiscal year. Total payments under subsections (1) and (2) of this section to a producer in a fiscal year may not exceed Six Million Dollars ($6,000,000.00).

(5) By the last day of October, January, April and July, each producer shall file a claim for payment for ethanol, anhydrous alcohol and wet alcohol production during the preceding three (3) calendar months. A producer with more than one (1) plant shall file a separate claim for each plant. A producer that files a claim under this subsection shall include a statement of the producer's total ethanol, anhydrous alcohol and wet alcohol production in Mississippi during the quarter covered by the claim, including anhydrous alcohol and wet alcohol produced or received from an outside source. A producer shall file a separate claim for any amount claimed under subsection (3) of this section. For each claim and statement of total ethanol, anhydrous alcohol and wet alcohol production filed under this section, the volume of ethanol, anhydrous alcohol and wet alcohol production or amounts of electricity generated using closed-loop biomass must be examined by an independent certified public accountant in accordance with standards established by the American Institute of Certified Public Accountants.

(6) Payments shall be made November 15, February 15, May 15 and August 15. A separate payment shall be made for each claim filed. Except as provided in subsection (10) of this section, the total quarterly payment to a producer under this subsection, excluding amounts paid under subsection (3) of this section, may not exceed Seven Hundred Fifty Thousand Dollars ($750,000.00).

(7) If the total amount for which all producers are eligible in a quarter under subsection (3) of this section exceeds the amount available for payments, the commissioner shall make payments in the order in which the plants covered by the claims began generating electricity using closed-loop biomass.

(8) After July 1, 2002, new production capacity is eligible for payment under this section only if the commissioner received:

(a) An application for approval of the new production capacity;

(b) An appropriate letter of long-term financial commitment for construction of the new production capacity; and

(c) Copies of all necessary permits for construction of the new production capacity. The commissioner may approve new production capacity based on the order in which the applications are received.

(9) The commissioner may not approve any new production capacity after September 30, 2002, except that a producer with an approved production capacity of at least twelve million (12,000,000) gallons per year but less than thirty million (30,000,000) gallons per year before July 1, 2003, is approved for thirty million (30,000,000) gallons of production capacity.

(10) Notwithstanding the quarterly payment limits of subsection (6), the commissioner shall make an additional payment in the eighth quarter of each fiscal biennium to ethanol producers for the lesser of:

(a) Twenty Cents (20) per gallon of production in the eighth quarter of the biennium that is greater than seven million five hundred thousand (7,500,000) gallons; or

(b) The total amount of payments lost during the first seven (7) quarters of the biennium due to plant outages, repair or major maintenance. Total payments to an ethanol producer in a fiscal biennium, including any payment under this subsection, must not exceed the total amount the producer is eligible to receive based on the producer's approved production capacity. The provisions of this subsection apply only to production losses that occur in quarters beginning after December 31, 2003.

(11) For the purposes of this section, "new production capacity" means annual ethanol production capacity that was not allowed under a permit application submitted to the pollution control agency before September 30, 2002, or for which construction did not begin before July 1, 2003.

(12) The commissioner shall adopt rules to implement this act.

(13) A plant in production or under construction by January 1, 2003, shall continue to receive uninterrupted payments under Section 3 of this act of at least Twenty Cents (20) per gallon of ethanol produced until July 1, 2013.

(14) Promotional or educational efforts related to ethanol that are financed wholly or partially with state funds and that promote or identify a particular crop or commodity used to produce ethanol must also include a description of the other potential sources of ethanol listed in Section 2 of this act. It is the intent of this legislation that corn and resource commodities shall be furnished totally by Mississippi farmers insofar as the supply is available at current market prices.

SECTION 4. This act shall take effect and be in force from and after June 30, 2002.