Common Tragedies

Thoughts on Environmental Economics

All Hail King Vilsack, Lord of Biofuels

Posted by jab12004 on December 17, 2008

Obama’s choice of Tom Vilsack for the Secretary of Agriculture requires some reflection on what kind of powers the Secretary of Agriculture has over biofuels. Governor Vilsack, being from Iowa, is admittedly pro-ethanol. He also fits into a potentially pro-ethanol administration, or as the NY times writes

Both Mr. Obama and Mr. Vilsack are regarded as staunch advocates of ethanol and other bio-fuels as a way to reduce the nation’s reliance on foreign oil.

Clearly Obama will guide biofuels policies from the White House as he sees fit, but for now I’m more interested in the specific powers that Governor Vilsack will have.

The USDA administers a number of programs which deal directly with biofuels. Policy is set out every 4-6 years in an omnibus farm bill, but ultimately the USDA has some power over how the programs are carried out.

Here are a few of the highlights:

-Conservation Reserve Program- The Secretary of Agriculture has huge powers over the 32 million acres of land in the program. The 2002 farm bill states

(2) PRODUCTION OF AGRICULTURAL COMMODITIES. — The Secretary may modify or waive a term or condition of a contract entered into under this subchapter in order to permit all or part of the land subject to such contract to be devoted to the production of an agricultural commodity during a crop year, subject to such conditions as the Secretary determines are appropriate.

Basically, the Secretary can change the program to allow land to be withdrawn from the CRP without penalty. This is a big deal considering currently farmers would have to pay back all of the payments they have received plus a 25% penalty. The Secretary also has the ability permit biomass production on CRP land. This would allow farmers to receive payments ($51/acre on average) while also generating profit from selling biomass.

-Biomass Crop Assistance Program – This program encourages the production of biomass by providing financial assistance to farmers who choose to grow approved crops. Farmers receive 75% of the costs associated with converting the land to biomass, two years of matching funds for up to $45/ton of the costs associated with the harvest, storage, and transportation of raw biomass to a biofuel refinery and indefinite annual payments. The program was just passed as part of the 2008 farm bill as a biomass subsidy, and has yet to be implemented. I’m sure Governor Vilsack will have some input.

-Bioenergy Program for Advanced Biofuels and Biorefinery Assistance – gives the Secretary of Agriculture $620 million to provide in grants to biorefineries for the production of “advanced biofuels.” Power over this sum of biofuels money (already appropriated) is not to be taken lightly. I would guess there is another $400 million in smaller programs for other biofuels purposes. This doesn’t count the large sums which have authorization for appropriations.

Basically, Governor Vilsack was just appointed king of biofuels.  Hopefully I won’t have to quit my job and grow corn.

One Response to “All Hail King Vilsack, Lord of Biofuels”

  1. David said

    Ya, but the increased production of biofuels from corn & soy is responsible for spiking food prices around the world. Crops that traditionally would go to food production instead being diverted to biofuel production? It would be better to come up with a non-food stuff source of biofuel. Brazil uses sugarcane waste.

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