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Rural Energy for America Act Expands Farm Bill's Energy Provisions

Bipartisan senators introduce legislation increasing overall funding for the renewable energy section over time to $250 million.

Tuesday a bipartisan group of senators introduced the Rural Energy For America Act, legislation that strengthens and expands the farm bill's Section 9006 renewable energy and energy efficiency program.

The bill will increase the overall funding under the section over time to $250 million, including funding for competitive grants to state or regional organizations for "off-the-shelf" renewable energy and energy efficiency projects. The bill also provides new grant options for wind energy development, fosters the administration of direct loans, and allows rural schools to participate in the program.

The bill is sponsored by Sen. Tom Harkin, D-Iowa, and co-sponsored by Sens. Richard Lugar, R-Ind., Richard Durbin, D-Ill., Chuck Hagel, R-Neb., and Ben Nelson, D-Neb.

The new legislation also renames section 9006 the Rural Energy For America Program (REAP).

During its first three years, the 9006 program has distributed nearly $64 million and catalyzed the development of 412 renewable energy and energy efficiency projects in 37 states. The awards have leveraged nearly $700 million in additional investments in farms and rural communities. As Chairman of the Senate Agriculture Committee in 2002, Harkin authored the first ever farm bill energy title establishing these renewable energy grants and loans through USDA.

This legislation also promotes wind energy expansion by giving farmers and other developers an additional financing option. Currently, many grant recipients use the grants to pay for capital development and construction costs. Under federal tax rules, such construction grants have the potential to offset important wind production tax credits.

To make clear USDA's authority to craft additional grant options, the legislation authorizes USDA in appropriate circumstances to structure grants as production incentives instead of construction grants, thereby reducing the risk of undercutting the tax credit benefit.

 This legislation also includes a new rebate program for relatively simple and straight-forward "off-the-shelf" renewable energy or energy efficiency projects. The rebate program allows small and medium-sized farmers and rural businesses to obtain rapid and long-lasting relief from high energy prices by installing energy efficiency equipment or renewable energy systems. This rebate program would mimic state-run programs that have been very effective at promoting small scale development projects. Grants will be made available with support limited to no more than 20% of the total available funding.

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