Congress Rejects Farm Bill Containing $1.4 Billion for Rural Energy

Posted June 27, 2013 | folder icon Print this page

In a move that surprised many last week, the House of Representatives voted down a version of the 2013 “Farm Bill,” which provides funding for agriculture programs over a period of five years. The measure, which failed by a vote of 195-234 with significant bipartisan opposition, would have provided $1.4 billion in discretionary funding for rural energy programs. These programs, which also received funding in the Senate version of the Farm Bill that passed earlier in the month, predominantly support the production of biofuels. These subsidies have been a source of contention in the debate over the major vehicle for U.S. agriculture policy, with opponents of rural energy programs questioning the need to continue to provide support to an energy source that is already heavily subsidized.

The failure of the House Farm Bill, H.R. 1946, came a week after the Senate approved S. 954. The Senate’s $955-billion-bill passed by a vote of 66-27, with the energy title (Title IX) again providing funding for renewable energy research and development projects. Much of this spending would be mandatory—meaning Congress will not be able to adjust the amount allotted for each of the next five years of funding, unless they amend the law. This mandatory funding for the energy title was provided in the amount of $900 million over the five-year period.

The Senate Farm Bill’s energy title contains three noteworthy programs: the Rural Energy for America Program (REAP), the Biomass Crop Assistance Program (BCAP), and funding under Section 9003 of the bill entitled Biorefinery, Renewable Chemical and Biobased Product Manufacturing Assistance. According to a summary by the Congressional Research Service, U.S. Department of Agriculture renewable energy projects run the gamut from solar and wind to anaerobic digesters, but these programs focus on the biofuels industry in particular.

To this end, the REAP focuses on biofuel projects that research ways to get around the “blend wall,” which refers to the dilemma posed by the fact that most U.S. vehicles are certified to run on no more than 10 percent ethanol fuel, but yet there is a federal mandate which specifies that the volume of ethanol blended into gasoline must increase each year and the amount of ethanol in gasoline nationwide is nearing 10 percent. One such way that federal agencies have envisioned overcoming the blend wall involves installing “blender pumps” that would offer multiple ethanol blends at gasoline stations.[1] The Senate voted to provide this program alone with $68.2 million in mandatory funding and $20 million in discretionary funding annually, from Fiscal Years (FY) 2014-2018.

The program providing subsidies for blender pumps is a perfect example of what is wrong with the Farm Bill. The federal government mandates the use of billions of gallons of ethanol a year under the Renewable Fuel Standard (RFS). But that is not enough for the ethanol industry. Now the federal government is providing subsidies for blender pumps to try to increase ethanol use. If American had a more free market farm policies and less government control of agriculture, it would be up to the ethanol industry to figure out how to sell their production, instead of relying on mandates and subsidies from the American taxpayer.

The Senate’s Farm Bill also continues significant subsidies for cellulosic biofuel as part of efforts at the federal level to reduce the use of corn in ethanol production.[2] Funding for the BCAP, which incentivizes farmers to develop “nontraditional crops for use as feedstocks for the eventual production of cellulosic biofuels,” is provided in the Senate version at the level of $38.6 million in mandatory funding annually.[3] Section 9003 of the bill assists in the production of renewable chemicals and biobased products as well as commercial scale plants, with $100 million in mandatory funding for FY 2014 and $58 million for the following FY 2015–2016, as well as $150 million in discretionary funding annually from FY 2013–2018.[4]

Again, we should note that the RFS already provides a guaranteed market of hundreds of millions of gallons of cellulosic ethanol every year. There should be no need for cellulosic ethanol to get additional subsidies and additional dollars from the American taxpayer.

In the recently-defeated House version of the Farm Bill, the biggest difference in energy spending—aside from relatively small changes to various programs, including BCAP—is the amount of mandatory funding. While the Senate approved $900 million in total mandatory funding over the next five years, the House version—which had been crafted and approved by the House Agriculture Committee—would have eliminated all mandatory funds and would have instead approved $1.405 billion in total discretionary funding. This means that all of funding would have been subject to annual Congressional appropriations.

Another notable difference between the House and Senate bills was a provision in the House version that would require a study comparing conservation plans for the lesser prairie chicken (LPC). A recent Fish and Wildlife Service proposal to list the LPC as a threatened species would endanger energy production operations on the one million acres of southwestern U.S. acres that the LPC inhabits.[5] The Senate failed to adopt a proposal delaying the listing of the LPC as an endangered species.

As the House goes back to the drawing board on the Farm Bill, it remains unclear if their next version will contain energy provisions identical to the last. Nonetheless, the efforts to fund ethanol producers via the Farm Bill are another example of too much government control of the agriculture sector and the energy sector. The American farmer does not need a trillion dollars from the American taxpayer, especially because much of this is subsidies to politically well-connected industries, such as the ethanol industry and cellulosic biofuel industry. In 2013’s America, the time has come to end these subsidies. The American taxpayer surely deserves a break—both at the pump and on their tax bill.

Policy intern Portia Conant contributed to this post
Author:
IER