On November 2, 2001, Committee Chair Senator Tom Harkin (D-IA) proposed a strong clean energy development title in his proposed Federal Farm Bill - the Agriculture, Conservation and Rural Enhancement Act. The original clean energy language was modified in several respects, but remained largely intact as it gained Ranking Republican Member Senator Richard Lugar's (R-IN) and other Senators' bipartisan support. The Senate Agriculture, Nutrition and Forestry Committee marked up the Farm Bill in mid-November, and the legislation was placed on the Senate calendar on November 27th as S. 1731. Several substantive and technical amendments have followed. We expect the Senate to vote on the Federal Farm Bill, including the new clean energy title, in February.

This is an important opportunity to advance clean renewables and energy efficiency development in the Midwest and nationally. It puts into practice ELPC's and our colleagues' longstanding policy views, expressed in Repowering the Midwest and other media, that "clean energy cash crops" can provide a new income stream to help support small and medium-sized family farmers and ranchers, enhance rural economic development, and improve environmental quality for everyone by avoiding pollution. This is sustainable development in action.

The proposed clean energy section (Title IX) of the Federal Farm Bill provides more than $500 million for clean energy programs over the next several years. It has attracted bipartisan support as indicated by the Committee vote and our discussions with Senators on both sides of the aisle. It includes significant new funded programs to support rural wind power, biomass energy, hydrogen fuel cell, and energy efficiency development and implementation. It puts real money into real programs and moves beyond research and analysis. It transforms the policy recommendations of Repowering the Midwest into action in rural communities.

This legislation contains a robust set of provisions advocated by ELPC and our Midwest environmental and sustainable agriculture colleagues to promote renewable energy and energy efficiency development in rural communities. There is significant five-year funding for new renewable energy project development, including both small-scale on-farm and utility-scale wind power systems, and for energy efficiency audits and improvements on farms and ranches. One innovative provision includes funding for feasibility studies and business plans to better enable farmers and ranchers to take an equity ownership stake in clean energy projects through cooperatives and other business ventures. Another provision provides new authority for USDA's Rural Utilities Service to make grants to rural electric cooperatives for renewable energy projects. The sections of the proposed new Title IX - Clean Energy are as follows:

Section-By-Section Summary

Findings (Section 901)

The major findings identify significant renewable energy development opportunities in the agricultural sector, support federal government purchasing of biobased products, and they recognize wind energy as one of the fastest growing clean energy technologies, the potential promise of developing fuel cells and other hydrogen-based energy, farm-based renewable energy generation as a major cash crop, and the benefits of energy efficiency audits and implementation:

• There are many clean energy development opportunities in the agricultural sector.
• Investments in clean energy and energy efficiency enhance our nation's energy security and independence, increase farmer income, promote rural economic development, provide environmental benefits and improve grid reliability.
• The agricultural sector is a leading producer of biobased products.
• The agricultural sector can play a major role developing fuel cell and hydrogen-based energy.
• Wind is one of the most promising clean energy technologies.
• Farm-based clean energy generation can become a major "cash crop".
• Energy audits can produce significant savings.
• The agricultural sector can help to mitigate climate change.

Section 902 - Amendments to the
Consolidated Farm and Rural Development Act

Definitions (Section 902 - Section 388A)

• "Biomass" is defined as any organic material that is available on a renewable or recurring basis including dedicated energy crops and trees grown for energy production, wood waste and wood residues, plants, residues, fiber, animal wastes and other waste materials, and fats and oils. The statutory definition standard builds upon language in the Biomass Research and Development Act of 2000 and explicitly excludes "paper that is commonly recycled," and "unsegregated garbage." Whether old growth timber should be excluded from the definition is, apparently, now under consideration.
• "Renewable energy" is defined as wind, solar, biomass, geothermal, or hydrogen resources.
• "Rural small business" has the meaning that the Secretary shall prescribe by regulation.

Chapter 1 - Biobased Product Development

• Mandatory purchasing requirement for biobased products that are listed by the Secretary of USDA for availability to federal agencies. Goal of 5% of the aggregate value of products purchased by the agency in the prior year. Also authorizes the labeling of "environmentally preferable" biobased products (similar to the Energy Star program). The Secretary may award grants for researchers to collect data and perform life-cycle analysis of bio-based projects for the Federal purchasing program. This program is funded at $2,000,000 per year, 2002-2006. (Section 902 - Section 388B: Biobased Product Purchasing Requirement)



• Support for commercialization of new and emerging technologies for converting biomass into petroleum substitutes, while also producing electricity, by making available USDA grants to competitively fund (up to 30% or, in special cases, up to 50%) one or more new biorefinery projects each year. This program is funded at $15,000,000 per year, 2002-2006. (Section 902 - Section 388C: Biorefinery Development Grants)



• USDA grants for public education on the benefits of biodiesel fuel use. Eligible recipients are nonprofit organizations that have demonstrated expertise in biodiesel fuel production, use, and distribution. This program is authorized, though not appropriated, at $5,000,000 per year, 2002-2006. (Section 902 - Section 388D: Biodiesel Fuel Education Program)

Chapter 2 - Renewable Energy Development and Energy Efficiency

• Low-interest loans, loan guarantees and grants to assist farmers and ranchers in becoming equity owners - through new cooperatives or participation in other business ventures - of utility-scale renewable energy projects and marketers of electricity produced from renewable energy plants. Grants up to $200,000 per year for feasibility studies, development of business plans, start-up operations, and aggregation efforts. Loans made or guaranteed up to $10,000,000 per year, at an interest rate of 4% or less, for start-up business capital or promoting aggregation of renewable electric energy sources. Farmers and ranchers must own at least 51% of the project to be eligible for the grants. The federal share is capped at 50% of the project costs, and the non-federal share of project costs must include at least 25% cash. This program is funded at $16,000,000 per year, 2002-2006, to cover the federal grants and pay the cost of the loan and interest subsidies. (Section 902 - Section 388E: Renewable Energy Development Loan and Grant Program)



• Funding for 75% of costs of whole-farm energy efficiency audits and renewable energy assessments linked to supportive grant and loan programs for implementation of clean energy recommendations. Grant funds to educate and assist farmers, ranchers and rural small businesses in becoming more energy efficient and using renewable energy technology. The administering organizations shall: (1) conduct energy audits and workshops, and recommend energy efficiency improvements and renewable energy development opportunities; and (2) make farmers, ranchers and rural businesses aware of and provide access to financial assistance programs. The farmer, rancher or rural small business is required to pay 25% of the audit costs, which is reimbursable if the audit recommendations are substantially implemented. This program is funded at $15,000,000 per year, 2002-2006. (Section 902 - Section 388F: Energy Audit and Renewable Energy Development Program)



• Low-interest loans, loan guarantees, and grants directly to farmers, ranchers, and rural small businesses to purchase and install renewable energy systems and make energy efficiency improvements. The grants and loans can fund up to a total of 60% of the cost of renewable energy systems and up to 50% of the cost of energy efficiency improvements. Loans made or guaranteed at an interest rate of 4% or less. Preference for loans, loan guarantees and grants is provided to participants in energy audit and renewables assessment program, and at least 25% of the funds are reserved for that use. This program is directed at relatively small- and medium-sized farms and ranches (producing $1,000,000 or less in market value of agricultural products). This program is funded at $33,000,000 per year, 2002-2006, to cover the grants and pay the cost of the loan and interest subsidies. (Section 902 - Section 388G: Loan, Loan Guarantees, and Grants to Farmers, Ranchers, and Rural Small Businesses for Renewable Energy Systems and Energy Efficiency Improvements)



• Competitive grants for demonstrations of fuel cells and other hydrogen technologies in farm and rural applications, and for studies of new technologies not yet ready for demonstration. Selection criteria favor innovative, renewable energy projects that generate both electricity and heat, are economically competitive, produce environmental benefits and have commercialization potential as mass-produced, farm/ranch-sized systems. The federal share is capped at 50% of the project costs. This program is funded at $5,000,000 per year, 2002-2006. (Section 902 - Section 388H: Hydrogen and Fuel Cell Technologies Program)



• USDA shall provide education and technical assistance to farmers and ranchers to develop and market renewable energy resources. (Section 902 - Section 388I: Technical Assistance to Farmers and Ranchers to Develop Renewable Energy Resources)

Chapter 3 - Carbon Sequestration Research,
Development and Demonstration Program

• Authorizes basic and applied research programs to promote a better understanding of net sequestration of organic carbon in soil and plants (including trees), and net emissions of other greenhouse gases from agriculture.. Mandates the development of benchmark standards to measure soil carbon content. At least 50% of the funds each year shall be allocated for competitive grants awarded by the Cooperative State Research, Education and Extension Service. This program is authorized, though not appropriated, at $25,000,000 per year, 2002-2006. (Section 902 - Section 388J: Research)



• Demonstration and outreach projects for measuring and monitoring carbon sequestration and greenhouse gas reductions. Specifies benchmarking, monitoring and evaluation conditions. At least 50% of funds must be allocated for demonstration projects that apply the monitoring programs. This program is authorized, though not appropriated, at $10,000,000 per year, 2002-2006. (Section 902 - Section 388K: Demonstration Projects and Outreach)

Additional Provisions

• Specific appropriation for the Biomass Research and Development Act of 2000. This program is funded at $15,000,000 per year, 2002-2006. (Section 903 - New Section 310 of Biomass Research and Development Act)



• New authority for USDA to make loans, loan guarantees, and grants to rural electric cooperatives and rural utilities to promote development of economically and environmentally sustainable new renewable energy projects to serve the needs of rural communities or for rural economic development. Grants to fund up to 75% of the costs of a feasibility study or technical assistance for a new renewable energy project. If a project is shown to be economically feasible, low-interest loans at 4% or less and loan guarantees are made available to pay a share of the project costs as determined by the USDA Secretary. This program is funded at $9,000,000 per year, 2002-2006, to cover the grants and pay the cost of the loan and interest subsidies. (Section 904 - New Section 21 of the Rural Electrification Act of 1936 - Financial and Technical Assistance for Renewable Energy Systems)



• New carbon sequestration demonstration program encouraging major greenhouse gas emitters to support projects by farmers to reduce greenhouse gas emissions, sequester carbon in rural areas and accurately measure the changes. Includes findings on the value of carbon sequestration in offsetting greenhouse gas emissions. Grants awarded on a competitive, cost-shared basis to colleges, universities and other research institutions to measure, estimate, monitor, verify, audit and test methodologies involved in "environmental trades" for projects to produce demonstrable reductions in net emissions of greenhouse gases, demonstrable new increases in the quantity of carbon sequestered in soils and trees, and produce other environmental benefits. Includes native grassland and other protections. This program is authorized, although not appropriated, at $20,000,000 per year, 2002-2006. $1 million of this annual appropriation is specifically designated for farmer-owned cooperative carbon environmental trade pilot projects. (Section 905 - Title IV of the Agricultural Research, Extension and Education Act of 1998, amended by adding Section 409: Carbon Sequestration Demonstration Program)



• Support and encouragement for adoption of national motor vehicle renewable fuels program and direction to USDA to act in accord. (Section 906 - Sense of Congress Concerning A National Renewable Fuels Standard)



• Support for continuing and expanding USDA's ethanol-based bioenergy program to increase ethanol and biofuel production capacity in order to phase out MBTE. (Section 907 - Sense of Congress Concerning the Bioenergy Program of the Department of Agriculture)

Conclusion

There is still a long way to go for this new clean energy title to become law. If the Senate passes the Committee's bill, there will be a challenging Conference Committee on the overall Federal Farm Bill; the Senate's clean energy title does not have a counterpart in the House Bill. In all respects, the bipartisan support for the clean energy provisions in the Senate Agriculture, Nutrition and Forestry Committee should be very helpful.

The proposed new clean energy title is an major step forward in the architecture of the Federal Farm Bill that comes up for renewal every five years. It provides new statutory infrastructure that can be built upon and improved in subsequent years, just as with the conservation reserve program. It is moving forward on the right path to passage and success.

Prepared by the Environmental Law & Policy Center of the Midwest