Washington Insider--Wednesday

By DTN's Washington Insider

Here's a quick monitor of Washington farm and trade policy issues from DTN's well-placed observer.

Ethanol Could Help Japan Reduce Greenhouse Gases

The U.S. Grains Council has released a study citing that a significant portion of U.S.-produced corn ethanol production could likely meet Japan's 50% greenhouse gas (GHG) reduction threshold over gasoline, supporting the case for that fuel's competitiveness and its sustainability compared to other fuel sources.

The council stated that the results from Japan will help the council and its industry partners dispel myths about U.S. ethanol and help make the case for opening the door for U.S. ethanol in the Japanese market. In particular, the study will help show key Japanese government officials and industry stakeholders that U.S. corn ethanol meets Japan's rigorous international sustainability requirements.

This is important as Japan has put into place a requirement that all biofuels must reduce greenhouse gas by 50 percent, and Japanese regulators will decide whether or not to include U.S. corn ethanol in Japan's biofuel policy in the spring of 2017 for implementation in 2018.

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USDA Focuses on Small Business and Energy

USDA announced Tuesday it is spending more than $300 million on projects to help small businesses reduce their energy costs through renewable energy and more energy-efficient technology. Agriculture Secretary Tom Vilsack announced the funding in Austin, Texas.

"Cutting our energy waste is one of the fastest, easiest and cheapest ways to help families save money on their energy bills while reducing harmful carbon pollution. Over the course of nearly eight years, the Obama Administration has taken strong actions to advance energy efficiency in our homes and businesses," Vilsack said.

USDA is investing nearly $80 million for energy projects in Texas. Nine Texas businesses will receive more than $870,000 in grants under the Rural Energy for America Program (REAP) and two businesses will receive loans of $5 million each. In Austin, the Vickery Wholesale Greenhouse Inc. is receiving a $28,238 REAP grant to install a 40.32 kW roof-mounted solar array. The electricity produced from this new installation will offset the company's annual energy consumption with an expected output of 198 million BTUs.

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Washington Insider: California's New Dairy Emissions Rules

California's dairy industry is large and politically well-connected and Inside Climate is reporting this week that it managed to evade "regulation on most kinds of pollution until now." However, that may be ending as the industry is facing methane reduction requirements under a new law.

After considerable pushback from the state's livestock producers, California Gov. Jerry Brown recently signed a law aimed at methane emissions. Inside Climate says the states' livestock are the largest source of heat-trapping methane in the country's biggest dairy-producing state. More than half of California's methane emissions come from dairy and beef operations, specifically from cow manure and belching--mostly from dairy cows.

Brent Newell, an attorney with California's Center for Race, Poverty and the Environment sees the new rules as a victory, and says it had become painfully obvious "that dairy absolutely had to do something. It could not remain exempt."

Nationally, the livestock industry and its allies in Congress have thwarted attempts to regulate greenhouse gas emissions, specifically from livestock operations. Since 2009, Congress has approved riders in spending bills that prevent EPA from regulating air pollution from livestock facilities, largely aimed at Concentrated Animal Feeding Operations.

California lawmakers passed an ambitious greenhouse gas emissions control law in 2006. This gave regulators authority to require methane controls, but was not pursued because of opposition from the industry, IC says. It argues that "the dairies …pushed back against the Air Resources Board and effectively prevented it from regulating methane," said Newell. "They used the same playbook that they use at the national level: We're family farmers, we can't afford it, the science isn't strong enough."

So, now a key question is what this new rule might mean for other states or for federal regulations, said Rob Vandenheuvel, general manager of California's Milk Producers Council, which fought against the new law. He called the new law "extreme."

The law requires the livestock industry to cut methane emissions to 40% of 2013 levels by 2030, and the state Air Resources Board thinks 75% of that reduction should come from dairies. Most of the cuts will come from converting methane into useable energy. The law also requires a 40% cut in hydrofluorocarbon gases; a 50% reduction in anthropogenic black carbon, or soot; and will establish targets for reducing organic waste in landfills.

For starters, the state will direct $50 million from fees gathered under its cap-and-trade program toward digesters and other methane-reduction technologies.

"If we can do this without regulation, that's everyone's goal," said Michael Boccadoro, executive director of Dairy Cares, a California-based livestock industry group. Now, Livestock producers say they don't think the targets are realistic and see the law as government overreach.

"We have 1,500 dairies in the state; we have 12 digesters right now. The idea that we should get digesters on 40% of the dairies in the state is just not realistic," Vandenheuvel said.

The California dairy industry is by far the largest in the U.S., accounting for one-fifth of the country's milk. So, the state's 1.8 million dairy cows are especially robust sources of methane, says the IC, making them an obvious target for meeting the state's goal of cutting overall greenhouse gas emissions.

So far, California has focused much of its resources and research on anaerobic digesters, which a state program will help dairies buy. The process enables dairy farmers to generate carbon credits that can be sold to organizations trying to meet emissions-reductions targets under state law.

Still, even with state subsidies dairies say they have a hard time making the digesters profitable. The new law, Parkhurst says, will change the equation by creating revenue streams for electricity or fuel generated from methane digesters.

Between now and 2024, state regulators and the industry will try to find ways to make methane capture profitable. There are a few possibilities beyond simply creating carbon credits. One is by injecting and selling methane into gas pipelines; another is turning compressed methane into a low-carbon vehicle fuel. "Dairies are like solar panels were 30 or 40 years ago. Some of the kinks are getting worked out," Parkhurst said. "But I continue to be impressed by the innovation in this space."

The rest of the industry will be watching to see if California's approach works. "There's a lot of wiggle room and a lot of delay in implementation," Newell said. "But the silver lining here is there will be methane regulations. The state can't address the emissions targets without regulating dairies. They can't get around it."

Well, we will see. While methane capture is an important goal for many environmental groups, it is often opposed broadly by agriculture. It will be important to see how much leverage the state's markets have on producers in other states, and that could be less important than it is for eggs. Still, the trend against greenhouse gas emissions is important and should be watched closely as it evolves, Washington Insider believes.

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