5th Annual Free Upstate Agri-Economic Development Summit
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Speech_5th Annual Free Upstate Agri-Economic Development Summit 5th Annual Free Upstate Agri-Economic Development Summit Cortland, NY February 22, 2007 Patrick H. Brennan State Director for USDA Rural Development in New York Keynote Remarks USDA Rural Development/Renewable Energy Policy Good Morning. It’s great to be here. Before I start with my remarks, I’d like to thank a few people for hosting this important conference. Recognize: “Official” host, Sen. Jim Seward, NY State Senate Committee on Agricultural and Education Marilyn Brown, chair of the Cortland County Legislature Danny Ross, chair of the Cortland County Legislature’s Agriculture, Planning and Environment Committee; Linda Hartsock and the Cortland County Business Development Corporation and Industrial Development Authority and the Cortland County Agriculture Local Development Corporation. I’d also like to recognize an old personal friend of mine, Dr. Raymond Cross, the President of SUNY-Morrisville, who is going to follow me on the podium. I was asked to speak today about USDA Rural Development and the renewable energy efforts we administer. It’s a topic I have a personal and professional interest in. By way of background, I’m a life-long dairy farmer from Oneida County, who’s served as the State Director for USDA Rural Development, the NY State Agriculture Commissioner and worked as an agricultural policy specialist in the New York State Legislature and the New York Farm Bureau. I’ve worked in agriculture and agricultural policy my entire adult life and there is nothing in my lifetime that will have as profound an impact on American agriculture as our national effort to develop renewable energy. It is the greatest opportunity for wealth creation in rural America in generations and may well be the greatest thing for the farmer and rural communities since Cyrus McCormick invented the mechanical reaper. There can be no overstating the potential the renewable energy market holds for agriculture. As a nation, we spent $300 billion last year on imported oil. If we can displace just one billion barrels of imports with biofuels – fuels made from crops grown on American farms – that would represent a larger sum than the nation’s 2006 net farm income of $60 billion. Speech_5th Annual Free Upstate Agri-Economic Development Summit Those are staggering numbers and indicative of the great potential renewable energy offers to agriculture. Before I get too far along, though, I want to take a second to define what I’m talking about when I use the term “renewable energy.” Renewable energy is just that – its energy that’s renewable. It can come from wind, water, the sun and plants, which are used to produce biofuels. At this point, biofuels are the most promising form of renewable energy and have the potential to replace a large percentage of our imported oil. Biofuels include diesel fuel made from soybeans, palm plants and vegetable oil; ethanol made from corn and other crops, and cellulosic ethanol, which can be made from a wide variety of plants. Ethanol is an excellent replacement for gasoline and dozens of corn ethanol plants have been built in the last couple of years in response to record gasoline prices. Currently, there are 112 ethanol plants operating and they produced just over 5 billion gallons of fuel last year. Seventy-seven (77) more plants are under construction and the Renewable Fuels Association predicts fuel ethanol production will exceed 7.5 billion gallons this year. As I’m sure my fellow farmers know, the current ethanol boom has helped drive corn prices to about $4 a bushel and a lot of people are fretting about this. Higher corn prices, however, are not necessarily a terrible occurrence, despite what you may have read in the headlines. Higher corn prices, lest we forget, means the people who raise corn make more money and that’s a good thing. It also means the taxpayers receive a break. The 2006 federal subsidy for corn growers was $8.8 billion. Thanks to higher corn prices, it’s estimated that the 2007 subsidy is going to drop to about $2.1 billion, a net saving of more than six- and-a-half billion dollars for the American taxpayer. Corn is just one of many crops that can be used to make ethanol. Brazil, which has the world’s only ethanol economy, makes the fuel from sugar cane. Cellulosic ethanol, however, is the most promising production method because it can use a wide variety of plant matter. The cellulosic process works by breaking down the cell walls of plants, allowing the entire plant to be used to make fuel. An efficient and economical cellulosic process will allow us to use corn stover, wheat straw, forest and wood waste, and a host of “energy” crops such as switch grass and willow trees, to produce ethanol. Scientists believe an economical cellulosic production method is still 10 to 15 years away but the potential is immense. It’s calculated that the U.S. can easily produce 1 billion tons of raw material a year for cellulosic ethanol plants and this could generate more than 30 percent of our fuel by 2030. Speech_5th Annual Free Upstate Agri-Economic Development Summit The construction of the hundred or so corn ethanol plants, the development of cellulosic ethanol and the production of flex-fuel vehicles by automobile manufacturers – GM, Ford and Daimler-Chrysler have announced that half the cars they build by 2012 will be flex- fuel vehicles, capable of burning anything from regular unleaded gasoline to E-85 – are more than just trends, or a blip in the market. Renewable energy development has become a national priority and reason for that is obvious. Our reliance on imported oil has long placed us at the mercy of many who do not share our interests. Unfortunately, the energy they provide has become absolutely essential to our way of life. There is near-unanimous agreement on both sides of the political spectrum and in both the executive and legislative branches of government that something must be done to end our oil dependence. To that end, President Bush has called for 35 billion gallons of renewable fuels a year by 2017. Congress is considering legislation that could require 60 billion gallons a year by 2030. The question now becomes not whether we are going to develop renewable energy on a national scale, but how are we going to do it. What are the public policies that we’ll use to help drive production and create widespread availability? At USDA Rural Development, we’ve administered a Renewable Energy and Energy Efficiency Program and used our business and industry loan program to assist renewable energy projects in the last five years. The 2007 farm bill Agriculture Secretary Mike Johanns has submitted to Congress is going to add to those programs. The Secretary has requested more than $1.6 billion to apply to bioenergy research, renewable energy and energy efficiency projects, and cellulosic ethanol programs. To fund cellulosic programs, the Secretary has requested $210 million, which will provide $2.1 billion in loan guarantees to construct cellulosic ethanol projects in rural areas. This proposal advances cellulosic ethanol development, uses government money to leverage private money, and keeps the economic benefits of biofuels development in rural areas. It’s a model we used successfully here in New York for a corn ethanol plant Western New York Energy is building near Medina. The plant was made possible by a $25 million USDA Rural Development loan guarantee and will produce 55 million gallons a year when it’s finished. The plant has created more than 800 construction jobs and will have 50 full-time employees when it’s finished. A carbon dioxide operation at the plant – it captures the carbon dioxide created when ethanol is made and sells it to soft drink manufacturers – will create 20 additional jobs. Secretary Johanns is also proposing a $500 million investment in a bioenergy research and bioproduct initiative. This initiative will work to harness technology advances to increase crop yields and help coordinate the efforts of our scientists, farmers and Speech_5th Annual Free Upstate Agri-Economic Development Summit entrepreneurs as they develop improvements in crop yields and reduce the costs of alternative fuels. This initiative holds great promise as well. If we can increase yields, we can provide more energy without dramatically expanding the land under cultivation and will enable us to meet the demands for both fuel and food. Corn is an excellent example of what increased yields can mean. In the last 25 years, we’ve increased corn acreage worldwide by less than 10 percent, but we’ve increased corn production by 56 percent. In the U.S., total corn yields have doubled over the past 30 years. And industry believes they can double again in the next 30 years, providing plenty of corn for ethanol plants, livestock feed, and people. The third major energy proposal in the 2007 farm bill is to allocate $500 million to continue our successful Renewable Energy and Energy Efficiency Grants program. This program is for farmers, ranchers and rural small businesses and supports energy efficiency efforts and small alternative energy projects – think wind mills, solar energy systems and anaerobic digesters that convert animal waste into electricity. Last year, we funded six of these projects in New York. Four of the grants went to farm operations, one to a greenhouse and one to a biodiesel operation in Wayne County. We want to fund more of these projects in New York and I urge anyone who’s interested in the program to contact us. It’s certain that a great deal of debate will take place over the 2007 farm bill and there’s no getting around the fact that this is going to be a tight budget. I’m confident, however, that the renewable energy programs will be approved and possibly added to. The national push towards biofuels is well under way and our 2007 farm bill proposals will add speed to those efforts. The biofuels movement has its critics and skeptics who point to a multitude of potential problems. In many instances, they’re right. The move to biofuels will present problems. Any great societal change causes problems. I’m convinced the problems will be solved and change will take place. It will often happen slowly, sometimes it will occur quickly, but one day we will all fill our cars with fuel that comes from corn or willow trees or switch grass and consider it be perfectly normal. In closing, I’ll simply emphasize that we are moving towards a biofuels future. The wheels have started to turn and it’s time to drive the truck. At USDA Rural Development, we intend to steer the truck so that it provides energy security for the nation and ensures that the economic benefits stay in the rural communities that produce that security.