Navigating The Political Scene
The financial success and growth potential of the biomass industry in 2013 may not be determined by a single day in November, but the long-term health of the industry will be transformed by the 2012 election results. Although President Barack Obama secured his role for the next four years as the country’s ultimate decision maker, the political landscape appears to be littered with many of the same divisive issues that, for the biomass industry, have muddled progress and blurred the view of how renewable energy can positively alter the country’s energy practices and rural economies. The renewable fuel standard (RFS) is still under attack and successful programs are in limbo, yet the combination of a president who many in the industry supported, and the potential for new legislation means the industry will excel in 2013.
A looming fiscal cliff, tax reform, immigration or even potential climate change legislation will earn the attention of the country at large, but in the 2013 biomass industry, several issues, programs or general strategies centered on biomass utilization will garner attention. The following is a compilation of industry perspectives, policy factors and political situations that could illuminate the best biomass-based strategies and provide a glimpse of what will matter in 2013.
Obama is in, the Democrats retained control of the Senate, and the Republicans did the same in the House of Representatives. What all of that means is anyone’s guess.
Regarding the president’s impact on fossil fuel development, James Coan, an energy forum research associate from a think tank at the James A. Baker Institute for Public Policy at Rice University, says that although most oil companies in Houston would have preferred it if Mitt Romney had won, those same companies have also done very well under Obama.
For bioenergy, Phil Fraas, a partner at the Washington, D.C.-based office of Stinson Morrison Hecker LLP, says that Obama’s second term will mean continued efforts to commercialize biofuels. Fraas has worked in agriculture and renewable energy law for over 20 years, and believes that the collaboration between the U.S. Navy, the U.S. DOE and USDA will gain ground in 2013 because of Obama’s re-election. Jim Bowe, a partner in the global transactions group for another D.C.-based firm, King & Spalding, also believes Obama's term will mean continued development in biofuels, a situation both Fraas and Bowe say may not have happened under Romney. “I’m not expecting massive benefits to be showered upon the renewable fuels or renewable generating industries,” says the long-time renewable power veteran. “Although, I think there is more lip service likely to be paid to them [biofuels].”
Michael McAdams, president of the Advanced Biofuels Association, is optimistic about Obama’s re-election, pointing towards his consistent support of the industry. “Over the last four years he has worked to create a broader renewable fuels industry across the board,” he says, “I think that bodes for a bright future for the advanced biofuel industry in the U.S.”
Bob Cleaves, president of the Biomass Power Association, offered a less clear opinion of Obama’s re-election immediately following the results, saying that the BPA is still evaluating what election results mean for biomass. “We hope to work with the Obama administration over the next four years,” Cleaves says.
Although position changes have not been announced for either the USDA’s secretary role currently filled by former Iowa Governor Tom Vilsack, or the DOE’s Secretary of Energy position occupied by Steven Chu, the biomass industry will not have to deal with the perceived difficulties linked to Romney’s potential staff choices. Political analysts indicated that Romney’s team would have included several members from the fossil fuels industry, including the American Petroleum Institute’s President and CEO, Jack Gerard.
An energy debate held between an Obama and Romney representative in October at Massachusetts Institute of Technology, may however, provide the best example of what Obama’s impact will be on bioenergy. During the debate, Joseph Aldy, a faculty member at the Harvard Kennedy School, told the crowd that, on the subject of energy policy, the president’s approach “has focused on an all of the above strategy.” That strategy, he added, “has supported the development of all energy resources, oil and gas, coal, nuclear, wind, solar and biofuels.”
Bowe could be right about Obama’s support of bioenergy. In the next four years, that support may only amount to more lip service during a State of the Union address or a visit to a pilot plant by the president, but the political scene in Washington will have a large impact on several programs that support biomass. In fact, some industry experts believe other issues that are determined by Congress are of far greater importance than who lives in the White House.
Cindy Thyfault, CEO of Westar Trade Resources, a renewable energy consulting firm based in Texas, seems to speak for everyone in the industry involved in a project with government ties. “The two main issues of utmost importance are the debate and discussions underway of modifying the renewable fuel standard and the concurrent debate concerning the 2012 Farm Bill Energy Title,” Thyfault says.
Fraas agrees. “I will be watching whether the energy title of the farm bill will be renewed with adequate funding,” he says. “Right now, budget restraints are weighing heavily on the drafters of the new farm bill,” adding that it is an open question of whether they will find the money needed to match the amount given to the energy title in 2008. USDA dollars invested in renewable biomass has seen a dramatic rise since 2003, when it hovered around $10 million. In 2012, that total will exceed $510 million.
Earlier this year the Senate Agricultural Committee passed a version of the 2012 Farm Bill that included an amended Energy Title section that would mandate energy program funding. The program would allocate roughly $800 million over five years. The vote to pass the Energy Title was strong, passing with a bipartisan, 16-5 vote. But, the current belief on passage of the Farm Bill shows a vote will not happen until the spring of 2013 because of a lame duck Congress that will be debating a way to stop automatic spending cuts or risk another U.S. credit downgrade, all before Congress leaves for January recess.
The 2012 Farm Bill Energy Title has specific programs to watch in 2013. “For second-generation biofuels,” Coan says, “the most important are the loan guarantees that are allowing the construction of first-of-a-kind commercial production facilities.” For advanced biofuels, Thyfault agrees with Coan about the important role loan guarantees have played. She points to the USDA 9003 program that has totaled roughly $1.08 billion. “This program has been instrumental in bridging the technology risk gap for financing,” she says. Along with the 9003 program, she also advocates for another loan option, the USDA Business and Industry Loan Program. Although the program has lowered the amount of funding available per project from $25 million to $10 million, she does note the program has mandatory appropriations each year, equal to $1 billion in 2013.
The biomass-based power generation industry needs to keep an eye on state-level renewable portfolio standards (RPS), Coan says, and Bowe agrees. “One thing I will be watching is whether there continues to be erosion for the support of RPS’s,” he says, “you don’t hear as much about those as you did years ago.” In the southern U.S. markets, an RPS can drive utilities to think of alternative generation sources, a huge benefit to biomass because the wind source is meager and the ability to grow fuel is well-established, he says. For Fraas, a Biomass Crop Assistance Program expert with several clients who have utilized the program, BCAP is another program that merits attention. Funding for BCAP has not been extended for 2013.
Outside of the programs linked to the 2012 Farm Bill, there are those offered by the DOE. All of the programs in the DOE are subject to congressional appropriations, Thyfault says. “So, the 2013 appropriations budget will also be a key indicator of future plans and programs,” she says for loan guarantees sponsored by the DOE.
The Potential in Policy
The political landscape in 2013 shouldn’t be entirely classified as a place where biomass-based energy programs could remain in limbo or ultimately begin to change forever. Kathy Halvorsen, professor of natural resource policy at Michigan Technological University, says that although the November elections have left us all with a divided Congress, positive change could be coming. “I think something is going to shake loose in Congress on carbon and climate in 2013,” she says. “Look for something on climate change or carbon credits to come along, especially in light of Superstorm Sandy.”
Don’t discount her sentiments on the divisive topic either. Bowe also implies that there is a push in the power industries to diversify their fuel mix and to lower their carbon footprint. Bowe points to a recently commissioned biomass power facility at Colby College in Maine. According to Bowe, the college is indicative of many institutions across the country that are spending money to lower their carbon footprint.
It’s not just institutions concerned with carbon or a renewed government push towards climate legislation that could provide opportunity in 2013. According to Bowe, the Obama administration’s commitment to retire coal-based power generation facilities would open the door for biomass, and, although it may sound unlikely, the surplus of natural gas could actually help biomass power as coal facilities will also have to compete with natural gas and may choose to cease operations or look to other cofiring options to compete on price.
In the end, trying to predict if or when climate legislation happens, how natural gas prices will affect project development or when a Farm Bill will pass, all based on any of those issues’ relative to a divided Congress or the return of Obama may be a futile effort. Both Thyfault and Bowe insinuate that may be true. With all of the issues to watch for in 2013, Bowe says he wouldn’t trust the work of Washington to any business in bioenergy just yet. And although Thyfault will stay abreast of the Farm Bill and other topics, she believes in this simple policy of her own: “The most successful companies will be making changes now, and not waiting until after the RFS and the Farm Bill debates are finalized.”
Author: Luke Geiver
Features Editor, Biomass Magazine