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Friday, March 25, 2011

Renewable Energy Programs in the 2008 Farm Bill


Megan Stubbs
Analyst in Agricultural Conservation and Natural Resources Policy

The Food, Conservation, and Energy Act of 2008 (P.L. 110-246, the 2008 farm bill) extends and expands many of the renewable energy programs originally authorized in the Farm Security and Rural Investment Act of 2002 (P.L. 107-171, 2002 farm bill). The bill also continues the emphasis on the research and development of advanced and cellulosic bioenergy authorized in the 2007 Energy Independence and Security Act (P.L. 110-140).

Farm bill debate over U.S. biomass-based renewable energy production policy focused mainly on the continuation of subsidies for ethanol blenders, continuation of the import tariff for ethanol, and the impact of corn-based ethanol on agriculture. The enacted bill requires reports on the economic impacts of ethanol production, reflecting concerns that the increasing share of corn production being used for ethanol had contributed to high commodity prices and food price inflation.

Title VII, the research title of the 2008 farm bill, contains numerous renewable energy related provisions that promote research, development, and demonstration of biomass-based renewable energy and biofuels. The Sun Grant Initiative coordinates and funds research at land grant institutions on biobased energy technologies. The Agricultural Bioenergy Feedstock and Energy Efficiency Research and Extension Initiative provides support for on-farm biomass energy crop production research and demonstration.

Title IX, the energy title of the farm bill, authorizes mandatory funds (not subject to appropriations) of $1.1 billion, and discretionary funds (subject to appropriations) totaling $1.0 billion, for the FY2008-FY2012 period. Energy grants and loans provided through initiatives such as the Bioenergy Program for Advanced Biofuels promote the development of cellulosic biorefinery capacity. The Repowering Assistance Program supports increasing efficiencies in existing refineries. Programs such as the Rural Energy for America Program (REAP) assist rural communities and businesses in becoming more energy-efficient and self-sufficient, with an emphasis on small operations. The Biomass Crop Assistance Program, the Biorefinery Assistance Program, and the Forest Biomass for Energy Program provide support to develop alternative feedstock resources and the infrastructure to support the production, harvest, storage, and processing of cellulosic biomass feedstocks. Cellulosic feedstocks—for example, switchgrass and woody biomass—are given high priority both in research and funding.

Title XV of the 2008 farm bill contains tax and trade provisions. It continued current biofuels tax incentives, reducing those for corn-based ethanol but expanding tax credits for cellulosic ethanol. The tariff on ethanol imports was also extended.

Implementation of the farm bill’s energy provisions is underway. President Obama, in May 2009, directed the U.S. Department of Agriculture (USDA) and the Department of Energy (DOE) to accelerate implementation of renewable energy programs. Notices, proposed rules, and final rules have appeared in the Federal Register soliciting applications for those programs with available funding.



Date of Report: March 18, 2011
Number of Pages: 20
Order Number: RL34130
Price: $29.95

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Battery Manufacturing for Hybrid and Electric Vehicles: Policy Issues

Bill Canis
Specialist in Industrial Organization and Business

The United States is one of several countries encouraging production and sales of fully electric and plug-in hybrid electric vehicles to reduce oil consumption, air pollution, and greenhouse gas emissions. The American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5) provided federal financial support to develop a domestic lithium-ion battery supply chain for electric vehicles. President Obama has called for 1 million fully electric vehicles to be on U.S. roads by 2015.

In making a national commitment to building electric vehicles and most of their components in the United States, the federal government has invested $2.4 billion in electric battery production facilities and nearly $80 million a year for electric battery research and development. To increase sales of such vehicles, the President has recommended that the current $7,500 tax credit for purchase of a plug-in hybrid be converted into a rebate, available immediately to car buyers upon purchase of a vehicle.

Developing appropriate batteries is the biggest challenge to increasing sales of electric and plugin hybrid vehicles. Batteries for these vehicles differ substantially from traditional lead-acid batteries used in internal combustion engine vehicles: they are larger, heavier, more expensive, and have safety considerations that mandate use of electronically controlled cooling systems. Various chemistries can be applied, with lithium-ion appearing the most feasible approach at the present time.

The lithium-ion battery supply chain, expanded by ARRA investments, includes companies that mine and refine lithium; produce components, chemicals, and electronics; and assemble these components into battery cells and then into battery packs. Auto manufacturers design their vehicles to work with specific batteries, and provide proprietary cooling and other technologies before placing batteries in vehicles. Most of these operations are highly automated and require great precision. It has been estimated that 70% of the value-added in making lithium-ion batteries is in making the cells, compared with only 15% in battery assembly and 10% in electrical and mechanical components.

Despite these supply chain investments, it may be difficult to achieve the goal of 1 million electric vehicles on U.S. roads by 2015. Costs remain high; although data are confidential, batteries alone are estimated to cost $8,000 to $18,000 per vehicle. Vehicle range limitations and charging issues may deter purchases. Lower gasoline prices and improvements in competing internal combustion engine technologies could slow acceptance of electric vehicles, whereas persistent high gasoline prices could favor it. Advanced battery manufacturing is still an infant industry whose technology and potential market remain highly uncertain. Its development in the United States is likely to depend heavily on foreign competition and how the federal government further addresses the challenges of building a battery supply chain and promoting advances in battery technologies.



Date of Report: March 22, 2011
Number of Pages: 31
Order Number: R41709
Price: $29.95

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Tuesday, March 22, 2011

Energy and Water Development: FY2011 Appropriations


Carl E. Behrens, Coordinator
Specialist in Energy Policy

The Energy and Water Development appropriations bill provides funding for civil works projects of the Army Corps of Engineers (Corps), the Department of the Interior’s Bureau of Reclamation, the Department of Energy (DOE), and a number of independent agencies.

Key budgetary issues for FY2011 involving these programs may include the following:
  • the distribution of Corps appropriations across the agency’s authorized planning, construction, and maintenance activities (Title I); 
  • support of major ecosystem restoration initiatives, such as Florida Everglades (Title I) and California “Bay-Delta” (CALFED) and San Joaquin River (Title II); 
  • alternatives to the proposed national nuclear waste repository at Yucca Mountain, Nevada, which the Administration has abandoned (Title III: Nuclear Waste Disposal); 
  • several new initiatives proposed for Energy Efficiency and Renewable Energy (EERE) programs (Title III); and 
  • funding decisions in DOE’s Office of Environmental Management. 
Funding for FY2010 Energy and Water Development programs is contained in H.R. 3183, which the House passed July 17, 2009. The Senate passed its version of H.R. 3183 July 29. The conference committee issued its report (H.Rept. 111-278) September 30, and the House passed the conference bill October 1, and the Senate October 15. The President signed the bill October 28 (P.L. 111-85).

President Obama’s proposed FY2011 budget for Energy and Water Development programs was released in February 2010. On July 15, 2010, the House Appropriations Subcommittee on Energy and Water Development approved a bill to fund these programs. In the Senate, the Energy and Water Development subcommittee approved a bill on July 20, and the full Appropriations Committee reported out S. 3635 (S.Rept. 111-228) on July 22. On September 30, the Senate and the House passed H.R. 3081 (P.L. 111-242), a continuing resolution that funded government programs at the FY2010 level through December 3. Most recently, H.J.Res. 44 (P.L. 112-4) extended funding through March 18, 2011. On February 14, 2011, H.R. 1 was introduced, continuing funding through the rest of FY2011 at the FY2010 level, but with many specified exceptions in which funding was reduced. On February 19 the House passed H.R. 1 by a vote of 235-189. 
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Date of Report: March 7, 2011
Number of Pages: 58
Order Number: R41150
Price: $29.95

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Monday, March 21, 2011

Fukushima Nuclear Crisis

Richard J. Campbell
Specialist in Energy Policy

The earthquake on March 11, 2011, off the east coast of Honshu, Japan’s largest island, reportedly caused an automatic shutdown (called a “scram”) of eleven of Japan’s fifty-five operating nuclear power plants.1 Most of the shutdowns proceeded without incident. The plants closest to the epicenter, Fukushima and Onagawa (see Figure 1), were damaged by the earthquake and resulting tsunami.


Date of Report: March 15, 2011
Number of Pages: 7
Order Number: R41694
Price: $19.95

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Thursday, March 17, 2011

The Strategic Petroleum Reserve and Refined Product Reserves: Authorization and Drawdown Policy


Anthony Andrews
Specialist in Energy and Defense Policy

Robert Pirog
Specialist in Energy Economics


Congress authorized the Strategic Petroleum Reserve (SPR) in the Energy Policy and Conservation Act (EPCA, P.L. 94-163) to help prevent a repetition of the economic dislocation caused by the 1973-1974 Arab oil embargo. The Department of Energy (DOE) manages the SPR, which comprises five underground storage facilities, solution-mined from naturally occurring salt domes in Texas and Louisiana. The Energy Policy Act of 2005 (EPAct) authorized SPR expansion to a capacity of 1 billion barrels, but physical expansion of the SPR has not proceeded beyond 727 million barrels its inventory at the end of 2010. In addition, a Northeast Home Heating Oil Reserve (NHOR) holds 2 million barrels of heating oil in above-ground storage.

EPCA authorized drawdown of the Reserve upon a finding by the President that there is a “severe energy supply interruption.” Congress enacted additional authority in 1990 (Energy Policy and Conservation Act Amendments of 1990, P.L. 101-383) to permit use of the SPR for short periods to resolve supply interruptions stemming from situations internal to the United States. The meaning of a “severe energy supply interruption” has been controversial. EPCA intended use of the SPR only to ameliorate discernible physical shortages of crude oil.

The government had ended the practice of purchasing crude oil to fill the SPR in 1994. In 2000, the Department of Energy began acquiring SPR oil through royalty-in-kind (RIK) in lieu of cash royalties paid on production from federal offshore leases. In May 2008, Congress passed legislation (P.L. 110-232) ordering DOE to suspend RIK fill for the balance of the calendar year unless the price of crude oil dropped below $75/barrel. Crude oil prices spiked to $147/barrel in the summer of 2008 and then sharply declined, allowing a resumption of fill. These activities have brought the SPR essentially to its current 727 million barrel inventory. The current Secretary of the Interior recently announced his intention to terminate the RIK program.

Congress approved $205 million for the SPR in FY2009, including $31.5 million to continue SPR physical expansion activities. DOE has evaluated a site in Richton, MS, as a possible location for an additional 160 million barrels of capacity, but set aside any further expansion plans. The FY2010 Energy and Water Appropriations Act (P.L. 111-85), which provides $243.8 million for the entire SPR program, included $25 million for expansion activities and $43.5 million for purchase of a cavern at Bayou Choctaw to replace a cavern posing environmental risks. The act also prohibits SPR appropriations from being expended to anyone engaged in providing refined product to Iran, or assisting Iran in developing additional internal capacity to refine oil.

Historically, the use of the SPR has been tied to a physical supply shortage, which normally would manifest itself, in part, as a price increase. The original intention of the SPR was to create a reserve of crude oil stocks that could be tapped in the event of an interruption in crude supply. However, price was deliberately kept out of the President’s SPR drawdown authority because of concerns about what price level would trigger a drawdown, and that any hint of a price threshold could influence private sector and industry inventory practices. The original intention of the SPR was to create a reserve of crude oil stocks that could be tapped in the event of an interruption in crude supply.

The Government Accountability Office recently observed that the proportion of crude oil grades in the SPR has been growing less compatible with the heavier grades of crude oil that U.S. refineries have been upgrading to handle. This finding has raised questions about the SPR’s effectiveness during a long-term oil disruption involving heavy oil.



Date of Report: March 11, 2011
Number of Pages: 18
Order Number: R41687
Price: $29.95

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