Brief ⁽¹⁾

HB 2011, as amended, would modify the section of law dealing with incentives for the production of ethyl alcohol. Specifically, the bill would provide for an incentive of $.05 for each gallon of agricultural ethyl alcohol sold by the producer to an alcohol blender with an annual cap of $2 million. This incentive would only be for current producers. After three years, this incentive would end. Any amount of money left at the end of the year would be transferred to meet the needs of the new production incentive described below. The bill would create the current production account in the Kansas Qualified Agricultural Ethyl Alcohol Producer Incentive Fund.

In addition, the bill would create an incentive for new production or expanded production of ethyl alcohol. This incentive would be for facilities which have new production of at least 5,000,000 gallons. No incentive would be available for new or expanded production over 15,000,000 gallons. The incentive on expanded or new production would be $.075 and would be limited to seven years. The bill would create the new production account in the Kansas Qualified Agricultural Ethyl Alcohol Producer Incentive Fund. When the current producer incentive ends, the total dollar amount of incentive for new or expanded production would be $3.5 million. Any moneys left at the end of the year would be held in the new production account for the next year.

The provisions of the agricultural ethyl alcohol incentive would expire on July 1, 2011.

Background

The bill was introduced by the 2000 Special Committee on Utilities.

Numerous conferees appeared in support of the bill including representatives of the following: the City of Russell; ICM (an ethanol production company); East Kansas Agri-Energy; the State Bank of Hoxie (Heartland Energy); NESIKA Energy; High Plains Corporation; the Kansas Corn Growers/Kansas Grain Sorghum Producers; and the Kansas Farm Bureau. In addition, Representative Nichols appeared in support of the bill. Written comments in support of the bill were provided by the Kansas Grain and Feed Association. Also appearing before the Committee on an informational basis were the Secretary of Transportation; a representative of the Kansas Corn Growers/Kansas Grain Sorghum Producers; and Kansas State University Extension Agents from McPherson and Anderson counties.

The major amendments made by the House Committee on Agriculture included the caps on the existing and expanded production; the new incentive for new or expanded production; and provide for the placement of moneys left in each incentive provision.

The fiscal note on the original bill states that the bill has the potential to affect state revenues. The note states that the Department of Revenue indicates, if the production of ethyl alcohol doubles as a result of the bill, then the additional incentives paid to producers would decrease the State Highway Fund by approximately $1.6 million per year. These incentives also would reduce the Special City and County Highway Fund by approximately $1.1 million per year.

1. *Supplemental notes are prepared by the Legislative Research Department and do not express legislative intent. The supplemental note and fiscal note for this bill may be accessed on the Internet at http://www.ink.org/public/legislative/fulltext.cgi