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BCO
Newsletter The
ECO Newsletter has changed its name to BCO, to reflect the expansion
of our work to all kinds of bioenergy. BCO is the Newsletter
of EESI's Agriculture & Energy Program |
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CULTIVATING
A NEW RURAL ECONOMY
Early
in our country’s history, agriculture and forestry provided the
capital and motivation for expanding our infrastructure and
boundaries, the food for a burgeoning population, and much of the
power for our growing manufacturing sector.
With the advent of the new bio-based economy, we have the
opportunity to turn once again to farms and rural communities for a
significant portion of the renewable resources that we need to feed,
fuel and run the industries of the nation.
For farm communities, which have been in decline for much of
the last 50 years, this “new” approach could provide the spark
long needed to revitalize the rural economy and agricultural sector
by providing new and diversified cropping and income opportunities. The primary benefit that the bio-based economy
provides farmers and rural communities is a growing market for
multiple agricultural crops and farm products.
The main commodity crops of the The
bio-based market has also increased demand for alternative farm
crops and products. This
new diversification is critical for farmland that is suffering from
decreasing soil quality, etc, due to intensive corn/soybean
production. For the bio-based market, farmers are being asked to
grow crops suited for high oil production (hazelnuts), perennial
grasses that produce high amounts of biomass (switchgrass), and
plants from which cosmetics and essential oils may be derived
(lavender). Many of
these crops provide more ground cover, better root structure, and
reduced erosion compared to traditional row crops like corn and
soybeans. Growing multiple crops for multiple markets
will enable farmers to diversify both their farms and their income
streams. The diversity of crops helps mitigate risk for the farmer
from both an environmental and economic perspective, as more crops
in a rotation can inhibit pest and disease problems, while
production of multiple farm products reduces the potential for crop
failure or low prices impacting overall farm profitability. With
new crops and products comes new processing and manufacturing needs
for rural communities, reversing years of reduced economic
opportunity and corresponding population flight. As much of the
demand for bio-based products is driven by concern for the
environment, farmers are increasingly being rewarded for managing
their land in specific ways, so they are not only producing crops,
but also providing environmental services such as wildlife habitat,
cleaner water, biodiversity and open spaces.
This transition results in more resilient and sustainable
working landscapes. To
achieve such multiple results, however, requires more than just a
successful bio-based industrial sector.
For farmers, rural citizens and the environment to benefit,
supportive state and federal policies must promote the community and
environmental aspects as well as economic goals. Some policies that
should be adopted include: ·
Bio-based Procurement Standards – The seed of
a new industry can be created simply by government agencies placing
a preference on these products. The ·
Tax and Incentive Programs – Building the
bio-based sector in a sustainable manner will require incentives
that are rooted in rural communities.
An industry has a much greater chance of succeeding – as
well as providing sustainable rural economic development – if
policies promote companies that are competitive, flexible, and
locally owned. Programs like the ·
More Funding for Biomass Crop Research –While
corn and soybeans have many bioindustrial uses, there are other
crops that hold great promise and need to be evaluated. More funding
and research is needed to look at alternate crops and to help speed
their introduction on the land and use in the factories. ·
More Stewardship Incentives – Programs like
the Conservation Security Program that provide payments for sound
environmental management can help farmers to transition to new
cropping systems and production methods.
Such programs that reward sound management need to be
broadened and supported if we want to return diversity to the
landscape and farmers’ pocketbooks. Bio-based
agriculture has strong support from both farmers and
environmentalists. A
great opportunity exists to develop policies and strategies that
produce a "big tent" of support for bio-based products and
sustainable agricultural production.
But there is much to be done.
It will require strong broad-based support to achieve
community and environmental as well as economic goals.
We at IATP are dedicated to promoting bio-based agriculture
and look forward to working with the various stakeholders. We are
coordinating the Bioindustrial Development Partnership, a cross
sectoral group dedicated to promoting sustainable bio-based
development and will be releasing a report on the potential for
bio-based production in These have all been proposed as potential replacements for
our current reliance on fossil fuels.
The Administration does appear to be enamored with hydrogen
as a future fuel source, though it offers little cost benefit and
may actually increase current CO2 emissions depending on the
feedstock source. A recent paper released by Dr. David Doty1,
outlines numerous reasons reliance on hydrogen, particularly for
light duty vehicles, will be cost prohibitive for the next few
decades. His argument is
that hydrogen is extremely expensive, is currently being produced
from fossil fuels, is stored through compression by fossil fuels,
and is transported by fossil fuels with every step in the process
continuing to release CO2 to the atmosphere.
Dr. Doty calculates the fuel cost for liquid hydrogen to be
roughly $5/kilogram and the price for pressurized hydrogen could
reach $100/kg, assuming natural gas will remain roughly $5/GJ.
Unfortunately predictions for the next 15 years indicate
natural gas prices might be closer to $14/GJ causing commercial
prices of hydrogen to balloon four times higher.
Fuel storage of hydrogen is a great concern as well.
Current technology of ‘low-cost compressed gas cylinders’
only store 1.5 percent H2
by mass while a $15,000 carbon-fiber fuel tank still only stores 11
percent H2. In Doty’s
own words, “the risks associated with carrying this mechanical
bomb around are probably two orders of magnitude greater than we are
accustomed to accepting in our gasoline-powered cars today.” Certainly, current hydrogen production technology does not
offer a real solution for the U.S. dependence on foreign oil, but
some recent innovations might. There
are now laboratories around the world exploring the possibility of
producing hydrogen for fuel cells directly from biofuels.
The University of Minnesota’s Department of Chemical
Engineering and Material Science has developed a technique to
produce hydrogen directly from ethanol and water.
Their process involves spraying tiny droplets of ethanol
mixed with water across a Rhodium-Ceria catalyst where it is rapidly
heated to 1500 degrees Fahrenheit.
All of the hydrogen from the ethanol and some from the water
is extracted. Researchers
see an immediate use for this technology for stationary fuel cells
in remote areas with a real potential that ethanol derived hydrogen
could fuel cars as well. According
to Lanny Schmidt of the Univ. of Minnesota research team, “We can
potentially capture 50 percent of the energy stored in sugar (from
corn), whereas converting the sugar to ethanol and then burning the
ethanol in a car would harvest only 20 percent of the energy in
sugar.”2 On the other side of the Atlantic in Great Britain, a
research team at the University of Leeds has developed a method to
produce hydrogen from sunflower oil.
Though this process is prohibitively expensive at present, it
would offer a renewable source of hydrogen and effective carbon
sequestration through the planting of additional sunflowers.
This technology would solve the issue of storing hydrogen, as
the energy would be transported as the more stable bio-oil and then
extracted when needed to power the fuel cell.
Their technique requires a nickel and carbon-based catalyst
to aid in releasing the hydrogen from the bio-oil.3 Whatever the outcome of the race to replace fossil fuels, a significant production of biofuels will be in order. Though a ‘Hydrogen Economy’ may sound attractive on paper, the technology’s heavy reliance on fossil fuels does not make it a viable option at present. Should biofuels become more economically efficient for the production of hydrogen, perhaps the idea of a hydrogen economy would become more acceptable. Regardless of the debate over the feasibility of hydrogen, a significant shift from carbon emitting energy sources to alternative sources of energy needs to be adopted swiftly. As Dr. Doty concludes in his paper, why focus on a technology that is decades away from being commercially available when, “Cellulosic bio-ethanol (from poplars and switchgrass) could be economically competitive within six years.”1 1 Doty,
David F, PhD. Practical, Clean Energy for Future Transportation. Doty
Scientific, Inc.
Study Finds
Farmers Support Renewable Energy Standards According to a study released by Harvesting Clean Energy,
national and regional farm organizations are joining forces in
support of renewable energy standards.
In the words of Patrick Mazza of Harvesting Clean Energy, the
reason a number of farm organizations are supporting renewable
energy standards is they feel it is “one of the most powerful
tools to build markets for biofuels, wind power, and other
agriculturally produced clean energy sources.”1
Reducing reliance from fossil fuels and petroleum fertilizer inputs
would significantly improve rural economic stability.
In 2003 alone, prices for fertilizer have increased by
one-third causing an average farmer to pay $10-15 more per acre.
High natural gas prices have caused the closure of 21 percent
of U.S. ammonia plants producing nitrogen fertilizer.
A significant change in federal energy subsidies will have to
be achieved if a successful shift to 20 percent of U.S. energy
supply from renewables is to occur.
In 2001, the EIA estimated federal support of renewables to
be $1.3 billion annually, while oil and gas received $11 billion and
coal received $3.3 billion annually in subsidies. Currently the concept of a renewable energy standard has
been separated into two fronts: a renewable fuel standard (RFS) and
a renewable portfolio standard (RPS), both of which contain real
benefits for the country’s agricultural sector.
An RFS that increased annual production of biofuels to 5
billion gallons by 2012 would have a significant impact on rural
economics and the already fast-growing ethanol industry.
In John Urbanchuk’s analysis, “The Contribution of the
Ethanol Industry to the American Economy in 2004”, he outlines the
fast rise of a ethanol’s 1980 ‘cottage industry’ with annual
production of 175 million gallons to today’s 74 ethanol
manufacturing facilities producing over 3.1 billion gallons per
year. The 25 percent
increase in ethanol production from 2003 to 2004 will require $4.6
billion in purchases, adding roughly $8.9 billion to 2004 U.S. gross
domestic product. The
American Farm Bureau Federation (AFBF), one of the farm groups
supporting an RFS, has stated it would stimulate the rural economy
through $5.3 billion in rural capital investment and 214,000 new
jobs. An RFS would
successfully increase annual farm income by $4.5 billion and add $51
billion to new farm income by 2012.
It would decrease the trade deficit by $34 billion and lower
federal crop support by $5.9 billion by 2012.1 This study found that an RFS on the regional scale has
tangible economic benefits. For
instance a plant that produces 40 million gallons per year generates
$142 million locally from construction costs and employment as well
as annually purchasing $56 million in goods and services from local
suppliers. During
operation of the plant, 71 percent of its purchases is grain from
farmers. A directly
visible economic benefit to farmers can be seen within a 50-mile
radius of a corn-ethanol plant, where crop prices are generally 5-10
cents higher per bushel. National and regional farm groups are also vigorously supporting a Renewable Electricity Standard (or a Renewable Portfolio Standard). So far 17 states have adopted RPS’s. As a direct result of these policies, these states have encouraged two-thirds of the wind development occurring between 1998 and 2003, according to the Union of Concerned Scientists. These clean energy initiatives have been reaping huge economic benefits for rural economies. A landowner leasing up to a half acre of land per turbine receives 2-3 percent of gross revenue (approx. $2,500-4,000 per turbine). For the local community every “100 megawatts of wind capacity creates 200 construction jobs, 2-5 permanent jobs, and up to $1 million in local property tax revenue.”1 UCS finds an RPS of 20 percent by 2020 would induce $75 billion in new capital investment, $4.7 billion in property tax revenues for rural areas, and $975 million in lease payments to landowners for wind power. Thus it is no surprise state farm groups in Colorado, Idaho, South Dakota, and North Dakota have been firm supporters of at least a state-wide RPS. The North Dakota Farm Bureau in 2002 called for the state to plan to install 10,000 megawatts of wind capacity by 2020. They cited benefits of up to $6 billion for construction, $23 million annually for landowner payments, and $59 million going to local economies for operation and maintenance of the wind farms. 1 Mazza,
Patrick. “Farm Groups Pushing for Renewable Energy Standards” Harvesting
Clean Energy Issue Brief August 2004 State DOT
Agencies’ Experiences with Biodiesel A collaborative research effort recently released at the
2004 joint American Society of Agricultural Engineers (ASAE) and
Canadian Society of Agricultural Engineers (CSAE) Annual
International Meeting produced an overview of state Department of
Transportation agencies’ impressions on biodiesel use in agency
vehicles. The research
effort was supported by the South Dakota Department of
Transportation (SDDOT) and involved analysis of completed surveys
from 48 of the 50 State DOT’s. SDDOT initiated this research project to collect
information on previous experience state DOT agencies’ operations
have had with biodiesel. According
to 18 states surveyed, the primary feedstock for biodiesel is soy
methyl ester with none reporting use of biodiesel from rapeseed.
Soybeans are the leading agricultural product for South
Dakota with 22 percent being processed within the state.
Between 1996 and 2000, 14.7 percent of South Dakota’s
agricultural cash receipts for livestock, crop production, and
government payments were accounted to soybeans.2 A total of 21 states have considered and are testing or
using a biodiesel blend in agency vehicles.
Nine responded that they were under some form of statewide
mandate, which was either in the process of being considered or had
been enacted previously. Five
states reported having a formal mandate either requiring use of a
biodiesel blend presently or in the near future.
Only Minnesota has enacted a statewide general use mandate
requiring all diesel sold to contain 2 percent biodiesel.
This will go into effect when annual consumption of biodiesel
exceeds 2 million gallons; current consumption is 397,000 gallons. North Carolina has reported consuming the most biodiesel
without a state mandate; NCDOT has utilized 3.1 million gallons.
Kansas’s DOT is consuming the second largest amount of
biodiesel, roughly 2 million gallons.
It enacted a mandate in the summer of 2003, requiring all
state agencies to use a B2 blended fuel as long as the price
differential with conventional petroleum diesel fuel did not exceed
$.10. Seventeen states reported not having any experience with
biodiesel, while 14 states surveyed admitted considering biodiesel
but decided against using it. The
most common reasons given for not adopting biodiesel use were: high
fuel cost, behavior in cold weather, issues around storage and
infrastructure, NOx emissions, performance and quality concerns, or
engine warranty. B20 was the most common biodiesel blend being utilized,
preferred by 14 of the 19 states utilizing blended fuels.
Minnesota and Kansas are using a B2 blend, while a few states
have used B10 (Delaware) and B5 (South Dakota) blends. This study concluded that though state mandates were often
the impetus for adoption of blended fuels in agency vehicles, over
half of the 19 states using biodiesel said they were not required
to. Of the 17 states
that responded to the Maintenance and Performance Issues section of
the survey, only 8 reported any fuel filter plugging problems.
All of these states noted that the problems were resolved
once filters were replaced. 1
Humburg, D et. al. 2004 Biodiesel Use and Experiences among State
DOT Agencies. ASAE/CSAE Meeting Paper no. 046072. Corporate Tax Bill Passes House and Senate, Awaiting
Presidential Signature On Monday, October 11, 2004, the Senate passed by a vote
of 69 to 17 the American
Jobs Creation Act of 2004
(HR. 4520). What emerged
as a $140 billion bill started out as a quite modest bill to repeal
subsidies ruled illegal by the World Trade Organization (WTO). The
WTO levied progressive sanctions on U.S. exports that increased 1
percent per month set to reach 13 percent in November. Within the 650 page conference report there are a number
of tax credits for renewable electric generation as well as tax
credits for biodiesel and ethanol fuel production.
Though the current legislation is far
from ideal, it
does mark a recognition by Congress of the importance of supporting
the development of viable commercial renewable energy.
However it may well be difficult for these technologies to be
competitive with more conventional energy sources as significant
subsidies for coal, oil, and natural gas were maintained-if not
increased-as well. The conference report saw the adoption of some of the
Senate energy title language, expanding the definition of qualifying
energy resources from wind and closed-loop biomass, to geothermal,
open-loop biomass, solar, small irrigation hydroelectric, municipal
solid waste, and refined coal. Some
important solar provisions, for example, were left out. The renewable tax credit indexed for inflation would be
1.8 cents/kilowatt hour. This
level was maintained for wind, solar, closed-loop biomass and
geothermal but halved for open-loop biomass, small irrigation
hydroelectric, and municipal solid waste to .9 cents/kilowatt hour. The language of the bill significantly limits the number
of electric projects that will qualify by specifying only facilities
that come on line between the enactment of this bill and January 1,
2006 will qualify for a 5-year tax credit term (including
geothermal, open-loop biomass, solar, small irrigation
hydroelectric, and municipal solid waste).
Wind and closed-loop biomass are an exception as the credit
extender applies to projects started after 1992, for closed-loop
biomass, and after 1993, for wind, and which come on line by January
1, 2006, with credits provided to projects for a 10-year term.
With this small window of time for the development of
renewable electric projects, it is difficult to imagine how many new
projects, if any in some technologies, will actually qualify for a
production tax credit. Because
the credit expires the end of 2005 it means that next year, there
will have to be another fight to extend the credits for renewable
energy. It is interesting to note that refined coal, defined by a
proven reduction in emissions of 20 percent NOx and either a
reduction in SOx or mercury emissions (not necessarily both), will
be awarded $4.375 per ton (indexed for inflation) for a ten year
term that will apply to facilities that begin operating after
enactment of this bill until January
1, 2009-
a very different treatment from renewable projects. This bill also amends and extends the alternative fuel
excise tax credits. The
Volumetric Ethanol Excise Tax Credit (VEETC) changes existing law so
that, effective September 30, 2004, the excise tax credit for
ethanol will not result in any loss of funds to the Highway Trust
Fund, but will instead be offset through the Treasury.
This has been a bone of contention for many state departments
of transportation. Upon enactment of this bill the Treasury will be
responsible for awarding 51 cents/gallon of alcohol (ethanol) mixed
with gasoline, 60 cents/gallon of alcohol (excluding ethanol) mixed
with gasoline, 50 cents/gallon of biodiesel mixed with traditional
diesel, and $1.00/gallon of agri-biodiesel mixed with traditional
biodiesel. The
definition of agri-biodiesel is biodiesel produced from virgin
vegetable oils derived from corn, soybeans, sunflower seeds, canola,
cottonseeds, crambe, rapeseeds, safflowers, flaxseeds, rice bran,
and mustard seeds, as well as from animal fats. The tax credit is applicable to the producer of the
biodiesel and alcohol fuel mixture for fuel sold after December 31,
2004. In the case of ethanol it will terminate after December 31,
2010 and in the case of biodiesel will terminate after December 31,
2006. Petroleum-based fuel tax credits included 5 cents/gallon
of low sulfur diesel fuel (“diesel fuel with a sulfur content of
15 parts per million or less”) for small business refiners as well
as significant tax credits were included for oil and natural gas
produced from marginal wells. The
credit amount is $3 per barrel of crude oil produced and 50 cents
per 1,000 cubic feet of qualified natural gas.
This bill is awaiting the
signature of the President, which is expected to occur in the near
future. **Full text of the Conference report
can be found at http://waysandmeans.house.gov
State
Renewable Portfolio Standard Updates It appears This form of
legislation has been stalled a number of times in the state’s
legislature, but advocates are optimistic that voters will show
overwhelming support for the initiative.
A poll completed three months ago showed 70 percent of voters
were in favor of implementing an RPS.
This legislation is less popular with the seven large power
companies that would fall under this mandate.
For instance, Xcel Energy Inc. argues that this mandate would
increase generation costs by anywhere from $580 million to $1.6
billion, with industrial and commercial energy consumers shouldering
the bulk of it. On September 22
the Environmental
groups in 19 States Have
Now Banned MTBE Methyl tertiary-butyl ether (MTBE), a gasoline
additive ruled a possible carcinogen and groundwater pollutant by
the Environmental Protection Agency, may not have a federal ban on
it yet but several states have implemented their own legislation
against its use. California Air
Resources Board Passes Greenhouse Gas Rule After what some have called a ‘marathon
public hearing’ on September 24, 2004, the California Air
Resources Board (CARB) approved a rule that would mandate automakers
to manufacture vehicles with reduced greenhouse gas emissions by
model year 2009. The
original legislation enacted by the FY
2005 Agriculture Appropriations Update On September 14, 2004 FY05 Agriculture Appropriations bill
was reported out of the Senate Appropriations Committee.
A number of cuts were made while some funds were restored to
critical energy title programs authorized by the 2002 farm bill.
Section 9004: Biodiesel Fuel Education Program:
*mandatory funding of $1 million/yr. provided in the 2002
farm bill. Section 9006: Renewable Energy and Energy Efficiency Rural Development Program:
*mandatory
funding of $23 million/yr. Section 9008 Biomass Research and Development Act:
Section 9010 CCC Bioenergy Program:
*mandatory
funding of $150 million/yr. Section 6401: Value-Added Agricultural Product Market Development Grants (VAPG):
*mandatory
funding of $40 million/yr. Senator Tom Harkin (D-IA) and Senator Kit Bond (R-MO) did
offer a successful amendment to restore funding to USDA’s
Biodiesel Fuel Education Program, Section 9004 in full committee.
Chief Executive Officer Joe Jobe, of the National Biodiesel
Board (NBB), was thankful to “Senators Harkin and Bond for their
bipartisan recognition that the fledgling biodiesel industry relied
on Congress’s commitment of funding to help increase awareness and
grow the biodiesel industry.” The future of this bill is
uncertain. It did not
reach the Senate floor before recess and, therefore, is likely to be
added to an omnibus funding bill to be voted on during the
‘lame-duck’ session in mid-November.
It is under a Continuing Resolution (CR) until November 25.
167 Renewable
Energy and Energy Efficiency Grants in 26 States On September 16 the US Department of
Agriculture announced, under its Section 9006 grant program, that
applicants from 26 states were awarded $21 million in renewable
energy project grants and $1.8 million in energy efficiency project
grants for FY 2004. This
year’s number of applicants, 237 applications submitted
for a total of $36.6 million in requested funds, was
significantly up from FY 2003 when 148 applications were received. The Senate FY 2005 Agriculture Appropriations
bill was reported by the full Committee September 14, 2004.
The Senate provides $20 million for Section 9006, $3
million below mandatory levels while the House bill provides the
full $23 million authorized in the 2002 farm bill.
Final appropriations levels will be determined during a
‘lame-duck’ session of Congress scheduled to begin Nov. 16. A breakdown of Renewable
Energy grant awards by state is shown below:
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