Washington Insider-- Tuesday

Torrefaction in Oregon

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

USDA Chief Economist Warns on Farm Economic Situation

A rise in the level of non-performing farmland and production operating loans revealed by an analysis by Reuters is "definitely a red flag," USDA Chief Economist Robert Johansson told the news service.

A special category of bankruptcies for smaller farms known as Chapter 12 signals issues are potentially rising in farm country.

Reuters reported the number of Chapter 12 filings (those with less than $4.03 million in debt) were 51% higher in the 12-month period ending June 30 of this year compared to the same period in 2013, according to federal court data for key Midwest grain-producing states.

USDA said in 2015 that the level of farms raising crops other than cotton were considered "highly leveraged" or "very highly leveraged" – debts equaled at least 41% of assets. "I expect these categories to get larger," Johansson said. "We should be looking at this."

US 'Patience Wearing Thin' on India Textile Subsidies

Concerns about export subsidies for India's textile and apparel industry are being voiced by the US, which called the incentives a "big step backward" at a World Trade Organization (WTO) meeting, sources told Bloomberg BNA.

U.S. officials told WTO's Committee on Subsidies and Countervailing Measures that India's textiles and apparel industry reached "export competitiveness" in 2007. Under the WTO Agreement on Subsidies and Countervailing Measures (SCM), India has eight years after achieving export competitiveness to phase out the subsidies given to a sector.

That eight-year transition period has expired that U.S. officials said their "patience is wearing thin," sources told Bloomberg BNA. The subsidies provided by the Indian government to the textile and apparel industry include interest on loans and incentives for exporting to specific markets in the form of duty-free imports, for carpets and handicrafts.

India refuted U.S. claims and said "export competitiveness" was reached in 2010, not 2007. They contend that India has until 2018 to do away with the subsidies, according to a senior official with India's Commerce Department, Ministry of Commerce and Industry. "We have already eliminated a large number of export subsidies from the sector. By 2018, all will be eliminated," the official said.

The official also said India plans to discuss the issue bilaterally with the U.S., explaining that some segments of the textiles and apparels industry still need government support and employ a large number of people.

Washington Insider: Torrefaction in Oregon

If you aren’t familiar with the process of torrefaction, you are not alone. It is a somewhat obscure technology that treats wood or other biomass material at high temperatures in an oxygen-deprived environment to change its chemical composition. In areas like Finland where it has been used, it is said to enhance the energy content and reduce greenhouse gas emissions from wood burning.

This week Bloomberg is reporting that plans to convert a coal-fired power plant in Oregon into what would be the nation's largest biomass facility will be tested soon when 8,000 tons of “toasted” wood thinned from a national forest is burned. In addition, Portland General Electric is considering whether it can use this feed stock to forestall decommissioning a plant it now plans to close.

The investor-owned utility also sees conversion to biomass as a potential means of meeting its obligation under a recent Oregon law that accelerates compliance requirements for the renewable portfolio standards, PGE spokesman Steve Corson told Bloomberg. The law requires at least half the state's electricity come from renewable sources by 2040.

However, the proposal is controversial. While conversion to biomass would mean sourcing sustainable fuel like wood instead of coal, a coalition of environmental groups worry that substituting wood for coal will not effectively slow climate change.

At the crux of the issue is whether the biomass in question, torrefied wood, is truly sustainable and carbon neutral. Wood thinned from the forest must either regenerate itself or be replanted after harvest to maintain equilibrium, experts note.

“If projects like Boardman were to go forward, we would see the biomass industry shift from waste feedstock to a feedstock relying on extra thinning projects in the forest,” Sierra Club conservation organizer Alexander Harris told Bloomberg. “We would see trees harvested and combusted that would otherwise remain in the forest, sequestering carbon for decades.”

Corson, the utility spokesman, said: “Oregon has a lot of work to be done in the area of forest health in terms of trimming and disposing of dead wood and excess wood in the forests. That presents not only an opportunity to find something to do with that material, but also as a way to avoid having the material burning anyway in catastrophic fires where you will not only release the carbon, but you'll also release the particulates that go with forest fires in a way that is far less controlled then if you do it in a power plant where we have emissions controls.”

Still, a coalition of 23 conservation groups, including Sierra Club, Audubon Society of Portland and WildEarth Guardians, is also deeply concerned that extending the life of older coal plants with fewer environmental controls by transforming them into biomass plants will supplant zero-carbon electricity sources such as solar. The group wants lawmakers to drop language from the pending Energy Policy Modernization Act and the Interior appropriations bill that would essentially declare as scientific fact that forest biomass harvested under certain conditions is carbon neutral.

“We are concerned about the energy bill's language and the language in the appropriations bill that exempts biomass carbon emissions from ‘regulation, control, or action’” by the Environmental Protection Agency, the letter said.

A Democratic staff member to the Senate Energy and Natural Resources Committee told Bloomberg that not a single member of the Senate objected to the amendment containing the biomass carbon neutrality language before the energy bill passed with broad bipartisan support. When Congress reconvenes after the general election, the bill will be reconciled in a conference committee with the House version, which does not contain the neutrality language, the staff member said.

Wyden, who is a member of both the Energy Committee and the conference committee, told Bloomberg that he is working with stakeholders to ensure that biomass policy is “rooted in science, is bipartisan, and moves Oregon and the entire country to a smarter carbon policy.” Even officials of Oregon Torrefaction LLC, which is providing wood for the pending test burn, say there is still a lot of basic science work to be done to determine what type of biomass and what technology meet carbon dioxide reduction goals.

So, we will see. Biomass tends to be bulky and moving it far and pre-treating it by torrefaction likely will be expensive. Nevertheless, there is a huge amount of waste cellulose in our fields and forests, and making useful, clean energy of that would be a very attractive prospect if it proves out as advocates now believe, Washington Insider believes.

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