New Farm Bill Speeds Commercialization of Advanced Biofuels

May 28, 2008

Congress passed a new farm bill on May 22 that will accelerate the commercialization of advanced biofuels, including cellulosic ethanol, encourage the production of biomass crops, and expand the U.S. Department of Agriculture's current Renewable Energy and Energy Efficiency Program. Section 9003 of the Food, Conservation, and Energy Act of 2008 provides for grants covering up to 30% of the cost of developing and building demonstration-scale biorefineries for producing "advanced biofuels," which essentially includes all fuels that are not produced from corn kernel starch. It also allows for loan guarantees of up to $250 million for building commercial-scale biorefineries to produce advanced biofuels. The bill funds the biorefinery program by drawing $75 million in funds from the Commodity Credit Corporation (CCC) for fiscal year (FY) 2009, increasing to $245 million by FY 2010. It also authorizes $150 million per year in discretionary funds for the program.

Section 15321 of the bill establishes a new tax credit for producers of cellulosic biofuels, that is, biofuels produced from wood, grasses, or the non-edible parts of plants. The new cellulosic biofuel producer credit is set at $1.01 per gallon and applies only to fuel produced and used as fuel in the United States. In addition, Section 9005 of the bill provides $55 million in CCC funds in FY 2009 to support advanced biofuel production, increasing to $105 million by FY 2012. It also authorizes up to $25 million per year in discretionary funding. The more crop-oriented measures include Section 9010 of the bill, which allows the CCC to buy sugar from U.S. producers and sell it to bioenergy producers, and Section 9011, which creates the Biomass Crop Assistance Program to support the establishment and production of biomass crops.

Section 9007 of the bill renames the U.S. Department of Agriculture's current Renewable Energy and Energy Efficiency Program as the "Rural Energy for America Program," providing $55 million in CCC funds for FY 2009, increasing to $70 million for FY 2011 and 2012, while authorizing another $25 million in discretionary funds. The program will provide grants of up to 25% of the cost of renewable energy systems and energy efficiency improvements for agricultural producers and rural small businesses, as well as guarantees for loans as large as $25 million. Section 9009 of the bill creates a new "Rural Energy Self-Sufficiency Initiative," which will support efforts to develop community-wide renewable energy systems. The bill provides no firm funding for the initiative but authorizes up to $5 million per year in discretionary funds. Likewise, Section 9013 authorizes up to $5 million per year to support community-wide wood-fueled energy systems.

The bill also provides $35 million in CCC funds to encourage existing biorefineries to reduce their dependence on fossil fuels. It continues the Biomass Research and Development Initiative, a joint effort of DOE and the U.S. Department of Agriculture that focuses on biofuels and bioproducts. The bill provides $20 million in CCC funds to support the initiative in FY 2009, increasing to $40 million by FY 2012, while authorizing up to $35 million per year in discretionary funds. See the new farm bill (PDF 1.4 MB). Download Adobe Reader.