North Dakota offers $15M low-interest loans to ethanol producers

By Erin Voegele | April 30, 2020

Officials in North Dakota on April 30 announced the launch of a low-interest loan program that will provide ethanol producers located within the state up to $15 million to help weather the economic impacts of the COVID-19 pandemic.

North Dakota Agricultural Commissioner Doug Goehring announced the approval of the Ethanol Recovery Program during a press conference held on April 30. The program was approved earlier in the day by the North Dakota Industrial Commission and will be administered by the Bank of North Dakota.

Loans provided under the program will have a 1 percent interest rate. Goehring said the program offers a six month deferment on principal and interest.

During his presentation, Goering spoke about the importance of the ethanol industry, noting it provides rural jobs while supporting grain farmers and the state’s livestock industry. He estimates North Dakota’s ethanol industry adds $600 million to $800 million in economic impact to the state annually.

North Dakota Gov. Doug Burgum explained the loans will be backed by the state’s Strategic Investments and Improvements Fund. He also noted that a law passed by the state legislature last year that established a fuel production loan guarantee program set up the ability to do this back-stop guarantee from the SIIF fund.

A statement released by the Industrial Commission on May 1 explains that BND is able to provide working capital to the ethanol industry by utilizing its Partnership in Community Expansion program, which offers buydowns to a borrower’s interest rate, in tandem with the fuel production loan guarantee program for biofuels. To assist private sector banks in providing the loans, BND is utilizing that loan guarantee program to provide a 100 percent loan guarantee to financial institutions providing loans to the state’s ethanol producers.

Ethanol producers can access up to $15 million or 50 cents per bushel of corn that would have been normally been purchased during the first two quarters of 2020, whichever is less. BND will provide buydown from its PACE program up to a maximum of $500,000.

“The North Dakota Ethanol Producers Association would like to thank the North Dakota Industrial Commission for its approval of the Ethanol Recovery Program, which is a $50 million loan guarantee and interest buydown program to provide a bridge for the state’s ethanol producers to future profitability,” said Gerald Bachmeier, president of the NDEPA.  

“The North Dakota Ethanol Producers Association worked with the Bank of North Dakota over the past week to ensure the program will be effective in bringing the industry, which is essential to farmers and rural communities, through this unprecedented time,” he said. “Fuel demand has plummeted due to the COVID-19 pandemic and global supplies of crude oil have pushed fuel prices down. As biofuel plants across the country close, this program will offer significant support toward sustaining North Dakota’s ethanol plants during this crisis.

“North Dakota’s ethanol industry commends the Bank of North Dakota for its responsiveness and excellent efforts to quickly and effectively develop this program, which fills the gap where the federal government programs are not working for the state’s ethanol industry,” Bachmeier said. “The ethanol industry is also appreciative of the North Dakota Legislature for previously authorizing the programs and funding that allowed the Ethanol Recovery Program to be established.”

North Dakota has five ethanol plants that can benefit from the program.