Benjamins for Biofuels in the 2015 Obama Budget: The Digest’s 7-Minute Guide

March 5, 2014 |

benjaminsbioenergy1-125x125Vitally interested in President Obama’s proposed 2015 budget and the 411 on grants, incentives, tax credits, loan guarantees and R&D support — but haven’t got the time to read all 1653 glorious pages?

Try the Digest’s 7-Minute Guide.

In Washington, President Obama outlined his $3.9 trillion budget proposal for 2015, with a focus on tax structure, as the nation lurches towards end-of-year Congressional elections.

Though numerous agencies and departments have a role in developing the bioeconomy, the opportunities lie primarily in the Agriculture, Energy and Defense budgets — with the triad of USDA, DOE and the Navy taking the lead on development and deployment of biofuels, and with USDA and DOE supporting development of other biobased products (such as chemicals) that reduce foreign oil dependence. The Administration also pursues development of the sector through tax policy — notably, investment and production tax credits.

There are a lot of programs. We’ve summarized the major activities and opportunities in this 7 Minute Guide — and we’ve added some industry reaction so that you can see how leadership sees the wins and losses adding up.

Agriculture

The Bottom Line: USDA takes the lead on deployment and commecialization, and as Agriculture Secretary Tom Vilsack said at the 2014 Commodity Classic: “”Bottom line is we’re going to continue to help this industry as best we can, advocate for it, and trust that EPA at the end of the day makes the right set of decisions.”

Biomass Crop Assistance Program (BCAP)

BCAP provides incentives to farmers, ranchers and forest landowners to establish, cultivate and harvest eligible biomass for heat, power, biobased products, research and advanced biofuels. Crop producers and bioenergy facilities can team together to submit proposals to USDA for selection as a BCAP project area. BCAP has been extended through 2018 and is funded at $25 million per fiscal year.

Feedstock Flexibility Program (FFP)

FFP is continued through fiscal year 2018. Congress authorized the FFP in the 2008 Farm Bill, allowing for the purchase of sugar to be sold for the production of bioenergy in order to avoid forfeitures of sugar loan collateral under the Sugar Program.

Rural Energy for America Program (REAP)

This program provides loan guarantees and grants to farmers, ranchers, and small rural businesses to purchase renewable energy systems and make energy efficiency improvements. The budget requests discretionary funding of $5 million for grants and $5 million for loan guarantees to support $47.3 million in guaranteed private lending.

Biomass Research and Development

The program provides competitive grants for research, development, and demonstration to encourage innovation and development related to biomass, and improved commercialization of biobased products and energy. USDA and the Department of Energy jointly administer the program. In 2015, mandatory funding for the program is $3 million.

Biobased Markets Program

Authorized in Section 9001 of the Farm Bill, this program promotes the BioPreferred label for government and consumer adoption of biobased products, and has a $3 million proposed budget in FY 2015.

The Commodity Credit Corporation: Bio-Based Fuel Production

Section 5(e) of the CCC Charter Act authorizes CCC to take action to increase the consumption of agricultural commodities by “…aiding in the development of new and additional markets, marketing facilities, and uses for such commodities.” Under this authority, CCC will make available up to $170 million to subsidize the production of bio-based jet fuel. Because there is no existing viable commercial source for the large-scale production of such fuel, CCC has entered into an agreement with the Department of Energy and the Navy to assist in the development of this product. The Defense Logistics Agency will award the contract at the end of FY 2014 or beginning of FY 2015. CCC expects to outlay $60 million for this purpose in 2015.

Agricultural Research Service (ARS)

ARS has active research programs directed toward 1) improving the efficiency and reducing the cost for the conversion of agricultural products into biobased products and biofuels; 2) developing new and improved products for domestic and foreign markets; and 3)providing higher quality, healthy foods that satisfy consumer needs in the United States and abroad.

Noninsured Crop Disaster Assistance Program (NAP)

NAP has been expanded to include buy-up protection, similar to buyup provisions offered under the federal crop insurance program. Producers may elect coverage for each individual crop between 50 and 65 percent, in 5 percent increments, at 100 percent of the average market price. Producers also pay a fixed premium equal to 5.25 percent of the liability. NAP coverage is expanded to include crops grown expressly for the purpose of producing a feedstock for renewable biofuel, renewable electricity, or biobased products.

Department of Energy

The Budget provides $2.3 billion for the Office of Energy Efficiency and Renewable Energy (EERE) to accelerate research and development (R&D), build on ongoing successes, increase the use of critical clean energy technologies, and reduce costs further. Within EERE, the Budget increases funding by 15 percent above 2014 enacted levels for sustainable vehicle and fuel technologies, by 39 percent for energy efficiency and advanced manufacturing activities, and by 16 percent for innovative renewable power projects such as those in the SunShot Initiative to make solar power directly price-competitive with other forms of electricity by 2020. The Budget provides funding within EERE to help State and local decision-makers develop policies and regulations that encourage greater deployment of renewable energy, energy efficiency technologies, and alternative fuel vehicles.

Bioenergy Technologies Office

The Budget proposes $253 million at DOE to develop and demonstrate conversion technologies to produce advanced biofuels, such as “drop-in” replacements for gasoline, diesel, and jet fuel. In addition, the Budget invests $2 billion over the next 10 years from Federal oil and gas development revenue in a new Energy Security Trust that would provide a reliable stream of mandatory funding for R&D on cost-effective transportation alternatives utilizing cleaner fuels such as electricity, homegrown biofuels, renewable hydrogen, and domestically produced natural gas that reduce U.S. dependence on oil.

This program funds RD&D projects to advance biofuels technologies and to validate and assist in the commercialization of integrated biorefinery technologies that will help transform the nation’s transportation sector. The program’s activities include the development of biomass conversion technologies to produce a variety of biofuels, bioproducts, and biopower. The program also works to evaluate environmentally sustainable feedstocks and to develop economically viable feedstock logistics systems to sustainably supply the biofuels industry. With the completion of the program’s technology development for cost-competitive cellulosic ethanol, the program is now partnering with the private sector to demonstrate economic viability at larger scales. It is also developing follow-on technology for more infrastructure- compatible biofuels, such as bio-based gasoline, diesel and jet fuel. This work is coordinated closely with the Departments of Agriculture and Defense.

Advanced Research Project Agency – Energy

For necessary expenses in carrying out the activities authorized by section 5012 of the America COMPETES Act (Public Law 110–69), as amended, $325,000,000, to remain available until expended: Provided, That $29,250,000 shall be available until September 30, 2016, for program direction.

Title 17 Innovative Technology Loan Guarantee Program

The Loan Programs Office (LPO) will consider and coordinate Departmental action on all loan guarantee applications submitted to the DOE under Title 17 of the 2005 Energy Policy Act.

Section 1703 of that Act authorizes the Department to provide loan guarantees for projects in categories including renewable energy systems, advanced nuclear facilities, coal gasification, carbon sequestration, energy efficiency, and various other types of projects. These projects must avoid, reduce, or sequester air pollutants or anthropogenic emissions of greenhouse gases; employ new or significantly improved technologies compared to commercial technologies in service in the United States at the time the guarantee is issued; and offer a reasonable prospect of repayment of the principal and interest on the guaranteed obligation. DOE has been implementing Section 1703 of this program under authorizing law that allows borrowers to pay the credit subsidy costs of these loan guarantees (“self-pay” authority).

For necessary administrative expenses to carry out this Loan Guarantee program, $42,000,000 is appropriated, to remain available until September 30, 2016: $35,000,000 of the fees collected pursuant to section 1702(h) of the Energy Policy Act of 2005 shall be credited as offsetting collections to this account to cover administrative expenses and shall remain available until expended, so as to result in a final fiscal year 2015 appropriation from the general fund estimated at not more than $7,000,000.

Defense

The Defense Production Act Title III office has requested $22 million in authority for FY 2015. The mission of the Defense Production Act (DPA) Title III Program is to “create assured, affordable, and commercially viable production capabilities and capacities for items essential for national defense.” On June 27, 2012, the Defense Production Act Title III Program published a Funding Opportunity Announcement for an “Advanced Drop-in Biofuels Production Project.” The Announcement requests proposals from domestic sources to execute the project, focused on the creation of an economically viable production capacity for advanced drop-in biofuels.

Tax action: cellulosic ethanol, biodiesel

Brooke Coleman, Executive Director of the Advanced Ethanol Council (AEC), highlighted a proposed multiyear extension of the tax credit for cellulosic biofuels, that he said “would help put the United States at the forefront of the global race to commercialize cellulosic biofuels. The expiration of this credit in 2013 came right at the time when the cellulosic biofuel industry was breaking through at commercial scale. Reinstating the provision will ensure that the next wave of commercial cellulosic biofuel plants will be built by Americans on American soil.

Coleman added: “We also strongly support the President’s proposal to tackle the issue of oil subsidies, which for decades have been driving investment away from the renewable fuel sector. Doing away with decades-old subsidies to oil and gas will not hurt those industries given their maturity and wealth, but will send a clear signal to the marketplace to invest in innovative, low-carbon alternatives to petroleum. It is this type of budget package that will create new jobs in new industries in the coming decade, and put the United States in the best position to succeed when it comes to developing next generation fuels.”

On the oil & gas subsidies, Caren Benjamin, Executive Director, Americans United for Change said, “We are elated that the President has renewed his commitment to doing away with billions of dollars in pointless subsidies for big oil that shortchange investment in cleaner burning, cheaper renewable fuels of the future.  100 years of Big Oil tax breaks is more than enough – especially for an industry that made $100 billion in profits last year and pays very little taxes in return.  To be consistent with the President’s budget, the EPA should also reconsider its plan to give a back door subsidy to Big Oil by gutting the Renewable Fuel Standard.  It’s a proposal that runs totally counter to the President’s strategy to address climate change by supporting clean energy — because a weak RFS means less incentive for innovation in cleaner burning, next generation renewable fuels and guarantees a greater use of dirty fossil fuels.”

At the same time, Iowa Renewable Fuels Association Policy Director Grant Menke cautiioned, “While we are pleased the President seeks to reinstate the cellulosic biofuel tax credit and several other important tax incentives, we are disappointed he did not include the biodiesel tax credit among these extensions.  As America’s leading advanced biofuel, biodiesel has made great strides in production, distribution, and use.  However, faced with the enduring effects of the petroleum industry’s continuous Century of Subsidies, reinstating the biodiesel tax incentive is a vital part of leveling the energy playing field and allowing true consumer fuel choice.”

Hey kids! Read all 1635 pages of the Budget! It’s fun!

The detailed budget is here.

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