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UPDATE: Energy bill 'vote for farmers'

A spokesman for Majority Leader Bill Frist said no more votes would be taken on the legislation before the Thanksgiving Holiday after senators balked at changing their vote while language exempting MTBE manufacturers from product liability lawsuits remains in the law. House leaders refused to withdraw the provision.

Meanwhile, Agriculture Secretary Ann Veneman issued a press release indicating just what farmers might lose if the Energy Policy Act of 2003 is allowed to die in the Senate this year.

"The energy bill offers increased opportunity for agricultural producers and for energy consumers who want renewable, domestically produced and environmentally friendly energy," Veneman said. "The bill would create jobs, increase demand for agricultural products and increase U.S. net farm income by an estimated $2 to $4 billion in 2012.

“We strongly urge the Senate to pass the energy bill."

According to a USDA analysis, the Energy Policy Act of 2003 that’s now before the Senate mandates greater use of ethanol and biodiesel, which would nearly double the amount of corn used in ethanol production, rising to almost 2 billion bushels by 2012.

“This will create new jobs in plant construction and operation in rural areas,” Veneman said. Incentives to expand the market for biodiesel would increase the demand for soybean oil and soybean oil processing facilities.

The increases in ethanol production would increase the prices farmers receive for corn and sorghum by an estimated 10 to 30 cents per bushel by 2012. These higher prices would also boost prices for other field crops, such as wheat, barley, oats, soybeans and upland cotton, as producers plant more corn and sorghum acreage and less to the other crops. Expanding biodiesel use will help support the price of soybean oil and soybeans.

The USDA analysis also indicates that the higher crop prices would lower government spending on counter-cyclical payments and marketing loan programs. Compared with the President's Budget FY 2004 baseline, the energy bill is forecast to reduce spending for farm price and income support programs by $3 to $4 billion during FY 2006-12.

The bill's provisions affecting agriculture would:

  • Create a Renewable Fuel Standard (RFS). This program would greatly expand ethanol and biodiesel production. In 2003, ethanol production is expected to reach a record high 2.7 billion gallons. Under the bill, ethanol would grow from a minimum of 3.1 billion gallons in 2005 to 5 billion gallons in 2012. Rural employment and farm income would rise as ethanol production rapidly expands.
  • Provide New Economic Opportunities. Ethanol produced from cellulosic feedstocks, ranging from forest residues and farm wastes to dedicated crops, would receive special incentives in the bill. This would create a new industry that would generate new economic opportunities for agriculture and rural America.
  • Increase Demand for Ethanol. MTBE is a fuel additive that enhances octane and oxygen in gasoline but has been found to contaminate ground water. The bill phases MTBE out of the gasoline pool by 2015. The MTBE phase-out would create market demand for ethanol for its octane and environmental benefits.
  • Change Tax Law. Another important part of the energy bill supports renewable fuels through changes in tax laws. For example, the bill expands the small producer ethanol tax credit and allows cooperatives to receive the benefit. This would foster the continued expansion of small ethanol plants, where farmers as owners will see income generated through value-added processing of their crops.
  • Expand the Renewable Resources Tax Credits. This bill also extends and expands the tax credits for energy produced from renewable resources. This would increase the incentive to use wind, solar, biomass and agricultural wastes, as the feedstocks produce power. Using these new sources to produce energy would generate new economic activity in rural areas.
  • Create a Biodiesel Tax Credit. The bill also creates an excise tax credit for biodiesel. Biodiesel from virgin oils, like soybean oil, get a $1 credit for each gallon of biodiesel marketed. This tax credit would increase the economic attractiveness of using biodiesel as a lubricity additive or alternative fuel.
  • Extend the Ethanol Excise Tax Exemption. Under the bill, ethanol receives an extension of its excise tax exemption recognizing its benefits in energy security and the environment. This extension fulfills the President's campaign promise and reiterated in the Administration's National Energy Policy.
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