This overview highlights many of the provisions of the Food, Conservation, and Energy Act of 2008, Public 110-246, (2008 Farm Bill or farm bill) that offer incentives to producers of Biofuels or the raw materials used in the creation of Biofuels or Bio-based products. Many of these programs or incentives will have regulations attached to them within the year as directed by Congress in the legislation. The purposes of the various programs have been divided into three subheadings for reading ease, despite there being obvious overlap between the categories.
Promotion of Demand for Renewable Energy
A centerpiece of the Energy Title of the farm bill is the Biobased Markets Program, which creates demand amongst the government agencies and their contractors. The premise of the program is similar to past legislation mandating the U.S. Post Office to use renewable energy, but it is much broader in scope. The Biobased Markets Program mandates that each procuring agency, defined as any agency or contractor of the federal government that uses Federal funds for procurement, must establish and develop a procurement program for biobased products, but also must procure biobased products to the maximum extent practicable with very few statutory exceptions.
The USDA, through consultation with other departments, will be responsible for implementing regulations regarding basic specifications required of the biobased products, as well as compiling relevant market data to disseminate to the various agencies, and classifications of biobased products that can meet the preference requirement of the Biobased Markets Program within 1 year of the date of publication.
This program will apply to purchases that exceed $10,000 or relative purchases in the preceding fiscal year totaled $10,000 or more. Therefore the scope of this program is broad and will create an instant market for biobased products with one of the largest consumers in the country. The exceptions are limited, but center upon the reasonableness of availability in a timely manner and price, as well as the ability of the products to meet the performance standards of any regulations and specifications to be implemented regarding finished products or services by the procuring agency.
Branding - The Biobased Markets Program has also created a voluntary labeling process that will allow biobased products to be “branded” in the market, similar to USDA certified organic products. Base guidelines found in the statute require the USDA to promulgate rules that allows a label for finished products that contain significant portions of biobased materials or components. In combination with the new label, there will be a recognition program that allows agencies and private entities to be singled out as users of a substantial amount of biobased products. The labeling and recognition program will not extend to motor vehicle fuels, heating oil, or electricity though. In addition, the establishment of a National Testing Center Registry for the product manufacturers will assist with the branding of these new products.
The governments will also award grants, on a competitive basis, to nonprofit organizations and institutions of higher education that are willing to educate the government and private entities that operate vehicle fleets as well as the public regarding the benefits of biodiesel use.
Promotion of Infrastructure Changes
Eligible entities, as defined in statute, will be able to receive assistance in the form of grants and guaranteed loans, disseminated on a competitive basis, to encourage the use of new technology that can be brought to commercial scale in biorefineries. The government is attempting to resolve the goals mentioned at the beginning of this article, but also to defray the costs of using mass-scale corn ethanol by pumping money into the development of advanced biofuels. As stated, these grants and loans are to be awarded on a competitive basis with standards that will be promulgated by the USDA with statutory guidelines that seem to promote a healthy relationship with producer associations and cooperatives.
In addition, Congress has established the Rural Energy for America Program that will award grants for energy audits and renewable energy development assistance to eligible entities such as rural energy cooperatives or public power entity that will provide assistance to producers and small businesses. The USDA will also award grants and guarantee loans to purchase renewable energy systems and to make energy efficiency improvements.
Congress has also set aside money for the USDA to pay to existing biorefineries to allow them to replace their use of fossil fuels. These additional payments are to be used to install new systems that utilize renewable energy, and aid in the production of energy from renewable biomass.
Promotion of Production of Renewable Energy
The Bioenergy Program for Advanced Biofuels will allow for payments to eligible producers in exchange for the producer entering into production contracts with the USDA, and report efforts to produce the crop to the USDA. The basis of the payments will be based on the quantity and duration of production, the net nonrenewable energy content, and other factors that will be promulgated through rulemaking. The mandatory funding of this program will be $55 million for 2009-10, $85 million for 2011, and $105 million for 2012, and the discretionary funding is $25 million for each eligible year. The program has a cap that does not allow more than 5% of the funding to be distributed to any facility exceeding 150 million gallons per year. The major change regarding this program from prior legislation is the exclusion of ethanol producers or producers of renewable biomass derived from corn kernel starch as defined in the farm bill.
The Commodity Credit Corporation (CCC) will offer a no-net-cost program to purchase eligible commodities from domestic entities and sell them to bioenergy producers. The eligible commodities are defined as a form of raw or refined sugar or in-process sugar that is eligible to be marketed in the United States for human consumption or to be used for the extraction of sugar for human consumption. Therefore, the qualified applicant would have to be a producer of biofuel using eligible sugar as feedstock.
The Biomass Crop Assistance Program (BCAP) will allow the USDA to provide assistance to groups of producers or biomass conversion facilities for the production and transportation of eligible biomass crops through contracting. The contracts will be based on acreage that will be produced on BCAP plots that are authorized by the USDA. In addition, the contracts will have a term of up to 5 years for annual and perennial crops and 15 years for woody biomass. There are requirements of the producers in addition to mere production, including compliance with HEL, implementation of conservation plan, and open communication with USDA regarding information the emergency deems pertinent. The USDA will determine the amount and timing of the annual payments.
Tax Incentives – In an effort to scale down the mass production of corn for use as ethanol, and indirectly encourage more efficient uses of biomass for energy purposes, legislators lowered the VEETC tax credit of 51 cents/gallon to 45 cents/gallon once annual production reaches 7.5 billion gallons. In addition, on a related note, Congress reduced the amount of allowable denaturants in the blended gasohol from 5% of volume of alcohol to 2% of volume of alcohol.
Other measures to increase domestic production of alternative biofuels include the new policy of Cellulosic ethanol producers will receive a tax credit of $1.01/gallon through the life of the farm bill, and the extension of the additional duty on imported ethanol to December 31, 2010.
By Craig P. Raysor