The Food, Conservation & Energy Act of 2008:

Title IX Energy Provisions & Issues

Larry D. Sanders

National Farm Bill Education ProgramKansas City--Webfile

8-9 Jul 08

Overview• NOTE: Key Bio-energy provisions for RFS are found in the Energy

Independence and Security Act of 2007, not in Farm Bill• Note: “advanced biofuel” is fuel derived from renewable biomass other

than corn kernel starch (cellulose, sugar, waste, biodiesel, biogas, butanol, etc.)

• Note: “renewable energy” is energy derived from wind, solar, renewable biomass, ocean, geothermal or hydroelectric source, hydrogen from renewable biomass or water

• Key shift in support from grain-based to cellulosic-based biofuels• $1 billion in funding for renewable energy • Biomass R&D continued; $118 mil. 2009-12• Collaboration between USDA & DOE• $320 mil. Biorefinery aid• REAP provides $250 mil.• $300 mil. for Bioenergy Program 2009-12• Sugar program in Commodity Title I calls for USDA purchase of sugar for

ethanol use• Ethanol blending tax credit reduced by 12%

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Energy Provisions: 2002 vs 2008

FSRIA021.Federal Procurement of biobased

products 2.Biorefinery development grants 3.Biodiesel fuel education programs 4.Energy audit and renewable

energy development program 5.Renewable energy systems and

energy efficiency improvements 6.Hydrogen and fuel cell

technologies 7.Biomass research and

development 8.Cooperative research and

extension projects 9.Continuation of bioenergy program

FCEA081. Federal procurement of biobased

products2. Biorefinery assistance3. Biodiesel education4. Energy audit/renewable energy

development program5. Renewable energy systems/

energy efficiency improvements6. Biomass R/D; crop assistance7. Rural aid; forest biomass;

community wood energy8. Sugar purchase9. Cellulosic tax credit; ethanol

subsidy cut; studies for infrastructure, fertilizer

10. Bioenergy program3

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Corn Dry Milling/Ethanol Process

Corn

Coarse Flour

Mash (Sugars)

Ethanol

CO2

DDGS

Water Enzymes

Yeast

Distillation

Fermentation

Saccharification

How ethanol is made – wet milling process

Corn

Steeping

Ethanol

Corn starch

Dilute H2SO4

Syrup

Corn oil

Poultry feed

Fiber Proteins

Corn steep liquor

Livestock feed

StarchGerm

Gluten meal

How ethanol is made – wet milling process

Corn

Steeping

Ethanol

Corn starch

Dilute H2SO4

Syrup

Corn oil

Poultry feed

Fiber Proteins

Corn steep liquor

Livestock feed

StarchGerm

Gluten meal

Zhiyou Wen and Jactone Ogejo, Biological and Systems Engineering, VT, source for this and preceding slide.

Biobased Markets Program• Purpose: Provide govt demand for biobased

products• Federal agencies will buy biobased products

– Reasonably available– Meet performance standards– Available at reasonable price

• Guidelines w/in 90 days• $1 mil. fy 08; $2 mil. each fy 09-12 mandatory

funds for testing/labeling• $2 mil. each fy 09-12 discretionary funds• FSRIA02 funding $6 mil.

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Biorefinery Assistance• Purpose: Encourage growth of advanced biofuels

industry• Competitive Grants for development/ construction of

demo biorefineries for advanced biofuels (up to 30% of cost)

• Loan Guarantees for development/construction/ retrofitting commercial biorefineries (max $250,000 or up to 80% of costs)

• Eligible entities: individual, Indian tribe, state/ local govt, organization, corp., farm coop, producer assn., National lab, higher ed, REC, public power, consortium of these

• Mandatory funding for loan guarantees $75 mil. fy 09, $245 mil. fy 10; Discretionary funding $150 mil. each fy 09-12

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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.

Cellulosic Ethanol Option

10http://gas2.org/2008/04/02/worlds-first-commercially-viable-cellulosic-ethanol-plant-online-2009/

Repowering Assistance

• Purpose: Encourage existing biorefineries to replace fossil fuels used in production w/renewable energy

• Mandatory funding $35 mil. fy 09, and until expended

• Discretionary funding $15 mil. each fy 09-12

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Bioenergy Program • 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

• Mandatory funding $55 mil. each fy 09-10; $85 mil. fy 11; $105 mil. fy 12

• Discretionary funding $25 mil. each fy 09-12• Eligibility Limitation: no more than 5% funds to

facilities w/capacity > 150 mil. gal./yr• FSRIA02: $150 mil./yr 03-06 authorized

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Biodiesel Fuel Education Program

• Purpose: Educate those w/vehicle fleets/ others about biodiesel benefits

• Eligible entities: – nonprofits or higher ed – Demonstrated knowledge of biodiesel fuel

production, use or distribution– Demonstrated ability to conduct

educational/technical support programs• $1 mil. each fy 08-12 (no change from 02)

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Biodiesel Production

Methanol

2. Transesterification

Crude glycerolCrude biodiesel

Biodiesel

Vegetable oil

Catalyst 1. Mixing

3. Separation

4. Washing

5.Methanol recovery

Source: Wen and Ogejo.

Rural Energy for America Program• Purpose: REAP promotes energy efficiency & renewable

energy development for ag producers & rural small businesses

• Provides Competitive Grants to provide 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 (max $25 mil. for guaranteed loan; max 75% of cost)

• Mandatory funding $55 mil. fy 09; $60 mil. fy 10; $70 mil. each fy 11-12

• Discretionary funding $25 mil. each fy 09-12

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Biomass Research & Development• 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• Mandatory funding $20 mil. fy 09; $28 mil. fy 10; $30 mil. fy 11; $40

mil. fy 12• Discretionary funding $35 mil. each fy 09-12• FSRIA02: $5M 2002; $14M 2003-2007; additional authorized $49M

2002-2007

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Rural Energy Self-Sufficiency Initiative

• Purpose: Provide financial assistance for rural communities to increase energy self-sufficiency

• $5 mil. authorized each fy 09-12

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Feedstock Flexibility Program for Bioenergy Producers

• 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 cost to Federal govt.

• CCC funds/facilities used to purchase sugar at loan levels

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Biomass Crop Assistance Program

• 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 for assistance w/collection, harvest, storage, transport: 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

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Forest Biomass for Energy• 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, land-grants, 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 mil. each fy 09-12 authorized

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Community Wood Energy Program

• 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 mil. each fy 09-12 authorized

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Studies

• Biofuels Infrastructure Study– USDA-DOE-EPA-DOT joint study to:

• Assess infrastructure needs to expand domestic production, transport, distribution of biofuels; water resource needs

• Recommend for specific infrastructure development actions• Trends thru 2025

– No funding authorized

• Renewable Fertilizer Study– Assess current state of knowledge on potential for

production fertilizer from renewable energy sources in rural areas

– $1 mil. authorized22

Title XV-Tax Provisions affecting Energy

• Credit for production of cellulosic biofuel $1.01/gal.

• Comprehensive study of biofuels by USDA, Treasury, DOE, EPA, NAS

• Modifies the subsidy paid to ethanol producers from 51 cents per gallon thru 2008 to 45 cents beginning 2009

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Likely Consequences• Argument for cellulosic over grain-based ethanol marginally

won out• To shift emphasis from grain-based to cellulosic could cost

billions (not yet commercially viable); FCEA provisions are for millions; weak commitment

• However, 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

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25http://www1.eere.energy.gov/biomass/

References• Babcock, B. “The Long-run Impact of Corn-based Ethanol on the Grain, Oilseed &

Livestock Sectors: A Preliminary Assessment”, CARD, ISU, January 25, 2007.• Bryant, H., et al., “Analysis of the Effects of Short Corn Crop Scenarios on the

Likelihood of Meeting the Renewable Fuel Standard”, AFPC Briefing Paper 08-02, June 2008.

• Cornell, C.B., “Gas 2.0: World’s First Commercially Viable Cellulosic Ethanol Plant Online 2009”, Biofuels business, Ethanol, cellulosic ethanol, April 2, 2008.

• “Revised RFS for 2008, …”, Notices, Federal Register, Vol. 73, No. 31, February 14, 2008.

• The Food, Conservation & Energy Act of 2008:Title IX Energy (pp. 421-454); Title XV, Subtitle C Tax Provisions, Part II Energy Provisions (634-637)

• Kenkel, Philip, various presenations, Oklahoma State University.• “Renewable Fuels Standard”, Renewable Fuels Association, information summary for

the Energy Independence and Security Act of 2007; http://www.ethanolrfa.org/resource/standard/

• Sanders, LD, J. Pease, J. Novak, “Bio-Energy Policy Issues for the 2007/8 Farm Bill”, OSU, December 2007.

• Snell, W. “Farm Bill & Energy Policy Update: Implications for US Agriculture”, Economic and Policy Upddate, January 18, 2008, UKCES. 26

Appendix

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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 from 2007 7 bil. gal. & 9 bil gal in 2008 to 36 bil. gal. by 2022 (15 bil. gal. corn ethanol; 21 bil. gal. cellulosic ethanol)

• Grants for production, R/D, infrastructure

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Corn Ethanol Production . . .expect to use 27% of ’07 corn crop for nearly 9 bil. gal.

0

1

2

3

4

5

6

7

8

9

10

1980

/01

1983

/04

1986

/07

1989

/90

1992

/93

1995

/96

1998

/99

2001

/02

2004

/05

2007

/08F

Bil

lio

n g

allo

ns

0

5

10

15

20

25

30

Per

cen

t

Ethanol Share of Corn Production

Biodiesel Production . . .expect to use 17% of ’07 soyoil crop for 500 mil. gal.

0

100

200

300

400

500

600

2000

/01

2001

/02

2002

/03

2003

/04

2004

/05

2005

/06

2006

/07

2007

/08F

Mil

lio

n g

allo

ns

0

4

8

12

16

20

24

Per

cen

t

Biodiesel Share

USDA Baseline Biofuel Production

0

5

10

15

20

25

30

35

40

2007/08 2009/10 2011/12 2013/14 2015/16

Bil

lio

n g

all

on

s

Ethanol Biodiesel

“20 in 10”

22 billion

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US Biomass Sources, 2005

Milbrandt, Anelia, 2005: “A Geographic Perspective on the Current Biomass Resource Availability in the United States”, National Renewable Energy Laboratory, Golden, CO.

Will renewable energy solve all the “problems”?

Targeted Problems– Energy independence

– Hi fossil fuel prices

– Environmental concerns (carbon footprint)

– Fossil fuel shortage

Solution?• Renewable energy likely to

be a marginal part of supply• Fossil fuel prices driven by

many factors (China)• New research suggests

ethanol not a solution to environmental concerns

• Fossil fuel demand likely to continue high

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