The Food, Conservation &
Energy Act of 2008:
Energy Provisions & Issues
Jody L. Campiche
Larry D. Sanders
May 2009
Overview
►
Shift in support from conventional or grain-based biofuels
to cellulosic biofuels
►
Additional funding for renewable energy
►
Collaboration between USDA & DOE
►
Sugar program in Commodity Title I calls for USDA
purchase of sugar for ethanol use
►
Ethanol blending tax credit reduced by 12%
►
NOTE: Key Bio-energy provisions for RFS are found in the
Energy Independence and Security Act of 2007, not in
Farm Bill
Energy Provisions
1.
Biobased Markets Program
2.
Biorefinery Assistance
3.
Repowering Assistance
4.
5.
6.
7.
8.
Biomass Research and
Development Program
9.
Feedstock Flexibility Program
for Bioenergy Producers
Bioenergy Program for
Advanced Biofuels
10.
Biomass Crop Assistance
Program
Biodiesel Fuel Education
Program
11.
Forest Biomass for Energy
12.
Technology Transfer for Energy
Crops and Conversion Facilities
13.
Sugar purchase
14.
Cellulosic tax credit; ethanol
subsidy cut; studies for
infrastructure, fertilizer
Rural Energy for America
Program
Rural Energy Self-Sufficiency
Initiative
3
U.S. Ethanol Production
U.S. Ethanol Production (mgy)
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
0
Source: Renewable Fuels Association
Biobased Markets Program
► Continued
from 2002 bill
► Purpose:
Provide government demand for
biobased products
► Federal
agencies will buy biobased products
 Meet performance standards
 Available at reasonable price
► Mandatory
and discretionary funding
Corn Dry Milling/Ethanol Process
Corn
Coarse Flour
Water
Enzymes
Saccharification
Mash (Sugars)
Yeast
CO2
Fermentation
Distillation
Ethanol
DDGS
6
How ethanol is made – wet milling process
Corn
Dilute H2SO4
Corn steep liquor
Germ
Steeping
Fiber
Corn oil
Proteins
Starch
Gluten meal
Livestock feed
Poultry feed
Syrup
Corn starch
Ethanol
Biorefinery Assistance
►
Continued from 2002 bill – now with mandated funding
►
Purpose: Encourage growth of advanced biofuels industry
►
Competitive grants to assist development and construction
of demonstration-scale biorefineries that convert
renewable biomass to advanced biofuels
 may not exceed 30% of project cost
►
Loan guarantees to fund development and construction of
commercial-scale biorefineries
►
Eligible entities
 individual, Indian tribe, state/ local govt, organization, corp., farm
coop, producer assn., National lab, higher ed, REC, public power,
consortium of these
Cellulosic ethanol production
As my reviewer Francis Epplin (Oklahoma State University) notes, there are several
alternate processes for cellulosic ethanol production, none of which have yet won
the battle as “the best process”: enzymatic hydrolysis , acid hydrolysis, gasification,
gasification-fermentation, liquefaction, mix alco. This slide is a generic
representation of the process, followed by the next slide which is another process.
Whether any of them are shown to be commercial and economic remains to be
seen.
9
Repowering Assistance
►
New in 2008 bill
►
Purpose: Encourage existing biorefineries to replace fossil
fuels used to produce heat or power with renewable
energy
►
Payments made for installation of new systems that use
renewable biomass or for new production of energy from
renewable biomass
►
Mandatory funding of $35 million through CCC for FY 2009,
until expended
Bioenergy Program for Advanced
Biofuels
►
Continued from 2002 bill – only advanced biofuels
producers are eligible – additional mandated funding
►
Purpose: Encourage production of advanced biofuels
►
Contract with biorefineries
 payments based on quantity of advanced biofuel produced and net
nonrenewable energy content of the fuel
Biodiesel Fuel Education Program
►
Continued from 2002 bill
►
Purpose: Educate those with vehicle fleets and others
about biodiesel benefits
►
Eligible entities:
 Nonprofits or higher education
 Demonstrated knowledge of biodiesel fuel production,
use or distribution
 Demonstrated ability to conduct educational/technical
support programs
12
Biodiesel Production
Catalyst
Vegetable oil
Crude biodiesel
4. Washing
Source: Wen and Ogejo.
1. Mixing
2. Transesterification
3. Separation
Methanol
5.Methanol recovery
Crude glycerol
Biodiesel
13
U.S. Biodiesel Production
U.S. Biodiesel Production (mgy)
700
600
500
400
300
200
100
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
Rural Energy for America
Program
►
Continued from 2002 bill – additional mandated funding
►
Purpose: promote energy efficiency & renewable energy development
for ag producers & rural small businesses
►
Provides competitive grants for energy audits, renewable energy
development assistance, energy efficiency improvements & renewable
energy systems
►
Eligible entities: state/tribe/local govt, land-grants/other higher ed,
REC or public power utility, other similar entity
►
Loan guarantees/grants to ag producers/rural businesses for energy
efficiency improvements & renewable energy systems
 Grants may not exceed 25% of cost
 Loan guarantees capped at $25 million/loan
 Combination of grant and loan guarantees may not exceed 75% of cost
Biomass Research & Development
►
Continued from 2002 bill – additional mandated funding
►
Purpose: USDA & DOE coordinate policies to promote
research/development for production of biofuels/biobased products
►
Establishes Biomass R/D Board & Technical Advisory Committee
►
Biomass R/D Initiative
 Competive grants/contracts/financial assistance
 Technologies for commercial, competitive biofuel production
 Hi-value biobased products
 Diversity of economical/environmentally sustainable domestic sources
of renewable biomass
 3 areas: Feedstocks; Biofuels/biobased products; Biofuels
development analysis
16
Renewable Energy Self Sufficiency
Initiative
►
New in 2008 bill
►
Purpose: Provide financial assistance for rural communities to increase energy
self-sufficiency
►
Provides grants to conduct energy assessments, formulate plans to reduce
energy use from conventional sources, and install integrated renewable energy
systems
►
Eligible renewable energy sources
 energy conversion systems fueled from solar, wind, hydropower, biomass,
or geothermal sources
►
Allows direct lending from U.S. Department of Treasury as an alternative to
financing through Federal Financing Bank
►
Authorizes appropriations of $5 million annually for FY 2009-12
►
Federal-cost share for any grant is limited to 50% of project cost
Feedstock Flexibility Program for
Bioenergy Producers
►
New in 2008 bill
►
Purpose: Establishes purchase program 2008-2012 crop
year for sugar (raw, refined, in-process eligible to be
marketed in US for human consumption or for extraction of
sugar for human consumption)
►
Sell sugar (by bid) to bioenergy producers at no net cost to
Federal govt.
►
CCC funds/facilities used to purchase sugar at loan levels
►
Program only implemented in years Secretary determines it
necessary to avoid Government costs
Biomass Crop Assistance Program
►
New in 2008 bill
►
Purpose: BCAP supports establishment/production of eligible crops for conversion to
bioenergy
►
Payments up to 75% of establishment costs for crop (seeds/stock, planting, site
prep/tree planting)
►
Payments to assist agricultural and forest landowners with w/collection, harvest, storage,
transport to biomass conversion facility: match $1 for $1 per ton of biomass up to
$45/ton for 2 yrs
►
5 yr contracts for annual/perenial crops, 15 yr contracts for woody biomass
►
CCC funds used, Annual payments to support production
►
Eligible crops/biomass

Doesn’t include crops eligible for commodity payments, invasive or noxious plants, animal waste
and byproducts, food and yard waste, or algae
US Biomass Sources, 2005
20
Milbrandt, Anelia, 2005: “A Geographic Perspective on the Current Biomass Resource Availability in the United States”,
National Renewable Energy Laboratory, Golden, CO.
Forest Biomass for Energy
►
New in 2008 bill
►
Purpose: USFS will conduct competitive R/D to encourage use of forest
biomass for energy
►
Eligible entities: FS, other Fed agencies, state/local govt, tribes, landgrants, private
►
Project selection criteria




►
Uses low-value biomass for energy
Integrate energy production into biorefineries and other mfg
Develop new transportation fuels
Improve growth/yield of trees for energy production
$15 million each fy 09-12 authorized
Community Wood Energy
Program
► New
in 2008 bill
► Purpose:
Development of community wood energy
plans and acquisition/upgrading
► USFS
will provide grants up to $50,000 to
state/local govts. to develop community wood
energy plans; competitive grants to state/local
govts. to acquire/upgrade community wood
energy systems
► $5
million each fy 09-12 authorized
Renewable Fuel Studies
► New
in 2008 bill
► Biofuels
infrasctructure studies
 assess infrastructure needs for expanding domestic
production, transport, and distribution of biofuels
► Renewable
fertilizer studies
 assess current state of knowledge regarding potential
for production of fertilizer from renewable-energy
sources in rural areas
Technology Transfer for Energy
Crops and Conversion Facilities
► Makes
permanent existing program
 Modifications
► reduced
input costs, conserving energy resources, diversifying
through new energy crops and generation facilities, and
expanding agricultural commodity markets for producers using
practices that enhance environment, natural resource base, and
quality of life
► Defines
several specific characteristics of
organization to provide assistance to farmers
► In
Rural Development Title
Pilot Programs and New Product
Development
► New
in 2008 bill
► Purpose:
Contract for studies of insurance
policies for energy crops
► In
Crop Insurance Title
Biofuel Tax Credit and Tariff Provisions
►
Credit for production of cellulosic biofuel - $1.01/gallon
►
Comprehensive study of biofuels by USDA, Treasury, DOE,
EPA, NAS
►
Modifies the subsidy paid to ethanol producers from
$0.51/gallon thru 2008 to $0.45/gallon beginning 2009
 Reduces tax credits to $0.45/gallon in calendar year
after annual production or importation of ethanol
reaches 7.5 billion gallons
26
Biofuel Tax Credit and Tariff
Provisions
► Calculation
of Volume of Alcohol for
Fuel Credits
 Reduces amount of allowable denaturants to
2% of volume of alcohol (previously 5%)
► Ethanol
Duty Extension
 Extends additional duty on ethanol imported for
fuel use for 2 years through Dec 31, 2010
Biofuel Tax Credit and Tariff
Provisions
► Limitations
on Duty Drawback on Certain
Imported Ethanol
 Phases out rebates available for imported ethanol after
Oct 1, 2008
► 2002
bill: U.S. businesses eligible for rebate of duties, fees, or
taxes paid on imported goods when the business subsequently
exported a "commercially interchangeable" good
► Rebate was available for exported jet fuel on basis of ethanol
imports, even though imported ethanol was not blended with
exported jet fuel
The Energy Independence and Security
Act of 2007 (HR 6)
►
Signed 18 Dec 07, in part amended Clean Air Act
►
Increases fuel efficiency standard from current 25 mpg to
35 mpg in 2020
►
Increases renewable fuels standards
 2007 - 7 billion gallons
 2008 - 9 billion gallons
 2022 - 36 billion gallons (15 billion gallons from corn grain ethanol,
21 billion gallons from cellulosic ethanol)
►
Grants for production, R/D, infrastructure
29
Grain Ethanol Production Costs
Source: United States Environmental Protection Agency (2007)
Likely Consequences
►
To shift emphasis from grain-based to cellulosic could cost billions
(not yet commercially viable)
►
Commitment to buy domestic sugar and sell to ethanol producers
could be very expensive with low-cost imported sugar
►
Reduction in ethanol tax credit at a time of high corn prices will
contribute marginally to decisions to halt plant construction
►
Debate continues over biofuel impact on food & feed prices
►
Debate continues over “life cycle” issues (do renewable fuels really
have a smaller carbon footprint?)
►
Commodity, conservation and disaster assistance provisions and
their impact on renewable fuels remains for further analysis
31
Will renewable energy solve all the
“problems”?
Problems
Solution?
 Energy independence
►
Renewable energy likely to be a
marginal part of supply
 High fossil fuel prices
►
Fossil fuel prices driven by
many factors (China & India)
 Environmental concerns
(carbon footprint)
►
New research suggests ethanol
not a solution to environmental
concerns
►
Fossil fuel demand likely to
continue to be high
 Fossil fuel shortage
32
Economic Stimulus:
American Recovery & Reinvestment Act 2009
►
DOE
 Energy Efficiency & Renewable Energy $16.8 bil. w/
$3.2 bil. For energy efficiency & conservation block
grants
 $5 bil. for weatherization assistance w/$3.1 bil. for Part
D, Title III energy policy
 $2 bil. for grants for mfg of advanced batteries
 $4.5 bil. for electricity & energy
 $3.4 bil for Fossil Energy Researcy & Development plus
$6 bil. for guaranteed loans
 Increases weatherization limits per home from $2500 to
$6500 per dwelling
Oklahoma Activity
► No
active biofuel plants in OK
► Many potential processing sites scrapped or
put on hold because of economy & lower
gas prices
► Existing biofuel activity:
 biodiesel facility in the Panhandle (which uses
hog fat as a feedstock)
 Conoco Phillips synthetic biodiesel experiment
 Hugoton, KS, Abengoa facility may contract
w/OK producers