by Brian Doidge, OCPA Economist & Market Analyst

(Third of a series. This article deals with Title 9 - Energy Programs; Title 1 - Commodity Programs and Title 2 - Conservation Programs were covered in previous issues)

The Farm Security and Rural Investment Act of 2002 (FSRIA) was signed into law by President Bush on May 13, 2002, and consists of 470 pages covering 10 Titles.

The U.S. Congress is about to ratify a new Energy Bill (currently before House and Senate conferees for melding of their respective versions into one Bill which will be forwarded to President Bush for signature likely late in October). There are some differences. The Senate version bans the use of methyl tertiary butyl ether (MTBE), an oxygenate additive to gasoline that has been identified as a carcinogen that binds to groundwater and has been found in water wells in California and other states. The House version removes the ban. The Senate version introduces a Renewable Fuels Standard (RFS) requiring usage of 2 billion gallons (7.57 b litres) of renewable fuels by 2004, 5 b gallons (18.9 b litres) by 2012.

The House version delays the RFS until 2005 and 2014 respectively. But the key point is that the RFS remains. Congress has declared its unqualified support for a biofuels (primarily ethanol and biodiesel) industry and is willing to fund that support.

This renewable energy initiative, driven also by the huge desire in the U.S. for a domestic, secure energy supply, is responsible for the introduction of an energy title into the new U.S. farm bill, the FSRIA. The bill’s Title 9 - Energy is new in U.S. farm legislation; there has never been an energy title before. As previous articles have documented, and assessments by the Food & Agriculture Policy Research Institute (FAPRI) concur, FSRIA will increase corn production and decrease corn prices.

Here’s the question: If you wanted to foster a domestic renewable biofuels industry, would you want to ensure for the next 6 years an enhanced supply and reduced cost for the main feedstock for that industry...corn?

The Energy Title has $405 million set aside for the production, research and use of ethanol and other biofuels. It introduces 6 new programs and re-authorizes 3 recent initiatives, all of which might serve as models for Canada, as we compete in a North American business environment where borders are transparent and essentially non-existent.

New Programs:
Federal Procurement of Biobased Products
Federal agencies are funded to purchase biobased products to support the development of biorefineries. Funding is provided to establish voluntary biobased product labeling, and for testing of biobased products.

Biorefinery Grants
A competitive grant program, with annual appropriations authorized by Congress as required, to support establishment and development of biorefineries converting biomass into biofuels, biochemicals, bioproducts and bioenergy.

Biodiesel Fuel Education Program
A competitive grant program, funded at $1 m annually through 2007, to educate government, the public and private entities with vehicle fleets about the benefits of biodiesel fuel use.

Energy Audit and Renewable Energy Development Program
A competitive grant program, with annual appropriations authorized by Congress as required, providing funding for entities to administer energy audits and renewable energy development assessments for farmers and rural small businesses.

Renewable Energy Systems and Energy Efficiency Improvements
$23 million annually through 2007 in a loan, loan guarantee and grant program to assist eligible farmers and rural small businesses in purchasing renewable energy systems and making energy efficiency improvements.

Hydrogen and Fuel Cell Technologies
The Secretaries of Agriculture and Energy are directed to enter into a memorandum of understanding regarding hydrogen and fuel cell technology applications for agricultural producers and rural communities. The USDA is required to provide information on these technologies to producers and rural communities. Ethanol and corn starch can be used to generate hydrogen as well as the catalytic membrane within fuel cells.

Existing Programs:
Biomass Research and Development
This Act of 2000 is extended and funded at $14 million annually through September 30, 2006. The Secretaries of Agriculture and Energy are directed to cooperate and to coordinate policies and procedures that promote research and development leading to the production of biobased industrial products.

Bioenergy Program
This biofuels subsidy program begun in 2001 is extended with funding of $150 million annually through 2006. It supports expansion of biofuel generation by providing grants to ethanol producers for expanded production. Biofuel producers with an annual production of less than 65 million gallons are reimbursed one bushel of corn for every 2.5 bushels used for increased production. Those producing more than 65 million gallons are reimbursed one bushel of corn for every 3.5 used. In 2001, the first year of the program, the USDA reported that US$32.7 million in payments was issued for the increased production of ethanol. As a result, ethanol production in the U.S. increased by 141.2 million gallons (373 m litres or 2.5 times the annual output of the Chatham ethanol plant). Another US$7.94 million was spent to increase biodiesel which rose by 6.4 million gallons for that time period. The list of eligible feedstocks is broadened to include animal byproducts and fats, oils and greases (including recycled fats, oils and greases).

Renewable Energy Development Loan and Grant Program
The list of business and industry loans and guarantees is expanded to allow for more types of renewable energy systems, such as wind energy systems and anaerobic digesters. USDA programs provide financial assistance to various kinds of businesses, including value-added agricultural enterprises. In addition, business and industry loan provisions are expanded under Title 6 - Rural Development, of the FSRIA.

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