Conferees Announce Farm Bill Agreement – White House Vows Veto
House and Senate negotiators Thursday reached final agreement on a new farm bill that will spend close to $300 billion on nutrition, conservation, energy and farm subsidy programs over the next five years, but USDA Secretary Ed Schafer immediately said President Bush will veto the bill.

"At a time of record farm income, Congress decided to further increase farm subsidy rates, qualify more people for taxpayer support, and move programs toward more government control," Agriculture Secretary Ed Schafer said. Of the $300 billion in the bill, about 12 percent ($36-40 billion) will actually go to farmers.

ERG successfully lobbied Congress on behalf of its clients for increases and maintenance of several energy provisions which are in the final package. The proposal invests $320 million for new loan guarantee program for the development and construction of commercial-scale biorefineries; $300 million in the Bioenergy Program to provide assistance to biofuel production plants for the purchase of feedstocks; $118 million for biomass research and development efforts; reauthorizes and $250 million for grants and loan guarantees for renewable energy and energy efficiency projects; the bill authorizes a new program, the Biomass Crop Assistance Program to help producers transition to new energy crops for biofuel production.

To help pay for the Farm Bill, negotiators cut the blenders tax credit for corn-based ethanol from 51 cents to 45 cents and initiated a tax credit for cellulosic ethanol.

Of note to Mid Atlantic farmers, almost $400 million in the bill is earmarked to aid producers in reducing runoff into the Chesapeake Bay, improve water quality, and restore wildlife in the Bay.

Conferees and Congressional Leadership are seeking support from congressional Republicans to override a veto, but many who support the legislation will find an override vote difficult in an election year.

House Minority Leader John Boehner (R-Ohio) indicated that he will vote against the bill, saying, "I don't think [it] represents our best effort."

The bill provides grain and cotton growers $5 billion a year in automatic payments, even if farm and food prices stay at record levels. House Agriculture Committee Chairman Collin Peterson (D-Minn.) acknowledged that the payments are "very hard to explain to our urban colleagues."

But administration officials cited a number of problems, including new protections for sugar beet and sugar cane growers that will require the government to buy excess quantities of Mexican sugar and resell it to ethanol plants at a loss. Schafer noted the bill increases support prices and guaranteed prices for more than a dozen crops, making the United States vulnerable to trading partners' claims that it violates subsidy limits.
All new money in the Farm Bill, more than $10.4 billion, would be targeted to nutrition programs, and programs for organic crops, fruits and vegetables.

The Energy provisions of the bill:

• Reauthorizes the federal procurement of biobased products program
• $320 million in mandatory funding for loan guarantees to assist in the development and construction of commercial, advanced biofuel production plants.
• Reauthorizes and provides $250 million in mandatory funds for the Rural Energy for America Program (REAP) which provides loans, loan guarantees and grants for producers to purchase and install on-the-farm renewable energy systems.
• $118 million in mandatory funding for continued research of cellulosic ethanol by extending the Biomass Research and Development Act. Also establishes a Forest Bioenergy Program to address the use of woody biomass for energy production.
• Makes adjustments to the CCC Bioenergy Program to provide incentives for increased use of agriculture commodities (except corn) and agriculture and forestry waste for biofuels. Provides $300 million in mandatory funding over the life of the bill.
• Creates a Biomass Crop Assistance Program (BCAP) which provides incentives for producers to establish and grow cellulosic energy crops. The program has $70 million in mandatory money for 2009-12. $70 million is the CBO score for the program – not a set amount of funding for the program
• The Feedstock Flexibility Program for Bioenergy Producers requires the Secretary to purchase sugar for bioenergy production to avoid forfeitures of sugar to the Commodity Credit Corporation, and to ensure that the sugar loan program is operated at not cost to the federal government.
• $5 million in mandatory funding for the reauthorization of the biodiesel fuel education program.

The Farm Bill tax package includes a new incentive for the development of cellulosic biofuels, offset by a gradual reduction of the current-law ethanol credit. The biofuel incentives will also help to grow good-paying jobs here at home, by supporting innovation in green-collar technologies.

The bill includes a new, temporary production tax credit for up to $1.01 per gallon, available through December 31, 2012, with an estimated cost of $403 million over the ten-year budget window.

To determine the effect of advancing biofuels technology, the bill will require a multi-agency study to analyze current and future biofuels production, and their impact on factors such as land use, fuel prices, the price of grains and forest products, etc. The study is intended to be a far-reaching analysis of the impact of biofuels production.

This package reduces the 51¢/gallon credit for ethanol by 6 cents in the year after which the 7.5 billion-gallon threshold established by the 2005 Energy Policy Act is reached. This proposal is similar to a provision in the December 2007 Clean Renewable Energy and Conservation Tax Act, and is estimated to raise $1.203 billion over the next 10 years – enabling tax incentives for additional renewable energy strategies.

Other energy-related measures in the tax package are reforms to offset costs. They include an extension of the tariff on imported ethanol through 2010, the exclusion of denaturant from the alcohol fuels credit, and a duty drawback on certain imported ethanol.

Additional tax provisions promote homegrown energy independence, endangered species recovery, and land conservation.

* Text of the Farm Bill will be available on line on the House Agriculture Committee website on Monday morning. Language is still being finalized.

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