Posted by: Phillip Fraas
January 23, 2008
Topic: REPORTS ON 2008 FARM BILL STATUS--January 2008 To Enactment

THE RENEWABLE FUEL STANDARD: Congress recently passed, and the President signed into law, the Energy Independence and Security Act of 2007, which contains a provision of very direct and substantial effect on U.S. agriculture. It raised the standard for the production of renewable fuels (the "RFS") to 9 billion gallons for this year and gradually increases the standard after that so that, by 2022, the United States should be producing 36 billion gallons of renewable fuels annually. It also set a subsidiary standard that, in 2022, 21 billion gallons of the renewable fuels should consist of advanced biofuels, such as cellulosic alcohol.

To the extent that this RFS is vigorously implemented in future years, it will strengthen the corn market considerably, since corn now is the preferred feedstock in the United States for renewable fuels, and it will open up huge new markets for other agricultural or forest crops used in producing advanced biofuels such as cellulosic ethanol.

Some argue that, because it creates a large new demand for crops to be feed stocks for biofuels, the RFS is as meaningful or more meaningful for row crop producers as any price or income support provision in the farm bill Congress is working on now. It also is said that, of itself, the new RFS will be sufficient to encourage the development of bioenergy production without additional laws being passed for that purpose. However, others believe strongly that the government, through USDA, also must foster the growth of the bioenergy industry in the United States through specific grant, loan, and assistance programs. Both the House and Senate farm bills passed last year took the latter approach and included substantial energy titles designed to establish and fund bioenergy development programs.

THE FARM BILL PROVISIONS: The energy titles of the Senate and House-passed farm bills each run many dozens of pages. This short blog posting can't hope to describe every important provision of the energy titles. However, what I can do is review what each bill provides in the way of funding the farm bill's bioenergy development initiatives. So, a summary of those provisions follows.

First, it might be helpful to explain how the farm bill can fund programs without appropriations. Normally, when Congress passes legislation authorizing new programs, it doesn't appropriate funds for them in the same package. The funding issues are referred to the powerful appropriations committees of the Senate and House, and they pass annual spending measures providing money for the authorized programs.

Decades ago, however, Congress determined it expedient to create authority within the Department of Agriculture to fund some farm programs directly and without the need of advance appropriations. A government corporation, the Commodity Credit Corporation (the "CCC"), was created and given authority to take money directly from the U.S. Treasury for farm programs. All farm bills since then have funded spending under the price and income support programs through the CCC, rather than just authorizing the programs and leaving it to the appropriators to provide the funds. A good argument can be made for doing it this way: The country's commitment to a stable and healthy agricultural sector requires that farmers be assured that, once Congress establishes a program, the funds will be forthcoming in a timely manner, not delayed and contingent on a later appropriation bill being passed. (By the way, the CCC funding process doesn't leave the appropriators entirely out in the cold; at the end of each year, typically they appropriate whatever is needed to replenish the CCC fund so that it will be able to handle the next year's farm program demands.)

Thus, when describing the funding for the farm bill energy provisions below, I will be referring to this direct funding process, under which the money will become available for the bioenergy programs as soon as the farm bill becomes law.

In each case, I will start by describing the House provision, since the House passed the bill first and the Senate measure was a substitute amendment for the House bill.

Federal procurement: Currently, Federal agencies are required to purchase biobased products; and voluntary biobased labeling is authorized.

The House bill will double current CCC spending to promote such procurement to $2 million annually for the period 2008 to 2012, and expand the purposes for which the money can be used.

The Senate amendment will provide CCC funding of $3 million annually during the period 2008 to 2012.

Biorefinery loan guarantees: This program helps finance the construction of biorefineries and biofuel production plants to conduct demonstration projects on the viability of converting biomass to fuels or chemicals.

The House bill will make available up to $2 billion in loan guarantees for biorefineries through 2012, and allocate $800 million in CCC funds for all activities under the program during the period 2008 to 2012.

The Senate amendment will provide $300 million in CCC funding in 2008 for biorefineries and for repowering of facilities that use fossil fuels so that they can use biofuels, and an additional $245 million through 2012.

Biodiesel fuel education program: Awards competitive grants to projects that teach about the benefits of biofuel use.

The House bill will provide CCC funding for this program of $2 million annually during the period 2008 to 2012.

The Senate amendment will provide, to the maximum extent practicable, annual CCC funding of $2 million during the period 2008 to 2012. (The use of the phrase "to the maximum extent practicable" suggests that the instruction to the CCC to provide such funding won't be completely mandatory, that if the CCC resources are otherwise strained so that all or some of such funding isn't practicable, the CCC would not be obligated to provide the full funding.)

Renewable energy and energy efficiency improvements program: Provides loans, guarantees, and grants to farms and rural business to make renewable energy and energy efficiency improvements.

The House bill will provide $500 million in CCC funding for this program during the period 2008 to 2012.

The Senate amendment will provide $230 million in CCC funding for the program in 2008.

Biomass R & D: This program provides funding for research and development projects on biofuels and biobased-products. It is jointly administered by USDA and the Department of Energy.

The House bill will increase CCC funding for such research and development work from $14 million annually to a total of $420 million for the period 2008 to 2012, and authorize another $2 billion for the ten years ending in 2015.

The Senate amendment will provide, to the maximum extent practicable, $75 million of CCC funding for the period 2008 to 2010.

Bioenergy program: This program makes incentive payments to bioenergy producers, based on year-to-year increases in the quantity of bioenergy that they produce.

The House bill will provide CCC funding for the program of $1.4 billion for the 2008-2012 period.

The Senate amendment is described as investing $345 million into the program over the life of the farm bill, and it authorizes a grant program for entities providing technical assistance.

House biomass energy reserve program/Senate biomass crop transition assistance: These are programs to encourage the production of feedstocks for cellulosic ethanol.

The House bill will provide CCC funding for the biomass energy reserve, but no amount is specified in the bill.

The Senate amendment will provide $230 million in CCC funding in 2008, and $10 million in each of 2009, 2010, and 2011.

Forest bioenergy research: This program, included in the House bill, will provide competitive grants and agreements for the conduct of research and development to encourage new forest-to-energy technologies. The House bill will provide funding of $15 million annually for such research in each year of the period 2008 to 2012.

Regional crop research: This is a new program, created by the Senate amendment, for research on side-by-side bioenergy crop experiments at ten dispersed land-grant institutions. The Senate provision will provide $40 million in CCC funding for the period 2008 to 2010.

Sun grant program: Another Senate amendment-only provision, it will authorize the establishment of six sun grant centers in association with land-grant schools to promote biobased energy technology. The Senate amendment will provide $25 million in CCC funding for the period 2008 to 2010.

All in all, the two bills have much the same focus and, in many instance, roughly comparable funding provisions. It can be anticipated, then, that the conference debate to resolve the Houser-Senate differences on the energy title of the farm bill should not be a heavy lift and that, looking further down the line, the new farm bill will have a substantial impact on the move away from fossil fuels and toward increased reliance on renewable energy.

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FOCUS ON BIOENERGY: The Energy Bill's Renewable Fuel Standard, And the House And Senate Farm Bill Energy Provisions

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