Farm Bill Energy Programs and Bioenergy Tax Cut Extenders Still Hanging in the Balance

The end of the year and the federal government’s fiscal cliff are rapidly approaching, but little progress has been seen in negotiations between political leaders concerning how to avoid plunging the U.S. economy back into recession next year, when sharp tax increases and spending cuts are scheduled to take place. A five-year Farm Bill reauthorization and bioenergy tax cut extensions, which already have bipartisan support, may be part of the final package. Continuing federal support for bioenergy is critical for addressing the nation’s climate, energy, economic, and environmental challenges.

On December 3, Reuters reported that the House leadership and the White House were both looking at the possibility of applying $32 to $35 billion in cuts to nutrition and agriculture programs in the pending Farm Bill as one way to help meet their deficit reduction goals in budget negotiations. However, the Reuters report says the House leadership and the White House remain far apart on which Farm Bill programs to cut.

The Senate has already approved its version of the Farm Bill (the Agriculture Reform, Food and Jobs Act of 2012 (S. 3240)) , with $23 billion in cuts over ten years, and the House Agriculture Committee has approved its version, the Federal Agriculture Reform and Risk Management (FARRM) Act (H.R. 6083), with $35 billion in cuts. The House bill would cut $16 billion from nutrition programs, $14 billion from commodity support programs, and $6 billion from conservation programs.

The question for rural renewable energy and bioenergy advocates is: Will critical energy title programs be funded in the final package? These programs include the:

• Biobased Market Program
• Biorefinery Assistance Program
• Bioenergy Program for Advanced Biofuels
• Biodiesel Fuel Education Program
• Rural Energy for America Program (REAP)
• Biomass Research and Development
• Biomass Crop Assistance Program
• Community Wood Energy Program

The Senate-passed bill would provide $800 million over five years in mandatory funding for these programs and up to $1.14 billion in discretionary funding (subject to annual appropriations). The House bill would provide no mandatory funding and up to $1.355 billion in discretionary funding. Authorization for all of these programs, except modest funding for REAP, expired on September 30.

Extending tax incentives for bioenergy is also critical to advancing renewable energy and sustaining and creating employment in the face of surging, cheap, climate-polluting fossil natural gas and oil production. In early August, the Senate Finance Committee approved the Family and Business Tax Cut Certainty Act of 2012 (S. 3521) with strong bipartisan support. The bill amends and extends tax policies across a wide range of economic sectors. For bioenergy systems, it would extend:

1. the investment tax credit in lieu of a production tax credit (including for a variety of types of biopower);
2. the cellulosic biofuels producer tax credit (including algae-based fuels);
3. incentives for biodiesel and renewable diesel; and
4. cellulosic biofuels bonus depreciation.

You can read the full summary here .

Also worthy of inclusion in an end-of-year renewable energy/energy efficiency incentives package is a bill introduced by Senators Bingaman (D-NM), Feinstein (D-CA), Snowe (R-ME), Merkley (D-OR), and Shaheen (D-NH), the Expanding Industrial Energy and Water Efficiency Incentives Act (S. 3352) . The bill would expand the existing tax credit for investing in combined heat and power (CHP) to larger systems and create a new investment tax credit for biomass thermal systems – the higher the efficiency, the higher the tax credit.