Bill urges farmers to grow energy crops

[May 29, 2007]  SIOUX FALLS, S.D. (AP) -- Legislation introduced in the U.S. Senate this week would entice farmers located near ethanol biorefineries to grow dedicated energy crops.

Sen. John Thune, R-S.D., said his bill would offer incentives to farmers who plant switchgrass, fast-growing trees and other cellulosic feedstocks and deliver them to the nation's next generation of ethanol plants. Cellulose is the woody material in branches and stems that makes plants hard.

"For cellulosic to achieve its potential, Congress needs to help this industry overcome some of the initial market barriers," Thune said Wednesday during a conference call. "And if we are serious in the country about reducing our dependence upon foreign oil, we have to be serious about giving the necessary jump start to America's budding alternative fuels industry and the farmers who supply it."

Thune said he hopes the legislation will be included in the energy section of the farm bill, which is up for review by Congress this year.

Breaking cellulose into sugar to spin straw into ethanol has been studied for at least 50 years. But the technological hurdles and costs have been so daunting that most ethanol producers instead relied on heavy government subsidies to squeeze fuel from corn.

In February, the U.S. Department of Energy awarded $385 million in grants over four years to six companies hoping to build the nation's first large-scale cellulosic ethanol plants. Earlier this month, Energy Secretary Samuel Bodman announced plans to invest an additional $200 million over five years to help companies develop smaller biorefineries.

Under the bill introduced Wednesday, the U.S. Department of Agriculture would determine the likelihood of construction of a future biorefinery, the local potential for feedstock production, the number of interested farmers and a biorefinery's economic impact.

The bill would likely fund 10 to 12 feasibility studies, each costing about $50,000, Thune said.

Once a project is approved, farmers could enroll eligible land in the program.

During a contract's first five years _ as the ethanol plant is built and the crop is getting established _ farmers would receive a cost share and a per-acre rental payment. Once the biorefinery starts up, the rental payment would end and the farmer would get a matching payment of up to $45 for each ton of delivered biomass for up to two years, said Thune, a ranking member of the energy subcommittee.

The bill would also authorize matching payments, capped at $45 per ton, to farmers anywhere in the U.S. who sell crop byproducts and residues such as corn stover and wheat straw to ethanol plants.

Such residues are the focus of Sioux Falls-based Poet, one of the recipients of the Energy Department's initial grants.

The company, which has been making ethanol from corn for more than 20 years, will use the $80 million grant to adapt its Emmetsburg, Iowa, plant to make additional fuel out of corn stalks and fiber. It will buy stalks normally left behind in fields from the same farmers that deliver corn.

Jeff Fox, Poet's vice president of legal and governmental affairs, said the legislation stimulates research, development and production of cellulosic ethanol.

"By directing funding to the producers who will grow all biomass crops or provide the corn stover and other crop residues directly to biofuels facilities, this bill will support the cellulosic ethanol industry while it is still in its infancy," Fox said in a statement.

The bill includes provisions that energy crops can't be cut lower than 10 inches and can only be harvested at a time of the year that doesn't interfere with nesting or wildlife habitat.

Wildlife groups have insisted that any new energy crop program not take acres from the USDA's Conservation Reserve Program, which pays farmers to idle some 35 million acres of marginal cropland for wildlife habitat.

Sen. Ben Nelson, D-Neb., co-sponsor of the legislation, said cellulosic ethanol has always faced a chicken-or-the-egg problem, but the new bill should help resolve that.

"It's difficult to start commercial production without a guaranteed supply of biomass, but it's hard to encourage farmers to grow the biomass unless they know they'll have a market," Nelson said in a statement.

[Text copied from file received from AP Digital; article by Dirk Lammers, Associated Press writer]