The Farm Bill approved by the Senate Agriculture Committee included $800 million in new mandatory funding for Energy Title programs, none of whose current funding is extended beyond the 2008 Farm Bill.  The Senate found offsets for the Energy Title in an estimated $1.7 billion surplus in the draft Senate bill above the Senate Committee’s goal of a $23 billion cut to the Farm Bill budget.  That surplus was divided in the Senate markup between the $800 million energy amendment and an amendment to increase the payment acres for the proposed new shallow loss revenue protection payment program.

The House Agriculture Committee, however, is aiming for $33 or 34  billion in cuts to the Farm Bill budget rather than $23 billion, which will make it difficult to find additional Energy Title funding.

Highlights of the hearing included the testimony of Steve Reinford who operates the Reinford Farms Inc., a dairy farm in central Pennsylvania.  The Reinfords used funding from a Rural Energy for America Program (REAP) grant and state funding sources to construct an anaerobic digester to treat the dairy’s waste, initially to deal with odor problems.  Mr. Reinford was told that he would need to increase the dairy to 800 cows in order to have the digester function at a profit.  But when the digester was installed, he was approached by local Walmart stores to take food waste from their stores for the digester.  This waste stream significantly increased the energy output and income from the digester.  The additional waste from non-farm sources allowed the Reinfords to keep the dairy herd at about 500 cows.  Mr. Reinford noted in his testimony that in Germany many dairies with 100 cows also take food waste and other organic wastes and operate their digesters at a profit.  The Reinford digester provides energy for the Reinford home and dairy operation, as well as powering 80-100 homes.

Jerry Taylor, president of MFA Biodiesel Co., focused his testimony on the Biomass Crop Assistance Program (BCAP), which has provided funding for a project to raise hybrid Miscanthus giganteus as feedstock for a biomass energy project.  NSAC does have concerns about the use of Miscanthus in BCAP projects because of its potential to become invasive.  But we also found merit in recommendations for BCAP proposed by Mr. Taylor in his written testimony.  These recommendations include focusing on projects involving perennial crops.  He also agreed that BCAP funds should not be used for projects on land that has not been cultivated but should rather focus on projects that can improve marginal land with the establishment of a perennial crop or trees.

Mr. Taylor also recommended that BCAP be modified to provide funding for a long enough period to establish sufficient biomass production for a bioenergy facility to undertake investments in the facility, seed sources and equipment necessary to plant and harvest a new type of crop in a region.  He suggested that projects be guaranteed funding for at least three years.  In response, Rep. Reid Ribble (R-WI) raised the concern that business ventures dependent on subsidies might never transition to a competitive market and would return to Congress for continued funding.  Mr. Taylor pointed out the BCAP was structured to avoid that problem because the biomass facility did not receive the BCAP funding directly and would not be basing its product pricing on the subsidy.  Instead, a longer time course for the BCAP funding to farmers would encourage more farmers to produce the feedstock for the biomass facility, helping to ensure the success of the venture.

Major action on the Farm Bill’s Energy Title was mostly about money as the Senate Agriculture Committee marked up the Agriculture Reform, Food and Jobs Act – the proposed name for the 2012 Farm Bill.  The draft Farm Bill offered to the Committee for consideration provided no mandatory funding for the Energy Title.

Senators Kent Conrad (D-ND) and Richard Lugar (D-IN) offered an Amendment  to provide $800 million in mandatory funding for Farm Bill energy programs.  The Amendment also made significant changes to some of the Title’s programs. Other supporters of the Amendment included Senators Stabenow (D-MI), Harkin (D-IA), Bennet (D-CO), Casey (D-PA), Klobuchar (D-MN), Brown (D-OH), Grassley (R-IA), Thune (R-SD), Cochran (R-MS) and Hoeven (R-ND).

Initially, the Amendment provided that the $800 million was to come from the Economic Adjustment Assistance to Users of Upland Cotton and by a reduction in the premium for catastrophic risk protection for cotton producers.  These offsets were opposed in an Amendment to the Conrad-Lugar Amendment filed by Senator Saxby Chambliss (R-GA).

But at the 11th hour, an additional $1.7 billion was found in the Farm Bill budget when the Congressional Budget scored the savings of the bill offered to the Committee at $24.7 billion. The Committee had committed to a $23 billion reduction in the Farm Bill budget, so the additional amount of $1.7 billion in scored “savings” was available to the Committee during the markup.  With the availability of the funding, the Committee by voice vote approved the Conrad-Lugar Amendment, with only Ranking Member Pat Roberts (R-KS) asking that his disapproval to be noted for the record.

Here are details on how some key Energy Title programs fared in the markup:

Biomass Crop Assistance Program (BCAP):  The Conrad-Lugar Amendment included a complete substitution for BCAP.  The Amendment provides BCAP with $38.6 million in mandatory for each fiscal from FY2013 through FY2017, for a total of $193 million in mandatory funding.  Of this amount, not less than 10 percent or more than 50 percent each fiscal year can be used for collection, harvest, storage and transportation payments (CHST).  NSAC has called for the removal of the CHST component of BCAP but instead the Amendment not only retains CHST but also expressly expands its scope to include the removal of commodity crop residues such as corn stover, from commodity crops.  CHST activities on agricultural land would require conservation plans.

The Conrad-Lugar Amendment limits the removal of woody material under CHST to private land or federal land that is not in a BCAP project area and to material that is a byproduct of preventative treatment to reduce fire hazards or to reduce or contain disease or insect infestation.  The CHST matching payment levels are set at any amount up to $1 for each $1 per ton of eligible material provided by a biomass conversion facility, in an amount not to exceed $20 per ton for a period of four years.  The limit in the current Farm Bill is set at an amount not to exceed $45 per ton for a period of two years.

The Amendment also modifies BCAP project provisions.  A new limit is set for payments to farmers or foresters for establishing a crop or trees in a BCAP project.  The limits are 50 percent of the costs of establishment in an amount not to exceed $500 per acre.  For socially disadvantaged farmers or ranchers the maximum payment for establishment is raised to $750 per acre.  In the current Farm Bill, the USDA Secretary is authorized to make establishment payments up to 75 percent of the costs to establish an eligible perennial crop.  The Amendment did not change the authorization for the Secretary to set annual payments for BCAP project participants subject to specific reductions.

Rural Energy for America Program (REAP):  The Senate Committee bill incorporated some provisions from the Franken-Harkin bill (S.2225) introduced in March.  REAP grants are capped at the lesser of $500,000 or 25 percent of the costs of the activity funded by the grant.

In addition, the Senate Committee bill provides a tiered process for REAP grants and loan guarantees.  The three tiers are grant and loan guarantee applications requesting not more than $80,000; from $80,000 to not more than $200,000; and equal to or greater than $200,000.

The bill requires that USDA provide a more streamlined application process for the applications requesting lower amounts of funding.  Another change to REAP is the addition of Resource Conservation and Development Councils to the list of entities eligible to receive REAP grants for energy audits and renewable energy development assistance.

The Conrad-Lugar Amendment modified the Senate bill to increase REAP funding from discretionary funding of $20 million per year to a total of $241 million in mandatory funding from FY2013 through FY2017, or $48.2 million per year.

Rural Energy Savings Program: The Conrad-Lugar Amendment would add this new program to the Energy Title with $15 million in mandatory funding from FY2013 through FY2017.  The program allows rural electric cooperatives to provide their customers with low-interest loans for energy efficiency upgrades.  The loans would be paid back on a customer’s monthly electricity bill.

Other programs provided with mandatory funding from FY2013 through FY2017 include the Biobased Markets Program provided $15 million; the Biorefinery Assistance Program provided $216 million; the Biofuel Education Program provided $5 million; and the Biomass Research and Development Program provided $130 million.

Both the Repowering Assistance Program and the Forest Biomass for Energy Program are repealed in the Senate Bill, as is a requirement for a Renewable Fertilizer Study.

Today, the House Appropriations Committee set its own discretionary spending allocations, but rather than abide by the spending caps agreed to by both the House and Senate in last year’s Budget Control Act, it lowered them an additional $19 billion.

On the Senate side, the allocation allows the Senate Agriculture Appropriations Subcommittee to provide discretionary funding of $20.785 billion for USDA and FDA programs.

The House allocation, as it passed today, caps House Agriculture Appropriations Subcommittee discretionary spending on USDA and FDA programs at $19.4 billion, roughly $1.4 billion below the Senate level.  (The House Democrats put forth an unsuccessful amendment to peg the agricultural allocation at $21.1 billion).

To put this $1.4 billion in perspective, the entire discretionary spending appropriation in FY 2012 for the Food Safety Inspection Service was $1 billion.  The difference is also more than all discretionary spending for the Animal and Plant Health Inspection Service and over half of all rural development spending in FY 2012.

As the House and Senate move forward with their respective agriculture appropriations bills, they will be moving on very different paths.

The Senate Appropriations Committee is scheduled to mark up its agriculture appropriations bill tomorrow morning.  We do not know much about the Chairman’s mark, which has yet to be released; however, funding levels for most programs are expected to be very close to if not the same as last year’s levels.

On the House side, the future of the agriculture funding bill is much less clear.  The House Agriculture Appropriations Subcommittee has yet to set a date to mark up its bill.  An allocation this low complicates matters, making it extremely difficult for the members of the Subcommittee to do their work.  Moreover, President Obama has said that he will veto any spending bill that does not conform to the levels set out in the Budget Control Act.

More likely than not, the House’s unwillingness to abide by the agreement struck in 2011 will lead to a rancorous and drawn out fight over vastly different spending bills come the end of the fiscal year.  We hope that, instead, the two chambers are able to reconcile their bills in conference at the Budget Control Act level and pass something that supports and enhances rather than undermines important rural development, research, conservation, and beginning farmer programs.

Stay tuned for a detailed analysis of the FY 2013 Senate Agriculture Appropriations Bill after it is released tomorrow.

The resolution abrogates the budget deal reached in August 2011 in two significant ways.  First, it reduces the level of funding for discretionary government programs by $19 billion below the agreement reached as part of last year’s Budget Control Act.  As a result, House appropriators will be writing their annual government funding bills at lower levels than their Senate counterparts, setting up another year-end government shutdown showdown much like the one last year the Budget Control Act was intended to overcome.  The one exception to that rule will be House defense appropriators, who will be writing a bill with more spending in it than the Budget Control Act would allow and thus at higher levels than their Senate counterparts.

Second, it proposes to rescind the automatic (sequestration) government funding cuts scheduled to kick in starting January 1, 2013.  These cuts are required under the Budget Control Act as a result of the failure of the congressional “Super Committee” process last year to come up with a plan to trim government programs, including mandatory and entitlement programs, by $1.2 trillion over the next decade.  The House resolution retracts the first year of those automatic cuts (but only the first year) and replaces them with instructions to several House committees, including the Agriculture Committee, to find an equal amount of savings from mandatory programs under their control.

House Agriculture Committee

The budget resolution triggers two Farm Bill actions by the House Agriculture Committee.  First, by April 27, the Agriculture Committee must produce a bill that cuts $33.2 billion from farm bill spending, including over $8 billion immediately in the first year.  This will be a wrenching affair.  There is no chance the Senate will do a similar bill, so the measure is doomed from the start.  Yet, the bill must be substantive, must be reported on time, and must include the specific policies required to reach the $33.2 billion savings.  Many observers expect this pre-farm bill episode to turn into a battle over SNAP (food stamp) benefits and to become a primarily partisan affair that will sour the atmosphere for actually producing a real farm bill later in the year.

Second, the budget resolution assumes ten-year farm bill cuts of $180 billion, including $30 billion in cuts to crop subsidy programs, $16 billion to conservation programs, and the balance to food stamp (equal to an approximately 17 percent cut to food stamps or about $90 a month for a family of four according to food stamp budget experts).

It is quite possible for the Agriculture Committee to return to its farm bill business later this year, after the dust has settled on the $33 billion reconciliation bill that is going nowhere but which they must attend to first.  If they can manage that pivot, they could quite conceivably produce a farm bill that cuts somewhere between $23 billion (the amount proposed in last year’s draft bipartisan farm bill prepared for the Super Committee) and the $33 billion due on April 27.  In fact, this week, Chairman Frank Lucas (R-OK) suggested a bill with cuts of about $30 billion.

If the House agrees to waive the budget resolution assumptions when proceeding to take up the farm bill, the Committee could thereby bypass the extreme $180 billion budget assumption from the budget resolution that just passed.  However, it clearly becomes a more difficult task in light of near unanimous Republican support for the $180 billion cut reflected in this week’s budget resolution.

The best case scenario for getting a farm bill this year, on schedule, would appear to be for the Senate Agriculture Committee to approve its version of the bill before Memorial Day (see below) and for the House Committee to take it in June or July, make its adjustments, and then try to get both houses to adopt its versions of the bill and go to a House-Senate conference either in the midst of a national election season or in the lame duck session after the elections are over.  This scenario, or any of several possible variations of it, is not an impossible scenario, but neither is it a particularly easy one.

If, as September approaches and the path forward to a five-year farm bill is not clear, Congress will need to turn hammering out a one-year extension of the current bill, with or without changes, and pass it before the current farm bill expires on September 30.  Chairman Lucas hinted this week that this might become the necessary path forward.

NSAC strongly supports doing a real, long-term farm bill this year, including renewed farm bill funding for conservation, beginning farmer, minority farmer, organic research, specialty crop research, farmers markets, organic cost share, and renewable energy programs that will otherwise expire.  If, however, an extension becomes necessary, we will urge that all programs be extended, including those mentioned above that will otherwise run out of money.

Senate Agriculture Committee

Unfazed by House budget politics, the Senate Agriculture Committee leaders intend to markup and vote on their version of the new farm bill in late April, and possibly into May.  Congress is at the start of a two week recess, and while they are out, agricultural staffers are meeting to go over each of the farm bill titles to discuss what should go in and what should come out.  When the Senators return mid-month, it is expected there will be several closed-door member meetings to start to hammer out deals.  If those go well, committee markup of the new farm bill could begin the last week of April.

The markup vehicle will be introduced by Chairwoman Debbie Stabenow (D-MI) at some point in advance of the markup.  It is expected in broad outline to be similar to the draft farm bill put together hurriedly last year in advance of expected Super Committee action that in the end never transpired.  It will likely include a net ten-year farm bill savings of $23 billion.  Unlike last year’s draft farm bill, however, the new version is expected to include more no-cost policy measures and very likely will also adjust mandatory funding levels for certain programs.

NSAC continue to advocate for inclusion of important policies and programs to assist beginning farmers, improve farm income through value-added and regional food system development, improve access to healthy food, increase investments in research to support sustainable farm and food systems, and fund and make working lands conservation programs work better for farmers and the environment.  On most of those fronts, it is still too early to tell how much progress is being made.  In nearly all cases, most of the reforms still hang in the balance.

The commodity program section of the farm bill is still very much a work in progress.  On Thursday, March 29, Senators Kent Conrad (D-ND), John Hoeven (R-ND), and Max Baucus (D-MT) introduced their preferred subsidy program, called the Revenue Loss Assistance Program (or RLAP), as part of their Revenue Loss Assistance and Crop Insurance Enhancement Act (S. 2261).  RLAP is another “shallow loss” payment proposal, but one oriented very much to the needs of more northern and western areas as compared to the Aggregate Risk and Revenue Management (ARRM) program introduced last year by Corn Belt Senators Sherrod Brown (D-OH), John Thune (R-SD), Dick Durbin (D-IL), and Richard Lugar (R-IN).

Those two, very different shallow loss proposals are in the mix with proposals from southern groups and Senators for higher target prices and thus larger and more regular counter-cyclical payments plus a proposal from the cotton industry for a highly lucrative crop insurance-plus program that would take cotton out of the commodity title altogether except for marketing loans.  If successful with their stand alone “STAX” proposal, cotton would achieve the unique status of having no payment caps and no conservation requirements whatsoever.

Payment caps will also be an issue regardless of what the underlying program choices of the Committee turn out to be.  For instance, the Rural America Preservation Act (RAPA) bill backed by several Committee members and supported by NSAC would cap total payments at not more than $100,000 in any one year, and cap marketing loan gains at not more than $150,000 in any one year.  The ARRM proposal, on the other hand, would cap payments at $130,000 and have place no limit on marketing loan gains.  The new RLAP proposal would go higher still, with payments capped at $210,000 and no limits on marketing loan gains.  Of those three proposals, only RAPA would close the loopholes which under current law and regulations allow mega farms to collect multiples of the payment cap regardless of the dollar limitation included in the farm bill.

Conservation obligations for receipt of taxpayer production subsidies also remain a hot topic.  This week two former Secretaries of Agriculture endorsed the NSAC proposal to attach conservation requirements to any new commodity program and to re-attach them to the receipt of crop insurance subsidies.  Under this proposal, all farmers could still purchase crop insurance, but to have the taxpayer pay the majority of the premium, the farmer would need to agree to stop excessive soil erosion and protect wetlands.  Crop insurance subsidies will cost the taxpayer $90 billion over the next decade.

Needless to say, we are concentrating on Senate Committee action for the coming month.  While the House budget reconciliation bill bears monitoring, it is unlikely to directly figure into the final farm bill deliberations, though indirectly it could very badly trouble the waters.  The Senate Committee action, on the other hand, will to a significant degree determine whether the effort to pass a farm bill this year is worth fighting for or not.  We will continue to keep readers appraised of developments and opportunities for engagement.

Senators Kent Conrad (D-ND), Amy Klobuuchar (D-MN) and Al Franken (D-MN) are cosponsors of the bill.

NSAC is supportive of the bill’s provisions for the Rural Energy for America Program (REAP).  That portion of the bill would:

• Simplify the application process for small projects by creating a three-tiered application system with application simplicity reflecting the size of the project;
• Strengthen the environmental and health provisions by requiring USDA to include stronger environmental and health aspects in its award considerations; and
• Expand start-up support for feasibility studies so that rural farmers and businesses can start projects with sound planning.

These provisions are the same as those in Senate Bill 2225 introduced by Senators Franken (D-MN) and Harkin (D-IA) on March 22, 2012.

The Rural Energy Investment Act would authorize mandatory farm bill funding for REAP of $70 million per year from FY2013 through FY2017.

The new bill would also amend the Biomass Crop Assistance Program (BCAP) to:

• Allow lands scheduled to come out of the Conservation Reserve Program to be prepared for biomass crop production during the last fiscal year of their conservation enrollment schedule;
• Define “qualifying eligible material” to better specify what materials are eligible to apply for collection, harvest, storage, and transportation payments and change payment limits to a maximum of $25 per dry ton for a maximum of 3 years;
• Reduce the maximum number of years for contracts for establishing woody biomass feedstocks from 15 to 7 years;
• Cap crop establishment payments at $500 per acre and at 50 percent cost share, but increase those limits to $750 per acre and to 75 percent for beginning, socially disadvantaged, and geographically disadvantaged farmers or ranchers; and
• Provide USDA with additional authorities to limit CHST payments to avoid wasteful payments.

In our 2012 Farm Bill Platform, NSAC calls for more comprehensive reforms of BCAP, including to:

• Eliminate the CHST component of the program given the very significant problems with the Farm Service Agency implementation of the CHST component;
• Ensure that BCAP projects for the establishment of bioenergy crops conform to the program purpose of establishing new bioenergy crops, particularly perennials;
• Require that, if project money is used to fund the production of an annual crop for bioenergy, annual crops must be part of a resource-conserving crop rotation;
• Ensure that the BCAP project component is competitive and only available for developing new sources of energy;
• Require that NRCS play a central role in the development and implementation of BCAP conservation plans; and
• Deny BCAP eligibility for commodity program crop residues.

The new bill would authorize mandatory farm bill funding for BCAP of $75 million per year from FY2013 through FY2017.

Individual funding requests by Senators and outside groups were also due yesterday.  You can download and read our FY 2013 appropriations testimony on our annual appropriations webpage.

Six Senators attended the hearing yesterday – Chairman of the Subcommittee Herb Kohl (D-WI), Ranking Member Roy Blunt (R-MO), John Hoeven (R-ND), Jerry Moran (R-KS), Mark Pryor (D-AR), and Sherrod Brown (D-OH).

Secretary of Agriculture Tom Vilsack began his testimony by discussing the importance of USDA programs to promoting rural development, ensuring access to adequate credit, providing necessary conservation technical assistance, conserving critical natural resources, and supporting the rapid expansion of local and regional food systems.

In response to a question for Senator Sherrod Brown about the closure of Agricultural Research Service (ARS) facilities, Secretary Vilsack suggested that USDA and Congress look into ways to allow for the transfer of land from USDA to beginning farmers that are looking to acquire land.  This is not currently part of the Beginning Farmer and Rancher Opportunity Act (BFROA), but is a very interesting idea that we hope will be developed further by USDA.

Toward the end of the hearing, Senator Hoeven and Secretary Vilsack discussed the Rural Energy for America Program (REAP), and the Senator’s and Secretary’s interest in using REAP money to subsidize oil and gas companies to install ethanol blender pumps at gas stations.  Despite USDA’s own decision to obligate $4.3 million in REAP funding to 65 REAP projects for blender pumps in FY 2011, Vilsack pointed out that the House included a prohibition on federal subsidies for ethanol blender pumps and infrastructure in its FY 2012 appropriations bill.  This particular use of the program was also discussed and explicitly rejected in the conference committee to finalize the 2008 Farm Bill.  NSAC opposes this new unauthorized use of the REAP program.

Conservation Funding Letter

On Friday, March 30, 19 Senators wrote to the Agricultural Appropriations Subcommittee urging full funding for the farm bill conservation programs.  In recent years, the appropriations bill has used backdoor methods to cut mandatory farm bill funding for conservation to the tune of $1.5 billion in just the last two years.  The letter aims to reverse that trend, noting big environmental challenges, high farmer demand, and economic growth and job opportunities.

Led by Senators Michael Bennet (D-CO) and Chris Coons (D-DE), the letter was also signed by former Agriculture Committee chairmen Tom Harkin (D-IA) and Pat Leahy (D-VT) as well as Dick Durbin (D-IL) and Chuck Schumer (D-NY) from the majority leadership.

Two Houses Divided

With the adoption of a budget resolution this week in the House of Representative, passed with only Republican votes, the two houses of Congress are setting off to work on their respective appropriations bills for the year with different assumptions about the amount of money they have to work with.  The Senate subcommittees will be working with the funding levels agreed to last summer in a bipartisan, bicameral agreement between the House, Senate, and White House.  The House subcommittees, however, will be working from a new funding cap $19 billion lower than what was agreed to and adopted into law through the Budget Control Act.

This difference very likely ensures another few weeks or month of high drama in September and then again in December, when Congress tries to reach a final agreement first on a continuing resolution keeping the government funded past the September 30 end of the fiscal year and then possibly on a final bill during the lame duck session of Congress after the elections.

NSAC will continue to monitor and report on the appropriations process as it unfolds.  We expect both the House and the Senate Agriculture Appropriations Subcommittees to mark up their appropriations bills in the coming months; beyond that, however, it remains to be seen whether the bills will be passed individually, folded into a omnibus package, or dropped in favor of a long-term continuing resolution based on current year funding levels.

Click here to read our earlier post on the FY 2013 appropriations process.

The firs panelist Rick Cruse, Director of the Iowa Water Center, focused on the adverse water quality and productivity impacts of intensive row crop cultivation.  He noted that in 2007 the average soil erosion rate on Iowa cropland was ten times greater than the soil replacement rate.  He then discussed the environmental benefits of establishing perennial bioenergy crops on marginal cropland.

Steve Flick, Chairman of the Board of the Show Me Energy Cooperative, praised the  Biomass Crop Assistance Program (BCAP) as a key program in helping farmers establish perennial bioenergy crops.  The Cooperative received the first BCAP project funding, which was used to establish mixed stands of native grasses to be harvested for energy production.  Mr. Flick noted that BCAP projects for perennial bioenergy crops can increase farmers’ income, promote economic development, and lead to cleaner water without affecting the feedstock supply.

Steve John, Executive Director of the Illinois Agricultural Watershed Institute, described a number of small scale bioenergy projects around the U.S. that include water quality and wildlife habitat improvement as part of the project.  He noted that even smaller scale projects can offer farmers significant economic benefits.

The final panelist, Nick Jordan, a University of Minnesota Agronomy professor, focused on political and institutional boundaries that must be addressed to bring together the resources of private enterprise, research, non-governmental organizations and government to integrate perennial bioenergy crops into the existing agricultural landscape.  He recommended that  the Agriculture and Food Research Initiative be provided a new program component with funding for engagement of stakeholders with knowledge and interest in perennial biomass crops.  He also flagged the Environmental Quality Incentives Program and Conservation Stewardship Program as sources of funding for farmers who want to establish farming systems that include perennial bioenergy crops.

Many of the speakers praised the BCAP program for its inclusion of projects to establish perennial bioenergy crops in projects that include conservation requirements. NSAC worked with the National Wildlife Federation and other organizations in the 2008 Farm Bill to ensure that BCAP project funding would give a high priority to perennial bioenergy crops.  In its initial implementation of BCAP, however, the Farm Service Agency instead prioritized the Collection, Harvest, Storage and Transport (CHST) component of the Program which included subsidizing the removal of corn stover and other annual crop residues.

NSAC’s 2012 Farm Bill Platform calls for reauthorizing BCAP with the following improvements:

• Given the very significant problems with the Farm Service Agency’s administration of the CHST component of the program, the CHST component should be eliminated from BCAP.

• In contrast to the CHST component, the BCAP projects funded to date, have, for the most part, conformed to the program’s purpose, which is to help establish new bioenergy crops, particularly perennials.  The next farm bill should require that if project money is used to fund the production of an annual crop for bioenergy, such annual crops must be part of a resource-conserving crop rotation.

• The BCAP project component should be competitive and targeted to developing new sources of energy.  In selecting projects through a competitive process, the program should give higher scores to advanced bioenergy projects (at least second generation) that establish  perennial crops and trees, with participating farmers or forest landowners who have a conservation plan approved by the Natural Resources Conservation Service (NRCS).

• While the current version of BCAP requires that farmers and foresters participating in BCAP projects must obtain a conservation plan, this requirement does not appear to be enforced.  NRCS should be given a central role in BCAP and and the next farm bill  should clarify the importance of BCAP project participants implementing conservation plans from NRCS that protect soil quality, including adequate soil carbon levels, and that protect water quality, air quality, wildlife habitat, and other natural resources; and

• The residues of Title I commodity crops are currently listed by the Farm Service Agency as eligible material under BCAP, despite the last farm bill excluding commodity crops from BCAP eligibility.  The new farm bill should clearly state that commodity crop residues are not eligible materials and that commodity crops are not eligible crops within BCAP.

The Franken-Harkin bill has new provisions for REAP that are supported by NSAC including:

• Simplifying the Application Process: The bill simplifies applications for small projects, creating a three-tiered application system with application simplicity reflecting the size of the project.
• Cutting Burdensome and Costly Regulation: The bill eliminates the USDA’s “two-meter rule,” which currently requires farmers to install a second meter for residential use that goes unread. This rule has levied heavy costs on farmers, and once removed by this bill will allow more farmers to benefit from REAP funding.
• Strengthening Environmental and Health Provisions: The bill requires the USDA to include stronger environmental and health aspects in its award considerations.
• Expanding Start-Up Support: The bill strengthens funding for feasibility studies so that rural farmers and businesses can start projects with sound planning

The new bill also proposes to increase the authorization for appropriation for REAP from $25 million to $100 million, and set the farm bill mandatory funding level for REAP at $70 million a year.  In recent years, demand for REAP dollars has outstripped supply by a 3:1 margin.  USDA recently issued a progress report on REAP accomplishments.

Overall, during the 3-year period covered by the report, REAP accomplished the following:

• Supported 5,733 renewable energy and energy efficiency projects nationwide;
• Generated or saved an estimated 6.5 million megawatt hours of power;
• Provided $192 million in grants and $165 million in loan guarantees to agricultural producers and rural small business owners for renewable energy systems and energy efficiency improvements; and
• Fostered partnerships that have leveraged an estimated $800 million from other sources.

Since the Program was first established in the 2002 Farm Bill, it has provided resources for more than 13,000 rural small businesses and agricultural producers, saved enough energy to power nearly 600,000 American homes for a year, and funded more than 1,000 solar projects and more than 560 wind projects.

REAP provides grants, loan guarantees, and a combination of grants and loan guarantees to rural small businesses and agricultural producers.  USDA is taking applications for guaranteed loans for renewable energy systems and energy efficiency improvements through June 29, 2012.  Applications for REAP grants and loan/grant combinations are due no later than March 30th.

Additional information on applying for REAP funding is available in the Federal Register funding notice issued January 20. You can also contact your USDA Rural Development state office for more information.

The four hearings covered the President’s budget requests for four USDA mission areas: Rural Development, Marketing and Regulatory Affairs, Natural Resources and Environment, and Food Safety.  Hearings for the Farm and Foreign Agricultural Services mission area and Research, Education, and Economics mission area have been scheduled for later this month.

The first hearing, which occurred on March 1, focused on rural development.  Judith Canales, Administrator of the Rural Business-Cooperative Service spoke about the importance of the rural development programs, including the Value-Added Producer Grants (VAPG) program, Rural Business Enterprise Grants (RBEG) program, Rural Microentrepreneur Assistance Program (RMAP), and Rural Energy for America Program (REAP).  In her written remarks, Canales states “USDA is revitalizing rural communities by expanding economic opportunities and creating jobs for rural residents to promote investment[…] and build a link between local production and local consumption.”

In response to a question from Rep. Sanford Bishop (D-GA) regarding improving and expanding upon the Rural Microentrepreneur Assistance Program in FY 2013, Administrator Canales explained that the Administration’s FY 2013 request of $3.4 million in discretionary funding for the program would support $22.5 million in loans and create or save more than 3,000 jobs.  Rep. Bishop noted that RMAP is able to leverage a small amount of money to create a major impact in rural America.  During the same exchange, Administrator Canales also spoke to the importance and effectiveness of VAPG, noting that the program is targeted at small business development and consistently contributes to farmer-led job creation in rural areas.

VAPG provides competitive grants to producers, groups of producers, or producer-owned businesses or cooperatives to develop value-added producer-owned enterprises. VAPG grants can be used for business planning and feasibility studies as well as for working capital.  Since 2001, the program has provided 1,541 grants totaling more than $210 million to all 50 states.  Despite being a key part of a proven job-creation strategy, VAPG has been cut by more than 30 percent in the last two years.  We hope that Congress does not continue this trend in FY 2013.

Following the rural development hearing, the Subcommittee held a hearing on March 6 to consider the President’s FY 2013 budget request for USDA’s Marketing and Regulatory Affairs mission area.  One of the issues that arose at the March 6 hearing was USDA’s implementation of the Grain Inspection, Packers & Stockyards Act (GIPSA) rule.  USDA implemented pieces of this rule last year, but was cut of at the knees on the rest of it by last year’s agriculture appropriations bill.  Unfortunately, two members of the Agriculture Appropriations Subcommittee spoke out against the rule on behalf of the anti-competitive meatpacking industry.  USDA will have an opportunity to implement the remaining portions of this fair competition rule in FY 2013 so long as it is not once again limited by the agriculture appropriations bill.

Subcommittee Ranking Member Sam Farr (D-CA) spoke up in support of a number of NSAC appropriations priorities related to organic production.  In particular, Rep. Farr noted the importance of maintaining funding for the National Organic Certification Cost-Share Program and for organic price data collection and reporting by the Agricultural Marketing Service, National Agricultural Statistics Service, and Economic Research Service.

The Subcommittee held two more hearings last week, one on March 7 and another on March 8.  Both Under Secretary Harris Sherman and Natural Resources Conservation Service (NRCS) Chief Dave White testified at the March 7 hearing on the President’s budget requests for the Natural Resources and Environment mission area.  Chief White began by discussing the agency’s Streamlining Initiative.  He noted that while the Initiative will result in increased efficiencies, NRCS must ensure that those efficiencies do not limit the agency’s ability to provide technical assistance to producers.

Within the agriculture appropriations bill, the Conservation Operations account is the primary discretionary funding mechanism used to support technical assistance for farmers and ranchers.  This is discretionary funding is paired with technical assistance support from mandatory conservation program spending, which does not come from the Appropriations Committees, but rather from the Farm Bill itself.  While appropriators do not provide mandatory funding, they do have the ability to limit it and have done so repeatedly in recent years.

In order to provide adequate technical assistance to producers across the country, NRCS needs more boots on the ground; and while the Streamlining Initiative will work toward this goal, it will do little so long as the Conservation Operations account is underfunded and mandatory conservation spending is undercut.

The Administration’s FY 2013 budget request includes a $347 million (roughly 20 percent) permanent cut to the Environmental Quality Incentives Program (EQIP).  Subcommittee Chairman Jack Kingston (R-GA) asked Undersecretary Sherman to explain how this Change in Mandatory Program Spending (CHIMPS) would play out on the ground.  Undersecretary Sherman noted that the CHIMPS would lower the level of activity in the program and “would delay the work that needs to be done.”

Representative Farr then asked Chief White to touch on the issue of reattaching highly erodible land and wetland conservation requirements to subsidized crop insurance.  This has become an increasingly important issue in recent years, with support from a broad array of groups, including NSAC, the National Farmers’ Union, American Farmland Trust, National Wildlife Federation, and many others.

Basic conservation requirements to protect against soil erosion and wetland drainage have been a condition of receiving farm subsidies since 1985.  This conservation requirement has dramatically reduced soil erosion on farmland and protected wetlands, keeping land productive and important natural resources intact.  Today, the biggest farm subsidy paid by U.S. taxpayers is for crop insurance.  With this shift in the prominence of crop insurance and with proposed changes to the farm safety net that will accelerate this shift, many groups and farmers around the country believe that compliance should be reattached to crop insurance subsidies, as it was up until 1996.  Chief White noted that he recognizes the importance and understands the rationale, but noted that in the end it is up to the House and Senate Agriculture Committees to decide.

Following this exchange, Rep. Farr asked Chief White to discuss the FY 2012 Conservation Stewardship Program (CSP) sign up, which ended in January, and to comment on the improvements that NRCS made to the program for FY 2012.  Chief White noted that demand for the program this year was incredible high and that the agency significantly increased the transparency and functionality of the Conservation Measurement Tool, which NRCS uses to enroll, score, and rank producers who apply for the program.  See this earlier post about the recent Senate Agriculture Committee hearing on conservation for more detailed remarks by Chief White.

The House Agriculture Appropriations Subcommittee will hold two more hearings next week.  A hearing on the Administration’s requests for the Farm and Foreign Agricultural Services mission area and Research, Education, and Economics mission area will be held on March 20 and March 21, respectively.  We will report on the results of those hearings shortly thereafter.