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Posted on  

November 1, 2000

USDA announces $300 million bioenergy program

The Clinton administration on Tuesday announced a $300 million program to subsidize ethanol production, drawing praise from farmers in Midwestern swing states just a week before Election Day.

The USDA said it will make cash payments to companies that increase purchases of corn, soybeans and other commodities to expand production of ethanol, biodiesel or other biofuels.

The program will provide higher payments to small processors and cooperatives to encourage the expansion of domestic bioenergy production capacity, the USDA said.

The USDA will subsidize 40 percent, or one bushel for every 2.5 bushels, of the additional commodities which small processors purchase to increase biofuel output.

Large biofuel makers producing over 65 million gallons a year will get 28.6 percent, or one bushel for every 3.5 bushels, of their commodity purchases subsidized. Producers can receive subsidies of up to $7.5 million per year.

"This program will help us tap into a huge domestic energy reserve -- our family farms," said Agriculture Secretary Dan Glickman in a statement.

U.S. farm groups have long supported government subsidies and programs to boost production of ethanol, which is made mostly from corn and is mixed with gasoline.

Supporters of ethanol programs say it is a cleaner-burning fuel additive and can help reduce foreign imports of oil.

The use of corn to produce the fuel is also a way to use up some of the nation's overflowing grain supplies that have depressed prices in recent years. Some 567 million bushels of corn, over 5 percent of U.S. corn production, are used annually to make biofuels, according to the USDA.

ETHANOL PRODUCERS LAUD PROGRAM

Ethanol producers praised the USDA announcement as a good first step in increasing alternative fuel production.

"This program is certainly a good program and will provide some help to farmers," said Monte Shaw, spokesman for Renewable Fuels Association, the trade group for the ethanol industry. "It will certainly help increase ethanol production."

Ethanol production is estimated at a record 1.6 to 1.7 billion gallons for 2000, up from last year's output of some 1.47 billion gallons.

The USDA announcement lets U.S. Vice President Al Gore score some needed political points from the crucial farm groups, as many Midwest states are seen as toss-ups seven days before Election Day.

Midwest farmers view ethanol production as an extremely important issue -- so much so that they are known to vote for political candidates based on their stance on the subject.

"Farmers distinctly consider a candidate's position on ethanol when they are choosing who they will vote for," said Chuck Spencer, director of national legislation for the Illinois Farm Bureau.

However, Shaw said he doubted the announcement would help or hurt either candidate, saying: "We don't think it will have a big political impact."

Under the new program, the USDA will provide up to $150 million in subsidies this fiscal year and $150 million in fiscal 2002. Sign-up for the program will begin in December.

The $300 million in bioenergy incentive payments is an increase from the Clinton administration's original fiscal 2001 budget proposal. In that proposal, the USDA said it planned to spend $250 million in two years to encourage more production of fuel grade ethanol and biodiesel from grain.  

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