Farm Bill 2018: Issues Summary – Energy

August 21, 2017

Prepared by Scott Irwin, University of Illinois

Policy Setting: The general environment for energy policy has changed drastically since the 2014 Farm Bill was passed. Crude oil prices have fallen from over $100 per barrel to as low as $30. Gasoline prices at the pump have fallen to around $2 gallon.

The reasons for the dramatic fall in prices include the unanticipated and large expansion of U.S. light tight oil (“fracking”) production and additional conventional production coming online in various places around the world, such as Iraq.

One can summarize the setting as now one of relative “surplus” compared to “shortage” when the 2014 Farm Bill was being formulated.

Another key change in the policy setting is the degree of emphasis on climate change mitigation.

By withdrawing from the Paris Accords the Trump Administration has clearly signaled that this will not have nearly as high of priority as in the Obama Administration.

Farm Bill Issues: The energy title of the Farm Bill is relatively new, first appearing in the 2002 Bill. The main purpose of this title is to promote U.S. biofuels production and use, including corn ethanol, biodiesel, and cellulosic ethanol.

The emphasis on type of biofuel has varied, with corn ethanol and biodiesel highlighted in 2002 and advanced (biodiesel and cellulosic) receiving central focus in 2008 and 2014. Total mandatory funding over the five years of the 2014 Farm Bill was $694 million, compared to $1.12 billion for the 2008 Farm Bill. Another $765 million of discretionary funding for the 2014 energy title was authorized.

The energy title created a number of programs, including:

1. Rural Energy for America Program (REAP) which provides grants and loan guarantees to ag producers, rural businesses, and electric cooperatives for energy efficiency and renewable energy related improvements;

2. Biomass Crop Assistance Program (BCAP) that supports the establishment and production of biomass for conversion to energy;

3. Biobased Markets Program which provides federal preference for purchase of biobased products;

4. Biorefinery, Renewable Chemical, and Biobased Product Manufacturing Assistance which provides loan guarantees for the development of advanced biofuel, renewable chemical, and biomanufacturing;

5. Repowering Assistance Program to provide funding for existing biorefineries to use biomass for heat and power;

6. Bioenergy Program for Advanced Biofuels to provide incentives for production of advanced biofuels excluding corn ethanol;

7. Biodiesel Fuel Education Program provides funding for biodiesel education; and

8. Biomass Research and Development that supports advanced research to improve bioenergy technology and production.

Over half of the mandatory funds authorized as part of the 2014 energy title went to REAP and the Biorefinery, Renewable Chemical, and Biobased Product Manufacturing Assistance programs. A notable use of REAP in recent years was the much publicized funding for installation of blender pumps to help expand the use of higher ethanol blends such as E15 and E85.

What to Watch: In an environment of much lower crude oil and gasoline prices and less support from the Trump Administration for climate change mitigation, the energy title could be an easy target for budget cuts. In addition, there is the potential for some shifting of programs away from advanced biofuels, particularly cellulosic ethanol given the limited success in ramping up production, and moving support back towards corn ethanol.

It would not be surprising to see corn ethanol interests push for further funding for programs to expand the infrastructure for higher ethanol blends in an effort to breach the E10 “blend wall.”

From AgFax

Share on FacebookTweet about this on TwitterShare on LinkedInPin on PinterestShare on Google+Email this to someone

Category: Agriculture