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Biofuels- Tax Issue; Farm Bill; Ag Econ; Competition; and Climate

Tax Issues: General Overview

Lori Montgomery and Paul Kane reported in today’s Washington Post that, “The Senate opened debate late Thursday on a reworked tax package that would add incentives for renewable energy, which many Democrats have demanded, but leave intact the core elements of a deal negotiated by the White House and Republicans, including a revived inheritance tax that has outraged liberal lawmakers.

“As the Senate steamed toward a Monday afternoon vote on the far-reaching package, House Democrats were in open revolt. Amid chants of ‘Just say no,’ they agreed overwhelmingly during a private meeting Thursday to block the measure from going to the House floor, a symbolic move that underscored the depth of their anger.

“Later, House Democratic sources said several options were under discussion, including an amendment to strengthen the inheritance tax provisions. By changing the underlying terms of the deal, however, such an effort could imperil the bill in the Senate, raising the risk that lawmakers could leave town without extending a host of tax provisions that are set to expire on New Year’s Eve – hitting virtually every U.S. family with an immediate tax increase.”

Tax Issues: Political Background- House

Anna Palmer reported yesterday at Roll Call Online that, “The frustration with President Barack Obama over his tax cut compromise was palpable and even profane at Thursday’s House Democratic Caucus meeting.”

Mike Lillis and Russell Berman reported yesterday at The Hill Online that, “The House Democratic Caucus on Thursday rejected the tax deal negotiated between the White House and Senate Republicans.

“The non-binding vote of the caucus held during a closed-door meeting puts tremendous pressure on House leaders to win changes to a proposal the White House has presented as a ‘take it or leave it’ package.

“House Speaker Nancy Pelosi (D-Calif.) issued a brief statement after the vote indicating that lower-chamber Democrats will fight to alter the bill.”

And a news release yesterday from Rep. Peter Welch (D-Vt.) indicated that, “In a significant demonstration of opposition to President Obama’s tax deal, [Rep. Welch] and 53 members of the U.S. House came out against the President’s proposal Thursday morning.

“In a letter sent to Speaker Pelosi Thursday, Welch and his colleagues called the proposal ‘fiscally irresponsible’ and ‘grossly unfair.’”

With respect to biofuels and the House, Reuters writer Charles Abbott reported yesterday that, “A renewed tax break for blenders of ethanol should be included in tax-cut legislation being negotiated in Congress and the White House, a high-ranking Democrat in the House of Representatives said on Thursday.

“‘Let’s bring ethanol to the table,’ said Representative James Clyburn, the third-ranking Democrat in the House.

“House Democrats are insisting that the terms of President Barack Obama’s tax-cut plan, which he negotiated with Republicans, should be reopened. Besides ethanol, House Democrats are particularly upset with the Obama plan’s tax breaks for the wealthiest Americans.”

Tax Issues: Political Background- Executive Branch

Emi Kolawole reported yesterday at The Washington Post Online that, “President Obama made clear Thursday in an interview with NPR that he did not believe disgruntled Democrats would stop a deal on tax cuts from moving forward.

“‘My sense is, there are going to be discussions between both House and Senate leadership about all the final elements of the package,’ Obama said. ‘Keep in mind we didn’t actually write a bill. We put forward a framework. I’m confident that the framework is going to look like the one we put forward.’”

Tax Issues: Senate- Biofuels

David M. Herszenhorn and Carl Hulse reported in today’s New York Times that, “Senate leaders on Thursday evening formally unveiled the huge tax cut package worked out between the White House and Republicans and immediately began debating it, while House Democrats rebelled against President Obama and threatened to keep the measure from ever reaching the floor.

“A procedural vote was scheduled in the Senate for Monday evening to overcome a filibuster by Democrats opposed to the plan. But in a first test on Thursday, the Senate voted 65 to 11 on a technical issue related to the bill, suggesting it would not be difficult to secure the 60 votes needed to defeat the filibuster.”

The Times article added that, “Democratic officials on Thursday also said they had secured some changes intended to widen support, adding a tax break for ethanol production and extending a grant program to promote alternative energy.”

Janet Hook and John D. McKinnon reported in today’s Wall Street Journal that, “The Senate has moved quickly after Mr. Obama and Republican leaders unveiled the package Monday, with a key test vote now scheduled for Monday. The bill is expected to pass with support from most Senate Republicans and a substantial number of Democrats, after lawmakers agreed to extend expiring subsidies for ethanol and other alternative-energy sources. Backers now include Senate Majority Leader Harry Reid (D., Nev.), who had been withholding support over the bill’s tax cuts for upper-income taxpayers.”

The Journal article pointed out that, “In unveiling the bill, the Senate added details to its treatment of inheritances. The federal tax on estates expired at the end of 2009 and is set to be reinstated from 2011 at a top rate of 55%, charged on estates over $1 million. The legislation would renew the tax at a top rate of 35% on estates over $5 million. In the bill released Thursday, the $5 million would be indexed for inflation, so it’s real value wouldn’t shrink over time. House Democrats want the tax to be set at a higher rate. Some are collecting signatures on a letter urging the tax be set at 45% for estates above $3.5 million.”

More specifically with respect to biofuels and the Senate bill, Darren Goode reported yesterday at Politico that, “A key ethanol tax credit has made the cut as part of a deal extending Bush-era tax incentives.

“Sen. Dianne Feinstein (D-Calif.) — who opposes extending the excise tax credit for the mainly corn-based gasoline additive — told reporters Thursday that her understanding is that it will be extended in the tax deal at its current level of 45 cents per gallon.

“‘As far as I know, they’re in and they should not be,’ Feinstein said of the ethanol credit.”

The Politico article noted that, “Senate Finance Committee Chairman Max Baucus late last week proposed extending the credit for one year at 36 cents per gallon. That lower level also was recommended this summer by House Ways and Means Democrats and backed by the White House. The tax totaled at least $5 billion this year.”

Carrie Budoff Brown reported yesterday at Politico that, “The Senate released its bill Thursday to extend the Bush-era tax cuts for two years, but also renews a host of more minor tax provisions aimed at winning over recalcitrant Democrats in the House and Senate.”

(Note: Language relating to biodiesel can be found on page 36 of the bill, while language regarding ethanol can be found page 41 of the bill).

Ms. Budoff Brown explained that, “The ethanol credit could attract support from Sen. Tom Harkin (D-Iowa), and it already won praise Thursday night from Sen. Chuck Grassley (R-Iowa), who put out press release touting its inclusion. The ethanol credit, which was set at 45 cents per gallon, was higher than many expected.”

A news release yesterday from the Renewable Fuels Association stated that, “The compromise legislation would extend the current tax credit through 2011 at the current rate of 45 cents per gallon. Additionally, the package with also extend the offsetting tariff on imported ethanol through 2011.”

Ben Geman reported yesterday at The Hill’s Energy Blog that, “Sen. Tom Harkin (D-Iowa) said Thursday that the emerging Senate tax package will extend an expiring ethanol tax credit for one year at the current rate…”

And Philip Brasher reported yesterday at the Green Fields Blog (Des Moines Register) that, “The compromise tax bill will extend the ethanol subsidy for one year at 45 cents per gallon while also retaining the 54-cent tariff on imports of the biofuel, Sen. Charles Grassley, R-Ia., announced this evening. The legislation also will revive the $1-a-gallon subsidy for biodiesel that expired at the end of 2009.”

Growth Energy CEO Tom Buis indicated yesterday that, “We would like to thank President Obama and our Congressional champions for recognizing the tremendous value of our nation becoming less dependent on foreign oil, creating jobs in America, improving our environment and strengthening our national security…An extension of the credit will give the industry certainty, and Congress the opportunity, to move forward with reforms that will remove the infrastructure barriers to the fuels market, such as our Fueling Freedom plan, next year.”

An update posted yesterday at the AgMag Blog (Environmental Working Group- EWG) indicated that, “Last week [EWG] published a top ten list of reasons why Congress should allow the ethanol tax credit to expire at the end of the year.

“Today (Dec 9) EWG leaders weighed in on what a renewal of the tax credit will mean: ‘If the corn ethanol giveaway is included, this tax deal would go from ugly to coyote ugly.’ -EWG President Ken Cook.”

Meanwhile, the “Washington Insider” section of DTN reported yesterday (link requires subscription) that, “In a statement, UNICA President & CEO Marcos Jank says UNICA will urge the Brazilian government to initiate dispute settlement proceedings at the WTO as soon as legislation extending the tax credits passes Congress and is signed by President Barack Obama.”

Farm Bill: Chairman-Elect Frank Lucas

DTN Ag Policy Editor Chris Clayton reported yesterday that, “Incoming House Agriculture Committee Chairman Frank Lucas, who takes over the committee gavel next month, said Thursday that regardless of politics, he plans to work to get a farm bill that President Barack Obama would sign before the 2012 presidential election even though a positive bill could help the president’s image in rural America.

“Lucas, R-Okla., in Washington, D.C., working through the lame-duck session of Congress, said in a phone interview with DTN/The Progressive Farmer that he would put good policy ahead of politics to get a bill completed on time.

“‘Working with the Senate, and my colleagues on both sides of the aisle, I’m going to try to work very hard to get a farm bill to President Obama that he can proudly sign in the late summer of 2012, I hope,’ Lucas said. ‘Sometimes, you have to put policy ahead of politics. And if I can get a good farm bill that the president will sign, I’m going to do what’s good for rural America.’”

Mr. Clayton noted that, “[R]egional and commodity differences are already showing in policy discussions over the next farm bill as Midwesterners champion shifting away from direct payments to boost risk-management tools such as crop insurance. Outgoing Ag Committee Chairman Collin Peterson, D-Minn., who is expected to stay as ranking member on the committee, advocates that approach. Lucas, however, supports the direct-payment program.

‘I have always been a proponent, at least since 1996, of the direct payments,’ Lucas said. ‘Since we joined the World Trade Organization, it comes down to the question of whether our farm programs are compliant. Direct payments are the most compliant, the least trade-distorting. You can’t be sued by the Argentines, the Brazilians or the New Zealanders over the direct-payment program.’”

Yesterday’s DTN article added that, “Rather than spend 2011 trying to write a farm bill, Lucas said the committee will work on oversight of USDA and EPA programs and policies affecting agriculture and rural America. Besides calling administration officials into hearings on unpopular regulations or programs, that year of oversight also gives veterans on the House Agriculture Committee a chance to educate a large group of freshmen members on the committee about agriculture nationally as well.”

Meanwhile, Reuters writer Charles Abbott reported yesterday that, “The incoming chairman of the U.S. House Agriculture Committee said on Thursday he wants to be sure ‘end users’ are treated fairly in an expansion of federal control of derivatives markets.

Frank Lucas, an Oklahoma Republican, said during a Reuters interview he expected the committee to review Agriculture Department revisions to fair-play rules in livestock marketing. USDA is going farther than Congress intended, he said.

Oversight of Obama administration activities ‘will be the big thing’ for the committee next year, he said. Action on a new farm policy law will be deferred until 2012 when the 2008 law expires. Budget cuts are possible in 2011 but not certain.”

And Ron Hays reported yesterday at the Oklahoma Farm Report Online that, “Congressman Lucas has told us in a conversation with him on Thursday afternoon that he understands there will be a lot of challenges ahead of him in the days to come. He expects 2011 to be a year of oversight hearings– to keep tabs on what the Obama Administration regulators are doing to farmers and ranchers- as well as to educate the many new members of Congress that may join the House Ag Committee about the diversity of U.S. Agriculture.”

Mr. Hays added that, “As [Rep. Lucas] has said before, the Direct Payment is the most compliant element of US Farm Policy to WTO rules- and that is a vital consideration that must be a part of the decision making process.”

To listen to an interview with Rep. Lucas by Ron Hays from yesterday, just click here.

In other Farm Bill news, a release from USDA’s Farm Service Agency yesterday indicated that, “Agriculture Secretary Tom Vilsack announced today that the Department of Agriculture will issue an estimated $10 million in Average Crop Revenue Election (ACRE) payments for the 2009 crop year to producers enrolled in the ACRE program for large and small chickpeas, sunflowers, canola, flaxseed, mustard seed, rapeseed, safflower, crambe and sesame seed. Of the $10 million in payments, about 95 percent are expected to be issued to sunflower producers in Minnesota, Nebraska, North Dakota and South Dakota. Last month USDA began issuing an estimated $420 million in ACRE payments for the 2009 crop year for corn, wheat and other commodities.”

Ag Economy (China)

Bloomberg News reported yesterday that, “China’s grain production capability may not be sustainable even as output increased for seven years, an agricultural official at the State Council said.”

The article noted that, “The amount of agricultural products China imports would require more than 600 million mu (40 million hectares) of overseas arable land, which China doesn’t have, [Chen Xiwen, the Cabinet’s vice director of agricultural affairs] said. This dependency on imports has made it difficult for the government to maintain controls on domestic food prices, Chen wrote.”

Scott Kilman reported in today’s Wall Street Journal that, “China could emerge in the next few years as the world’s biggest importer of corn, which would reshape global grain markets, according to a new report by agribusiness lending giant Rabobank Group.

“The report by analysts at Rabobank, which is a lender and investment banker to many of the world’s biggest food concerns, predicts China’s demand for imported corn will soar to about 25 million metric tons annually, or roughly one billion bushels, by 2015, from this year’s 1.3 million metric tons, or about 51 million bushels.”

Competition

Philip Brasher reported yesterday at The Des Moines Register Online that, “Attorney General Eric Holder says the Justice Department is cracking down on unfair practices in agribusiness, aided by information gathered at a series of public meetings.

“‘This is not an exercise in hand-holding,’ designed to soothe the concerns of farmers, Holder told reporters after appearing at the last of the meetings today. The Obama administration is committed to ensuring that fairness, profitability and transparency are ‘part of this very important sector of our economy,’ he said.”

Climate

A news release yesterday from USDA indicated that, “Calling it ‘one of the greatest threats facing our planet,’ Agriculture Secretary Tom Vilsack today announced that USDA is taking action to meet the challenge of climate change. Speaking at the United Nations Climate Change Conference, the Secretary said USDA continues to take steps to reduce greenhouse gas emissions ‘by helping farmers, ranchers and forest landowners to be even better conservationists.’”

Reuters writers Chris Buckley and Patrick Rucker reported yesterday that, “Talks on a 190-nation deal to fight global warming were on a ‘knife edge’ on Thursday as Bolivia stuck to hardline demands and accused capitalist climate policies of causing genocide.

“A deadlock between rich and poor countries on whether to extend the United Nations’ Kyoto Protocol, which obliges almost 40 rich nations to curb greenhouse gas emissions until 2012, overshadows the two-week meeting in Mexico, which is due to end on Friday.

“‘It’s on a knife edge, we could well have a good outcome but we could also have a car crash,’ said Chris Huhne, Britain’s energy and climate change secretary, who is co-leading talks on Kyoto at the meeting in the Caribbean resort of Cancun.”

Keith Good