Biomass Initiative

2008 Farm Bill Provides Federal Support for Advanced Biobased Fuels and Products

Harriet Foster, BCS, Incorporated

Public Law 110-246, the Food, Conservation, and Energy Act of 2008 (FCEA), was passed by the House and Senate overturning a Presidential veto on June 18, 2008. With this legislation, Congress enacted 15 titles “to provide for the continuation of agricultural and other programs of the Department of Agriculture through fiscal year 2012, and for other purposes.” FCEA includes many biomass-related policy measures.

In brief, FCEA supports biomass development by:

• Funding production and research of specialty crops and animal manure for energy uses.
• Establishing a Renewable Energy Advisory Committee (REC) for the U.S. Department of Agriculture (USDA) and its Land Grant University partners.
• Setting guidelines for Federal Biobased Products Procurement.
• Funding and guaranteeing loans for cellulosic biorefinery construction.
• Funding repowering assistance to replace fossil fuel heat and power with renewable sources.
• Establishing contract grower payments for bioenergy crops.
• Involving the Commodity Credit Corporation in bioenergy crop markets.
• Establishing biofuel producer payments for advanced biofuels.
• Encouraging use of forest feedstocks for bioenergy.
• Supporting biodiesel use for transportation fleets.
• Funding and guaranteeing loans for the Rural Energy for America Program’s renewable energy efforts.
• Reauthorizing the Biomass Research and Development Initiative (BRDI) through 2012, and allowing for more flexible BRDI technical solicitations.
• Establishing a Community Wood Energy Program.
• Requesting a comprehensive cooperative Federal study of biofuels infrastructure needs and solutions.
• Requesting a comprehensive cooperative Federal study of biofuels production, feedstocks, markets, and policies.
• Amending several tax and trade provisions for cellulosic ethanol and other biofuels, including:
  • Cellulosic Biofuel Production Tax Credit
  • Alcohol Credit and Volume Calculation
  • Ethanol Tariffs and Duty Drawback Limits on Imports 

Policy measures are funded with a mix of authorized discretionary spending, which will require further congressional appropriations on an annual basis, and mandatory spending. Mandatory spending activities are not required to await a House and Senate appropriations process before receiving funding. Funding details are listed in each section.

A review of the relevant sections of FCEA is below:

TITLE III  - TRADE

• Section 7207: Agricultural Bioenergy Feedstock and Energy Research and Extension Initiative - Addresses Department of Agriculture efforts to enhance production of biomass energy crops and energy efficiency of agricultural operations, and to improve agricultural biomass production, conversion in biorefineries, and biomass use. The Department of Agriculture will award competitive grants in consultation with its National Research, Extension, Education and Economic Advisory Board (see Title VII, section 7104).
  • Funding: Discretionary $50 million for FY 2008-12.

• Section 7311: Specialty Crop Research Initiative- Supports the development and dissemination of science-based tools to address the critical needs of the specialty crops industry.
  • Funding: Mandatory $30 million for FY 2008 and $50 million for FY 2009-12; Discretionary $100 million for FY 2008-12

• Section 11014: Study on Bioenergy Operations - Requires the Secretary of Agriculture to study the role of animal manure for fertilizer and other possible uses, including as a bioenergy feedstock. A report on the study is due to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate by June 18, 2009.

TITLE VII â€" RESEARCH AND RELATED MATTERS

• Section 7104: Renewable Energy Committee - Amends the National Agricultural Research, Extension, and Teaching Policy Act of 1977 to establish a permanent Renewable Energy Committee (REC). The REC “shall study the scope and effectiveness of research, extension, and economics programs affecting the renewable energy industry.” Under the oversight of the National Research, Extension, Education, and Economics Advisory Board (which provides input to the Department of Agriculture and its Land Grant University Partners), the REC will consult with the Biomass Research and Development Technical Advisory Committee, an external group established by the Biomass Research and Development Act of 2000 to provide input to the Departments of Agriculture and Energy regarding their bioenergy activities.

TITLE IX â€" ENERGY

• Section 9001: Energy â€" Amends the Farm Security and Rural Investment Act of 2002 (7 U.S.C. 8101 et seq.), with the following biofuels-relevant policy measures (section numbers preceded by “FSRIA” refer to that separate legislation):

• FSRIA Section 9002: Biobased Products - Establishes various measures to implement the Federal procurement preference for biobased products, named the Biobased Markets Program. Agencies must establish procurement preference for biobased products and products containing the highest level of biobased ingredients possible, within required and practicable performance and cost standards. Guidelines for Federal Agencies participating in the Program must be issued by the Secretary of Agriculture. The Program is to be administered by the Office of Federal Procurement Policy, in consultation with the Secretary of Agriculture. Administration tasks include labeling, program recognition and incentives, collaboration with House and Senate administration, product testing oversight, and reports. Procurement of motor vehicle fuels, heating oil, and electricity are exempted from the requirements of the Biobased Markets Program.
  • Funding: Mandatory $1 million for testing and labeling activities for FY 2008 and $2 million for FY 2009-12; Discretionary $2 million for FY 2009-12.

• FSRIA Section 9003: Biorefinery Construction  - Provides funding for both cost-share grants and loan guarantees to support the construction of commercially viable advanced biofuel refineries. Grants and loan guarantees are to be competitively awarded to high-scoring applicants based on criteria such as market access, cost-share capability, novel feedstocks use, collaboration with producers, processes with positive environmental effects, possible rural economic development, geographic diversity, ability to replicate the process and ability to replicate and scale for commercial use.
  • Funding: Federal cost-share for projects awarded will not exceed 30 percent; awardee cost-share can include up to 15 percent material payment. Construction laborers involved in these biorefinery projects must be paid competitive wages. For loan guarantee funding, mandatory funding of $75 million is made available in FY 2009, $245 million in FY 2010 and $150 million for FY 2009-12.

• FSRIA Section 9004: Repowering Assistance - Reauthorizes Department of Agriculture payments for replacing fossil fuel to produce heat or power with renewable sources to operate existing biorefineries.
  • Funding: Mandatory $35 million for FY 2009, until expended.

• FSRIA Section 9005: Bioenergy Program for Advanced Biofuels - Requires payments to advanced biofuel producers on a contract basis. Limited to not more than five percent of available funds available for each fiscal year, to producers for production at facilities with a total refining capacity exceeding 150 million gallons annually.
  • Funding: Mandatory $55 million for FY 2009-10, $85 million for FY 2011, and $105 million for FY 2012; Discretionary $25 million for FY 2009-12.

• FSRIA Section 9006: Biodiesel Fuel Education Program - Establishes grants for government and private educational efforts for biodiesel use in fleets. Limited to non-profits and educational institutions, to be carried out by the Secretary of Agriculture in consultation with the U.S. Department of Energy.
  • Funding: Mandatory $1 million for FY 2008-12.

• FSRIA Section 9007: Rural Energy for America Program - Amends FSRIA section 9006 (becomes section 9007) regarding the Department of Agriculture’s Renewable Energy Systems and Energy Efficiency Improvement Program. Loan Guarantee Limits are capped at $25 million, while Federal Share is capped at 75 percent of costs. Cost-share grants are established for energy audits and feasibility studies, and a production incentive program is also established in lieu of grants.
  • Funding: Mandatory $55 million in FY 2009, $60 million in FY 2010 and $70 million for FY 2011-12; Discretionary $25 million for FY 2009-12.

• FSRIA Section 9008: Biomass Research and Development - Repeals Title III of the Agriculture Risk and Protection Act of 2000 (PL 106-224) regarding the Biomass Research and Development Initiative managed by the Departments of Agriculture and Energy, and reauthorizes it through 2012 under Title IX of FCEA. The Senate provides flexibility on distribution of funds between solicitation technical areas.
  • Funding: Mandatory $20 million in FY 2009, $28 million in FY 2010, $30 million in FY 2011 and $40 million in FY 2012; Discretionary $35 million for FY 2009-12.

• FSRIA Section 9010: Feedstock Flexibility Program for Bioenergy Producers â€" Establishes a program for the Secretary of Agriculture to purchase and resell bioenergy crop commodities for bioenergy producers’ use. The program will run from 2008-12.
  • Funding: The program will be run and funded via the existing Commodity Credit Corporation.

• FSRIA Section 9011: Biomass Crop Assistance Program - Creates establishment and annual grower, collection, harvest, transportation, and storage payments for renewable energy crops. The Secretary of Agriculture is to report to House and Senate committees regarding data and participant information gathered by June 18, 2012.
  • Funding: Mandatory as necessary, FY 2008-12.

• FSRIA Section 9012: Forest Biomass for Energy - Requires the Secretary of Agriculture to encourage forest biomass to be used for energy production R&D projects.
  • Funding: Discretionary $15 million for FY 2009-12.

• FSRIA Section 9013: Community Wood Energy Program - Establishes a Department of Agriculture grant program to assist with community wood energy feasibility studies and plans, and acquire and upgrade community wood energy system.
  • Funding: Discretionary $5 million for FY 2009-12.

·         Section 9002: Biofuels Infrastructure Study â€" Requires the Secretaries of Energy and Agriculture and the Administrator of the Environmental Protection Agency to assess biofuels infrastructure needs, recommend development approaches, and analyze cost, siting, and regulatory issues of infrastructure development. The study will include examination of a variety of infrastructure and transportation possibilities, and be conducted in consultation with interest and expertise in the area. A report to Congress is required upon completion.

TITLE XV â€" TRADE AND TAX PROVISIONS

• Section 15321: Cellulosic Biofuel Production Credit - Establishes a per-gallon tax credit for registered cellulosic biofuel producers of $1.01 between December 31, 2008 and January 2, 2013. Cellulosic biofuel is defined according to Environmental Protection Agency regulation in the Clean Air Act (42 U.S.C. 7545), and additional mixing and proof guidelines are provided in this section of the Farm Bill. Fuel must be produced and used in the United States, and credit overlaps with the biodiesel tax incentives are not allowed. These measures apply to fuel produced after December 31, 2008.

• Section 15322: Comprehensive Study of Biofuels - Requires the Secretaries of Treasury, Agriculture and Energy, and the Administrator of the Environmental Protection Agency to work with the National Academy of Sciences to study current biofuels science. Results of the study will include information on: current and future projections of biofuels production, U.S. capability for biofuels production and feedstocks availability, domestic effects of increased biofuels production, conversion of corn ethanol plants for cellulosic or biodiesel fuel production, analysis of corn ethanol versus other renewable fuels, the impact of the tax credit in section 15321 on agriculture and silviculture capabilities, and possible future bioenergy study subjects. Study findings must be reported to Congress. Various deadlines for congressional reports are detailed in section 15322(b).

• Section 15331: Alcohol Credit Modification - Amends section 40(h) of the Internal Revenue Code of 1986 regarding a reduced tax credit for ethanol blenders, increasing it to 45 cents per gallon for calendar year 2008, and 51 cents per gallon for calendar year 2009 for any gallon over 75 billion gallons’ annual production or importation. The modification took effect June 18, 2008.

• Section 15332: Alcohol Volume Calculation for Fuel Credits - Amends section 40(d) of the Internal Revenue Code of 1986, allowing for inclusion of up to two percent denaturant in biofuel volume calculations, a decrease from the previous five percent. The amendment takes effect for fuel sold after December 31, 2008.

• Section 15334: Ethanol Tariff Extension - Extends Headings 9901.00.50 and 9901.00.52 of the Harmonized Tariff Schedule of the U.S. from January 2009 to January 2011. These Headings impose cumulative general import duties on imported gallons of ethyl alcohol and/or ethyl alcohol mixtures, if used as a fuel or in producing a mixture to be used as a fuel.

• Section 15335: Limitations on Duty Drawback on Certain Imported Ethanol - Amends the Tariff Act of 1930 (19 U.S.C. 1313(p)), regarding substitution of finished petroleum derivatives, to add special duty rules on imports of ethyl alcohol and ethyl alcohol mixtures. Exported fuels and mixtures are not eligible for duty refunds if the duty drawback claim is based on fuels not containing ethyl alcohol or an ethyl alcohol mixture. The limitations are established for imports on or after October 1, 2008, or duty drawback claims filed regarding the imports on or after October 1, 2010.

Complete text of the bill can be found at:

http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=110_cong_bills&docid=f:h6124enr.txt.pdf

Biomass Spotlight â€" Nebraska

Nebraska is the third largest corn producing state in the United States, producing approximately 1.47 billion bushels of corn in 2007. It is also the fifth largest soybean producing state, producing approximately 190 million bushels in 2007. Nebraska’s large agricultural output has allowed it to become a major source of biofuels production. The state is set to almost double its current ethanol capacity of 1.3 billion gallons/year to 2.5 billion gallons/year in 2009. In addition, biodiesel production in the State is expected to triple from its current combined production capacity of 25 million gallons a year to 75 million gallons with a new facility scheduled to come on line later this year. The table below displays Nebraska’s current biofuels production capability.

Eleven ethanol production facilities in Nebraska receive a state-funded production incentive of 18 cents per gallon, with a limit of 18.6 million dollars a year. The facilities receiving this credit can do so for eight years. According to Steve Sorum of the Nebraska Ethanol Board, a state agency created in 1971 that furthers the development of the ethanol industry, Nebraska is naturally attractive to ethanol producers because of the large amount of corn grown as well as the amount of cattle raised in the state. The ethanol producers can sell dried distillers grains (DDGs), a byproduct of ethanol production, to cattle farmers for feed.

The Nebraska Ethanol Board is also involved in funding several ethanol-related research projects. Currently, the Board is funding cellulosic ethanol research being performed at the University of Nebraska at Lincoln. The research is focusing on a variety of feedstocks including wheat straw, corn stover and switchgrass. In addition, the University is researching ways to improve DDG technology as an alternative feed to corn. In a major step forward, Abengoa is operating a pilot-scale cellulosic facility at one of its locations in order to investigate how best to integrate cellulosic technology into an existing facility.

Currently, there are approximately 34 fueling stations in Nebraska that offer E-85 and 5 facilities offering biodiesel. According to Mr. Sorum, the state is putting more emphasis on expanding the use of E-85. Currently, Nebraska’s ethanol production capacity is double the amount of gasoline the state consumes. The Nebraska Ethanol Board is engaged in a large public education campaign to encourage retailers to sell the product. Mr. Sorum noted that there are 65,000 flex fuel vehicles on the road in Nebraska that would be able to use the fuel. Currently, 75 percent of the 1,500 gasoline retailers in the state sell blends of gasoline containing at least 10 percent ethanolâ€"accomplished without the use of any mandates, mainly because of the level of ethanol produced in the state.

Governors Talk of Moving Beyond Corn-Based Ethanol (7/13)

Governors from the coal fields of West Virginia to the corn fields of Iowa spoke about moving beyond ethanol produced just from food sources. They sometimes had different priorities in reaching this conclusion - priorities that can be as simple as who grows corn and who feeds it to livestock. The Governors were not concerned with replacing corn as a feedstock, but rather supplementing: using switchgrass or wood waste products, for example, along with corn.

Link: http://hosted.ap.org

Cleveland, Tennessee Based Kudzu Ethanol Preparing For Production (7/7)

A Cleveland, Tennessee man who knows how to make ethanol out of kudzu may soon bring his refining process to market. This time next year, the gas you fill-up with in Chattanooga may be cheaper than other parts of the country.  Tom Monahan with Agro*Gas says Chattanooga will be number one and then it will spread out from there. In the basement of a Cleveland, Tennessee home, Doug Mizell's experiment in energy appears to be taking off.  He's found a way to turn kudzu into fuel.  Mizell says "if it blows a good blue flame like that, that means there's purity there." Mizell's spent the last decade perfecting a process to refine kudzu into commercially viable ethanol.  Monahan says "cellulosic which is the way we're going, is from plant refuse, we basically can use anything that grew and convert it into ethanol." And since this ethanol isn't corn or soy based, it won't impact food prices.  It takes 10 to 15 pounds of plant material to make a gallon of fuel, at a cost of about $1.30.

Link: http://ethanol-news.newslib.com/story/6938-27060/

South Carolina Passes Ethanol Law Challenged by Oil Companies (6/26)

South Carolina fuel distributors must have access to pure gasoline needed to make their own ethanol blends under a law that supporters say is first in the nation and will save customers at the pump. Industry experts say other states could enact similar laws. More than a dozen states, largely in the South, will likely consider such legislation next year, said Daniel Gilligan, spokesman for Virginia-based Petroleum Marketers Association of America. But oil companies moved quickly to stop it here and vow to do so elsewhere: They filed a lawsuit in the state's Supreme Court on Thursday - one day after the measure became law - claiming it violates the state constitution.
Link: http://hosted.ap.org/dynamic/stories/E/ETHANOL_BLENDING

Hoover, Alabama to Use Wood Based Ethanol as Fuel Alternative (6/19)

Hoover Mayor Tony Petelos announced on that the city will be the first city to use wood-based ethanol. A company called Gulfcoast Energy in Livingston, Alabama has built the first demo plant to produce it. Petelos said the move will make a huge difference. Hoover has been using already using leftover cooking oil from local restaurants to produce fuel. Two years ago President George Bush visited Hoover and praised leaders for their innovation. Now the city's fleet will be powered by ethanol, a cheaper and more environmentally friendly alternative fuel.

Link: http://ethanol-news.newslib.com/story/6938-26585/

PG&E Contracts Solar Thermal-Biomass Hybrid Power (6/12)

California utility PG&E Corp said it has contracted with a renewable energy unit of Portuguese conglomerate Martifer for 106.8 megawatts (MW) of solar thermal-biofuel hybrid power. Two projects, which will provide enough power for nearly 75,000 homes in northern and central California, combine solar thermal technology with steam turbines powered by gas produced by local agricultural waste and livestock manure. "This hybrid technology combines two renewable resources abundant in California -- solar energy and biofuel," Fong Wan, vice president of energy procurement for PG&E, said in a statement. The plants will be located near Coalinga, California, in the center of the state, and will help PG&E reach the state-mandated goal of increasing the amount of electricity it produces from renewable sources. The projects are expected to begin operations in 2011.

Link: http://www.reuters.com/article/environmentNews/idUSN1139875020080612

Ethanol Plants Also Must Work Within Water Use Regulations (6/14)

Cambridge, Nebraska - Standard Ethanol plant workers in Cambridge are grinding corn, processing ethanol and trucking wet distillers grains to area livestock producers. But the site won’t be considered a finished plant until mid-July or early August. Bob Lundeen, chief executive officer of North Platte-based Mid America Bio Energy Inc., which owns 60 percent of the plant and manages it, said there will be a dedication of the 44 million-gallons-per-year plant in October. A similar Mid American Bio Energy plant at Madrid had a grand opening Oct. 6, 2007. Cambridge plant managers already unload 100 semitrailers of corn a day and sell 50 to 55 loads of distillers grains that are a co-product of ethanol processing. Lundeen said they have contracts to sell most of the ethanol to West Coast buyers. Burlington Northern Santa Fe Railroad provides transportation. At capacity, the plant will use 16 million bushels of corn annually. There is on-site storage in two huge bins for 500,000 bushels. Water is the biggest issue for ethanol plants and other industries interested in sites within the Republican and Platte basins. All or major parts of those basins are fully appropriated or overappropriated, so no net new water use is allowed without retiring an equal or greater water use.

Link: http://ethanol-news.newslib.com/story/6938-26379/