In November of 2002, Governor John Hoeven announced a proposal to provide incentive funding for new ethanol plants built in the state. Subsequently, the 58th Legislative Assembly approved Senate Bill 2222 which set forth the ethanol production incentive program in the North Dakota Century Code. This bill was signed into law and has received revisions in subsequent legislative sessions. The currently applicable chapter of the Century Code is 17-02.

The ethanol production incentive currently in place for North Dakota is a counter-cyclical program. This means it helps producers during adverse times when ethanol prices are unusually low and/or corn prices are unusually high. When these prices are normal or better than normal, the incentive is phased out and market conditions are allowed to prevail.

There are two components to the incentive. One component is directly tied to the average North Dakota wholesale ethanol price, as published by Axxis Petroleum, for the preceding quarter. The other is directly tied to the average North Dakota corn price for the preceding quarter, as established by the USDA National Agricultural Statistics Service.

For information about the program contact North Dakota Department of Commerce, 701-328-5300.

How to Apply

Formula Information

The ethanol price component is calculated by subtracting the average ND wholesale ethanol price for the quarter, in dollars per gallon, from the baseline price of $1.30 per gallon, and then multiplying the result by the number of gallons produced during the quarter and an incentive factor of 0.2. For example, if a facility produced 12,500,000 gallons during a quarter when ethanol prices averaged $1.10 per gallon, the ethanol portion of the incentive for that quarter would be calculated as follows:

(1.30 - 1.10) x 12,500,000 x 0.2 = $500,000

Similarly, the corn price component is calculated by subtracting the $1.80 per bushel baseline cost from the average North Dakota corn price for the quarter and multiplying the result by the number of gallons produced during the quarter and an incentive factor of 0.1. Continuing with the example above, if corn prices averaged $1.60 per bushel, the corn portion of the incentive for that quarter would be calculated as follows:

(1.60 - 1.80) x 12,500,000 x 0.1 = ($250,000)

Note that in the ethanol component the actual is subtracted from the baseline, while in the corn component the baseline is subtracted from the actual. The reason for this is that the incentive is designed to increase when ethanol prices decline and/or when corn prices rise. Also note that either component may calculate out to be positive or negative, depending upon prevailing market prices. 

The net incentive is simply the sum of the two components, as shown below for this example:

$500,000 + ($250,000) = $250,000

The incentive available to each eligible producer in any year is capped at $1.6 million, and payouts can only be made to the extent that money is available in the incentive fund. Also, no producer may receive in excess of $10 million in incentive payments  over the life of their production facility or for longer than ten years.