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Should We Pay Farmers to Grow Switchgrass? The Feds Think So

Farmers will now be paid by the federal government to produce a new kind of crop -- and it's not to grow food. Instead, the USDA will pay farmers to grow and transport non-food based biomass crops, including switchgrass, corn cobs and woody plants, to refineries that make biofuels. The program has been couched as a way to give rural economies a boost and help a burgeoning biofuels industry grow and move away from corn-based ethanol and towards advanced non-food based fuels.

The Biomass Crop Assistant Program, announced this week by Agricultural Secretary Tom Vilsack, was just one of several new initiatives that total more than $1.5 billion in assistance aimed at supporting the biofuels industry. Under the BCAP, which was piloted last year, farmers can receive funds to cover up to 75 percent of the cost of establishing eligible perennial crops. Farmers also will be paid for five years for grassy crops and up to 15 years for woody perennial crops.

Farmers and forest landowners also can receive matching payments for delivering eligible feedstocks to qualified biomass power plants or advanced biofuels plants. In all, BCAP is expected to cost $461 million over 15 years. At least one company, ethanol producer POET, has already said it plans to certify three of its plants under the federal program so farmers can receive payment for deliveries there.

The goal here is fairly simple and well, mandated by the federal government. The Renewable Fuel Standard requires 36 billion gallons of renewable fuel to be consumed annually by 2020. Of that, 21 billion gallons must be "advanced" biofuels, which means it can't be corn-based ethanol.

So how far away are we from that goal? Ethanol producers are expected to make 13 billion gallons of renewable fuel this year -- the vast majority of it from corn. In all, the U.S. has 16.2 billion gallons of renewable fuel capacity. That means to meet the RFS we need to two things: the crop, non-food biomass or corn; and the plants or refineries to make the fuel. Oh, and the network to transport the fuel as well as the fueling stations so it can pump it into your car. The number of biorefineries would have to more than double and that means substantial investment from either the private sector or the federal government, which ultimately means you.

One problem here, is the estimated $461 million price tag seems optimistic. During the pilot program last year, the USDA paid out some $250 million in just three months to paper companies that took advantage of loosely defined eligible biomass products, the Des Moines Register noted. The rules have since been tightened.

Moving away from corn-based ethanol is good, it's just also expensive. There are a few other steps the government could take to speed up the process and save money, such as ending the 45-cent-per-gallon blender's tax credit for corn-based ethanol.

Other assistance programs announced by Vilsack:

  • Within 60 days five biorefinery or bioenergy projects will be selected for loan guarantees to help pay for construction;
  • Matching funds to retailers to install new service station blender pumps and storage systems, which cost about $25,000 each. Vilsack wants to install at least 10,000 pumps in the next five years.
  • Some $281 million to help bioplants that increase production defray the cost of feedstock.
Photo from Flickr user Andrew Stawarz, CC 2.0