South Dakota State panel OKs ethanol pumps fund

Source: Cody Winchester • Argus Leader  • Posted: Wednesday, December 21, 2011

A state legislative panel voted Tuesday to establish a fund to pay fuel station owners to install ethanol blender pumps.

The interim rules review committee passed the proposed rule 5-0. It will be incorporated into the state’s administrative rulebook in 20 days.

Under the program, authorized by a Senate bill passed last session, fuel stations can apply for grants to install pumps that dispense blends of 10 percent ethanol, 15 percent or more ethanol, and 25 percent or more ethanol.

“Ethanol production is a very effective way to increase the value of our agriculture base,” Gov. Dennis Daugaard said in a news release. “By making more ethanol blends available, we are improving producer opportunities, creating jobs, and stabilizing our domestic fuel supplies.”

The grants also could end up paying for “projects to encourage the purchase of flex fuel vehicles in the state,” as well as marketing efforts to “encourage the increased use of ethanol in this state.” To be eligible, the projects must be in South Dakota or “directed toward end users in this state.”

Station owners will be reimbursed up to $25,000 for the first pump and $10,000 for each pump thereafter. Station owners would have to keep the pumps for at least two years.

The money for the grants — $3.5 million the next five years — will come from the state’s existing ethanol production credit program, which pays the state’s ethanol producers 20 cents for each gallon distilled.

Dana Siefkes-Lewis, president of the South Dakota Ethanol Producers Association, said the total amount appropriated for the producer’s credit will not change; it will just be spread out over more years. She said marketing will be key.

“The blender pump progam that we’re doing in South Dakota is great, but for it to work in other places that aren’t as ethanol-friendly, there’s going to need to be more education,” said Siefkes-Lewis, who is the chief administrative officer at Redfield Energy.

In testimony before the rules committee, Hunter Roberts, energy policy director in the Governor’s Office of Economic Development, said the grant amounts would be reviewed annually.

“We don’t know what sort of demand is going to be out there,” he said.

The first 80 percent of the grant money will be offered on a first-come, first-served basis; the final 20 percent will be awarded competitively.

The state could sue grant recipients that don’t abide by terms of the grant unless the default is driven by fuel shortages, “changes in fuel market conditions” or regulatory changes that make compliance impractical.

Committee Chairwoman Sen. Jean Hunhoff, R-Yankton, said she is concerned about the broadness of these conditions.

“We’re treating this population differently than if I’m a regular small-business owner, and there’s a new federal regulation that causes my costs of business to go up.”

Roberts replied: “We’re trying to accept some of that risk with the station owners — saying, this is a newer technology, we’re willing to share in some of that risk, or share some of that pain, if federal regulations were drastically changed.”

The Governor’s Office of Economic Development will begin accepting grant applications Jan. 9.