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Mid America Ag Network - Interview


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Announcer: Hello everyone, and thank you for joining us for today's media briefing. Here in the studio we have Agriculture Secretary Tom Vilsack, and he's going to be announcing a Biomass Crop Assistance Program, or BCAP projects, that are taking place in several states here in the United States.

And he is here now just to go ahead and start with the details.

Secretary Vilsack: Thank you, Susan. And thanks to all who are on the call today.

You know, across the country, American families and businesses are obviously feeling the impact of high energy costs and continued rising gasoline prices. The president has recognized that something has got to be done, and since taking office it's been his goal to break our nation's unsustainable dependence on foreign oil, and move toward a clean energy economy.

We recognize that there is no one solution, no silver bullet, if you will, to address our energy needs in the short term, but there are steps that we can take to ensure that the American people don't fall victim to high energy prices over the long term, and that we can indeed reduce our reliance on foreign oil.

Today, as Susan indicated, we're announcing the creation of four additional Biomass Crop Assistance Program project areas. These four projects will cover counties in six states, and will allow us to expand the availability of non-food farm crops to be used in the manufacture of liquid biofuels.

According to industry estimates, these four projects that we're announcing today will help to create more than 3,400 jobs in the biorefinery, agriculture and supporting sectors, and will, once fully functional, produce 2 million gallons annually of biofuels manufactured when full production levels are achieved.

The Bio-CAP program, the BCAP program, has allowed financial incentives to interested farmers and ranchers and forested land owners for establishing and producing these non-food crops for conversion to heat, power, and biobased products, as well as advanced biofuels.

Just as a reminder, the Renewable Fuel Standard does call for 36 billion gallons of biofuels by the year 2022, and because cornstarch ethanol is limited at 15 billion gallons, it means that more than 20 billion gallons of renewable fuels must be produced in just 10 years from feed stocks other than cornstarch.

That's why BCAP is important, and that's why today's announcement is important: because this is the only federal program that ensures sufficient biomass will be available to reduce America's reliance on foreign oil.

It will allow us to improve domestic energy security. We believe it will reduce pollution. And I believe very firmly that it will help to spur economic development and job creation.

The two projects we're announcing today will grow camelina in a significant scale. Camelina is an oil seed. It's a rotational crop with wheat that can be established in marginally productive land. Biofuel from camelina is an ideal jet fuel substitute.

And it's interesting to note that this announcement is being made on the first anniversary of a joint announcement made last year by USDA, the Boeing Corporation, and the Air Transportation Association on our initiative to bring sustainable and renewable aviation fuels to the marketplace.

Now, this project will be located in parts of Oregon and Washington, and will roll roughly 1,000 acres in those two states.

The sponsor of the project is Beaver Biodiesel, LLC, and it surrounds the company's bioconversion facility, which is located in Albany, Oregon. The hope is that this will allow production of up to 40,000 gallons annually of biofuel.

Project area number seven, it targets roughly 20,000 acres in Kansas and in one county in Oklahoma. These acres will be set aside to grow switchgrass and other perennial grasses for energy purposes.

The sponsor of this project is Abengoa, A-B-E-N-G-O-A, Bioenergy, LLC, and it surrounds the facility's -- biomass conversion facility in Hugoton, Kansas.

The switchgrass is a native perennial grass well-suited for biomass production in many areas due to high tonnage yields and low establishment and maintenance costs.

Project number eight that we announce today will be located in Central California, Washington, and Montana, and it targets roughly 50,000 acres in those three states.

It's a project that is sponsored by AltAir Fuels, LLC. It will be located in and around the biomass conversion facilities owned by that company in Bakersfield, California and Tacoma, Washington.

The company was formed in 2008, and it's hopefully going to utilize biomass to develop a green jet drop-in fuel, roughly 2 million gallons of that. It's a cellulosic biofuels effort, and we're excited about that opportunity.

Project area number nine is a cellulosic biofuels company as well, ZeaChem. It's going to use hybrid poplar trees in Oregon, on about 7,000 acres, as one of our wood-to-energy initiative efforts.

In all, we will spend roughly 45 million dollars for contracts in this process. This is in addition to the five BCAP projects that we announced earlier this year, which cover roughly 250,000 acres in 66 counties located in Arkansas, Kansas, Missouri, Pennsylvania, and Ohio, focused on giant miscanthus and switchgrass.

So our hope is that we will continue to be able to make these kinds of announcements. The BCAP program was established in the 2008 Farm Bill, and it's now coming to fruition to help supply the feed stocks for facilities that we will also be encouraging to build, biorefinery facilities, commercial-size facilities, all designed to develop a number of alternative opportunities for us beyond dependence on foreign oil.

Announcer: All right, reporters. If you'd like to ask a question of Secretary Vilsack on the announcement that he made with BioCAP projects that are taking place around the country, please let us know by pressing *1 on your touch tone pad.

As we wait for callers -- we really only have about five minutes left to get calls in -- did you want to add anything to what's happening with these projects?

Secretary Vilsack: Just that the producers who enter into these BCAP projects will be eligible for receiving reimbursements of up to 75 percent of the establishment costs of the crop, and up to five years of annual maintenance payments for the grass crops, and up to 15 years for woody crops.

So that provides some assistance in terms of putting the crop in the ground, and then some additional assistance for a period of time to defer the expenses associated with this new crop.

Announcer: Okay. We've got some people that have jumped on the line. Let's go with John Runyan, with Mid America Ag Network. John?

Mid America Ag Network: Thank you, Ag Secretary Vilsack. I just was curious about the concerns about the BCAP program looking forward.

Do you see any cuts across BCAP programs in the 2012 Farm Bill?

Secretary Vilsack: Well, at the present time, John, as you know, the Congress has essentially reduced their commitment to BCAP, and there is no assurance at this point in time, in 2012, that we will have additional resources.

I think it's important for us to note that we have made these announcements -- these are beginning to create jobs, beginning to encourage farmers to take a look at non-productive land, creating another income source.

And it is certainly consistent with everyone's desire to reduce our reliance on foreign oil at a time when oil prices continue to be unstable, and we see that reflected in increases in pump prices.

So I would hope that, notwithstanding the fact that we are dealing with some constrained resources, that we do not lose sight of the opportunity to invest and to grow the economy, and to allow that growth to also help us get control of our fiscal house.

So my hope is that we will continue to see support for these kinds of programs, and that we also look at creative ways to use additional resources that USDA has available to it to spur more private capital investment, more credit and equity, being invested in rural areas.

That's one of the reasons why the president established the Rural Council, to take a look at ways in which we might be creative with credit.

Announcer: We continue on the line with Jerry Hagstrom, with The Hagstrom Report. Jerry?

The Hagstrom Report: Good afternoon, Mr. Secretary. As I understand it, yesterday EPA reduced its cellulosic requirement, really because of lack of supply. How do you react to that, and do you maintain your faith in cellulosic?

And also, is the funding for this, for these projects, assured, even though Congress is not supporting it so much?

Secretary Vilsack: Jerry, the funding is there, which is why we're making the announcements. And we will obviously continue to make announcements, based on the amount of resources that we have available.

And the funding is there to basically fully pay the responsibilities in contracts that will be entered into under these projects.

I have full faith and confidence in the capacity of the United States to develop a number of alternative energy efforts: cellulosic ethanol, advanced biofuels, drop-in fuels. And I think my confidence is supported and verified by the fact that the Department of Energy just recently announced a fairly large loan guarantee to POET to establish the first commercial-size cellulosic facility in Emmetsburg, Iowa, that will be operational in a couple of years.

It is clear that we were slow -- over the course of the early part of the 21st century, we were slow to use these programs and to get them going. But it is also clear that in the last two and a half years we've been very aggressive in terms of increasing our research efforts in terms of assisting biorefinery construction, and in terms of providing resources for feed stock development.

Announcer: Reporters, if you'd like to jump in on the conversation, let us know by pressing *1 on your touch tone pad.

Our next caller on the line is Tom Lutey with Billings Gazette.

Billings Gazette: Yes, Secretary, it's along the same lines about funding. What is the -- how long will this 45 million dollars last?

I mean, are you engaging these companies in a year of support, two years of support? And what's it going to take to get House Ag Approps back on board with BCAP?

Secretary Vilsack: Well, when we enter into a contract for a long-term commitment, both in terms of the resources to put the crop in the ground and then the maintenance, we essentially have the resources to pay the full amount of the contract as it's being entered.

We aren't making a commitment that is dependent on, or conditioned upon, subsequent appropriations. We only make commitments that we know we can fund based on the resources that are already available in the program, and that can be carried over from year to year to support the contracts.

So people can be assured that they're -- that if they enter into an agreement with the government, that we will follow through with it, notwithstanding what may happen with budgets.

In terms of the House Ag Appropriations Committee's budget, we obviously will be working with their Senate colleagues to make sure that -- we understand the importance and the necessity of reducing budgets.

Right now, we're dealing with a fiscal budget based on the Continuing Resolution that reduced our discretionary spending by roughly 10 percent. We are managing that.

We understand the House has called for additional, deeper cuts. And our hope is that we are given enough time to manage this thing properly.

I believe that there are opportunities for us to modernize USDA. There are opportunities for us to improve service by the use of technology, notwithstanding the difficult budget times we find ourselves in, and we at USDA see this as a challenge, not as something to fret about.

We see it as a challenge to our creativity and innovation, and I know that our team is up to meeting the needs, so long as we are given sufficient time to manage, and the cuts are not so deep that it cuts into our capacity to invest in the future, which will allow us to grow our way out of this deficit, as well.

Announcer: All right. We're going to be able to slip in one last call, and that's coming from Chuck Abbott, with Reuters. Chuck?

Reuters: Good afternoon, Mr. Secretary. I'm hoping you can look a little further into the future.

The CBO has said that virtually all the bioenergy programs that were authorized in the 2008 Farm Bill expire, and will not have a baseline going into 2012. What does that say about the future for biofuels in America?

And what will the Administration do if you wish to continue things like the Biorefinery Assistance Program, BCAP, or these loan guarantees to build commercial-scale second- or third-generation plants?

Secretary Vilsack: Well, a couple of things. First of all, it's important for us to get these resources out into the countryside so people can see the benefits that will accrue to farmers and to those looking for employment.

Secondly, I think it is important to note that we are looking at ways in which we can use existing resources more creatively, to leverage and to expand the reach of those resources.

There are a number of programs that we have within Rural Development that potentially, with some modifications or changes, could essentially provide additional resource and additional help for the industry.

Third, as these commercial-sized operations get up and going, as the aviation industry begins to embrace the drop-in fuels that we'll be able to produce, as our work with the Armed Forces begins to solidify, you're going to see fairly significant demand for the product that we'll now be able to produce.

And that demand will also drive the private sector to take a look at more and additional investment. And finally, we're looking, as part of the Rural Council, looking at ways in which we can be creative with encouraging more debt and equity capital coming into rural America.

So I don't think that you necessarily have to tie yourself into a particular energy program, or an energy title of a Farm Bill, to be able to provide the help and assistance.

I think this is a great challenge for everyone in government, and I'm embracing the challenge. I'm not shying away from it. I think there are ways in which we can restructure programs, modify programs, simplify them, focus them, create additional interesting partnerships and leverage.

And I think you're going to see examples of that in the very near future, probably perhaps as early as next month on some things we're working on.

Announcer: All right. Thanks to everybody who got in on the line. And that concludes this media briefing.

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