Peterson emerges as obstacle to major energy and climate legislation

WASHINGTON, D.C. — As a major energy and climate bill winds its way through Congress, Rep. Collin Peterson has emerged as a pivotal player and a potential roadblock to the legislation that the Minnesota Democrat says could hurt farmers, ranchers and biofuel producers around the country.

"If they don't fix this, there isn't going to be a bill," Peterson said in an interview with MinnPost.

The chair of the House Agriculture Committee, who has never been shy about speaking his piece, has voiced concern over a draft of the bill that passed out of the Energy and Commerce Committee last week — a version Peterson and other members of his panel call unacceptable and say ignores the significant affect the legislation would have on agriculture.

"They either have to deal with us, or they can't pass this," he said.

By "us," Peterson means about 40 Democrats — all the Democrats on the Agriculture Committee plus about 15 more — who would represent a critical voting bloc if the bill receives little or no Republican backing, as is expected.

Before Peterson's group can support the bill, known as the American Clean Energy and Security Act, they have said that they want to see more offsets for farmers, a larger role for the U.S. Department of Agriculture, changes in requirements for renewable fuels and alterations to carbon footprint calculations for biofuel operations.

Without these considerations, they say America's agriculture and biofuel industries will be hobbled by increased fuel and feed costs and unfair competition from abroad, where farmers and ranchers will not have to abide by the same rules.

'Incomplete and imperfect'
Their concerns not only serve to underscore the very preliminary stage of the negotiations, but also highlight the myriad complications of instituting a cap-and-trade system — one that is seeking to invent an entirely new market, which may attempt to weigh the carbon effects of tilling a field against removing grasslands against forest destruction and increased farming in other countries.

"The bill is incomplete and imperfect," said Rep. Stephanie Herseth, Sandlin, D-S.D., who sits on the Agriculture Committee. "Specifically, the bill is very short on the role of agriculture so clearly more has to be done."

Not surprisingly, behind the obstinate representatives is an angry agriculture lobby. So far, no large farm groups have endorsed the bill and the American Farm Bureau and the National Corn Growers Association have officially opposed it.

"There really isn't anything for ag in this bill," said Richard Krause, senior director of Congressional relations for the American Farm Bureau. "We really think that ag can play a key role in any kind of carbon reduction scheme, so we would just like to see that recognized."

Krause said that he would like to see the inclusion of agricultural offset options — or steps that farmers and ranchers can take to earn credits and defray increased costs — that might include different tilling practices, fertilizer management or other carbon sequestration measures.

Greg Schwarz, who is a corn farmer and ethanol producer in Minnesota, said that he is withholding judgment until there is a final bill, but that the potential for increased costs was worrisome.

"We are more concerned that the fuel prices that we pay to farm will be affected," Schwarz said.

"As the cost for production increases, there will be no one else to pass it off to except the consumers," said Brian Kletscher, the chief executive officer at Highwater Ethanol LLC., a new ethanol plant in Minnesota.

According to the Minnesota Department of Agriculture, the state has about 18 operating ethanol plants producing about 850 million gallons a year. There are at least three more plants that are expected to go online soon, which would add about 250 million gallons a year to Minnesota's output.

'Indirect' land use
Another major concern for biofuel producers and farmers in Minnesota and across the country is the inclusion of "indirect" land use in carbon footprint calculations.

Indirect land use refers to an industry's potential peripheral carbon impact.

Following a 2007 energy law, the Environmental Protection Agency (EPA) is using indirect land use predictions in the United States and abroad to determine the carbon emissions of various biofuel industries.

So, if demand for ethanol rises and farmers start turning trees or a grassland into a corn fields, the resulting carbon emission increase or decrease would be included. Or, if the value of corn rises and that causes other countries to turn forests or grasslands into crop fields, that would also be included.

Farm-state lawmakers, however, have called the EPA's predictions speculation, saying that the unproven models render an unfair portrait of the industry. They also say that if such factors are going to be taken into consideration for biofuel production, they also need to be considered when calculating the carbon footprint of gasoline production to have a clearer perspective.

"If it is good for the goose it is good for the gander," said Ralph Groschen, senior marking specialist for the Minnesota Department of Agriculture. "They didn't apply the same rigor or creative or forward looking to gasoline or diesel."

Peterson, along with the ranking member of the House Agriculture Committee, Frank Lucas, R-Okla., recently introduced separate legislation that would eliminate the requirement that the EPA take indirect land use into consideration for advanced biofuels.

Still, environmental groups say that this argument is largely illusionary because a majority of the country's biofuel plants were grandfathered in under the 2007 energy law, so the indirect land use calculations do not apply to them.

But some environmental groups are advocating that the new legislation change that and apply indirect land use to all biofuel operations regardless of when they were constructed.

"If the point of the bill is to reduce greenhouse gas emissions, then it seems rather odd to exempt the vast majority of the industry from meeting greenhouse gas emission standards," said Craig Cox, the Midwest vice president for the Environmental Working Group. Cox also served as a former USDA undersecretary for natural resources.

Cox argues that without taking indirect land use into consideration, it is impossible to get a complete picture of how the emerging biofuel industries will really affect greenhouse gas emissions and the world's resources.

"It is frustrating to see Chairman Peterson threatening to hold the bill hostage in yet another attempt to help prop up the corn ethanol industry," Cox said.

Minnesota ranked fifth in the nation for farm subsidies from 1995-2006, according to the Environmental Working Group's farm subsidy database.

The two crops that garnered the most federal dollars were corn and soybeans. Of the $10.3 billion in subsidies that went to Minnesota from 1995-06, Peterson's Seventh District received about 50 percent of the money, while the First District, represented by Democratic Rep. Tim Walz took about 35 percent.

Potential backlash
"I think that we [ethanol producers] have been very successful… and sometimes when you become successful, you do fall under criticism," said Schwarz.

Groschen worries that the potential backlash to that success could stifle further development.

"Hell, there is not a perfect fuel," said Groschen. "But, ethanol and biodiesel are at least renewable and they are the first step in the process."

Rural lawmakers have also taken issue with what types of materials can qualify for incentives under the renewable fuel standard. While the climate bill eases some of those restrictions, Agriculture Committee members like Herseth Sandlin say it doesn't go far enough.

"They are seeking again to institute unrealistic standards for the renewable energy standard," said Herseth Sandlin.

Herseth Sandlin introduced a bill this year that would allow the use of woody biomass, such as slash piles, from federal lands and private forests to be included. Meanwhile, environmental groups have rallied against the inclusion of such materials contesting that it will open the door to the destruction of the country's national forests.

But, in South Dakota, Herseth Sandlin sees areas like the Black Hills National Forest as potential reservoirs of cleaner fuel. Without access to it, Herseth Sandlin says, South Dakota may be at a disadvantage in the new market.

"It would inhibit western state's, like South Dakota, ability to participate because of the vast amount of slash that wouldn't count."

Peterson and Walz have also supported increasing the biomass definition.

"I think there is obviously going to be some pain in the transition," said Walz. "My goal is to make sure that it doesn't fall disproportionately on the Midwest."

Kevin Brook, who is managing director of ClearView Energy Partners in Washington and a longtime energy analyst, had a slightly different take on the unfolding climate and energy drama. He emphasized that the ethanol program began as an energy security program and under that mission had done very well.

"The ethanol program was an energy security policy and it worked," Brook said. "It was not a greenhouse gas abatement policy, and it can't be. It seems like the two sides haven't reached that rational consensus."

Whether they ever reach a consensus or not, Brook said that congressional leaders and the administration would likely need to face the reality that they will need Peterson and his crew, and their counterparts in the Senate, on board to pass any climate or energy legislation.

According to Brook, about 30 states — a significant voting bloc — now have vested interest in making sure ethanol succeeds.

"You are not going to get through the U.S. Senate without cars, coal and corn on board," said Brook. "You can leave crude to the side, but you can't do it without corn."

Cynthia Dizikes covers Minnesota's congressional delegation and reports on issues and developments in Washington, D.C. She can be reached at cdizikes[at]minnpost[dot]com.