Introducing the USDA Sponsored Margin Protection Program for Dairy Decision Tool (via Farmdoc Daily)

Today the U.S. Department of Agricultural, Farm Service Agency announced the new Margin Protection Program (MPP) for Dairy Producers. The program is effective September 1, 2014 and dairy farmers may enroll beginning September 2, 2014.

To aid dairy operators in the decision process the U.S. Department of Agricultural, Farm Service Agency, the University of Illinois as the lead for the National Coalition for Producer Education (NCPE), and the National Program on Dairy Markets and Policy[1] (DMaP) partnered to develop a web-based decision support tool for MPP and the Livestock Gross Margin-Dairy (LGM-Dairy) insurance program.[2] DMaP has a 30-year history in the development of decision aids and producer outreach initiatives related to the dairy industry and dairy farm risk management. Working with NCPE, DMaP has taken the lead role in developing the MPP and LGM-Dairy decision tool.

As a culmination of this effort, DMaP has introduced the MPP Decision Tool to help dairy farmers and other interested parties make key coverage decisions for the MPP and LGM-Dairy programs.

Access to the MPP Decision Tool, and other educational material, is available at the following websites:

A brochure identifying the features of the MPP Decision Tool is available here: brochure.

Easy to Use

The MPP Decision Tool was designed to be easy to use and is optimized to run on all electronic devices including home PC, smart phones, and tablets using Windows, iOS, and Android operating systems. Additionally, only one data point is need from the dairy producer to use the decision tool for the MPP decision. The only data point needed is the dairy operation’s production history.

Dairy farmers can use the MPP Decision Tool in as few as 4 clicks of the mouse:

Click 1: What is Your Production History? The dairy operation’s production history is defined as the maximum calendar year milk production during 2011, 2012, and 2013. This is the only data point needed in order to generate unique MPP Decision Tool results with respect to MPP. The decision tool includes a downloadable form to help determine production history.

Click 2: Evaluate MPP Margin Forecast. Each day price forecasts of the dairy production margin are generated using CME Group futures market data. This information is used to forecast the probability of MPP payments for all 126 coverage options for the coverage year.

Click 3: Select a Coverage Level Threshold and Coverage Level Percentage. Different coverage options reflect a producer’s ability to generate different margin levels (from $4 to $8 per hundredweight) and different coverage percentages (from 25% to 90%).

Click 4: Print Registration Forms. Tool users can elect a coverage level and coverage percentage and then print their farm-specific USDA FSA registration forms directly from the MPP Decision Tool. Alternatively, users on a mobile device can generate a PDF file displaying their coverage options selected from within the MPP Decision Tool.

After this 4-step process dairy farm operators can easily view and print for all 126 coverage options: (i) the total premium costs and administrative fee; (ii) forecast MPP payments to be made during the coverage year; and (iii) net MPP benefits (defined as the MPP payment minus the premium and administrative fee).

To highlight the risk management approach that needs to occur during the registration and coverage modification process, dairy farmers using the MPP Decision Tool have the ability to analyze historical U.S. milk and feed prices. This feature is for research purposes only, but provides the opportunity for dairy farmers to go back in time to determine how MPP would have worked as a risk management instrument had it been in place during prior years.

For dairy operators who seek to use their own expectations of milk, feed, and margin price risk the MPP Decision Tool will soon include an Advanced interface that will allow dairy operations to self-select all 48 milk and feed prices to determine how MPP may function to smooth dairy production margins.

With respect to LGM-Dairy, the MPP Decision Tool makes moving between MPP and LGM-Dairy a one-click solution. MPP Decision Tool users simply click the “MPP” or “LGM” option to toggle between the two web interfaces. The MPP Decision Tool incorporates the award winning LGM-Dairy Analyzer ©.  LGM-Dairy Analyzer © is the sole software system available that allows dairy farm operators and insurance providers to examine forthcoming insurance contract offerings and anticipated premium costs.  LGM-Dairy Analyzer © is used extensively by insurance providers and dairy farm operators across the U.S.

Train the Trainer Materials and Events

DMaP, as a partner with NCPE looks forward to serving all of America’s dairy producers by providing timely and accurate analysis of risk management options. To complement this effort, DMaP will host five Train-the-Trainer workshops across the U.S beginning September 9, 2014 (see Train the Trainer). Additionally, members of the DMaP team and other educators and trainers will conduct meetings geared to dairy farmers to help them learn to use this exciting new tool (see State Meetings).

As part of the educational effort DMaP will soon release a series of online materials including web videos, PowerPoints, printed materials, and links to other online 2014 Farm Bill decision tools. This material will provide farmers with MPP specific information such as: (i) learning how to calculate their own dairy production margin; (ii) learning how MPP dairy can be integrated into the existing suite of risk management options; and (iii) evaluating unexpected risks in milk and feed markets.

These DMaP educational materials are designed to be flexible to the schedule of the dairy operator or educator. Producers and educators can access the educational materials on their own schedule and needs; additionally, farmers and educators can refer back to these materials as a reference. Links to the supplementary educational material and Train the Trainer Event registration can be found online at: www.dairymarkets.org/MPP.

Cutting Edge Margin Forecasting

The MPP Decision Tool uses innovative and new peer-reviewed price forecasting techniques to provide dairy farmers with timely market information on milk and feed price probabilities to help with the MPP and LGM-Dairy decisions (Bozic, Newton, Thraen, and Gould 2014).

The MPP Decision Tool provides dairy farmers the opportunity to use farm specific milk production variables in conjunction with daily futures prices on milk and feed as part of the consideration for coverage-level choices under MPP and LGM-Dairy. The MPP Decision Tool calculates USDA commodity price estimates and then uses historical correlations among milk and feed prices in a simulation to estimate the financial returns from MPP for farmer-selected coverage options.

With respect to LGM-Dairy, the MPP Decision Tool includes the LGM-Dairy Analyzer © software. LGM-Dairy Analyzer © incorporates the insurance program structure and data obtained from futures markets to provide a farm-level evaluation of the risk management capabilities of the LGM-Dairy program.

Summary

The 2014 Farm Bill provides the most comprehensive reform to the U.S. federal dairy farm safety net seen in decades. In place of milk price and revenue support programs the 2014 Farm Bill creates the Margin Protection Program for Dairy Producers. MPP is a voluntary program which places an emphasis on protecting dairy production margins.  MPP protects against severe downturns in the milk price, rising livestock feed prices, or a combination of both.

MPP is a flexible program that allows a dairy operator to self-select coverage options to protect the farm against declines in national average production margins. Different coverage options reflect a producer’s ability to protect different margin levels (from $4 to $8 per hundredweight) and different coverage percentages (from 25% to 90%).

To assist in the MPP decision process DMaP has developed a decision tool and companion educational materials in partnership with the U.S. Department of Agriculture Farm Service Agency and the University of Illinois led National Coalition for Producer Education.

References:

Bozic, M., J. Newton, C.S. Thraen, and B.W. Gould. 2014. “Tails Curtailed: Accounting for Non-Linear Dependence in Pricing Margin Insurance for Dairy Farmers.” American Journal of Agricultural Economics 96(4):1117-1135.


[1] DMaP represents a consortium of dairy and agricultural economists from land grant institutions across the U.S. and includes John Newton at the University of Illinois as lead for the National Coalition for Producer Education, Andy Novakovic at Cornell University, Chris Wolf at Michigan State University, Marin Bozic at University of Minnesota, Cameron S. Thraen at The Ohio State University, Charles Nicholson at The Pennsylvania State University, and Mark W. Stephenson and Brian Gould both at University of Wisconsin.

[2] The National Program on Dairy Markets and Policy is working with the University of Illinois led consortium National Coalition for Producer Education, which is supported by the U.S. Department of Agriculture, Farm Service Agency, under Agreement No. 58-0210-4-002 N

Maps contradict EPA on ‘Waters of U.S.’ rule, Rep. Smith says (via Agri-Pulse)

EPA has provided the House Science Committee with detailed maps that the panel’s chairman, Lamar Smith, R-Texas, says show the agency’s “plan to control a huge amount of private property across the country” by defining the waters of the U.S. that fall under the jurisdiction of the Clean Water Act (CWA).

EPA disputes Smith’s interpretation, saying the maps were made merely to show water resources within the U.S., including stream patterns by watershed. In a letter to Smith, EPA Deputy Assistant Administrator Nancy Stoner said the agency is unaware of any maps of waters that are “jurisdictional under the CWA or that would be jurisdictional” under its proposed Waters of the U.S. rule.

But Smith isn’t buying it. And neither is the National Cattlemen’s Beef Association, which has been one of the most vocal critics of the EPA proposal among agricultural groups.

“This is the smoking gun for agriculture,” Ashley McDonald, NCBA’s environmental counsel, said in a news release. “These maps show that EPA knew exactly what they were doing and knew exactly how expansive their proposal was before they published it.” NCBA said the maps show individual states facing upwards of 100,000 additional stream miles that could be regulated under the EPA’s proposed rule.

In two letters to Smith, in late July and early August, Stoner said the maps were originally prepared in 2005, and updated last year with data from the U.S. Geological Survey.

“It is my understanding that they were prepared (in 2005) in part to better understand the potential impacts of certain court decisions to aquatic resources, but not to depict the scope of protected under the Clean Water Act,” Stoner wrote.

Smith rejected that explanation, and in a letter to EPA chief Gina McCarthy, said the maps – of the U.S., of the 50 states, and of 10 regional wetlands — must have been created with regulation in mind.

“You claim that the EPA has not yet used these maps to regulate,” Smith said in the letter. “However the EPA failed to explain why it used taxpayer money to create these maps. It is apparent that the EPA paid a private contractor to make many of these map, yet the details of the arrangement remain murky. While the agency marches forward with a rule that could fundamentally redefine Americans’ private property rights, the EPA kept these maps hidden.”

Smith asked the EPA to provide his committee with all documents and communications related to the agency’s contract with the company that created the maps, including the original contracts. He also called on the EPA to enter the maps and any previously undisclosed maps in the official docket of the proposed Waters of the U.S. rule for public review and comment. And he asked that the public comment period be kept open for at least 60 days after the maps are entered into the docket to allow adequate time for stakeholders to respond.

The comment period is currently scheduled to close Oct. 20.

#30

For more news, go to: www.Agri-Pulse.com

U.S. biodiesel industry suffers as biofuel rule delays drag on (via Reuters)

The long wait for final 2014 federal biofuel use targets has compounded troubles for U.S. biodiesel producers already hit by the Obama administration’s preliminary plan to slash renewable fuel requirements.

Nearly nine months behind schedule, 2014 targets from the Environmental Protection Agency could arrive in September at the earliest.

In the meantime, biodiesel producers have been squeezed by falling prices, as refiners and blenders delay purchases until they see a final mandate.

Debate about the future of the Renewable Fuel Standard has mostly focused on ethanol. But the smaller biodiesel industry has arguably been hurt more by proposed production cuts, said Anne Steckel, vice president of federal affairs at the National Biodiesel Board.

“The longer we wait, the worse the biodiesel industry is impacted,” Steckel said.

The RFS requires increasing amounts of renewable fuels – including ethanol, produced mostly from corn, and biodiesel, often made from soybeans – to be blended into U.S. gasoline and diesel supplies each year through 2022.

The preliminary 2014 rule, announced in November, held the biodiesel target at the 2013 level of 1.28 billion gallons.

Producers had asked for a target of 1.7 billion gallons after producing nearly 1.8 billion gallons in 2013, and warned in a letter to President Barack Obama that a lower target would imperil billions of dollars in investments and thousands of jobs.

Renewable Energy Group, one of the few publicly traded biodiesel producers, reported a 13 percent drop in second-quarter revenues as lower prices offset an 11 percent increase in volume. Its shares have languished.

The company said the average price per gallon of biodiesel sold in the second quarter was $3.67, 21.4 percent lower than the same period in 2013.

A recent NBB survey found that nearly 80 percent of producers had cut back output this year and more than half had idled production or shut down a plant for a time. Many have cut their workforces as well.

“It’s more difficult for smaller producers who don’t have as much capital to take the risk of producing, not knowing what the consequences are,” said Pete Moss, president of Frazier, Barnes and Associates, a biofuel consulting firm in Memphis.

Although the industry is confident it could meet a higher target, the EPA’s delay means producers would have to quickly ramp up production late in 2014.

Cramming production into the final weeks of the year disrupts the market, Moss said.

The market is in “disarray,” Moss said. “We are fully capable of producing higher numbers, but we really can’t without some guidance.”

Without the export market enjoyed by corn ethanol producers, or built-in demand from refiners that use ethanol as a cheap source of octane, some biodiesel makers have already been forced out of business.

More could shut if persisting delays leave the industry guessing at the future direction of U.S. policy, said Jeff Haas, chief executive of Seattle operations for General Biodiesel, which produces fuel from recycled cooking oil.

“We’ve been sailing across an ocean without a compass,” Haas said.

(Reporting by Ayesha Rascoe; editing by Ros Krasny and Leslie Adler)

ASA Urges Action on Pending Biotech Approvals in Letters to USTR, EU Commission

In letters sent this week to the European Commission and the U.S. Trade Representative, the American Soybean Association (ASA) urged that the European Union (EU) take action in September on nine biotech events that have received positive safety reviews and are awaiting final import authorization. ASA was joined on the letters by 18 other farm, commodity, grain processing, grain trade, and biotechnology associations throughout the U.S. agricultural value chain. There are currently nine products, including four soybean products, which have already received positive European Food Safety Authority (EFSA) opinions and completed the subsequent review process, but are still awaiting final authorization for import for food and feed use from the EU’s College of Commissioners.

In a letter to United States Trade Representative (USTR) Michael Froman, the groups encouraged the Administration to contact EU Commission President Barroso to ensure action on the pending events in September and to ask the EU to respect its obligations under the World Trade Organization (WTO) to make timely regulatory decisions on new biotechnology applications.

In a letter to the EU Commission, the groups stated that “the time required for EU decisions on new biotech crops has only lengthened in recent years and no authorizations have been issued since November 2013. Some of the products have been before the European Commission since the end of 2013 and were submitted to EFSA more than five years ago.

“Several of these products are already being commercialized under stewardship programs in the U.S. and elsewhere, and failure to approve them at the meeting of the College of Commissioners in September will increase the risk of trade disruptions during the coming months.”

The letters emphasized that the delays could cause feed shortages and price increases, which would affect European producers, traders, livestock industry and consumers.

Link: http://soygrowers.com/asa-urges-action-pending-biotech-approvals-letters-ustr-eu-commission/

Decision could boost use of popular weed killer (via Associated Press)

Faced with tougher and more resistant weeds, corn and soybean farmers are anxiously awaiting government decisions on a new version of a popular herbicide — and on genetically modified seeds to grow crops designed to resist it.

Critics say more study is needed on the effects of the herbicide and they are concerned it could endanger public health.

The Environmental Protection Agency is expected to rule this fall on Dow AgroSciences’ application to market Enlist, a new version of the 2,4-D herbicide that’s been around since the 1940s. It’s partly a game of catch-up for the agriculture industry, as many farmers are dealing with weeds that have become resistant to glyphosate, an herbicide commonly used on corn and soybeans now.

If approved, the 2,4-D would be used in combination with glyphosate.

An Agriculture Department decision on the company’s genetically modified seeds also is expected this fall. In the department’s final environmental review released last week, the USDA recommended approval. The agency said that if both the seeds and herbicide are approved, the use of 2,4-D could increase by an estimated 200 to 600 percent by the year 2020.

While the USDA only oversees the safety of the plants, the EPA oversees the safety of the herbicide for human and environmental health. The agency has already found the chemical safe several times for other species as well as for the public and agricultural workers.

Groups lobbying the agency to prevent the herbicide’s expanded use say they are concerned about the toxic effects of the herbicide and the potential for it to drift. Corn and soybeans are the nation’s largest crops, and the potential for expanded use is huge.

Scott Faber of the Environmental Working Group said the EPA studies so far have not been comprehensive enough and need to look more closely into the effects of pesticides on children.

“This is a once-in-a-generation decision that will have a huge impact on public health, especially on farmers and rural residents,” Faber said. “This is a moment to step back and ask if this is a durable weed control solution for farmers.”

Damon Palmer of Dow AgroSciences says the new version has been re-engineered to solve potential problems, like drift before and after the herbicide hits the plant. The company says it is moving forward at a critical time in agriculture, helping farmers be more productive so they can meet an increasing demand for food. Officials say multiple studies and reviews over the last six decades have confirmed the herbicide’s safety.

2,4-D is now used on other crops, including wheat, and on pastures and home lawns. It is the world’s most popular herbicide and the third most popular in the United States, behind atrazine and glyphosate.

Most corn and soybeans grown in the U.S. are already genetically engineered. Before Monsanto’s Roundup herbicide was introduced in 1976, most farmers tilled their fields prior to planting, flipping the soil over and burying the weeds to kill them. The technique exposed tilled earth to the air, creating problems with erosion and runoff and releasing greenhouse gases.

Herbicide-resistant seeds introduced in the 1990s allowed farmers to spray fields after their plants emerged, killing the weeds but leaving crops unharmed.

Critics expressed concern that if the herbicide is approved, weeds will eventually become resistant to it, too. George Naylor, an Iowa farmer who is on the board of the advocacy group Center for Food Safety, called it a “pesticide treadmill” that needs to be slowed down. The Center for Food Safety has lobbied against expanded use of genetically modified crops and chemicals in agriculture.

Palmer of Dow AgroSciences said the company has created the new seeds with “multiple locks on the door” in an effort to avoid increased weed resistance.

In its environmental assessment, the USDA said increased resistance is a risk, and farmers will have to find ways to adapt if they find it decreases in effectiveness. The agency said it’s hard to predict how that will play out, however.

“Therefore, it is difficult to accurately predict when and the extent to which 2,4-D-resistant weeds will become a problem,” the USDA said.

GAO faults cost analyses for EPA regulations (via The Hill)

A government report made public Monday finds fault with the Environmental Protection Agency’s analyses of the costs and benefits of its regulations.

The Government Accountability Office report concluded that information incorporated into the EPA’s Regulatory Impact Analyses (RIA) was sometimes murky.

Additionally, the GAO found that the agency did not always monetize the costs and benefits of proposed actions and that the EPA had estimated effects of its regulations on employment by, in part, using a study that is more than two decades old.

“Without improvements in its estimates, EPA’s RIAs may be limited in their usefulness for helping decision makers and the public understand these important effects,” the GAO concluded.

An EPA spokeswoman stressed that the report focused on only a “small subset” of rules and that the GAO concluded the agency generally adheres to official guidance for how the analyses are to be conducted.

“We rely on the best available information and methods to calculate both the costs and benefits of our rules and use the public comment process to further refine that work,” Liz Purchia said.

Republicans, who have relentlessly criticized the EPA’s regulations as overly burdensome, meanwhile, seized on the report as evidence that the agency is playing fast and loose with its cost-benefit analyses.

“Rather than using a fair and open rulemaking process, EPA pushed through regulations using sloppy analysis without sufficiently informing Congress or the public of the economic impact,” Rep. Darrell Issa (R-Calif.) said in a written statement.

Issa, chairman of the House Committee on Oversight and Government Reform, requested the GAO probe in 2011 and Sen. David Vitter (R-La.), the top Republican on the Senate Committee on Environment and Public Works, followed suit last year.

The 53-page report looks at seven EPA regulations designated as “major rules,” meaning that they carry an annual economic impact of $100 million or more.

Among them were rules involving the EPA’s renewable fuel standard, regulations governing Commercial and Industrial Solid Waste Incineration Units and emissions standards for heavy-duty trucks.

The GAO examined the EPA’s analyses for each rule against 2003 guidance from the Office of Management and Budget (OMB) that lays out best practices for how agencies should evaluate the costs and benefits of rules making their way through the federal pipeline.

The EPA’s rules lacked transparency, the GAO found.

“Specifically, the information EPA included and presented in the RIAs was not always clear,” the report found. “According to OMB guidance, RIAs should communicate information supporting regulatory decisions and enable a third party to understand how the agency arrives at its conclusions.”

EPA officials told GAO researchers that the costs and benefits cannot always be gauged, given the limits of agency resources and available data.

The report concedes that such estimates are not always possible.

“However, without doing so, the public may face challenges understanding the trade-offs associated with regulatory alternatives,” the GAO found.

The report recommends that the EPA take steps to improve the agency’s adherence to the existing government guidance, but also that the OMB clarify the best way to apply that practice to the thorny process of estimating costs and benefits of reducing greenhouse gas emissions.

Note: The report can be accessed by visiting http://oversight.house.gov/wp-content/uploads/2014/08/GAOreport.pdf

EPA – Late for a Very Important (RFS) Date (via Energy Tomorrow)

Answers: The monthly mortgage payment, the carpool getting you to your first day at work, the flight to your Tahiti vacation, that Mother’s Day card. And … finalizing annual ethanol requirements under the Renewable Fuel Standard (RFS).

Question: What are some things that shouldn’t be late?

OK, so most people understand the importance of timeliness in the first four items above. Yet, for the nation’s refining sector, EPA’s annual responsibility to establish how much ethanol must be blended into the nation’s fuel supply under the RFS also is a big deal.

The RFS tasks EPA with setting ethanol requirements for the next calendar year by Nov. 30 of the preceding year. That way, refiners can make plans to comply with the RFS. Setting the requirements, on time, is EPA’s job. So, how’s the agency been doing lately? Not too well, as this graphic illustrates:

rfs_delays

EPA hasn’t actually managed to meet the statutory deadline a single time in the past five years – but the 2011 rule was only nine days late, so we can call that close enough to be considered “on time.” The more recent delays have exacerbated RFS dysfunctions, including the approach of the ethanol “blend wall.” Ethanol requirements for 2013 weren’t finalized until August of 2013, eight months late. Requirements for ethanol use in the current year still aren’t done, and some think they won’t be completed until September or October – or perhaps even later. Clearly, ethanol requirement setting under the RFS is broken. Bob Greco, API downstream group director, recently noted:

“We’re concerned that this delay means EPA will further delay the final RFS requirements for this year.  More than half of 2014 is behind us, yet EPA still hasn’t finalized the ethanol requirements for this year. The administration’s inability to meet the congressionally-mandated deadline of November 30 is a clear example of how unworkable the RFS is. And given the rule has yet to be submitted to the White House for interagency review, it most likely won’t be finalized anytime soon.  … Right now, EPA should be proposing the 2015 requirements, but we’re still waiting for them to finalize requirements for this year. Unfortunately, this has become the rule rather than the exception when it comes to implementation of the RFS under this administration.”

The delay means multi-faceted problems for refiners:

  • The lateness of ethanol requirements for the current year means they will have to be applied retroactively.
  • While the RFS was supposed to generate regulatory certainty for the refining sector, issuing final ethanol standards after half the year is over does the opposite, sowing uncertainty. Refiners are in the untenable position of having to guess what this year’s standards will be.
  • Whenever final standards are set, EPA’s delay likely impacts decisions regarding carryover Renewable Identification Numbers, or RINs, the federal credits refiners receive for blending each gallon of ethanol. When EPA issues the rule companies will learn whether they guessed right on their compliance plans, so EPA’s untimeliness potentially affects RIN prices and ultimately impacts the supply of gasoline and diesel fuel.
  • As mandated ethanol volumes continue to escalate beyond the ethanol blend wall, EPA will have to continue to rely on its general waiver authority to adjust the standards down to feasible levels to avoid the adverse economic consequences. Timely issuance of the standards is becoming even more important as the volumes outlined in the law escalate.

More than a year ago Greco outlined the harm from EPA missing the RFS deadline in a letter to the leaders of the U.S. House Energy and Commerce Committee:

One and only one conclusion is clear … EPA has not taken statutory deadlines seriously. An annual RVO (renewable fuel volume obligation) standard-setting process that should be routine by now has been moving more and more slowly with each passing year, resulting in retroactive rules. This has created regulatory uncertainty which, in turn, has been both disruptive and potentially costly for the obligated parties who must plan for and demonstrate compliance with the rules, and it has likely been a factor contributing to the market volatility … In short, the annual RVO-setting process is flawed. The Agency has repeatedly missed the statutory deadlines and, as will be discussed next, has set aspirational standards. These issues create uncertainty for all of the program stakeholders.

For a number of reasons the RFS is broken and should be repealed. Among those is the basic regulatory function of telling those who must comply with the law what is required of them in a timely manner, as the law requires. Ethanol use requirements for this year, 2014, are eight months late already, helping cement the RFS as a towering example of the general difficulties associated with central economic planning and specifically in attempting to create artificial markets in a free-market system.

About The Author

Mark Green joins API after spending 16 years as national editorial writer in the Washington Bureau of The Oklahoman newspaper. In all, he has been a reporter and editor for more than 30 years, including six years as sports editor at The Washington Times. He lives in Occoquan, Virginia, with his wife Pamela. Mark graduated from the University of Oklahoma with a degree in journalism and earned a masters in journalism and public affairs at American University. He’s currently working on a masters in history at George Mason University, where he also teaches as an adjunct professor in the Communication Department.

– See more at: http://www.energytomorrow.org/blog/2014/aug/epa-late-for-a-very-important-rfs-date#sthash.6efyEGnv.dpuf

Obama’s Delay on Renewable Fuel Puts Producers in Bind (via Bloomberg News)

In the arid Imperial Valley of California, Tim Brummels is trying to turn an agricultural cousin of sugarcane into low-carbon ethanol.

It’s the kind of climate-friendly project supporters have pined for since Congress in 2005 ordered refiners to use more renewable fuel. Even so, Brummels’ company — Canergy LLC — is being stymied by an unlikely culprit: the Obama administration.

The Environmental Protection Agency is eight months past the deadline for issuing its mandate of how much ethanol, biodiesel and other petroleum alternatives must be blended into motor fuels this year, leaving investors wary about the government’s commitment to the program. At the same time, cuts EPA proposed last year, and a surprise regulatory rewrite last month, may undercut demand for Canergy’s ethanol.

“Right now the technology works. It’s the regulatory barriers that are holding it back,” Brummels, the chief executive officer, said in an interview after a meeting with the administration to discuss his complaints.

The EPA is preparing to send its mandate to the Office of Management and Budget for final review as soon as this week. That will kick off the last-ditch lobbying campaign on the 2014 requirements, which were due by the end of November 2013.

Signed by President George W. Bush, the law was designed to boost gasoline alternatives by forcing refiners to add specified amounts of biofuels each year to motor fuels. It requires increasing amounts each year and gives the EPA authority to make adjustments in the event of supply shortfalls.

Eight Months

The agency has missed the deadline for issuing the requirements in each of the past three years. Refiners such as Valero Energy Corp. (VLO) and Tesoro Corp. (TSO) have had to guess what will be required for 2014 — and may have to make rapid adjustments in the final months of the year if they guessed wrong.

“The EPA shares the goal of getting back on the statutory timeline,” said Ben Hengst, associate director of the EPA’s transportation and air office. “But doing this on an annual basis is a big challenge.”

President Barack Obama’s administration also faces conflicting pressures, with oil lobbyists jockeying with makers of alternative fuels to bend the guidelines in their favor. Production of cellulosic fuels such as those derived from cornstalks and switchgrass have also failed to live up to the promise.

Iowa Corn

The most recent delay comes as alternative fuel companies such as Canergy, Royal DSM NV (DSM) and a joint venture of BP Plc and DuPont Co. (DD) say they are finally ready for market. Those companies say the EPA’s management of the Renewable Fuels Standard, or RFS, has created turmoil.

“When I talk to investors, one of the first questions I am asked is, ‘What’s going to happen to the RFS?’ ” said Rebecca Boudreaux, president of Oberon Fuels, a company making an alternative to diesel from natural gas.

“People are wary that if you build it, they may not come, because they aren’t obligated to consume that amount of fuel,” said John May, a managing director at Stern Brothers & Co. who does investment banking for renewable energy companies.

Advanced Biofuels

Corn-based ethanol is booming despite proposed EPA cuts, in part because corn prices have fallen due to a record crop last year and good forecasts for 2014.

“It really hasn’t affected corn-based ethanol much, if at all,” Scott Irwin, a professor of agricultural economics at the University of Illinois at Urbana-Champaign, said in an interview. “The real losers, despite the headlines, are advanced biofuels and biodiesel.”

Corn ethanol faces its own pressures from critics who say it’s bad for the environment and consumers. The Environmental Working Group said EPA isn’t taking into account the full climate hit from producing a gallon of that fuel.

There’s no divide between the corn ethanol industry and the rest of the renewable fuels producers, as many companies produce several types of fuel, said Bob Dinneen, president of the Renewable Fuels Association.

“There’s more than just philosophic synergies here,” Dinneen said. “It’s largely the same people.”

The EPA says it’s working to help establish the market for the advanced biofuels. “We are doing all we can right now to push forward these fuels,” the EPA’s Hengst said.

Draft Standards

A draft of the 2014 standards released by the EPA Nov. 15 would require 15.21 billion gallons (57.58 billion liters) of renewable fuels, including about 13 billion gallons (49 billion liters) of corn ethanol and 1.28 billion gallons of biodiesel in 2014. That’s a cut from a 18.15 billion gallon total set in the 2007 law.

After meeting with White House adviser John Podesta July 24, Democratic Minnesota Senator Al Franken said the EPA would raise the mandates from what it had proposed.

Some outside lobbyists say the White House is looking to raise the requirements in part to boost the prospects of Democratic Representative Bruce Braley, who is in a tight race for the Senate in Iowa, the nation’s top corn producer.

“This is all politics at this point,” Bob Greco, head of the downstream group at the American Petroleum Institute in Washington, told reporters last month. “There’s no reason for this thing to go on as long as it has.”

Beyond Corn

After years of disappointment, not everyone making fuels beyond corn ethanol is losing.

In Iowa, DSM, a Dutch biotechnology company, and ethanol maker Poet LLC joined together to build a plant that makes cellulosic ethanol from corn waste. The plant, the first of its kind, is set to have its grand opening Sept. 3, and the company has invited Obama and some of his cabinet members to attend.

“Anybody at the facility that day will no longer be able to argue that it’s a phantom fuel,” said Hugh Welsh, DSM’s president for North America. “Once this technology is proved at a commercial scale, you will see a lot of people interested in it.”

Two other projects, one by Abengoa SA (ABG/P) and another by Butamax Advanced Biofuels LLC, the BP and Dupont joint venture, are also opening so-called next-generation plants.

Lost in the shuffle are companies trying to get established with fuels made from sources other than corn or soybeans. They say that the government mandate is crucial to helping their products get on the market.

Energy Cane

The delay in issuing standards “is hurting my guys the most, because my guys are looking for financing to build plants,” Michael McAdams, president of the Advanced Biofuels Association, said in an interview. “The guys Congress intended to bring into this have had the rug pulled out from under them.”

Canergy, which is backed in part by the agribusiness company CHS Inc., and has partnered with local farmers to plant energy cane in fields near the Mexican border. Energy cane is a perennial crop similar to sugarcane that was bred to have lower sugar content and more fiber, making it better for fuel use.

The outlook for its fuel was put in doubt on July 18 when the EPA issued details on what kinds of energy cane can qualify as cellulosic fuel. The guidelines left even researchers funded by the Department of Agriculture funded scratching their heads.

“I have no idea what their thinking is, and where they are getting their numbers,” said Donal Day, a professor at the sugar institute of Louisiana State University who has a USDA grant to help develop and spread the use of the crop. “This is a game they are playing, or they just don’t understand it.”

The agency said it’s reacting to conflicting requests from producers of energy cane, producers of competitive crops and refiners, who had requested tighter restrictions.

For Brummels, the confusion means he worries the cane varieties he purchased from LSU may no longer qualify.

“Who repays me for this misleading representation?” he said. “With uncertainty, who will finance this?”

Radio Interview: The Renewable Fuels Standard

Dave Ladd, President of RDL & Associates, was recently a guest on the Linder Farm Network to provide an update regarding the Renewable Fuels Standard (RFS).  Mr. Ladd can be contacted at daveladd66@gmail.com for additional details.

The interview can be accessed here: https://www.dropbox.com/s/h14abbr4f7n5daw/Linder%20Farm%20Network%20-%20RFS%20%28July%202014%29.mp3

The Linder Farm Network: http://linderfarmnetwork.com/