Farm Bill Includes Energy and Organic Agriculture Measures

Last Friday the U.S. Senate passed by an overwhelming majority the 2007 farm bill, called The Food and Energy Security Act.  The bill, championed by Senator Tom Harkin (D-IA), Chairman of the Senate Committee on Agriculture, garnered more votes than any other farm bill since 1973, with a final vote count of 79-14. 

Of particular interest are measures within the energy title and others assisting organic agriculture.

Highlights of the bill’s energy title include investments in farm-based energy  that create financial incentives to help farmers transition into biomass crops, and supports the construction of biorefineries for cellulose ethanol with a loan guarantee program that will provide up to 80% of total project cost with a loan cap of $250 million.  

The bill expands markets for biobased products, and invests in farm-based energy R&D, and in helping farmers, ranchers and rural small businesses move to renewable energy and energy efficiency. 

A package of agriculture tax measures pushed by Senate Finance Committee Chairman Max Baucus (D-Mont.) includes the following important energy provisions:

–Residential Wind Credit: Currently, there are no tax incentives for residential wind property. The proposal creates a new 30% personal credit for residential wind property, capped at $4,000 per year. 

–Transmission Pole Payment Exemption: Easement payments generally must be included in a taxpayer’s income for federal income tax purposes. The proposal allows taxpayers who locate an electricity transmission pole on a line of 230 kilovolts or more to exempt easement payments received from the electric utility or electric transmission company.

–Small Producer Credit for Cellulosic Alcohol: The value of credit is set at $1.25 per gallon and extends the length of the credit to April 2015 for the first billion gallons of cellulosic biofuel, with no single year limit. 

–Expand Expensing for Cellulosic Ethanol Facilities: The proposal expands the eligible property qualifying for the 50% expensing to include alcohol produced from any lignocellulosic or hemicellulosic matter.  

–Small Ethanol Producer Credit: The proposal extends for two years (through

December 31, 2012) the 10 cent per gallon tax credit on the first 15 million gallons of ethanol production for producers with annual capacity of not more than 60 million gallons. 

–Fossil-Free Alcohol Production Credit: The proposal creates a new small producer alcohol credit of 10 cents per gallon for facilities that produce ethanol through a process that does not use a fossil-based resource available through December 31, 2012. 

–Biodiesel Tax Credits: Extends for two years (through December 31, 2010) the $1.00 and 50 cent production tax credits for biodiesel. Extends for four years (through December 31, 2012) the 10 cent per-gallon tax credit on the first 15 million gallons of biodiesel production for producers with annual capacity of not more than 60 million gallons.

–Renewable Diesel Incentives: Extends for two years (through December 31, 2010) the $1 tax credit for diesel created through a thermal depolymerization process and caps, on a per facility basis, the $1 credit at 60 million gallons per year. 

–Alternative Refueling Station Tax Credit: The proposal extends the 30% alternative refueling property credit (capped at $30,000) for non-hydrogen property for one year (through December 31, 2010). 

–Energy Efficient Motors Tax Credit: The proposal provides for a tax credit for the purchase of qualified energy efficient motors often used in agricultural settings.

The bill provides funding and guidance for the organic agriculture industry, including $5 million for organic data collection at the U.S. Department of Agriculture and $80 million over the life of the bill for organic agriculture research and extension. 

According to a release by the Organic Trade Association, the bill also provides the following support:

–$22 million in additional funds for certification cost share to aid organic farmers

— the bill bars USDA from charging a premium surcharge on organic crop insurance

–adds organic production as an eligible activity in the Environmental Quality Incentives Program

–adds to the Soil and Water Conservation Protection Loans a priority for those converting to organic farming practices and adds conversion to organic production as an eligible loan purpose

Caren Wilcox, executive director of the Organic Trade Association (OTA), said, "We in the organic community appreciate all the support we have received for our priorities in the Senate. Thank you to Chairman Harkin and Senator Leahy, who led efforts to create a national organic program, and Senator Chambliss. With their leadership and interest, organic agriculture and processing will have access to the many federal programs typically reserved for non-organic production and processing." 

The tax title includes $330 million in fossil fuel tax credits that have little or nothing to do with agriculture, do not support a cleaner environment and will lead to strain on the nation’s water supply in supporting the coal-to-liquids process. Credits are also available to compressed natural gas and other non-biomass fuels used in cars and trucks. 

Not Law Yet

Even with tremendous support in the Senate, the farm bill still has several hills to climb before becoming law, including the threat of a presidential veto. But before the bill can be sent to the president’s desk it must pass through a conference process to work out differences between the House and Senate versions.

The biggest discrepancy between the bills is the source of funding for the energy titles, which is different in each version of the bill. As a result, negotiations may lead to cuts in various programs.

The White House has stated opposition to measures in farm bill, which it says increase taxes and provide unfair benefits for wealthy farmers that are not available for smaller farms. However, if the bill maintains the support demonstrated in the Senate, a presidential veto could be overridden.