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Analysis: Farm bill hikes biofuels funding

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by Rosalie Westenskow
Washington (UPI) May 22, 2008
The farm bill passed last week by Congress, and promised a veto this week by President Bush, gives a big boost to the renewable fuels industry.

The bill passed by high majorities, with a vote of 318-106 in the House and 85-15 in the Senate -- enough to override a veto if the majority of policymakers vote the same way again.

Government subsidies and funding for the research and development of alternative fuels will increase by $1 billion if the bill becomes law.

The provisions target cellulosic fuels, made out of non-food crops such as switchgrass or waste materials like corn cobs. In recent weeks, as food prices have skyrocketed, some experts have said increased production of corn-based ethanol is partly to blame. As a result, Congress wants to get cellulosic fuels up and running as soon as possible.

"America's energy solution will be achieved by expanding renewable fuel production and alternative energy through investment in scientific research," said Rep. Nick Lampson, D-Texas, who met with Senate leaders in conference to reconcile the House and Senate versions of the bill. "We need to make sure we are providing incentives and resources to industries that are working to diversify America's energy platform."

The bill certainly does that, allocating the $1 billion for alternative fuels into a variety of different programs, including $320 million in loan guarantees for biorefineries producing advanced biofuels. It also establishes a Biomass Crop Assistance Program, providing incentives for farmers to grow crops specifically designed for fuel production.

These "dedicated energy" crops are just beginning to emerge on the marketplace. Ceres, a bioenergy company, announced in April the release of its first commercial series, called Blade Seeds, which will be available this fall.

Dedicated energy crops have been bred by scientists for desirable traits to increase the amount of biomass per acre and gallons per ton produced. While these crops could play a key role in getting cellulosic fuels on the road, farmers need incentives to grow them, said Anna Rath, vice president of commercial development at Ceres.

"It's difficult for growers to want to plant large acreage of dedicated energy crops until they're assured a market in the form of a biorefinery," Rath said Monday in a teleconference on the issue.

However, a company is not likely to build a biorefinery in an area unless a sufficient feedstock base has already been established. The farm bill helps solve this issue, Rath said.

"The Biomass Crop Assistance Program really takes care of the chicken-and-the-egg problem by providing farmers with the assistance that they will need to establish and produce dedicated energy crops, even in advance of the biorefinery actually being built," she said.

Encouraging farmers to jump into the biofuels sector goes beyond providing incentives to plant new crops. Other cellulosic biorefineries, like one slated to be built in Emmetsburg, Iowa, plan to produce fuel from agricultural wastes, and the cooperation of local farmers will be necessary to get the feedstock needed. Farm bill subsidies will help convert farmers to the process, said Darrin Ihnen, a South Dakota farmer and board chairman of an ethanol plant run by POET, the company that plans to open a cellulosic biorefinery in Iowa.

"In most cases biorefineries that need biomass will be asking farmers to change ag practices that go back generations," Ihnen said. "The biorefining crop payment included in the farm bill will help convince farmers to make an investment and take a chance on something new."

Despite the benefits the farm bill could have for alternative fuels and its popularity in Congress, the White House opposes the bill. Last week President Bush said the bill "spends too much."

Although Congress projects the total increased cost of the bill is $10 billion, the administration estimates it will add $20 billion to the current 10-year spending level of $600 billion. And these increases won't benefit Americans as a whole, Bush said.

"Farm income is expected to exceed the 10-year average by 50 percent this year, yet Congress' bill asks American taxpayers to subsidize the incomes of married farmers who earn $1.5 million per year," Bush said. In addition, "the bill creates an egregious new sugar subsidy program that will keep sugar prices high for domestic consumers, while making taxpayers subsidize a handful of sugar growers."

The bill is also full of "massive earmarks," said Agriculture Secretary Ed Schafer, pointing as an example to the $170 million allocated to West Coast salmon fishermen.

Despite concerns over spending and other potential problems, the biofuels provisions haven't sparked any of the controversy, said Matt Letourneau, minority spokesman for the Senate Energy Committee.

"Advanced biofuels really are part of the solution, so I don't think you'll see much opposition to that in Congress," Letourneau told United Press International.

Because of this, biofuels industry representatives aren't too worried about the president's promise to veto the bill. If Congress fails to override the veto, some of the provisions probably will be changed to satisfy the White House, but it's not likely the biofuels subsidies will be altered, said Brent Erickson, vice president of the Biotechnology Industry Organization, a trade association that includes many bioenergy companies among its members.

"We should be fine either way," he told UPI.

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