Vilsack announces funding for 5 new biorefineries, FAA partnership, among major new bioenergy measures

October 22, 2010 |

US Secretary of Agriculture Tom Vilsack, recently named by Digest readers to the #1 position in the “100 Top People in Bioenergy” gave a major policy speech on bioenergy in Washington, in which he outlined that the final rules on the Biomass Crop Assistance Program will be published in the Federal Register today.

The BCAP program will provide up to $525 million in subsidy payments to farmers over a 15 year period to incentivize the growth of a biomass supply chain for bioenergy.

“The assistance could be as much as 75% of the cost of establishing the new crop as well as annual rental payments to help cover the costs of transitioning from current cash crops,” Vilsack said.

Here are highlights from Vilsack’s major policy speech:

Funding for five new biorefineries

Today, I am directing the Rural Development mission area of USDA within 60 days to announce funding under the current Biorefinery Assistance Program for the construction (to commence in 2011) of a biorefinery or bioenergy plant in each of the regions serviced by the regional centers. In doing so, the entire country can begin to see the economic benefit to producers and job creation potential of the biofuel/bioenergy industry.

A growing shortage of domestic oil production

Thirty years ago 28% of the oil consumed in the United States was imported. Today that figure is closer to 60 percent – some of which comes from countries that neither like us nor support us. Today we still send a billion dollars a day outside our shores helping other countries’ economies to grow while our economy recovers from a deep recession. With the disastrous oil spill in the Gulf of Mexico, we are also reminded that the development of our own oil resources is not without environmental and economic risk. We can do better. We have to do better. Rural America is where we will do better.”

Impact of the RFS

According to a recent industry study, a $350 billon cumulative total value of avoided petroleum imports over the 2010-2022 period. This means $350 billion that we can keep here, in this country. This means less fossil fuels releasing fewer toxins and having cleaner air to breathe, and, according to that same industry study, creating up to a million new jobs with investments of $95 billion in new biorefineries.

The establishment of five USDA regional Biomass Research Centers

These Regional Centers, involving a collaboration between the Agricultural Research Service (ARS) and the U.S. Forest Service, will focus, accelerate, and coordinate the science and technology needed to incorporate feed stock production into existing agricultural and forest based systems.

The centers will be:

1. The Northeast center will be located in Madison, Wisconsin, led by the Forest Service.
2. The Central East Center will be located in Lincoln, Nebraska, led by ARS.
3. The Southeast center, a little more complicated because so much is going on there, will be located both by ARS in Boonesville, Arkansas; and Tifton, Georgia, and in Auburn, Alabama, led by the Forest Service.
4. The Western Center will be located in Maricopa, AZ.
5. The Northwestern Center will be located in Pullman, WA, led by ARS, and Corvallis, OR, led by the FS.

VEETC and Biodiesel Tax Credit

Congress should start by reinstating the Biodiesel Production Tax Credit and providing a fiscally responsible short-term extension of the Volumetric Ethanol Excise Tax Credit. At the same time, we need to begin to think about reforms to the ethanol credit program to make it more efficient and effective at addressing the full range of challenges we face in meeting our goals for traditional and next generation biofuels.

We have already seen what happens when incentives are withheld too quickly. The lapse of the biodiesel tax credit cost the industry jobs – nearly 12,000 jobs were lost as production was cut in half once the credit lapsed, according to industry estimates – these are jobs we can’t afford to lose.

Fuel use at USDA

We’ll encourage more use of biofuels in our fleet of almost 43,000 vehicles. The impact can be significant. The Department reported 42,882 light, medium, and heavy duty vehicles in the motor vehicle inventory in FY 2009. The approximate total fuel consumption was 19,500,000 gallons. The miles traveled by the USDA Motor Vehicle Fleet were approximately 342,500,000 with approximately $41,000,000 in fuel costs reported.

Partnership with the FAA

The USDA is already partnering with the Department of the Navy as it embraces a biofuel future. Today, USDA announces another partnership with the signing of a Memorandum of Understanding with the Federal Aviation Administration (FAA). Under the MOU, the USDA and FAA will work together with the airline industry over the next 5 years to develop appropriate feed stocks that can be most efficiently processed into jet fuel. Doing so will decrease the industry’s current dependence on foreign oil and help stabilize fuel costs in the long run.

The Secretary’s complete remarks are here.
Industry, public reaction

Brent Erickson, EVP, BIO’s Industrial & Environmental Section:

“The U.S. needs to rapidly develop and produce large volumes of advanced biofuels to reduce reliance on foreign oil. A comprehensive national policy is needed to drive commercial development of the most promising advanced biofuels and biobased products. The programs announced today establish a strong advanced biofuels policy foundation. In combination with supportive tax policy, loan guarantee program reforms, and continued commitment to the Renewable Fuel Standard, these policies will create thousands of manufacturing jobs for Americans, while delivering sustainable transportation fuels and products. Secretary Vilsack’s announcement today is another positive step in developing a concrete suite of policy initiatives to accomplish these goals.”

Joel Velasco, US Representative of UNICA, the Brazilian sugar growers’ association

“U.S. Department of Agriculture Secretary Tom Vilsack unveiled a laundry list of proposals designed to spur production and demand for biofuels.  Along the way, he expressed the belief that “the [ethanol import] tariff is likely to continue but over time be phased out,” in conjunction with his call for a “fiscally responsible short-term extension of the Volumetric Ethanol Excise Tax Credit [VEETC].” 
 
Vilsack’s remarks put him at a great distance from where he stood four years ago when (as Governor of Iowa and a presidential hopeful) he offered surprisingly candid remarks on those very topics in a sitdown at the Council on Foreign Relations. ““Some might suggest that there may be a difficulty even, with conservation, having sufficient supplies of renewables, which is why we should rethink our tariffs in connection with Brazilian ethanol. Those tariffs should be reduced and lifted as we embrace ethanol as a short-term strategy for energy security…” Vilsack said at the time.

See the video.

Natural Resources Defense Council

While Secretary Vilsack embraced a vision for transitioning from corn ethanol towards the newer, cleaner, advanced biofuels we need, when it came to concrete policy he signaled administration support for an extension of wasteful corn ethanol subsidies and a flawed biomass program, and praised EPA’s wrong decision to allow even more corn ethanol to be blended into our fuel supply. The Gulf Coast oil disaster has made clear that we must urgently transition toward low-carbon fuels if we are to break our dangerous dependence on oil, minimize the risk of further oil spills, and decrease global warming pollution. Advanced biofuels can be part of the solution to these challenges, but let’s be clear: Not all biofuels are created equal.

“Like corn ethanol, collecting wood to use for energy could do more harm than good if it leads to degradation of our forests. Unfortunately, USDA has not conducted the necessary environmental assessment, nor established the necessary safeguards, to ensure that this does not occur.

The National 25x’25 Steering Committee

25×25 commends Agriculture Secretary Tim Vilsack and the USDA leadership for steps announced today that will boost domestic production of renewable biofuels. The measures announced by the secretary today go a long way toward fulfilling the promise of the U.S. biofuels industry by encouraging the development of a national network of regional biomass research centers and biorefineries, building market demand by using USDA Rural Development funds to install 10,000 blender pumps over the next five years, and giving farmers greater incentives to grow new bioenergy crops. Vilsack said the final rule implementing the Biomass Crop Assistance Program (BCAP) will appear in the Federal Register next week and open up an initiative that will offer broad support for biofuels feedstock production.

The Digest’s Take

For supporters of first generation corn ethanol, the Administration has signaled that it is supporting an extension of the VEETC ethanol credit on a reduced, and limited basis, and an extension of the tariff. That’s a relief for the mainline ethanol sector. Less surprising on the tariff, which costs nothing directly to the taxpayer (though it imposes costs in the form of higher prices for ethanol).

For supporters of advanced biofuels, the news that the USDA will announce funding for five new biorefineries – well, God is in the details. Will the funding opportunity focus on advanced biofuels (we expect so), will it be tied to the USDA loan guarantee program in such a way that the biorefineries will be financeable? If so, it’s a major step forward for five projects.

Every advanced biofuels producer better be watching carefully for this funding announcement and be prepared to throw every resource at it. It may well be the last major funding “hurrah” until the new Farm Bill arrives in 2013-14.

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