Subsidies Worth Billions at Stake in Battle Over Biofuel Rules

U.S. Rep. Collin Peterson thinks corn-based biofuels deserve stronger support from the federal government, and he’s threatening to impound the House climate bill until they get it.

That’s a polite way to put it. A more abrasive rendition would just quote Peterson:

"You're going to kill off the biofuels industry before it even gets started. You are in bed with the oil industry," he told administration officials on May 6, a day after the EPA proposed new rules for the national Renewable Fuels Standard, rules that don’t bode well for corn ethanol.

"I want this message sent back down the street: I will not support any climate change bill. I don't trust anybody anymore."

The Minnesota Democrat has somewhat softened his language since then, but the threat remains. From May 19:

“What it comes down to is, if they want the [climate] bill passed, I think they better deal with us.”

Peterson, who wields some power as chairman of the House Agriculture Committee, wants Congress to modify provisions of the 2007 Energy Independence and Security Act, the law behind the Renewable Fuels Standard.

The 2007 law requires the EPA to measure biofuels’ lifecycle emissions, including emissions linked to indirect land use changes, such as the clearing of Brazilian forests to grow food to make up for the loss of U.S. cropland now used for biofuels.

Most advanced and cellulosic biofuels, such as those made from switchgrass and agriculture waste, would have no trouble meeting the proposed standards for lifecycle emissions. However, certain methods of corn-based ethanol production likely won't make the cut once indirect land use changes are taken into account under the EPA's newly proposed rules. Those proposed rules were published in the Federal Register yesterday, starting a 60-day comment period. The EPA plans a public hearing June 9.

To protect corn ethanol, Peterson wants to make sure that indirect land use changes aren’t factored into biofuels’ carbon footprint.

He has gathered 46 co-sponsors on a bill to modify the 2007 law, and he can muster a like-minded brigade of mostly farm-state House members to help him block the climate bill if his concerns aren’t addressed.

Here’s the odd part about all of this: Existing corn-based ethanol and soy-based diesel operations are already grandfathered in under the terms of the 2007 energy law.

Peterson’s worried that future modifications could interact with EPA regulations finding bio-fuel production to be a net-emitter (for what it’s worth, the EPA is leagues behind the research on this), and make bio-fuels economically unviable.

His real fear is that Congress could eviscerate the subsidy programs that funnel funds to bio-fuel production, currently dominated by corn ethanol.

This could cost farm states some hefty sums of money.

How much? That’s what Doug Koplow, a researcher specializing in subsidies of all sorts, attempts to quantify in a recent bulletin laying out the rough costs of the largest tax credits and subsidies for biofuels from now until 2030. Koplow notes two key areas: