Minnesota governor expected to target ethanol subsidies in moves to close $5 billion state budget gap

In Minnesota, Gov. Tim Pawlenty is expected to tackle ethanol subsidies in his efforts to close a $5.2 billion budget deficit caused by the economic crisis. The state paid out $15 million in 2007 to ethanol plants in a per-gallon production subsidy program, but cut the subsidy program as part of efforts to meet an earlier budget crisis, and observers expect the subsidy to be targeted again. Rural Minnesotans, facing ethanol prices in the $1.50 range in the wholesale spot market and corn prices in the $3.50 range, will be hard-pressed to keep ethanol production going without subsidies until ethanol prices recover.

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