The Minnesota Legislature acted appropriately when it denied ethanol subsidies to the succeeding owners of the controversial Gopher State Ethanol Plant in St. Paul after it went out of business, a federal judge ruled Wednesday.

U.S. District Judge David Doty said the state was within its rights to suspend an estimated $2.1 million in payments when the plant stopped producing ethanol after it closed in 2004 in bankruptcy.

BHGDN, a firm tied to Bruce Hendry and family members of legendary Minnesota businessman Curt Carlson, sought the so-called "deficiency payments" after buying the plant and, they believed, its rights to the payments in 2005.

BHGDN got some payments until the Legislature changed the law last year.

BHGDN then sued the state and the state Department of Agriculture, which administered the payment program, in July 2008. It argued that a legislative amendment restricting payments only to plants actually producing ethanol was unconstitutional and unfairly singled out the former Gopher State plant.

Doty disagreed.

"The stated goal of the [ethanol] fund was to increase the production of ethanol in Minnesota," Doty wrote in his 15-page order. "Thus, the state had a legitimate interest in ensuring that the deficiency payments supported ethanol production, and the state's decision not to make deficiency payments to businesses that no longer produced ethanol was rationally related to that interest."

Doty's ruling also cleared Minnesota Agriculture Commissioner Gene Hugoson and Finance Commissioner Steve Ernest from the lawsuit.