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**Renewable Energy and Biobased Products**

***Background***

In fiscal year (FY) 2005, U.S. ethanol and biodiesel production made
from all sources was 3.73 billion gallons and 66.2 million gallons,
respectively. Corn used in ethanol production was 1.338 billion bushels.
U.S. biodiesel made from soybean oil was 60.6 million gallons, which
required 39.3 million bushels of soybeans. The value of these biofuels
to the U.S. economy totaled \$8 billion. Additionally, other biobased
products such as biobased chemicals and plastics continue to emerge.

Title IX of the 2002 farm bill, commonly known as the Energy Title,
includes a series of provisions to expand production of bioenergy and
bioproducts and promote energy conservation.

Section 9006 established the Renewable Energy Systems and Energy
Efficiency Improvements Program---authorizing USDA loans, loan
guarantees, and grants to farmers, ranchers, and rural small businesses
to purchase renewable energy systems and to make energy-efficient
improvements. Congress provided \$23 million to fund the program in each
of FY 2003, 2004, 2005, and 2006.

This program strives to help rural America reduce energy consumption and
costs; assist the Nation in meeting its energy needs; stimulate rural
economic development; create new jobs; and develop new uses for
agricultural products and waste materials.

Section 9006 grant requests may not exceed 25 percent of the eligible
project costs. Grant applications for renewable energy systems must be
no more than \$500,000, and applications for energy efficiency
improvements must be no more than \$250,000. In FY 2003 and 2004, a
total of \$44 million in grants was awarded to 281 agricultural
producers and rural small businesses in 33 States.

Section 9008 reauthorized the Biomass Research and Development Act of
2000 and provided \$75 million in funding from the Commodity Credit
Corporation for 2002 through 2007. In the last 3 years, the program has
awarded \$40.8 million for 39 research, development, and demonstration
projects on biobased products, bioenergy, biofuels, biopower, and
related processes.

In addition to these two farm bill programs, Section 9002 provided
funding for the testing of biobased products and established a Federal
procurement program for biobased products. Section 9004 established the
Biodiesel Fuel Education Program to make competitive grants to eligible
entities to educate governmental and other entities and the public about
the benefits of biodiesel fuel use.

The Bioenergy Incentives Program operated by the Commodity Credit
Corporation provided incentive payments to encourage increased purchases
of eligible commodities for the purpose of expanding production of
ethanol and biodiesel and supporting new production capacity of these
biofuels. The program provided over \$500 million in awards between 2001
and 2005. Up to \$60 million is available for the program in FY 2006.
The program expires at the end of FY 2006.

USDA also provides loan guarantees for production of renewable energy
and biofuels through the Rural Development Business and Industry Loan
Program, through section 9006 of the 2002 farm bill, and through the
Rural Utilities Service.

***General Opinions Expressed***

-   Commenters generally expressed support for retaining or expanding
    Title IX of the farm bill---to help farmers and rural small
    businesses slash energy bills and build new income opportunities.

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-   Many requested that the Section 9006 program funding be
    significantly increased and that USDA support an increase in the
    production of farm-based renewable energy of all types (anaerobic
    digestion, crop fermentation energy, liquid fuels, etc.); many also
    stated that farm-based renewable products could be the linchpin of a
    new long-term model of farm sustainability.

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-   Many comments suggested that it would be necessary to increase the
    amount of, and the priority for, research and development in support
    of the sustainable production of biofuels.

-   USDA was encouraged to better promote the benefits of bio-refineries
    so that farmers can adopt practices that yield many co-products,
    increase farm incomes, and stabilize cash flow.

-   Some asked for full implementation of segments of the 2002 farm bill
    that help farmers and agribusinesses develop and market renewable
    energy resources and biobased products.

-   Others suggested pilot tests for new uses for manure such as energy
    generation, composting, and restoration of abandoned lands. Others
    suggested utilizing municipal solid waste as a feedstock for
    conversion to ethanol, creating a valued commodity with numerous
    industrial and commercial applications.

-   Some suggested that USDA better educate consumers about the benefits
    of ethanol and biodiesel.

-   Many suggested that USDA offer new renewable energy subsidies, and
    others suggested incentives to encourage renewable power use by
    farmers.

-   Some suggested that the Government deregulate its control over rules
    for development of ethanol and let the free market determine price
    and supply.

-   Commenters generally supported tapping a viable renewable energy
    source as an alternative to petroleum for marketing to either
    domestic or foreign markets.

-   Some suggested that USDA promote the wide-ranging benefits of
    renewable energy for the farm community by directly legislating
    mandates within the next farm bill.

-   USDA was encouraged to continue efforts to promote the use of woody
    biomass from public and private forestlands for sustainable rural
    development purposes.

***Detailed Suggestions Expressed***

-   Frustration was expressed about our country's 60 percent dependence
    on other countries for oil. There is a need for an energy policy
    that works for farmers. The commenter is pushing to mandate 10
    percent ethanol in all gasoline and 5 percent biodiesel in all
    diesel fuel.

-   Agriculture must move beyond food and fiber and add fuel as the
    third arm of its production portfolio. Provide incentives for both
    producers and end-users of ethanol and biodiesel until they are able
    to directly compete with large petroleum companies.

-   Green power from biomass crops provides an opportunity for
    agricultural and energy sectors to work together to find profitable
    and sustainable new crops for producing base-load electricity,
    liquid transportation fuel, and synthetic natural gas. Farmers and
    ranchers will contract with Fortune 500 companies and others and be
    paid for removing non-point emissions of carbon dioxide and methane.

-   The Rural Development Title should provide incentives to accelerate
    development and commercialization of a variety of bioproducts.
    Consideration should be given to a pilot program for buying and
    selling of carbon credits.

-   Biofuel cooperatives should be created so small farmers could bring
    their crops to be converted into biofuels that can supply the energy
    needs of local communities and help to revitalize small family
    farms.

-   The Section 9006 program should set aside 10--15 percent of the
    grant funds for small projects up to \$50,000, allowing small
    projects to compete against other small projects and remedying the
    bias toward funding large projects. In FY 2004, only 2.6 percent of
    the funds went to small wind and solar projects. The commenter also
    suggested a simpler application; taking applications anytime until
    funds are expended; eliminating the "residential use" prohibition;
    and limiting funding to new equipment.

-   The Commodity Credit Corporation should be reauthorized at a
    respectable level--it is targeted to be zeroed out in 2007.

-   Hydroelectric power should be included as an eligible purpose for
    loans or grants from the alternative energy production program.

-   Crop rotation systems that include alfalfa save 292,000 tons of
    anhydrous ammonia equivalent fertilizer each year. Using alfalfa in
    crop rotations should be part of an agriculture program for U.S.
    energy independence.

-   Funds for hydroelectric in remote Alaska, where energy is especially
    costly, and hydroelectric generation is environmentally the best
    solution, should be included.

-   The Section 9006 program, as currently structured, is providing
    windfall benefits to a few, and scant opportunities for the many. In
    2005, 35 commercial wind projects in 2 States (MN and IA) received
    32 percent of the total funding. Oklahoma farmers, who may have
    better wind resources and could produce electricity cheaper, cannot
    compete. USDA should restructure the program to resolve these
    inequities.

-   Use the \$500 million allocated to drilling in the Alaska National
    Wildlife Refuge to build biodiesel plants.

-   Renewable energy investment funds should not be diverted to factory
    farms to subsidize digesters turning unmanageable amounts of animal
    manure into energy. Funds should instead be used to help family
    farmers develop clean, safe, renewable energy projects that harness
    the wind and the sun.

-   Much emphasis and funding has been plowed into development of
    ethanol and biodiesel fuels derived from "heavily subsidized"
    agricultural crops. These annual crops require incredible input
    costs (irrigation, fossil fuel, fertilizer, pesticides) to grow.
    Other long-lived perennial, nonsubsidized crops (trees, grass) need
    equal time with research and development funding.

-   Support a competitive research program for fuels, chemicals, and
    energy from biomass.

-   The biobased energy provisions contained in the 2002 farm bill
    should serve as a springboard for the expansion of
    agricultural-based energy research and development and called for
    the creation of a biobased strategic energy reserve.

-   Extend the deadline for renewable energy grant applications to help
    farmers who are sometimes pressed to meet the deadline due to the
    short time period between publication of rules governing the program
    and the application deadline.

-   The USDA should terminate the Conservation Reserve Program and use
    those funds to support a biodiesel program with payments to growers
    for growing oilseed crops.