The People of America's Oil and Natural Gas Indusry

Energy Tomorrow Radio: Episode 94 - Kerry-Boxer Bill Detrimental to Ag Industry

Jane Van Ryan

Jane Van Ryan
Posted November 17, 2009

In this episode, I interview Bob Stallman, president of the American Farm Bureau, on the potential impact of climate change legislation on agriculture.

Use the audio player below to listen to the conversation and follow along with the show notes. I hope you find the podcast informative.

Show Notes:

00:17 Several hearings have been held this fall about the Kerry-Boxer climate bill that is under consideration in the U.S. Senate. The bill is more than 900 pages long, and one would think that it must cover virtually every issue in the climate debate. According to the American Farm Bureau (AFB), that's not the case.

00:55 The American Farm Bureau has been around for 90 years. Currently, there are 6.2 million member families--there are no individual members, only family memberships. They represent producers of all commodities in the United States, whether local food, organic food, biotechnology and conventional production. Membership comprises farmers and ranchers--mostly people living in rural areas--though in recent times there has been an increase in members from the rural-urban fringe. There are 2,800 local county or parish farm bureaus organized into the 50 state bureaus, as well as a bureau in Puerto Rico.

01:50 The AFB makes huge contributions providing affordable and plentiful food. Last year, there were nearly $100 billion in agricultural exports--mostly food. The United States, at least in recent times, exports approximately one out of every three acres of production, and we have historically been looked to as a reliable supplier in the world commercial markets. We are also a supplier in times of need--the U.S. has been a main provider of food aid to hungry parts of the world.

02:32 In terms of greenhouse gas emissions, we are the most efficient producers in the world per unit of production. In other words, the agriculture industry uses less carbon per unit of production than any other industry.

02:47 In recent congressional testimony, the AFB stated that it opposes the Kerry-Boxer climate bill, as well as the House version--Waxman-Markey. The AFB recognizes several holes that exist within the Senate's bill, including failure to provide a transition to a clean energy economy.

03:10 The mandatory cap-and-trade scheme in the two bills creates an artificial energy shortage by limiting fossil fuels, namely oil and coal. Over the life of the bill, that will create a hole in our energy supply that will need to be filled by low-carbon fuels like solar, wind, nuclear energy and biofuels. The assumption is that this will happen automatically and, unfortunately, the AFB doesn't believe that is a valid assumption. The bill needs much more policy language that will help encourage these things to happen. The EPA's analysis of the bill assumes that all this new energy will be created as we reduce the use of coal and oil in the United States. Nuclear is a big part of that; the last nuclear power plant started construction in 1977. To accomplish what the EPA says will happen, we need to build four to five power plants per year for the next 40 years. They don't address the costly and burdensome licensing procedures or prevent the lawsuits that hinder the building and operation of nuclear power plants. We think it is highly unlikely that those assumptions will be achieved. Furthermore, wind energy has been under recent attack for its impact on endangered species and the "viewscape." Also, corn-based ethanol and other renewable, low-carbon fuels are under attack. We question those assumptions are reliable and we think there will be a huge shortage of energy by 2030. The Kerry-Boxer bill needs to do more to ensure that the hole is plugged.

05:20 Natural gas is considered a bridge fuel because it emits about half the carbon that coal does, and currently coal provides a lot of our electricity generation. As demand for natural gas rises, farmers could face problems for two reasons. First, farmers use natural gas directly as an energy source in irrigation motors, for crop drying and livestock facility heating, so that would be an immediate cost increase on the energy side. What many people forget or do not realize is that natural gas is the feedstock for fertilizer--it is the primary component from which nitrogen fertilizers are made. As the price of natural gas goes up, so will the cost of fertilizer for farmers. We were worried about the availability when the cost of natural gas rose in previous years causing a large amount of the manufacturing base for nitrogen fertilizers to move offshore because natural gas prices were higher in the United States than in other parts of the world. If demand is increased and prices are increased, we are concerned that there is a potential for the need to import our fertilizer in the future. We do not think that is good for American agriculture.

06:42 The Kerry-Boxer bill doesn't make economic sense because it doesn't provide a role for farmers and forestry in the offsets program.

06:55 The bill is deficient in the offsets program. The House version of the bill, Waxman-Markey, required the United States Department of Agriculture (USDA) to run an agricultural offsets program that had a provision that allowed farmers and ranchers the opportunity to benefit from an offsets program. There is no similar structure in the Kerry-Boxer bill; the choice was made to give the President the discretion on who qualifies for the program. We need more certainty of what practices would be allowed, who will be running the program and if they will know anything about agricultural production. There is a big gap with the Kerry-Boxer bill in comparison to those provisions that were included in Waxman-Markey. There is a perverse impact, though, and the law of unintended consequences still applies here. Forestry offsets, as specified in the Waxman-Markey bill, will create an effect that as carbon prices go up, crop land will be used to plant trees. The land owner would likely benefit from the offset related to planting trees on their land, but at the same time, that removes the land from food production. We are talking about the possibility of downsizing American agriculture. Under the scenarios in the EPA analysis, land use for production in the United States could be reduced by 17 percent--that is not our idea of a good bill for American agriculture.

08:55 At a minimum, we think the Kerry-Boxer bill should include a provision that prevents the EPA from regulating agricultural greenhouse gases under the Clean Air Act. The EPA, with its so-called "finding of endangerment," will trigger a number of Clean Air Act programs that will become applicable not only to agriculture, but also most of U.S. business sector. The problem with the Clean Air Act application is that it was designed to protect against industrial pollutants. It is not suited to regulate carbon dioxide, which is produced as we grow crops and raise livestock; yet that is how it is going to be applied. If this process moves forward, and there is not a provision preventing it in the bill, EPA regulation would extend the most livestock operations--about 90 percent of the beef operations, 99 percent of the dairy and 95 of the hog operations--in this country. It was never intended to regulate American agriculture.

10:51 U.S. agriculture is the most efficient in the world for producing food, fiber and fuel. We depend on our current and future success on the ability to sell into a very competitive global agricultural market. In many cases it is developing countries that are our competitors. The Kerry-Boxer bill unilaterally caps carbon in the United States, creating higher energy costs and reducing food production. There is nothing in the bill that will either cause other countries to cap or reduce their carbon emissions; nor is there anything in the bill that says if other countries do not reduce carbon emissions, then the U.S. doesn't have to either. The effect of that will be to shift food production to other countries without those same greenhouse gas emission caps. As stated earlier, we are the most efficient producers of food in the world based on our greenhouse gas emissions per unit of production. That is not the case in China, Brazil, India, Russia and Argentina. If food production moves to these countries, it will create a perverse effect of more greenhouse gas emissions for the same amount of food produced in the world.

12:36 Consumers have a big stake in all of this--and they may not realize it now. Under the Waxman-Markey bill analysis, the EIA projected energy costs would grow by $1,870 per household per year. If you plug in the decreased food production effects because of higher costs for farmers and ranchers, that will raise food costs for consumers, creating a total of approximately $2,300 per household per year in the United States. The cap-and-trade bill would impose costs of up to $200 billion per year on U.S. taxpayers--roughly equivalent to a 15 percent hike in personal income tax. For the world, this bill would reduce the ability of U.S. farmers to produce food just at the time when international organizations are worrying about how we are going to increase food production in the world by 70 percent on the same amount of acres to feed a population of 9.1 billion people in 2050. We're headed in the wrong direction with this bill. For the future of this country and world, we need to have a viable agricultural production system and this bill will keep that from happening.