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Conservation and Energy Provisions are Important Parts of New Farm Legislation

February 07, 2014

On Friday, Feb. 7, President Obama signed the Agricultural Act of 2014. The legislation comprises more than a 1,000 pages and will cost $964.4 billion over the next 10 years to implement. The legislation is lengthy, quite complex and includes conservation and energy provisions, which should be of interest to Wisconsin based businesses and professionals that serve the agricultural, forest products and conservation communities.

Conservation Programs

The new legislation includes changes to the Conservation Reserve Program which pays farmers to remove sensitive lands from production of agricultural crops in a way that should reduce nutrient loadings and prevent soil erosions in rural agricultural basins. There are caps on the total enrollment of acreage authorized in the program. These caps include 27.5 million acres in fiscal 2014. This cap drops to 24 million acres in fiscal 2018. This is a drop from the current maximum enrollment level of 32 million acres in fiscal 2013.

The Conservation Stewardship Program is expanded by this new legislation to include pasture land capable of supporting livestock production. The "sod saver" provision in the new legislation would limit crop insurance subsidies for the first few years in which land is newly converted to crop land. This provision is a disincentive for farmers to convert native grass lands for crop use.

In addition, the Environmental Quality Incentives Program (EQIP) preserves conservation priorities for invasive species management, soil health and air quality by providing payments to participating farmers who otherwise forego income by participating in this program. However, the new legislation imposes payment caps for EQIP contracts of $450,000 per person for all contracts entered into from fiscal 2014 through 2018. The legislation authorizes mandatory funding for the EQIP program of $1.4 billion for fiscal 2014, $1.6 billion for fiscal 2015, $1.7 billion for fiscal 2016, $1.7 billion for 2017 and $1.8 billion for fiscal 2018.

The new farm legislation also includes an Agricultural Conservation Easement Program which combines existing conservation programs. The existing programs for wetland, grassland and farmland protection are combined in the new Agricultural Conversation Easement Program. The new legislation imposes a land ownership requirement of 24 months before an agricultural producer would be eligible for a conservation easement under the program.

The new legislation authorizes mandatory funding amounts for conservation easements of $400 million for fiscal 2014, $425 million for fiscal 2015, $450 million for fiscal 2016, $500 million for fiscal 2017 and $250 million for fiscal 2018.

The legislation contains a one year extension of the payment in lieu of taxes federal program that compensates rural counties to offset lost property tax revenues for various conservation programs.

Finally, a new Regional Conservation Partnership Program is established by the new legislation which combines several current programs including the Agricultural Water Enhancement Program, the Great Lakes Basin Program and the Chesapeake Bay Watershed Program. The legislation directs the Department of Agriculture to use $100 million each year for funding to carry out these programs. The source of the funding will be the Commodity Credit Corporation.

Energy and Bio-Products Provisions

1. Bio-based Products.

The Farm Legislation modifies the definition of "bio-based products" to expressly include forestry materials and forest products that meet bio-based content requirements, regardless of the market share the product holds, the age of the product or whether the market for the product is a new or emerging market. The legislation also defines "renewable chemicals" as a substance produced from renewable bio-mass.

Of particular importance is the reauthorization of the BioPreferred Program and the Federal Government Procurement Preference Program that establishes a target bio-based only procurement requirement for federal agencies. The legislation includes reporting requirements of quantities and types of bio-based products that are purchased by procuring federal agencies and establishes a focus on bio-based content requirements and expressly includes forest products.

The new legislation provides strong incentives and increases awareness of bio-based products. In the past, the USDA Bio-based Markets Program had excluded most forest products effectively making many forest products ineligible for the program. The new legislation clarifies that all forest products, regardless of the market share the product holds, age of product or whether the products market is newer or emerging, are eligible for the procurement and labeling program as long as the products meet bio-based content requirements and the innovation standards for the program as outlined in the law. It is Congress’ intent that all bio-based products in this program use innovative approaches in the growing, harvesting, sourcing, procuring, processing and manufacturing or application of the bio-based product.

The Congressional intent relating to forest products is a belief that products with recovered fiber content apply innovative approaches to the growing, harvesting, sourcing, procuring and manufacturing of the products, and therefore, should qualify for this program.

2. Bio-Refinery Assistance.

The legislation renames the existing bio-refinery program and extends and expands the program to include renewable chemical and bio-based product manufacturing. It extends loan guarantee availability to the development and construction of renewable chemical and bio-based product manufacturing facilities.
The legislation authorizes mandatory funding of $100 million for fiscal 2014 and $50 million each for fiscal 2015 and fiscal 2016. It also authorizes $150 million annually to be appropriated for fiscal year 2014 through 2018 for this program.

The legislation also caps the amount of funds used for loan guarantees at 15 percent of the available mandatory funds.

3. Rural Energy for America Program (REAP).

The new legislation creates a three tiered application process for loan guarantees and grants under this program. REAP funds cannot be used for feasibility studies and includes eligible entities of renewable projects associated with agricultural or residential properties. Mandatory funding of $50 million is available for this program for fiscal year 2014 and each fiscal year thereafter. It is designed to fund renewable energy systems and energy efficiency improvements. This program is designed to support renewable energy efficiency projects to help farmers and rural small businesses cut costs.

4. Other Energy Related Funding.

Finally, the legislation also provides mandatory funding through fiscal 2018 for the following energy and renewable fuel programs:

• $20 million per year for the bio-mass research and development initiative.
• $15 million per year for the bio-energy program for advance bio-fuels.
• $10 million per year for the repowering assistance program.

Godfrey & Kahn is closely following the complex conservation energy and bio-based product provisions in this new Farm Bill. These provisions will provide significant opportunities for forest and agricultural based industries in Wisconsin. In the future, Godfrey & Kahn will host a complimentary educational opportunity regarding this bill. More details on this educational program will be forthcoming.

Please feel free to contact any member of the Environmental & Energy Strategies team at Godfrey & Kahn for more information regarding these complex provisions.

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