NACIA Washington Update
June 19, 2009

It is essential that during this difficult time for agents, NACIA has a strong voice in Washington. Numerous challenges face us, ranging from inquiry hearings by the House Agriculture Committee to a Congress that is in a very tight budget situation and looking anywhere for possible funding streams. In addition, the recently released GAO report highlighting A&O reimbursement and agent commissions as excessive does not help to educate decision makers on the true work and value that come with the crop insurance program. 

Due to cap and trade legislation and possible food safety activity taking up the focus of the House Agriculture Committee, the crop insurance hearing that was previously rumored to be scheduled this week is postponed. We will keep you apprised of the situation and let you know of any developments. Chairman Peterson’s (D-MN) Committee held a hearing on the cap and trade legislation last week, which NACIA attended. The hearing featured USDA Secretary Vilsack, as well as representatives from numerous agriculture groups. Overall, a considerable number of issues regarding the legislation were discussed, and many expressed disappointment that the agriculture sector was not included in discussion during the drafting of the legislation. A summary of the hearing is below. In addition, House Agriculture Committee Ranking Member Lucas (R-OK) has posted a list of 114 agriculture organizations as well as numerous letters that oppose the climate change legislation. The list and letters can be viewed here.

Also on the House side, the Committee on Energy and Commerce just reported out food safety reform legislation on Wednesday.  Unlike the climate change legislation, this bill is bipartisan. Normally the legislation would head straight to the House Floor for consideration as soon as time is available, but earlier yesterday House Agriculture Committee Ranking Member Lucas issued a statement expressing some concerns with the legislation and declaring that he would have discussions with Chairman Peterson regarding possible jurisdiction that the House Agriculture Committee may have over the bill. This could further delay the legislation from reach House Floor consideration. Details.

The appropriations process continues to move forward, with the agriculture appropriations bill being marked up in Full Committee yesterday afternoon. A summary of the Committee-passed bill is available here, and a list of programs cut or terminated is available here. The full House of Representatives is expected to take up the bill on July 8 and 9. The Senate Agriculture Appropriations Subcommittee is also expected to take action on its version of the FY 2010 bill that same week.

On the Senate side, the Committee on Energy and Natural Resources conducted a two-day markup of their bipartisan energy legislation, concluding a long process of developing a comprehensive bill that they have been working on for most of the year. The Committee’s statement is available here, and below we have given a summary of the various amendments. 

USDA has also been very active, with numerous announcements over the past week: 

• USDA is distributing $176 million in stimulus money to upgrade laboratory buildings and support facilities at various research locations in 29 states across the country.  For a list of projects receiving funding, please click here.
• Secretary Vilsack announced on Wednesday that Tom Tidwell has been nominated as the new Chief for the U.S. Forest Service. For more information on Mr. Tidwell, see here.
• On Monday, Secretary Vilsack announced the appointment of John Ferrell as Deputy Under Secretary for Marketing and Regulatory Programs. Details.
• In speaking at the Western Governor's Association meeting on Monday, Secretary Vilsack discussed several projects being funded through stimulus funds for wood-to-energy and biomass utilization. The 30 projects are funded at a level of $57 million and are located in 14 states, with the majority in Arizona, California, Colorado, Idaho, Nevada, New Mexico, North Dakota, Oregon and Washington. Details.

It is also important to note that in a Delta Farm Press article written June 11, Secretary Vilsack is reported to have said that he intends to investigate “fair distribution of federal crop insurance coverage.”  The full article can be found below, with the pertinent portion highlighted. 

As always, if you have any questions please contact us. 

Brent W. Gattis
NACIA Washington Representative
www.nacia.org

HOUSE AGRICULTURE COMMITTEE CAP AND TRADE HEARING

On June 11, 2009, the House Agriculture Committee held a hearing entitled “To review pending climate legislation,” referring to H.R. 2454, “The American Clean Energy and Security Act of 2009.”  Chairman Peterson (D-MN) and Ranking Member Lucas (R-OK) presided over the hearing, and were joined by Representatives Boswell (D-IA), Cardoza (D-CA), Cassidy (R-LA), Conaway (R-TX), Costa (D-CA), Dahlkemper (D-PA), Ellsworth (D-IN), Fortenberry (R-NE), Goodlatte (R-VA), Halvorson (D-IL), Herseth Sandlin (D-SD), Holden (D-PA), King (R-IA), Kissell (D-NC), Latta (R-OH), Luetkmeyer (R-MO), Lummis (R-WY), Markey (D-CO), Moran (R-KS), Neugebauer (R-TX), Pomeroy (D-ND), Roe (R-TN), Shmidt (R-OH), Schrader (D-OR), Scott (D-GA), Smith (R-NE), Thompson (R-PA), and Walz (D- MN). Below is a summary of the hearing. 

Witnesses

Panel I

• The Honorable Tom Vilsack, Secretary, U.S. Department of Agriculture

Panel II

• Mr. Bob Stallman, President, American Farm Bureau Federation, Washington, D.C.
• Mr. Steve Ruddell, Senior Associate, First Environment, Washington, D.C.
• Mr. Earl Garber, Second Vice President, National Association of Conservation Districts, Basile, Louisiana
• Mr. Fred Yoder, Past President and Climate Change Task Force Member, National Association of Corn Growers, Plain City, Ohio
• Mr. Roger Johnson, President, National Farmers Union, Washington, D.C.
• Mr. Ken Nobis, Treasurer, National Milk Producers Federation, St. Johns, Michigan

Panel III

• Mr. Glenn English, Chief Executive Officer, National Rural Electric Cooperative Association, Arlington, Virginia
• Mr. Ford West, President, The Fertilizer Institute, Washington, D.C.

Opening Statements

Chairman Peterson expressed concern with the possibility of the Environmental Protection Agency (EPA) being given authority to regulate and administer agriculture programs. He stated that many House Agriculture Committee Members are worried about how the legislation will affect their constituents.

Ranking Member Lucas stressed that there are many unanswered questions in regards to the legislation and that he is worried the legislation is being rushed through the House. He said the cap-and-trade provision will create a national energy tax that will do more harm to production agriculture, American industry, and our standard of living than it will do good for the environment.

Representatives Holden and Goodlatte, Chairman and Ranking Member of the Subcommittee on Conservation, Credit, Energy and Research, also provided short opening statements. They highlighted their concerns with certain provisions of the legislation, including those concerning the renewable fuel standard and cap-and-trade.

Testimony

Panel I

Secretary Vilsack declared that climate change is one of the “great challenges facing the United States and the world.” He indicated that passage of climate change legislation in the United States would be a significant statement to foreign countries, giving evidence to a commitment to making a change. In addition, Secretary Vilsack stated that engaging farmers, ranchers, and forest landowners is of critical importance, as it allows them to contribute to and potentially profit from efforts to reduce global warming. He commended the Committee for their climate change survey efforts and concluded by describing the role that USDA would play in the administration of agriculture and forestry efforts relating to climate change. 

Panel II

Mr. Stallman declared that the agriculture industry will incur higher fuel, fertilizer, and energy costs as a result of the legislation. He urged for legislation that ensures American agriculture is not competitively disadvantage in international trade, contains a carbon reduction offset program that fully utilizes agriculture, and recognizes that offsets do not shield producers from the adverse impacts of the current legislation.

Mr. Ruddell stated that U.S. forests and agriculture lands sequester and store as much as 25 percent of our annual carbon emissions. He stressed that the legislation should “keep our forests as forests,” and urged for legislation that provides incentives for private landowners to manage their lands for increasing carbon sequestration and storage and to avoid conversion to other land uses.

Mr. Garber said that additional gains can be made to sequester carbon and reduce greenhouse gas emissions (GHG), but that the legislation must also recognize and reimburse landowners that have already taken appropriate conservation activities on their land. He also suggested a supplemental incentives program, funded through allowance awards and run by USDA, to reach smaller producers and landowners who might not be able to participate in offset markets. 

Mr. Yoder stated that Congress should recognize the carbon sequestration benefits that agriculture can provide, structure a cap-and-trade system in which value exceeds cost, and ensure early actors of carbon sequestration receive benefits of the offsets program.

Mr. Johnson characterized the cap-and-trade provisions of the legislation as a good first step for agriculture due to the fact that they include allowable offsets and not cap emissions from the agriculture sector. However, he said NFU has several concerns with the legislation, specifically the offset provisions. Mr. Johnson asserted that a cap-and-trade system could provide farmers and ranchers with a valuable revenue stream while at the same time allowing them to be part of the climate change movement.

Mr. Nobis expressed support for a cap-and-trade system, as long as the agriculture industry is not subject to a cap.  Mr. Nobis declared that changes should be made to the provisions on offsets and allowances, and specifically made the following recommendations on H.R. 2454: institute a stronger role for USDA; exclude CAFO’s from “back door” legislation; shorten time allowances for offset program standards set up; recognize and reward emission avoidance efforts in agriculture; provide to agriculture an allocation of allowances or part of auction revenues; base offset eligibility on carbon sequestration or GHG reduction from a particular date; and foster global climate change activity. 

Panel III

Congressman English mentioned the Supreme Court action that instructed EPA to determine whether carbon was an endangerment to the health of the American people and expressed concerns with having EPA regulate carbon emissions from agriculture practices. He stressed that the legislation does not provide a fair allocation of allowances from state to state and that no state should get more than 100 percent. 

Mr. West stated that the nitrogen industry will be affected by a cap-and-trade system because it is uniquely sensitive to the price of natural gas. He expressed concerns with the allowance program, stating that it is unclear the number of allowances that would be available to the fertilizer industry. He stressed that the current legislation would cause the U.S. nitrogen industry to become uncompetitive internationally and production would be forced overseas.

Discussion Period

The following topics were discussed during the question and answer period for Panel I:

• Capability of USDA vs. EPA to administer the offsets program
  • USDA capabilities – strong on research, education, outreach, access to data, and technical experience, and
  • Concerns with EPA – lacks knowledge, experience, and staff on the ground, and some feel has a cultural bias,
• Obama Administration support for cap-and-trade program;
• H.R. 2454 definition of “biomass” vs. Farm Bill definition – Farm Bill viewed as better;
• Elimination of international competitiveness if other countries do not adopt similar regulations;
• Concerns with USDA lack of analysis of the bill;
• Possibility of stacking credits – USDA looking at all options;
• Lack of agriculture in the legislation;
• Concerns with the validity of climate change science;
• Concerns the legislation will cause refineries to go out of business;
• Committee and USDA opposition to a tax on livestock emissions;
• Incorporating the offset program in with other USDA programs;
• Ensuring credit for those who already sequester carbon;
• USDA strong support for a peer review process for indirect land-use modeling;
• Concerns with Representative Stupak’s derivatives provision being to broad and onerous;
• Concerns cap-and-trade does not reduce dependency on foreign oil
  • Simply an increased tax,
  • Possibility of having cap and “no trade,” and
  • Technology not available yet, and
• Support for ethanol as part of the renewable movement
  • Concerns the legislation will increase the cost natural gas, and thus, the cost of production for ethanol.

The following topics were discussed during the question and answer period for Panel II:

• Difficulty for dairies with anaerobic digestors to participate in programs
  • Concerns that they will not be able to compete with municipal lagoons for allocations,
• Ensuring “early adopters” of sequestration processes receive credits/benefits;
• Lack of support for the legislation from the agriculture industry;
• USDA administration of the offset program only makes a slight improvement to the bill;
• Possibility of legislation giving benefits to nuclear power plants in rural areas that provide GHG-free energy and electricity;
• Measurement rates for offsets based on a standards-base approach rather than a project-based approach;
• Lack of agriculture participation in Energy and Commerce Committee process – not invited;
• Negative impacts on agriculture producers in the international marketplace;
• Should these regulations be established on an international stage instead of in legislation;
• Lack of a USDA analysis of the legislation;
• Agreement that all land-use practices should be included, as well as room for new science and new practices;
• Difference in “carbon credits” and “derivative”;
• Possibility of carbon sequestration by small ethanol plants; and
• Legislation’s potential to affect rice farmers.

The following topics were discussed during the question and answer period for Panel III:

• Allowance levels for fertilizer industry unclear;
• Concerns with elimination of fertilizer industry
  • If moved overseas or to Canada, would not have to comply with regulations, and
  • Counterparts around the world have signed Kyoto Protocol, but none have implemented, except Alberta, Canada;
• NRECA lack of participation in negotiating allowances – not invited;
• Possibility of states sharing allowances with those who need more;
• Should Congress take money for the legislation and instead use for advancing technologies to implement future regulations; and
• Probability of legislation increasing electricity costs for consumers.

 SENATE ENERGY MARKUP

Amendments from Energy Policy Mark Up, June 16

Adopted

• To make certain technical corrections. Sponsored by Sen. Bingaman (D-NM). Agreed to by voice vote.
• To express the sense of Congress on renewable energy and energy efficiency. Sponsored by Sen. Bingaman (D-NM). Agreed to by voice vote.
• To improve nuclear energy policy. Sponsored by Sen. Bingaman (D-NM). Agreed to by voice vote.
• To improve the ultra-deepwater and unconventional natural gas and other petroleum resources program. Sponsored by Sen. Bingaman (D-NM). Agreed to by voice vote.
• To reduce the dependence of the United States on foreign oil. Sponsored by Sen. Bayh (D-Ind.). Agreed to by voice vote.
• To promote the development of solar and wind energy on public land.  Sponsored by Sen. Bingaman (D-NM). Agreed to by voice vote.
• To repeal outer Continental Shelf deep water and deep gas royalty relief. Sponsored by Sen. Bingaman (D-NM). Agreed to by recorded vote, 12-11.
• To improve the inventory of outer Continental Shelf resources.  Sponsored by Sen. Bingaman. Agreed to by voice vote.

Rejected

• Regarding the market authorities of the Federal Energy Regulatory Commission. Sponsored by Sen. Cantwell (D-WA).  Rejected by recorded vote, 10-13.

Withdrawn

• To require the recipient of a cooperative agreement under the large-scale carbon storage program to maintain adequate liability coverage.  Sponsored by Sen. Sanders (I-VT). Withdrawn by unanimous consent.
• To provide multiyear contract authority to the Department of Defense for the procurement of alternative fuels.  Sponsored by Sen. Bunning (R-KY). Withdrawn by unanimous consent.

Amendments from Energy Policy Mark Up, June 17

Adopted

• To establish uniform national standards for the interconnection of certain small power production facilities. Sponsored by Sen. Bingaman (D-NM). Agreed to by recorded vote, 12-11.
• To promote vehicle technology deployment.  Sponsored by Sen. Dorgan (D-ND). Agreed to by voice vote.

Rejected

• To establish uniform national standards for net metering service. Sponsored by Sen. Bingaman (D-NM). Rejected by voice vote.
• To modify the cost-sharing requirement for the advanced technology vehicles manufacturing incentive program.  Sponsored by Sen. Stabenow (D-Mich). Rejected by recorded vote, 11-12.

DELTA FARM PRESS ARTICLE

Vilsack: Revitalize rural America

Jun 11, 2009 9:42 AM, By Ray Nabors
Contributing Writer

Secretary of Agriculture Tom Vilsack visited the Delta Center in Portageville, Mo., recently for a rural community forum to discuss USDA plans to revitalize and rebuild rural America.

“President Obama and I are committed to investing in and revitalizing rural communities, in part because they play an important role in our national and international food delivery system,” Vilsack said.

Vilsack spoke of providing more off-farm job opportunities as one target program for agriculture. According to USDA, most farm families work 200 days a year off the farm.

Another concern for Vilsack is the aging farm population. The average age of the American farmer has gone from 55 to 57 in just five years, the largest increase in history.

Young persons are leaving the farm seeking other opportunities in urban environments. There has been a 20 percent decrease in farmers under 25 years of age.

USDA nutrition programs, which already use over 60 percent of USDA distribution funds, have been increased nationwide, according to Vilsack. A four-person household will receive an $80 increase monthly and there will be no limit for jobless adults.

USDA’s rural development programs will fund 12 water and wastewater projects with a cost of $42 million in loans and grants.

USDA’s Natural Resources Conservation Service is using recovery act funds for watershed rehabilitation programs.

USDA’s Forest Service in Missouri has been allocated over $2 million, the bulk of which will be used for the Mark Twain National Forest project. These funds are expected to create 25 jobs in 29 counties.

USDA’s Farm Service Agency has assisted 75 Missouri farmers with $4 million in loans. Of these, 34 were beginning farmers and 14 were socially disadvantaged.

Vilsack said USDA will attempt to entice higher paying jobs into rural communities. The advantages mentioned were time savings because commuting is reduced and traffic is negligible. Another big advantage are lower crime rates, making rural communities better places to raise children.

Another focus of USDA concerns the increased marketing of U.S. agriculture products for export. It is hoped increased demand for U.S. agricultural commodities in export markets will improve agriculture income in rural areas.

Vilsack said USDA will work on improving agriculture opportunities in Asia. The idea is to shift Asian farming away from opium poppies to food crops. USDA believes this will improve economic opportunity and diversify businesses in rural Asia. The programs are designed to provide more profitable enterprises to give more people a vested interest in their economies and thereby reduce terrorist activity.

Another major focus of the current administration is to increase biofuel use and improve the associated technology with improved funding for cellulosic ethanol and biodiesel, according to Vilsack. The most favored proposal is increasing the alcohol content of gasoline from 10 percent to 15 percent.

Vilsack says cellulosic ethanol should be available in 2016. He said that the biofuel industry will remain volatile for the near future. Increasing biofuel production is seen as a way to increase rural economic opportunities and jobs as well as having environmental benefit.

The secretary said the reaction of China and other countries banning imports of American pork products is obviously misguided, noting that swine flu is not transmitted in pork products and no influenza infections have been found in any U.S. swine herds.

Vilsack said confidence in American agricultural products must be maintained around the world. Vilsack will work with importing countries to explain the safety of GMOs (genetically engineered organisms). The advantages of GMO products outweigh any risk, according to USDA policy and acceptance by other nations will potentially increase exports, he said.

Vilsack addressed a farmer’s question on the disparity between Corn Belt states and Southern states in regard to crop insurance. The farmer said that Southern farmers pay higher premiums but have fewer losses in both number of claims and the cost of those claims. Vilsack said he intends to investigate the fair distribution of federal crop insurance coverage.

Another concern is the antiquated USDA computer system. Vilsack the department intends to apply for additional tax dollars to upgrade the system.

Many farmers in attendance told Vilsack they were not in favor of cap and trade climate change regulation proposals. Vilsack pointed out that farms are estimated to produce 7 percent to 10 percent of greenhouse gases, yet mitigate 20 percent to 23 percent. He said it might be possible for farmers to sell their 15 percent credit to industries that have a negative green house gas deficit.

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