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Biofuels; Ag Economy; Climate Issues; Food Safety; and Political Notes

Biofuels: Sec. Vilsack Outlines Strategy

Reuters writer Charles Abbott reported yesterday that, “The government is offering more than $1.5 billion in assistance, from field to filling station, to bring next-generation biofuels to market, Agriculture Secretary Tom Vilsack said on Thursday.

“Vilsack said the aid would assure renewable fuel consumption reaches 36 billion gallons by 2022, with the bulk of it coming from non-food sources such as grass, algae or woody plants.

“During a speech, Vilsack also urged Congress to revive a biodiesel tax credit and to extend, possibly at a lower rate, an ethanol tax credit due to expire on Dec 31. He said a 54-cent-a-gallon tariff on imported ethanol was likely to continue but eventually be phased out.”

The article noted that, “Biofuels are a favorite cause in the U.S. Midwest, where the ethanol industry is concentrated. Vilsack announced the biofuels aid less than two weeks before mid-term elections when Republicans are expected to gain seats. Two-thirds of the most competitive U.S. House races are in rural districts.

“Ethanol makers will produce about 13 billion gallons of the renewable fuel this year, chiefly from corn. A 2007 law requires annual use of 36 billion gallons from 2022 and reserves 21 billion gallons of it for ‘advanced’ biofuels.”

Mr. Abbott explained that, “Vilsack listed four steps to expand biofuel production and usage:

“–Launch of the Biomass Crop Assistance Program, which pays up to 75 percent of farmers’ costs to grow and harvest biomass crops for use in nearby bioengineered or biopower plants.”

“–Selection within 60 days of five biorefinery or bioenergy projects around the nation for loan guarantees to assist construction. An Agriculture Department official said $650 million in guarantees were available and half a dozen projects were under review. USDA awarded two guarantees in 2009.

“–Action to make $281 million available to defray the cost of feedstock to bioplants that increase production. Vilsack said USDA intends to issue a regulation by year’s end to make the money available.

“–Matching funds to retailers to install 10,000 ‘blender’ pumps and storage systems within five years. Blender pumps can dispense fuel with various amounts of ethanol beyond the 10 percent mix that is standard. The pumps and storage tanks cost around $25,000 or more. Total cost could be $250 million.”

Philip Brasher reported yesterday at the Green Fields Blog (Des Moines Register) that, The Agriculture Department is releasing rules today for a program that will compensate farmers for producing energy crops such as switchgrass that can be turned into biofuels. The USDA issued the regulations in conjunction with a speech in biofuels that Agriculture Secretary Tom Vilsack was set to make at the National Press Club this morning.

“Under the Biomass Crop Assistance Program, farmers can get payments of up to 75 percent of the cost of establishing eligible perennial crops and payments for up to five years for annual or non-woody perennial crops. Subsidies for woody perennial crops can go up to 15 years. The USDA started making payments under the program last year but has tightened up the rules. Much of the money was being claimed by paper companies and totaled $250 million in just three months, and critics said the program was driving up the cost of wood products. The payments under the new rules are estimated to total $461 million over 15 years.”

DTN writer Todd Neely reported yesterday (link requires subscription) that, “Vilsack said a final rule on the Biomass Crop Assistance Program will be published in the Federal Register Friday.”

The DTN article also pointed out that, “Ten thousand new blender pumps could be installed across the U.S. during the next five years under a new program announced Thursday by USDA Secretary Tom Vilsack.

“In a biofuels speech, Vilsack said rural development officials will provide matching funds for gasoline retailers to install the pumps. Blender pumps allow consumers to choose between a variety of ethanol blends or gasoline without ethanol.”

Bloomberg writers Christopher Martin and Alan Bjerga reported yesterday that, “The U.S. will pay farmers to produce non-food crops that can be converted to fuels for planes, cars and power plants to reduce reliance on imported oil and boost rural economies, Agriculture Secretary Tom Vilsack said today.

“The Agriculture Department will resume payments to farmers under the 2008 Biomass Crop Assistance Program for eligible perennial crops and work with the Federal Aviation Administration to develop aviation fuels from farm wastes, Vilsack said today at the National Press Club.

“The effort is part of a plan to boost annual production of biofuels, including corn-based and cellulosic ethanol, to 36 billion gallons required by the Renewable Fuels Standard. U.S. drivers will use about 138 billion gallons of gasoline this year, and ethanol facilities are expected to produce 12.8 billion gallons of the additive, according to the Washington- based Renewable Fuels Association.”

The Bloomberg article added that, “Vilsack said he is directing the agency to plan within 60 days and help fund construction of five refineries spread across the U.S. to process biomass into fuels. Higher costs for refiners related to use of the new feedstocks will be paid from up to $281.5 million that remains from the 2008 Farm Act, Vilsack said.”

Also on his speech yesterday, Sec. Vilsack highlighted the release of an Economic Research Service (ERS) report titled, “Effects of Increased Biofuels on the U.S. Economy in 2022.”

An ERS summary of the report noted that, “Achieving greater energy security by reducing dependence on foreign petroleum is a goal of U.S. energy policy. The Energy Independence and Security Act of 2007 (EISA) calls for a Renewable Fuel Standard (RFS-2), which mandates that the United States increase the volume of biofuel that is blended into transportation fuel from 9 billion gallons in 2008 to 36 billion gallons by 2022. Long-term technological advances are needed to meet this mandate. This report examines how meeting the RFS-2 would affect various key components of the U.S. economy.”

And Darren Goode reported yesterday at The Hill’s Energy Blog that, “Agriculture Secretary Tom Vilsack on Thursday said the Environmental Protection Agency’s recent decision to allow the use of a higher ethanol fuel blend in some vehicles is a ‘momentum builder’ for the industry.

“Vilsack expressed optimism that EPA would approve the E-15 blend — comprised of 15 percent ethanol and 85 percent gasoline — for older vehicles in model years 2001 through 2006. He also noted that NASCAR already uses E-15 in its racing cars.”

Reaction to Sec. Vilsack’s Outline

Renewable Fuels Association President Bob Dinneen noted in part yesterday that, “The Obama Administration has shown strong leadership on the issue of domestic biofuels, putting forward a vision that recognizes the importance of the existing industry and the potential of new technologies. Domestic ethanol production is one of the few bright spots in a gloomy economic forecast, providing tens of thousands of jobs in hundreds of rural communities all across the country. By expanding the scope of American ethanol production to include new feedstocks from grasses to wood waste to algae, the industry can extend the benefits seen in rural America to every corner of the country.”

Growth Energy CEO Tom Buis stated yesterday that, “There is no doubt that Secretary Vilsack and President Obama understand the need to move this nation off our dependence on foreign oil, create jobs here in the U.S. and improve our environment. The measures announced today accelerate our progress toward energy independence and getting our economy going again.”

POET noted yesterday that, “‘The 85 farmers we have contracted with to deliver 56,000 tons of biomass this fall are nearly finished harvesting, so the final BCAP rule comes not a day too soon,’ said Jim Sturdevant, Director of Project LIBERTY for POET. ‘We will now apply for our cellulosic ethanol plant to become an approved Biomass Conversion Facility (BCF) so that local farmers can become eligible for matching payments for the biomass they will soon deliver.’”

The National Corn Growers Assoc. (NCGA) indicated yesterday that, “The [NCGA] expressed gratitude and support for new efforts by the U.S. Department of Agriculture and the entire Obama Administration to expand the development and use of domestic renewable biofuels, including ethanol from corn. Agriculture Secretary Tom Vilsack today announced a series of measures aimed at supporting the rural economy and reducing dependence on foreign oil.

“‘Because time is very short before the current Congress ends, we urge lawmakers to take the importance of this initiative to heart and move quickly,’ said NCGA President Bart Schott, a corn grower from Kulm, N.D.

American Soybean Association (ASA) Pres. Rob Joslin stated yesterday that, “ASA applauds efforts by USDA to promote biofuels use and invest in the facilities and infrastructure needed to incorporate more biofuels.”

National Farmers Union Pres. Roger Johnson noted yesterday that, “We are extremely pleased with today’s announced investment in flexible fuel and blender pumps, biorefineries, and research and development.”

In an update posted yesterday at the AgMag Blog, the Environmental Working Group noted in part that, “Although he focused most of his remarks on the prospects for ‘advanced’ biofuels that would be made from something other than corn and soybeans, Vilsack said the administration supports ‘a fiscally responsible short-term extension’ of the tax credit that currently pays 45 cents per gallon to plants that blend ethanol with gasoline for the automobile market. That Volumetric Ethanol Excise Tax Credit (VEETC) is due to expire at the end of the year, but Congress is expected to take up a measure to extend it in a lame duck session following next month’s elections.

Vilsack also called for reinstatement of a lapsed tax credit for biodiesel.

“‘The continued unwillingness of the Administration to make a clean break with first-generation biofuels is a real disappointment,’ said Craig Cox, Senior Vice President for Agriculture and Natural Resources at the Environmental Working Group.”

Ag Economy

Alan Beattie reported earlier this week at The Financial Times Online that, “Four leading economies have called on G20 governments sharply to increase contributions to a fund to help poor countries achieve food security, amid fears that aid promises are being broken.

“The US, Canada and South Korea said that a global trust fund administered by the World Bank, set up in the aftermath of aid pledges at the G8 meeting in Italy in 2009, was critically short of funds.”

The FT article noted that, “The ‘global agriculture and food security programme’, administered by the World Bank, was set up in response to the 2007-08 worldwide food crisis, which revealed weaknesses in agricultural production and distribution across the developing world.”

Meanwhile, William Neuman reported in today’s New York Times that, “Shoppers in the supermarket today can buy chicken free of nearly everything but adjectives. It comes free-range, cage-free, antibiotic-free, raised on vegetarian feed, organic, even air-chilled.

“Coming soon: stress-free?

“Two premium chicken producers, Bell & Evans in Pennsylvania and Mary’s Chickens in California, are preparing to switch to a system of killing their birds that they consider more humane. The new system uses carbon dioxide gas to gently render the birds unconscious before they are hung by their feet to have their throats slit, sparing them the potential suffering associated with conventional slaughter methods.”

Tom Polansek reported in today’s Wall Street Journal that, “The U.S. Department of Agriculture’s failure to accurately predict the size of the current corn-crop harvest has undermined confidence of some investors in the agency’s forecasting, which has for years been held as gospel.

The USDA earlier this month slashed its prediction for corn production, citing smaller-than-expected yields, sending corn prices up 6%. Farmers and investors say the agency should have realized much earlier that the crop wasn’t as plentiful as initially thought.”

Climate Issues

Robin Bravender reported yesterday at Politico that, “The Obama administration will propose the first-ever greenhouse gas emission limits for heavy trucks and buses next week.

“The proposal will call for a 20 percent reduction in heat-trapping emissions from trucks’ tailpipes, according to Dan Becker, director of the Safe Climate Campaign.”

Food Safety

Lena H. Sun reported in today’s Washington Post that, “The voluntary quality control system widely used in the nation’s $1 trillion domestic food industry is rife with conflicts of interest, inexperienced auditors and cursory inspections that produce inflated ratings, according to food retail executives and other industry experts.”

Political Notes

An update posted yesterday at The University of Virginia Center for Politics (Larry Sabato’s Crystal Ball) provided an updated look at the midterm races for the U.S. House.

The update provided additional information regarding some of the House Agriculture Committee Members who are locked in competitive reelection races.

Earlier this week, FarmPolicy.com provided this overview of how a New York Times analysis sketched out some of the House Ag Committee races. This FarmPolicy.com update from yesterday adds the University of Virginia analysis as an additional benchmark estimate of some of the closer Ag Committee contests.

With respect to some of these House Ag Committee matches, a Rasmussen report from yesterday indicated that, “With less than two weeks until Election Day, Republican challenger Rick Berg has moved to a 10-point lead over longtime Democratic Congressman Earl Pomeroy in the race for North Dakota’s only seat in the U.S. House of Representatives.”

In related news regarding some of these competitive House Ag Committee races, Kasie Hunt reported yesterday at Politico that, “Does GOP leadfoot Kristi Noem endanger children’s lives when she’s behind the wheel? According to the Democratic Congressional Campaign Committee the answer is yes – and Rep. Stephanie Herseth Sandlin is refusing to ask the DCCC to take down a tough new ad making the claim. The next House Speaker continues to be an issue as well – Noem raised eyebrows after she told the Argus Leader she wouldn’t commit to supporting John Boehner for Speaker – a decision, sources tell POLITICO, designed to avoid a discussion about Boehner’s opposition to renewable fuel standards and the farm bill.”

The Politico article added that, “According to a Monmouth University poll released Thursday, [Ag Comm Member] Democratic Rep. Frank Kratovil [Maryland] is trailing GOP nominee Andy Harris, 53 percent to 42 percent 11 percentage points. The contest is a rematch of 2008, when Kratovil won by a slim margin—and the new Monmouth data shows he’s lost support on the Eastern Shore, his home, the heart of the district and the most conservative part.”

The Des Moines Register editorial board endorsed Iowa Democrat Rep. Leonard Boswell yesterday. Rep. Boswell is Chairman of the House Ag Subcommittee on General Farm Commodities and Risk Management; both the New York Times and University of Virginia updates categorize this race with GOP competitor Brad Zaun as a “Toss-Up.”

And Neil King Jr. reported in today’s Wall Street Journal that, “How high will the Republican wave crest Nov. 2?

Few places will offer a better gauge on election night than Indiana, where polls close early and where three House seats the Democrats took in 2006 are now up for grabs.”

The Journal article stated that, “If the GOP gets none—or just one—of the three, it will portend a weaker-than-expected tide.

Taking two would signal that the Republicans likely have the momentum to grab the 39 net seats needed to regain control of the House.

But if the Republicans get all three, officials from both parties say, the nationwide GOP wave favor of the GOP could be high indeed.”

Today’s article added that, “Polls and interviews on the ground suggest that two of the races are essentially dead heats. The third, in the southwestern corner of the state known as the Bloody Eighth, which has flip-flopped from party to party, has already tipped strongly toward Republican Larry Bucshon.

“A heart surgeon from the suburbs of Evansville, Mr. Bucshon is running against Trent Van Haaften, a state representative and former prosecutor, for a seat vacated by Democratic Rep. Brad Ellsworth [who serves on the House Ag Committee, and], who is waging an uphill campaign for the Senate against Republican Dan Coats.”

The New York Times currently categorizes the Indiana Eighth as “Leaning Republican,” while the University of Virginia update calls the race, “Likely Republican.”

Keith Good