The farm bill and its impact on financing renewable energy

The first Farm Bill was introduced in 1933 for the overall purpose of ensuring that everyone had enough to eat, farmers earned a living, and that the soil and water stayed healthy. A new Farm Bill is written, debated and passed every five to seven years. Since 1933 15 different versions of the Farm Bill have passed. The 2008 Farm Bill, called the Food, Conservation and Energy Act, authorized $289 billion in spending over five years.

Every Farm Bill is comprised of different titles, each of which covers a different set of programs (e.g., Energy, Bioenergy programs, renewable energy systems). The Energy title was added in the 2002 incarnation of the Farm Bill. Since then, USDA renewable energy programs have been used to incentivize research, development, and adoption of renewable energy projects, including solar, wind, and anaerobic digesters. However, the most recent primary focus of USDA renewable energy programs has been to promote U.S. biofuels production and use.

The $288 billion 2008 Farm Bill (aka the Food, Conservation, and Energy Act of 2008) was a continuation of the 2002 Farm Bill and provided funding for the following renewable energy programs:

Biobased Markets Program: Continues the federal preference for procurement of biobased products and the biobased products labeling program
Biorefinery Assistance: Loan guarantees to produce advanced biofuels
Repowering Assistance: Encourage existing biorefineries to install new energy systems to use biomass for heat and power
Bioenergy Program for Advanced Biofuels: Incentives for next generation biofuel production
Biodiesel Fuel Education Program: Education and outreach on biodiesel use
Rural Energy for America Program (REAP): Grants and loan guarantees for energy efficiency and renewable energy
Biomass Research and Development: Supports advanced research to improve bioenergy
Rural Self-Sufficiency Initiative: Cost-share grants for rural communities to develop and implement energy self-sufficiency initiatives
Feedstock Flexibility Program: Sugar import management program
Biomass Crop Assistance Program (BCAP): Assistance to stimulate energy crop plantings
Forest Biomass for Energy: Research on use of low-value forest biomass
Community Wood Energy Program: Grants for rural communities to install wood energy systems in community facilities
Biofuels Infrastructure Study: Study of the infrastructure needs associated with the production and use of biofuels
Renewable Fertilizer Study: Study potential to produce fertilizer from renewable energy
Parts of the 2008 Farm Bill expired September 30, 2012 but the American Taxpayer Relief Act of 2012 (January 2, 2013) extended most aspects of the 2008 farm bill for one additional year until September 30, 2013. This date has of course since passed and expiration has become an issue again since Congress has not yet agreed to a new farm bill or extended the current one beyond 2013. All of the major farm bill energy programs lack baseline funding going forward.

A bicameral team of 41 lawmakers is charged with merging farm bills passed this summer by the House and Senate into one piece of legislation to create the Agriculture Reform, Food and Jobs Act of 2013. However, negotiations are currently hung up on a number of points, including a $35 billion gap between the two sides on food stamp spending and the apparent reluctance of each side to budge from its position.

For those involved in renewable energy, the Farm Bill Energy Title programs are of particular interest. The Farm Bill Energy Title programs help rural communities access investment capital to build new markets and create new jobs and other economic opportunities. For example, the Bioenergy Program for Advanced Biofuels program provides funding to support research, investment and infrastructure necessary to build a biofuels industry that creates jobs and produces renewable fuel. Since 2009, more than 275 eligible producers in 44 states have received payments. Similarly, the Biomass Crop Assistance Program (BCAP) enables farmers to develop next-generation energy crops from non-food sources, thus creating new farm income sources. According to the most recent USDA figures, BCAP supports more than 860 growers in 188 counties across 12 states, enabling them to convert approximately 59,000 underutilized acres to energy crops.

As another example, the Rural Energy for America Program (REAP) is a widely utilized program under the Energy Title. REAP provides financial assistance to agricultural producers and small businesses in rural communities to purchase, install, and construct renewable energy systems; make energy efficiency improvements to non-residential buildings and facilities; use renewable technologies that reduce energy consumption; and participate in energy audits, renewable energy development assistance, and feasibility studies. USDA says that the 7,600 projects REAP supports employ nearly 18,000 people and generate or save more than 7.3 billion kilowatt hours of electricity.

The lack of a deal on the 2013 Farm Bill — combined with the spending cuts mandated by the sequester earlier this year — has cut into funding for renewable energy programs and created a state of uncertainty about the future. For instance, as a result of the sequester funding for the REAP program was reduced by about $1.4 million and the Advanced Biofuel Payment Program was reduced by about $3.3 million. These cuts represent a 5.1 percent reduction in funding over previous year figures. The impact of these reductions are fewer projects will be able to be funded under REAP and all 260 producers who have applied under the Advanced Biofuel Payment Program will see a proportional reduction in the amount of funding they receive. As of right now, most of the renewable energy programs that were authorized in the 2008 Farm Bill are currently unfunded as the funding provided in that Act has been exhausted.

The USDA says that a new Food, Farms and Jobs Bill is necessary in order to provide additional mandatory funding for these important programs. Secretary Vilsack has repeatedly expressed the need for a comprehensive Food, Farm and Jobs Bill to support renewable energy projects in rural communities, keep up momentum in American agriculture, grow the rural economy and create jobs. Without a new five-year bill, producers, rural America will suffer.

There are two different versions of the Farm Bill under consideration — the Senate-assed version (S.954) and the House-passed version (H.R. 2462). Both the Senate-passed and House-passed bills extend most of the renewable energy provisions of the farm bill, with the exception of the Rural Energy Self-Sufficiency Initiative, the Forest Biomass for Energy Program, the Biofuels Infrastructure Study, and the Renewable Fertilizer Study which are either omitted or explicitly repealed by both bills.

In addition, S. 954 omits the Repowering Assistance Program, while H.R. 2642 adds a new reporting requirement on energy use and efficiency at USDA facilities. Otherwise, the primary difference between the House and Senate bills is in the source of funding. Over the five-year reauthorization period (FY2014-2018), the Senate bill contains a total of $880 million in new mandatory funding and authorizes $1.140 billion to be appropriated for the various farm bill renewable energy programs. In contrast, H.R. 2642 contains no mandatory funding for these programs, while authorizing $1.405 billion over the five years, subject to annual appropriations. In addition, the House bill eliminates all support for the collection, harvest, storage, and transportation (CHST) component of Biomass Crop Assistance Program (BCAP), severely limiting its potential effectiveness as an incentive to produce cellulosic feedstocks.

The House and Senate recently came together in a rare show of bipartisanship and approved a new overall spending budget. For those of us keeping on eye on renewable energy funding, this is a small sign of hope that a new Farm Bill is on the horizon.

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