An anaerobic digestion system (AD system) captures the methane that may otherwise be released from conventional manure handling methods, and has the potential to reduce greenhouse gas emissions and produce clean energy. Absent such technology, confined animal feeding operations typically collect and store manure (e.g., in a waste storage facility) under anaerobic conditions, which produces the potent greenhouse gas methane. The methane is released into the atmosphere as the manure decomposes while being stored. Livestock producers handle large quantities of manure on a daily basis that emit methane. Some estimate that livestock operations produce more than 1 billion tons of manure yearly and that 7% of total U.S. methane emissions are from managed manure. Through methane capture, anaerobic digestion has the potential to reduce these emissions. In addition, anaerobic digestion of manure produces biogas--a combination of methane, carbon dioxide, and trace amounts of other gases that can be used for renewable energy purposes or flared. Recent legislation pertaining to agricultural sources of renewable energy has focused primarily on corn-based ethanol and cellulosic ethanol for liquid fuel purposes, and not biogas. The economic environment is not currently favorable to profit from the investment required to compress biogas produced from an AD system into a liquid fuel. There are, however, several successful cases where an engine-generator set has been used to generate electricity from the biogas or the biogas is burned in a boiler to produce heat. Biogas from an AD system could be used to assist livestock producers in an effort to have an energy self-sufficient operation as well as, potentially, to sell electricity to the local utility. There are more than 160 AD systems operating on farms nationally (see Table 1 ). Some factors that may be responsible for the low technology adoption rates are high capital costs, reliability concerns, and payment rates for the electricity generated. Congress may consider encouraging increased adoption of the technology by (1) identifying the primary technology benefit, so as to determine whether AD should be pursued in the framework of greenhouse gas emission reduction or clean energy development; (2) determining if the captured methane will count as a carbon offset; and (3) considering additional financing options for the technology. Moreover, Congress may receive insight on collaborative techniques by monitoring the first public-private partnership agreement between the U.S. Department of Agriculture and the Innovation Center for U.S. Dairy to reduce greenhouse gas emissions from dairy operations by 25% by 2020. One goal of the agreement is to "accelerate and streamline the process for adopting anaerobic digesters by the United States dairy farm operators through various USDA programs." A number of developments have occurred since the agreement was signed in 2009, including USDA providing funds to establish 30 more anaerobic digesters in FY2010. This report provides information on AD systems, technology adoption, and challenges to widespread technology implementation, and explores the issues facing Congress concerning adoption of the technology. Most manure management systems used on livestock operations store the manure in an open facility, allowing the manure to decompose naturally, which releases the potent greenhouse gas methane into the atmosphere. By contrast, an AD system feeds manure into a digester that breaks it down in a closed facility in the absence of oxygen (see Figure 3 ). The digested feedstock is contained for a period of time as anaerobic bacteria decompose the manure to produce several outputs, including biogas, liquid effluent, and dry matter. The captured biogas is flared (see footnote 5 ) or used for energy. The liquid effluent may be applied to the land as a fertilizer. The digested dry matter may be sold as a soil amendment product or used for animal bedding. AD systems have other benefits (e.g., odor reduction) that may curb negative impacts of livestock operations, including environmental pollution. An AD system is designed and constructed to suit the needs of an individual livestock operation and is typically selected based on the total solids (TS) content of the manure and the manure handling system (see Figure 3 ). Other criteria taken into consideration when building an AD system include the feedstock quantity, feedstock quality, feedstock availability, feedstock handling, demand for effluent, use of captured biogas, and transportation logistics (e.g., feedstock may be transported to an AD system if it is not available on-site, or effluent transported to a receiving entity if not used on-site). AD systems in the United States are in use on dairy cow, swine, and poultry operations. More than 80% of the operating AD systems are located on dairy cow operations. Some argue that less complex AD systems could be constructed on dairy cow operations at a lower cost and that the manure could be easily transported to the AD system, thus making them more economically appealing. Others contend that fewer AD systems are installed on swine operations because many swine operations currently store liquid manure in pits beneath the livestock; the producer would need to redesign the swine operation to incorporate an AD system. Installation of an AD system on a swine operation may also be more expensive if a storage facility must be constructed to contain the digested feedstock. Some assert that AD systems are not a favorable addition to a poultry operation partly because the litter is dry and may require more resources for transport to an AD system and additional inputs to digest. Methane (CH 4 ) is one of the primary greenhouse gases associated with the agricultural sector. The odorless, colorless, flammable gas is potent because it is 21 times more effective at trapping heat in the atmosphere than carbon dioxide (CO 2 ) over a 100-year timeframe. In other words, it takes 21 tons of CO 2 to equal the effect of 1 ton of CH 4 . Methane has a relatively short atmospheric lifetime (approximately 12 years) when compared to the atmospheric lifetime for carbon dioxide, which has a half-life of roughly 100 years; thus some argue that efforts to capture methane from anthropogenic sources may provide near-term climate change abatement. Major sources of methane emissions from animal agriculture are enteric fermentation and manure management (see Table 1 ). While enteric fermentation emissions are much larger than manure management emissions, they are also much more difficult (nearly impossible) to control. Emission factors affiliated with methane released from enteric fermentation, and conversion factors affiliated with methane released from a manure management system, are used to estimate overall methane emissions from animal agriculture. Estimation incorporates a multi-step process that takes into account livestock population data, waste characteristics, waste management system data, and other variables. Capturing methane with an AD system is beneficial because it reduces emissions of a harmful greenhouse gas from an agricultural source of methane: managed manure (e.g., manure stored in pit storage, an anaerobic lagoon, or a storage facility). Swine and dairy cattle are the two dominant livestock emitters of methane for managed manure (see Table 2 ). Emissions from managed manure vary on a statewide basis depending on the livestock population and the manure handling systems in place (see Figure 6 ). Captured methane may qualify as a carbon offset because the methane would no longer be released directly into the atmosphere. Carbon offsets are a facet of the climate change cap-and-trade program debate that was underway in the 111 th Congress. Accurate quantification and verification of the methane captured from an AD system requires robust data, observed or inferred, to ensure that actual reductions are occurring as projected. Another AD system benefit is the production of biogas, which can be used as a renewable energy source. Biogas consists of 60%-70% methane, 30%-40% carbon dioxide, and trace amounts of other gases (e.g., hydrogen sulfide, ammonia, hydrogen, nitrogen gas, carbon monoxide). Biogas can be explosive if exposed to air, depending on the concentration of methane in a confined space. The quality (i.e., heat value) and amount of biogas produced varies based on the hydraulic retention time of the AD system, the manure total solids content, and temperature. Biogas can be used to produce heat or generate electricity. The biogas may be burned in a boiler for space heating or water heating on-site. Another option is to use an engine-generator set to create electricity from the biogas. Biogas that is upgraded to pipeline quality may be sold to a natural gas utility. Typically a producer will decide on only one use for the biogas--either generating electricity or producing heat--due to the expense associated with energy generation and boiler equipment. Few choose to sell the biogas to a natural gas utility. If electricity is generated from the captured biogas, it may be sold to a utility in addition to its on-site use. A rule of thumb is that manure from approximately five Holstein milking cows supplies fuel for 1 kilowatt capacity. Sales to a utility require a contractual agreement between the producer and the local utility provider that typically outlines safety, reliability, and performance standards. Additionally, any federal and state environmental requirements must be met (e.g., AD system generators may have to meet Best Available Control Technology requirements). Net metering, a preferred form of billing for many renewable electricity generators, is an option for producers selling the electricity generated to electric utilities in 43 states, the District of Columbia, and Puerto Rico. Biogas may be used as a fuel if it contains at a minimum a 50% concentration of methane (CH 4 ). The biogas must be cleaned, upgraded, and compressed if it is to be used in a mobile engine. Cleaning biogas removes hydrogen sulfide. Removing any moisture and carbon dioxide upgrades the biogas and increases the British thermal unit (Btu) value. With an energy content of 600 Btu/ft 3 for biogas with approximately a 60% methane concentration, biogas is a low-Btu fuel compared to other fuels (see Table 3 ). A high-Btu fuel is necessary for energy applications requiring greater amounts of power. Biogas is flared if not used for energy purposes. Flaring the biogas destroys the methane and yields the greenhouse gas carbon dioxide (CO 2 ) and water. Carbon dioxide has a longer atmospheric lifetime (~100 years) and is less effective at trapping heat in the atmosphere when compared to methane, which has an approximate atmospheric lifetime of 12 years. Some view the release of the carbon dioxide due to biogas flaring as more environmentally acceptable than releasing unused biogas into the atmosphere. Environmental impacts of flaring methane require further investigation to determine flare efficiency under varying wind speeds and various biogas compositions. Federal funding (discussed in the following section) has supported the installation of many of the more than 160 AD systems in operation on farms nationwide, operating with a total electricity production of approximately 454,000 megawatt-hours (MWh) per year as of September 2011. EPA estimates the AD systems restrict roughly 1,160,000 metric tons of carbon dioxide equivalent (CO 2 e) in direct emissions annually from entering the atmosphere, which is comparable to the annual greenhouse gas emissions from more than 225,000 passenger vehicles. Congress as well as states have enacted legislation that provides financial assistance for AD system installation. Loans, grants, tax credits, tax exemptions, and production incentives are common financial assistance tools available at the federal and state levels. One principal source of federal funding is the Section 9007 Rural Energy for America Program (REAP) of the Food, Conservation, and Energy Act of 2008 (2008 farm bill, P.L. 110-246 ). Section 9007 authorizes $255 million in mandatory funding for 2009-2012, with an additional $25 million per year in discretionary funding. For FY2012, $70 million is available, part of which is to be distributed to eligible applicants for AD system projects. Grants dispensed to applicants are not to exceed 25% of the cost of the activity. Loan guarantees dispensed to applicants are not to exceed $25 million. The maximum amount of a combined loan and grant can be no more than 75% of the cost of the activity. Another source of financial assistance offered for anaerobic digestion projects is the Renewable Electricity Production Tax Credit (REPTC; 26 U.S.C. SS45). The REPTC grants a 1.1 cent per kilowatt-hour tax credit for electricity generated from open-loop biomass (e.g., agricultural livestock waste nutrients). The tax credit is subject to certain conditions (e.g., service start date, nameplate capacity rating) and expires for open-loop biomass on December 31, 2013. Some technology deployment and adoption barriers exist because of the complexity involved in designing and operating an AD system. Thus far, a significant number of successful AD systems are operated by producers who have sophisticated anaerobic digestion technology knowledge. Some assert that the technology will reach its full potential when an array of concerns are addressed. Some challenges include Lack of economic return . AD systems are capital-intensive. The cost fluctuates depending upon the system type, system size, livestock operation type, and factors specific to the site. Capital costs generally include the AD system cost, the engine-generator set, the engineering design process, and installation. Extra costs are incurred for additional elements (e.g., a post-digestion solids separator, utility and interconnection fees). System costs range from a few hundred thousand dollars to a few million dollars. A covered lagoon AD system could cost at a minimum a few hundred thousand dollars. A complete mix AD system or plug flow AD system can cost a few million dollars. An analysis of 38 AD systems indicates that approximately one-third of the total system cost is estimated to be spent on the electrical generation equipment. A producer may find it feasible to forgo producing electricity to save money and to use the biogas produced on-site for heating purposes, which still requires a boiler. A general approximation is that the potential for a positive financial return appears to be most likely at a dairy cow operation with at least 500 cows and a swine operation with at least 2,000 total head of confinement capacity. Reliability . Some argue that producers hesitate to adopt anaerobic digestion technology due to the poor performance rate observed in the 1970s. AD system performance has improved over time due to better engineering, construction materials, and management. Communicating current performance rates may provide producers with the information needed to gain more confidence in the improved technology. AD system performance data may be expanded with mandatory reporting on a periodic basis by an independent third party, which might bolster performance claims made by some AD system construction companies. Information (e.g., demonstration projects, long-term performance records) that communicates recent performance may mitigate producers' doubts about technology reliability and may verify energy generation and greenhouse gas emission reduction data reported. Some producers and construction companies are opposed to a national reporting program because of the release of potentially proprietary information. Lack of an engineering practice standard . A national practice standard that lists performance criteria, safety precautions, technical components, and design elements and has undergone review from a standards developing organization is not available for anaerobic digestion technology. Some producers may be reluctant to make a financial investment in a technology that may or may not meet future environmental and technical requisites. The USDA Natural Resources Conservation Service (NRCS) issued an anaerobic digester conservation practice standard in 2009. Utility collaboration . Rates paid by utilities for the electricity generated from AD systems vary by state and within each utility. It may not be economically attractive for a producer to sell the renewable energy generated depending on the cost per kilowatt-hour offered. Some net-metering agreements pay wholesale rates instead of retail rates for the electricity generated, thus limiting potential profitability. Some gas utility companies may be reluctant to accept a renewable energy fuel originating from a technology with no official standard that may contaminate an otherwise clean energy source. Unquantifiable co- benefits . Certain benefits (e.g., odor reduction) may not be quantifiable in dollar terms but may add to the value of an AD system. Operation and maintenance . AD systems perform optimally when they are well maintained. Some estimate that daily AD system operation and maintenance may require 30 minutes to an hour. The producer may have to acquire a level of technical expertise not previously necessary. Congress is faced with proposed legislation centered on clean energy and the environment. There may be an opportunity for the agricultural community, particularly the livestock industry, to participate in forthcoming efforts for energy generation and greenhouse gas emission reduction with anaerobic digestion technology. Prior to incorporating anaerobic digestion technology into legislation, Congress may choose to consider: Identify ing the primary benefit offered by an AD system . Selecting a primary benefit (renewable energy generation or greenhouse gas emission reduction) may assist with determining which policy vehicle could support technology deployment (e.g. energy legislation, climate change legislation, agricultural legislation). A single message regarding the technology benefit may encourage producers to adopt the technology to achieve the policy goal. Determining if the methane captured from the technology will be included as a carbon offset . The climate change debate that occurred during the 111 th Congress included carbon offsets as a potential greenhouse gas emission reduction strategy. Producers may find it economically worthwhile to invest in AD technology if it produces an additional revenue source in the form of carbon offsets. If the methane captured and combusted is not treated as a carbon offset, will the 112 th Congress consider regulating the methane captured as a pollutant? Identifying whether alternat e sources of financial support for technology implementation are appropriate . Most of the federal financial assistance available comes in loans and grants for AD system construction. A shorter payback period for an AD system may occur if producers receive a more substantial monetary sum for the energy generated and transferred to a utility company via a federal electricity rate premium. Additional tax credits may also improve the economic return for AD technology (e.g., raising the tax credit value for agricultural livestock waste nutrients to that of closed-loop biomass for the Renewable Electricity, Refined Coal, and Indian Coal Production Credit).

Summary:
Anaerobic digestion technology may help to address two congressional concerns that have some measure of interdependence: development of clean energy sources and reduction of greenhouse gas emissions. Anaerobic digestion technology breaks down a feedstock--usually manure from livestock operations--to produce a variety of outputs including methane. An anaerobic digestion system may reduce greenhouse gas emissions because it captures the methane from manure that might otherwise be released into the atmosphere as a potent greenhouse gas. The technology may contribute to the development of clean energy because the captured methane can be used as an energy source to produce heat or generate electricity. Anaerobic digestion technology has been implemented sparingly, with more than 160 anaerobic digestion systems operating on farms nationwide. Some barriers to adoption include high capital costs, questions about reliability, and varying payment rates for the electricity generated by anaerobic digestion systems. Two sources of federal financial assistance that may make the technology more attractive are the Section 9007 Rural Energy for America Program of the Food, Conservation, and Energy Act of 2008 (2008 farm bill, P.L. 110-246), and the Renewable Electricity Production Tax Credit (26 U.S.C. SS45). Congress could decide to encourage development and use of the technology by (1) identifying the primary technology benefit, so as to determine whether it should be pursued in the framework of greenhouse gas emission reduction or clean energy development; (2) determining if the captured methane will count as a carbon offset; and (3) considering additional financing options for the technology. This report provides information on anaerobic digestion systems, technology adoption, challenges to widespread implementation, and policy interventions that could affect adoption of the technology.