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EPA officials show interest in refining indirect land use

At the request of Senator Chuck Grassley (R-IA) two high-ranking EPA officials came to Iowa Thursday to learn first-hand how their agency’s rules could affect farmers and the biofuels industry.

They got a tour of Iowa State University’s brand new BioCentury Research Farm near Boone, where round bales of last year’s switchgrass are waiting to be turned into cellulosic ethanol. They climbed into a combine and tractor at Rick and Martha Kimberley’s farm near Farrar. And they saw the Renewable Energy Group’s 30-million gallon biodiesel plant at Newton.

“I think we learned a lot,” EPA’s Gina McCarthy told Agriculture Online after stepping outside the spotlessly clean biodiesel plant. “It helps us put a face on the agricultural issues and the challenges we face together.”

McCarthy is EPA’s Assistant Administrator for the Office of Air and Radiation. With her was Margo Oge, who heads the office of transportation and air quality.

It’s no exaggeration to say the two women hold the future of the biofuels industry, and even the future price of corn and soybeans, in their hands.

Oge is in charge of writing the final rule for a new renewable fuel standard that requires all biofuels to have lower carbon emissions than fuel from petroleum. The change is required by a 2007 energy bill that also ramps up federal support for biofuels.

When EPA released the first draft of that rule last May, neither ethanol nor biodiesel made the cut. The 2007 Energy Bill exempts existing corn ethanol plants, but ethanol from new ones has to be 20% greener than gasoline. EPA found Midwest corn-based ethanol to be only 16% greener. Soy biodiesel has to be 50% greener and older plants aren’t exempt from the rule. EPA said in May that soy biodiesel is only 22% greener than diesel fuel.

The reason is that EPA included “indirect land use” in computer modeling used to estimate the carbon footprint of biofuels. That’s the concept that when corn or soybean production is diverted from food to fuel in the U.S., grassland and rainforests in tropical countries like Brazil are converted to grain and oilseed farming. Burning off the forests and plowing up tropical savannah puts so much carbon dioxide into the atmosphere that it can take up to 166 years for the benefits of ethanol to counteract that, according to one theory advanced in Science magazine.

Thursday, McCarthy and Oge heard why that hypothesis misses the mark. And the polite but documented criticism came from some of agriculture’s most influential leaders  – Dean Oestreich, chairman of Pioneer Hi-Bred International, Ted Crosbie, vice president of global plant breeding for Monsanto, and Jeff Stroburg, CEO of the Renewable Energy Group.

EPA hasn’t accounted for the future effect of rapidly advancing crop yields due to biotechnology, both Oestreich and Crosbie said.

For the past 40 years, agriculture has struggled with overproduction, Oestreich said.

Biotechnology is providing two to three times the rate of yield increases that was gained by traditional plant breeding, Crosbie said. In the case of transgenic drought tolerance, “a single biotech gene can add 20 bushels per acre to 100-bushel per acre corn,” he said.

And in other areas of the world, even very simple changes in technology could have dramatic effects on yields. Some 55 million acres of corn grown in the rest of the world is still open-pollinated, he said. Those farmers are using the same technology the U.S. used in the 1920s and 1930s, before hybridization led to a long trend upward from yields a little above 30 bushels an acre to the 200 typical on grain farms in Iowa today.

“We have doubled our yields twice in the United States with far less technology than we have today,” Crosbie said.

CHALLENGING THE BIG ISSUE

Indirect land use came under challenge from academics, too.

Dermot Hayes, an economist with ISU’s Center for Agriculture and Rural Development shared research by a graduate student, Jerome Dumortier, that shows the effects of technology as crop prices rise due to demand for biofuels. Farmers are more likely to spend more on biotechnology that speeds up yield gains, Hayes said. If this effect is just 1% more than the trendline in yields over 10 years, it brings the gain from ethanol from 166 years to just over 30. If it’s just 2% higher, the gain from producing ethanol instead of using gasoline is immediate. In essence, there is no indirect land use effect.

After Hayes talked, Oge told Agriculture Online that EPA’s modeling had not looked at such effects on crop yields and she is interested in learning more.

“We want to do this using the best data in the most unbiased way possible,” she said.

Later, when she visited the biodiesel plant in Newton, Oge agreed with REG’s CEO Jeff Stroburg that EPA needed to consider more factors when it looks at biodiesel’s carbon footprint.

REG recommends giving biodiesel another 21% cut in nitrous oxide emissions, a greenhouse gas associated with nitrogen fertilizer since soybeans fix their own nitrogen. And it says biodiesel’s glycerin co-product ought to be counted for another 17%. Combine that with a better energy balance from more efficient biodiesel plants, and REG estimates soy biodiesel has a 61.4% improvement in greenhouse gas emissions over diesel fuel.

A FLAWED IDEA

Stroburg thinks the indirect land use concept is flawed, but if it has to be included, soy biodiesel would meet required 50% cut in greenhouse gas emissions.

As the tour wrapped up, Senator Chuck Grassley was in a good mood. He was pleased the EPA officials made the trip from Washington to Iowa, and thankful for the hospitality that Iowa farmers, including several from the Iowa Soybean Association and Iowa Corn Growers, showed them.

Grassley thought the EPA officials were interested in learning more about the biofuels industry.

“It seemed to me there were sincere questions being asked,” he said.

“It went very, very well,” he said of the visit. “I’m judging it from the six hours we’ve been with them. We really won’t know for maybe six months.”

It could be a bit sooner. The time to submit comments on EPA’s computer modeling that includes indirect land use runs out near the end of this month. McCarthy told Agriculture Online that she expects EPA’s final rule on the new renewable fuel standard to be out by the end of this year. And the agency has until early December to decide on another crucial change, its response to a petition to increase ethanol levels in gasoline from 10% to 15%.

The decisions are crucial. For a lot of economic reasons, the biodiesel industry is struggling, Stroburg told his visitors at one point.

“Right now the industry is running at 18% of capacity and REG and its network of plants are running at 40% or less,” he said.

Things are only slightly better for the ethanol industry.

Walt Wendland, CEO of Golden Grain Energy and Homeland Energy Solutions, told the EPA officials, “In the next six months, you may very well determine my livelihood for the next 10 years.”

At the request of Senator Chuck Grassley (R-IA) two high-ranking EPA officials came to Iowa Thursday to learn first-hand how their agency’s rules could affect farmers and the biofuels industry.

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