Driving force

BISMARCK, N.D. - The contrast between urban and rural North Dakota is obvious driving across the state into Bismarck. Just outside the city in early December, a brisk, north wind whips dozens of tumbleweeds across the highway.

BISMARCK, N.D. - The contrast between urban and rural North Dakota is obvious driving across the state into Bismarck. Just outside the city in early December, a brisk, north wind whips dozens of tumbleweeds across the highway.

Inside the city, past hotels, shopping malls and a Starbucks, the state Capitol looms large on the skyline. In the marble hallways inside, men and women in business suits huddle together, discussing the upcoming legislative session.

The dress code makes it hard to distinguish between senators and representatives from rural districts and those from cities. But at least one state lawmaker believes there are philosophical differences between urban and rural North Dakota, which may crop up again in the House and Senate chambers this winter.

Urban and rural

"Everybody thinks its an 'R' vs. 'D' fight when you get down there," Sen. Joel Heitkamp told attendees at the North Dakota Dairy and Pork Producers convention Nov. 29. "I would dare say, in my time in the Legislature, we have had way more fights, way more arguments, way more disagreements, urban vs. rural, than we have ever had Republican vs. Democrat."


Heitkamp is a Democrat from District 26, a predominantly rural area in southeastern North Dakota, but he points out that many of the state's urban lawmakers still have roots in rural areas. "That's our strength, that's what we have to call on to make sure we get the legislation through," he advises.

This year, the key issue that may bring rural and urban interests together at the state Capitol, is renewable fuels.

"I think that will be a common denominator for many people," Rep. Tim Flakoll predicted early in the Legislature's organizational session. "We've done a lot of good things in the past, but I think we'll continue to see extensive attention to renewables."

Research emphasis

Flakoll is a Republican representing District 44, centered on the state's most populous city, Fargo. This will be his third session as Agriculture Committee chairman.

Flakoll also serves as provost of the Tri-College University system, a partnership between North Dakota State University, Minnesota State University-Moorhead and Concordia College.

"I used to work at NDSU's ag department," he points out. "I stay in touch with students I used to have, people who used to work for me, the network of extension agents and county agents that I know."

Flakoll says new attention will be paid this year to NDSU's research extension stations. In the past, center directors typically have met only with appropriations committees to discuss budget requests.


"But this year, we're going to hold a joint session of the House and Senate Ag Committees," Flakoll says. "We'll ask the branch stations to give presentations on what they're working on, the problems they see and what they're doing to solve those problems."

Governor's priorities

In his formal budget presentation to state lawmakers, North Dakota Gov. John Hoeven suggests that research is one of his top agriculture priorities.

"As we expand and diversify our economic base, we must also continue to provide strong support for agriculture, and that means strong support for agricultural research, to ensure that our producers remain competitive," Hoeven says.

"We recommend appropriating $9 million to build a new research greenhouse facility (at NDSU) and other funding for the ag research extension centers," he says.

Hoeven says production agriculture no longer is just about food, but also energy. However, he included sources such as wind energy and traditional coal, oil and natural gas in that discussion.

In a one-on-one interview after his budget address, Hoeven describes his goals for renewable energy.

"We have a comprehensive program there, and we want to keep building it. That includes both value-added agriculture and energy, and it's a great synergy between the two," he says. "We want to do more ag research, both for production ag and value-added ag, so it's both about building our ag base as a source of food and fiber and energy."


Hoeven says the state can support that effort by providing production, marketing, financing and tax incentives for renewable fuel production. "But it's also about using the byproducts, that's a huge issue," he adds.

Financing issues

The governor's budget proposal includes a new biofuels PACE program, in addition to the regular PACE program. The original program provides low-interest financing to on-farm businesses to buy down the interest rate on loans approved by a local lender and the Bank of North Dakota.

Hoeven, who served as president and CEO of the Bank of North Dakota from 1993 to 2000, says the new biofuels PACE program will not be limited to just biofuels plants.

"The program will be available not only for new ethanol and biodiesel facilities but also for new or expanding dairies and cattle feeders that can use livestock feed, which is a byproduct of these plants," he says.

The Bio-fuels PACE program provides $500,000 of interest buy-down for each new biofuels facility in North Dakota, and when combined with regular PACE and local match, Hoeven says up to $900,000 is available to finance each new ethanol or biodiesel project.

It is targeted to new ventures that are either 50 percent owned by North Dakotans or 10 percent owned by producers.

Co-product concerns

Flakoll agrees that biofuel byproducts, or co-products as he calls them, are an important part of the renewable energy equation.

"We need to work with universities and experiment stations to make sure they have tools they need to investigate all the best uses for those co-products," he states.

"A lot of those co-products come out wet. Well, for a good number of months in North Dakota, that creates a problem, whether it's transportation, delivery, storage."

Flakoll says it's important to provide NDSU with adequate funding for co-product research. "And not just the traditional ones," he says, "we need to see if there are some new ones that we haven't thought of."

Republican state Rep. Wes Belter, a longtime farmer in the Leonard, N.D., area, also hopes university research will provide some answers. Joining Heitkamp in addressing the state dairy and pork producers convention, Belter refers to a recent report which suggests biofuel plants produce three times as much by-product as we can use.

"This new renewable energy thing certainly opens the door to livestock groups and grain growers to work together," he says. "For corn and soybean growers, it's to their benefit to have as many feedlots and hog enterprises as we can, because it'll help sell their product."

Commissioner's perspective

North Dakota's state agriculture commissioner, Democrat Roger Johnson, was away from the Capitol the day Hoeven unveiled his budget plan. Had he been there, he may not have been satisfied with what he heard.

Johnson says renewable fuel production has far-reaching implications, not only for agriculture, but the state's overall economy as well.

"There are a number of issues that are going to have to be dealt with legislatively on renewables," he told Agweek several days before the Legislature's organizational session.

His ambitious goals include, not only research funding, but also production support.

"I think there should be a dedicated fund for renewables of about $20 million, which is about a quadrupling of what the current dedicated funding is," he says.

Johnson says the state also should con sider funding to raise countercyclical program caps or adjust pricing components if biofuel production causes market fluctuations.

"I also think there should be a $5 million dollar dedicated fund for cellulosic conversions, whether for ethanol or other projects, but predominately research and development money," Johnson adds.

"If we don't move on this now, we've missed the boat," he says.

Johnson says a state incentive for switchgrass production would be a good start. He points out that the native grass is relatively easy to cultivate once it's established and believes a dependable supply of the cellulosic material will attract new businesses to process it.

The mandate debate

Johnson also believes more should be done to encourage North Dakotans to use the biofuels produced within the state. "I support a standard. I always have," he says. "Much of the rest of the country is moving in that direction, and a lot of states are doing it.

"All of the Canadian provinces have been working on it," he says. "The last time I talked with my Canadian counterparts, they were looking at a uniform 7 percent requirement across the country, but they were going to do it on a provincial level.

"To me, it's a no-brainer. At some point, you have to say we're serious about this. We need to be able to say that we're sending the same strong signals as all of the other states and provinces."

Johnson says incentives or cost-shares could be offered to encourage gasoline outlets to install additional tanks, new E85 islands or blender pumps. He notes that higher-percentage ethanol might open the door to liability issues for retailers and hopes those concerns can be addressed.

Hoeven, meanwhile, has not been a proponent of state renewable fuel mandates. He says he's always supported standards at the federal level, but believes "strong goals and incentives" are most effective at the state level.


The governor says when all of the plants currently under construction in North Dakota are completed, they're expected to produce more than 300 million gallons of ethanol a year. He says the state consumes only 367 million gallons of gasoline a year, so the focus should be on sending biofuels out of the state.

"We have only 640,000 people," Hoeven points out. "We're going to continue to be an export market."

While North Dakota may export much of the ethanol it produces, Belter says the opposite may be true for the ag products required to make renewable fuels.

"With ethanol, many states are soon going to become corn deficit states, and North Dakota is probably going to be one of those," he says. "As construction of those new plants is completed, we're going to have to ship corn in to feed those plants."

Like many others, Belter would like to see the state's livestock industry grow, to take advantage of the feed produced as renewable fuel byproducts.

Drawing lines

Belter says one major hurdle standing in the way of livestock expansion in North Dakota is the issue of zoning authority.

"We have a lot of environmental and consumer groups who really don't understand agriculture. They really don't understand what an important part it is of our economy and how important it is to our national security."

Belter asked the dairy and pork producers gathered in Fargo, "if we can't find places in North Dakota to build hog facilities or dairy facilities or feedlots, where are we going to find places for them?"

"If we, as a society in North Dakota, choose not to have livestock here, then we also have to realize the reality that the feed we raise here has to be sent to where the livestock is," he says.

"It means if our children want to be involved in an agricultural industry, they're going to have to move to the states where the agricultural industry exists."

Belter believes a bill may be introduced that would preclude townships and counties from overriding state law when applications are filed for new livestock facilities.

"I certainly don't have a problem with that concept," he admits. "But I will tell you that it will be very difficult to get the legislative votes because legislators can count and, unfortunately, you look at how many hog farmers and cattle feeders and dairy farmers there are vs. how many people live in Fargo and Grand Forks, and the numbers are overwhelming.

"Those of us who are involved in the agriculture industries really have an uphill battle," he predicts. "It will take some real grass-roots planning to develop support for a framework in which you can operate."

Flakoll also expects debate over livestock zoning issues.

"I think we have to be careful so we don't create scenarios where we block the agriculture industry," he warns, "but I've lived close to confined hog operations, so I know there can be some pretty smelly downsides.

"You always hate it when you get into a situation where someone can't use the land as they wish, or they can't sell it to who they want because of some restrictions," he warns, quickly adding that some of the old environmental concerns about big livestock operations might be overcome with new technology.

When asked about the zoning issue, Hoeven says the state health department has some regulatory rule over livestock operations, but adds that counties and other local authorities also play a role.

"The siting is just a logistics issue," Hoeven says, "both in terms of where you put it and how you manage it. That can be done, but it's going to take a communication effort, a collaborative effort with citizens so that they welcome it and recognize the benefits of the economic activity and don't feel that it's an environmental issue."

Collective voice

Lawmakers and politicians on both sides of the aisle agree, given the challenges that production agriculture faces today, it will be critical for farmers, ranchers and renewable fuel companies to come together in the next few months.

Belter says it's a lesson that lawmakers need to keep in mind, too.

"When you go to the Legislature, there's 141 of us, so there's 141 ideas on how things should be done, and then you have the executive branch with their ideas," he says to the dairy and pork producers. "I'd like to commend your two groups for having a convention together, and I think in the future it might be beneficial to include the stockmen in your organization."

He says that for too long, farmers have had a reputation for not working together. "One thing agriculture is noted for is its inability to all be on the same page."

Heitkamp agrees. "We gotta all be on the same page, guys, cuz there's not enough of us," he warns.

"If there's anything I can ask you for, it's gotta be that."

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