Tag Archives: small farms

“Green” Energy: The Color of Money

In light of the recent legal filing for creditor protection by Spain-based, Abengoa, Inc., the viability of the Renewable Fuel Standard (RFS) is getting appropriate scrutiny and reconsideration. Through that program, the giant green-energy company received billions of U.S. taxpayer dollars in grants, loans, and subsidies. Still, last week they were forced to close their cellulosic ethanol facility in Hugoton, Kansas. The court filing for creditor protection came the day before Thanksgiving and within a week, the Kansas employees received layoff notices while many creditors received nothing.

Economic predictions suggest taxpayer losses could amount to five-times that of the 2011 Solyndra collapse. For local farmers, $5 million in unpaid, delivered product prompted their cooperative (CHS, Inc.), to file a lawsuit just two days prior to Abengoa filing for protection in a Spanish court. While some articles and blogs appear to revel in an Obama administration failure, others denounce the fact-based reporting of Abengoa’s troubles as a hit-piece against green-energy. Neither position is accurate, valid or productive.

From a free-market, smaller government perspective, the issue is not green-energy versus traditional energy sources. There is no denying the world would be a better place if everyone had access to affordable, renewable clean energy. But, consider the financial sink-hole that is the Hugoton plant and contrast that with the stunning announcement that it has sold zero gallons of cellulosic ethanol, and it is apparent that to some the label of “green” energy denotes big money as opposed to an emphasis on low environmental impact.

It should be noted that Abengoa’s demise was not a shock to everyone. Various sources have been sounding the warning sirens for years.

  • A 2009 Government Accountability Office (GAO) report warned of multiple challenges to RFS’s increasing volumes of biofuels, particularly cellulosic.
  • November 2011: Senator Jeff Sessions of the Senate Budget Committee specifically requested all documents relating to Abengoa and other solar companies from the Department of Interior (DOI).
  • 2012 GAO letter to The Honorable Dianne Feinstein, and House & Senate members of the Subcommittee on Energy and Water Development, Committee on Appropriations stating it was the sixth time GAO had reported its concerns about (DOE) loan guarantees for biofuels.
  • March 2012 GAO report to Congress restating concerns about the lack of adequate review and oversight by DOE and its $30 billion loan program, detailing Abengoa as the recipient of $1.2 billion.
  • March 2012: U.S. House Oversight Committee report specifically finds loans and resources granted to Abengoa, created excessive risk. The report reveals that “Abengoa managed to obtain a DOE loan commitment for the lowest rated project across the entire DOE Junk portfolio — which received an extraordinarily low CCC rating and was still approved by DOE for a direct loan to the project. This overinvestment in this single firm will likely cause substantial harm to the taxpayer.”
  • May 29, 2012: Letter from the U.S. House Oversight Committee threatened the Department of Interior (DOI) with “compulsory action” if they failed to release requested documents related to Abengoa and other solar companies. The Committee stated appearance of preferential treatment in taxpayer-funded loan guarantees.
  • April 30, 2013: Office of Inspector General (OIG) reported Abengoa of received $2 million dollars through The American Recovery and Reinvestment Act of 2009 (Recovery Act) for a project completed before the passing of the law.
  • May 1, 2014: GAO warned a significant threat to taxpayers in the DOE biofuels loan programs due to poor oversight and deviation from monitoring and qualifying procedures that, “pose an unacceptable risk of default.”

Highlighted above are but a few examples of serious problems with the government’s renewable fuels program. So, as presented, critics are not opposed to the concept of green energy but see the RFS as a seriously flawed mechanism to that end. The wasting of billions of dollars on infrastructure for a product that is not market ready could be better served funding advancing research projects in laboratories. The simple concept of putting the cart before the horse comes to mind. It is not Capitalism when the Federal government, through sheer financial force develops unsustainable, artificial industries.

Even Abengoa knew the Kansas plant would not be self-sustainable. In a 2014 report to DOE, the company presented their risk mitigation plan. The list included a push for the development of “energy crops”, continued dependence on the RFS to maintain a premium for ethanol, and to encourage the USDA to allow farmers to produce cellulosic biofuel crops on Conservation Reserve Program (CRP) lands.

The Abengoa plan does not reflect the goal of eventual self-sufficiency, but instead, details what others may contribute to help restructure market fundamentals to suit Abengoa’s projected goals. That is not capitalism. We have limited lands for food production, and the thought of more farmland to biofuel production is alarming. Also, the move would defeat one of the RFS stated goals of developing renewable energy by utilizing material currently identified as low valued waste or by-products.

To be clear, green-energy, as in renewable, eco-friendly, sustainable, and affordable, is a national security and humanitarian issue. There is little debate about the need to pursue that end. But, the government mandates and financial handouts created extremely provocative incentives to abuse the U.S. taxpayers. Through big dollar, experimental programs that ignore market impact, economic viability, coupled with extremely lax oversight, the term “green-energy” takes on a different meaning.

Committee for Responsible Budget Highway Plan has Issues

Recently, the Committee for a Responsible Federal Budget, released a report titled, “The Road to Sustainable Highway Funding.” The committee, which includes Erskine Bowles and Alan Simpson, builds on many of the transportation recommendations included in the Bowles-Simpson report. It recommends passage of comprehensive tax reform while ensuring the Highway Trust Fund remains adequately funded. It includes three steps:

  • Getting the Trust Fund Up to Speed ($25 billion) by paying the “legacy costs” of pre-2015 obligations with savings elsewhere in the budget;
  • Bridging the Funding Gap ($150 billion) with a policy of raising the gas tax by 9 cents and limiting annual spending to income; and
  • Creating a Fast Lane to Tax Reform to help Congress identify alternative funding and financing.

The report is a great attempt at creating a sensible national transportation policy which is something that seems to elude Congress. Many of its suggestions are excellent. These include reducing funds for the Congestion Mitigation and Air Quality program (CMAQ), eliminating Davis-Bacon requirements and killing the transportation alternatives program. Keeping federal transportation funding constant is an excellent goal. Limiting future spending to income is a great idea that seems obvious everywhere but Washington, D.C. Encouraging future highway bills to make tax and spending decisions together would be great policy, although I am not sure how this occurs without the Ways and Means Committee losing power, which would never happen politically.

However, some of the bill components are troubling. First, to get the Highway Trust Fund up to speed, the plan spends $15 billion reducing and reforming agricultural subsidies and $10 billion extending the mandatory sequester. While reforming farm policy is a great idea, since paying farmers not to plant certain crops has always been one of our most curious policies, such funding should not be directed to the highway trust fund. Rather, it should pay down general fund debt. There is no real link between farming and transportation.

Second, a two-year highway bill is better than a series of extensions but does not provide the needed long-term certainty. It takes 10 years or longer to complete many highway projects. Securing sufficient funding requires a mix of public and private funding that requires complex deals. DOTs need long-term certainty, and two years is not long-term enough. The traditional six-year bills are also a little short. Ten years would be ideal.

Third, the group proposes to schedule a 9-cent increase after one year. Such an increase is reasonable but only with significant program reforms. Policy makers should also eliminate Buy America. Federal caps on financing tools including Private Activity Bonds need to be increased. And while a 9-cent increase would be a short-medium term solution, increasing fuel efficiency and the presence of electric and hybrid cars, makes the gas tax a poor long-term solution.

Finally, the report’s acceptance of the blanket spending cuts in the sequester (as a baseline) is poor policy. The sequester cut discretionary programs such as Next-Gen which is a core national priority for aviation while not touching formula programs such as streetcars which are neither a national nor a core transportation program. The sequester cuts should be examined to ensure that areas cut do not serve a vital national function.

Draconian California Water Restrictions

California has been plagued by a highly-politicized water crisis for months now, despite crisis warnings for years.

The state has fallen prey to the “tragedy of the (water) commons”, where each person feels their single contribution to the water crisis will not impact the overall situation. With this thought, each Californian uses water like it rained yesterday, with no regard to the desperate calls from Governor Jerry Brown for water conservation.

Until now, Californians have faced few real incentives to lower their water consumption levels. Past water infrastructure subsidies have kept the price of water down as political forces ensured a disastrously low price for California’s many residents. The result was a low water price of less than 0.7 cents per gallon in 2014 for San Diego and Los Angeles. In cities such as Irvine, next to the University of California, the price can be as low as 0.2 cents per gallon.

Economists believe simply raising the water price by 10 percent could cut consumption by 2 to 4 percent.

Not limited to simple price increases, however, new California laws are mandating significant decreases in water consumption. These policies include:

  • New cuts affect 276 rights held by 114 entities to pull water from the Delta, Sacramento, and San Joaquin watersheds. Each of these entities could be supplying water to dozens of additional users.
  • Farmers in the Central Valley have already had their surface water allotment lowered or erased in the last few years.
  • In May, about 200 farmers agreed to lower their water usage by 25 percent in exchange for a promise to face no deeper cuts during the growing season.
  • Other restrictions implemented in May limited yard watering to twice a week and between the hours of 9 a.m. and 6 p.m.
  • Owners of large farms will now have to hand over detailed reports of their water use to state regulators.
  • A recent executive order calls for the replacement of 50 million square feet of ornamental turf, such as municipality-owned lawns or private lawns.
  • For wealthy consumers, districts now reserve the right to install flow restrictors for private use.
  • Top water users are facing cuts up to 36 percent.

While these policies might lower water consumption, they may be a little too much too late. In the end, these draconian measures are sure to enrage those who can afford higher water prices, while also punishing farmers and low-income water consumers.

Farmers Hit Hard by the Estate “Death” Tax

On April 16, 2015, the House of Representatives voted to repeal the estate tax. The Internal Revenue Service defines the estate tax as, “a tax on your right to transfer property at your death.”

Advocates for the estate tax decry the perpetuation of inequality due to inherited wealth. The estate tax, often called the “death tax” by opponents, is ineffective in reducing inequality; it does, however, excel at destroying family business, especially agricultural operations. Unlike investments and cash, real estate cannot be as easily placed into trust. Thus, American farmers and small business owners are hardest hit by the tax, while cash-rich Americans avoid it.

The shale gas revolution has created economic booms from Pennsylvania to Texas to North Dakota, but it is a mixed blessing for American farmers. The sudden influx of money to rural areas is increasing the wealth of farms in America and complicating estate tax calculations for farms.

  • Many farm estates have increased in value due to the mineral rights to the land. Farmers saw land values appreciate immediately upon signing leases with natural gas producers and land values have continued to rise. In both Texas and Pennsylvania, land values increased from 1997 to 2012, even after several years of drilling.
  • The increase in land value due to the demand for mineral leases was followed by increases in farm estate values, as many farmers invested their royalties from gas extraction back into their farms. The Federal Reserve Bank of Kansas estimates that three-fourths of farms’ wealth accumulation from energy payments are through increases in land values.

As the U.S. Senate begins debate over the estate tax, it is obvious the stakes are higher than ever. With farms in Pennsylvania and Texas experiencing 10 percent or greater increases in household wealth, the estate tax is a continuing threat to farm families’ ability to pass their farms to their children.

Mike Gajewsky is a research associate at the National Center for Policy Analysis

Agricultural Education – A Growing Field

Since 1928, the United States has housed an organization that connects a home life in farming to the classes students take in high school. The Future Farmers of America (FFA) immerses students in programs to learn where our food comes from and to appreciate how important agriculture is to the world.

From 2007 to 2012, the number of farms in the U.S. dropped by 100,000, while the FFA enrolled an additional 60,000 students, opened new chapters and propelled the organization to its highest number of students. 580,000 students receiving agricultural education is a monumental achievement, one that many people did not see coming. In Nebraska, this is particularly difficult as they are seeing the highest number of students interested in agriculture programs ever. In response to the need, the Nebraska Farm Bureau is creating a scholarship program to help schools find more agriculture teachers. The scholarship is directed by the University of Nebraska-Lincoln’s agriculture education program, and will pay $1,200 during a semester of student teaching. There is also a program to pay off loans for current teachers starting at $500 dollars and increasing for each school year. Meanwhile, other states are fighting to keep their programs running.

Ag. Top 10 States

California has experienced extraordinary difficulties in years past, and they are reaching a peak as the state faces one of the worst droughts in history. Agricultural education is needed more than ever, yet law makers are attempting to cut the Agriculture Education Incentive Grant Program (AEIGP). The AEIGP supports 315 agricultural programs that currently enroll over 75,000 high school students statewide. Free markets and privatization are critical in any growing industry, but high school boosters have struggled in years past to keep up with the growing demand that agriculture places on society. The reason the government places incentives on agriculture is because of how important it is to the continuation of society.

States recognize the importance of agriculture and the benefits that they receive from investing in education. Their return is substantial as those students not only go on to learn about agriculture, but a majority will also take jobs in the agriculture industry and assist states in the production of food. As new techniques are developed, the way food is grown constantly changes. Agricultural education is needed to keep up with those growing changes.

Drones Strike the Farms

Technology advances in the United States as quickly as it can be researched and one of the oldest professions is still seeing accelerating growth. The most recent achievement is the use of drones in agricultural surveillance. Also known as Unmanned Aerial Vehicles (UAVs), drones gained fame during the Iraq-Afghanistan conflict as a safer way to attack targets. Their original intention has been lost recently as companies such as Amazon and UPS are researching ways to use drones to deliver packages to your front doors.

While it may sound like drones will be taking jobs away from Americans it is in fact the opposite. One report details that once the Federal Aviation Administration (FAA) establishes guidelines for commercial use, the drone industry could expect to create more than 100,000 jobs and nearly half a billion in tax revenue to be generated collectively by 2025, and most of that is just agriculture.

The agriculture industry represents over 16 million jobs in the United States and nearly 1.1% of all Gross Domestic Product (GDP). With numbers like that it is no wonder that drone surveillance is such an emerging technology for farmers. There are even colleges in the Midwest that are incorporating learning drone technology for farming. However, while there are significant benefits with utilizing drones, there are consequences to the technology.

Right to privacy is a huge factor and how do nearby farmers know that the drones are not watching their land? This could create huge advantages for local farms that are looking to receive an advantage from using highly advanced surveillance techniques. This year alone nearly 36 states, including Iowa, are attempting to implement legislation that would put numerous restrictions on drone use.

The possibility of drones depends wildly on the users definitions of privacy. Citizens in some states may care more than others, thus it may allow one state to have a high level of drone use while another may choose to not allow them. Whatever the decision is, it is my prediction that the use of drones for commercial purposes may make its way up for the Supreme Court to decide. There is too much controversy around the technology to take off immediately; there are several hurdles that the technology will have to jump before it becomes mainstay in society.

Chipotle’s Assault on Farms

Chipotle has recently come into the news as the creator of a new TV series, ‘Farmed and Dangerous’. The series sets out to portray a satirical look at industrialized agriculture, but when the satire is created by a corporation set on organic foods it creates more harm than good. Declaring war on “big farms” is a misguided agenda that can only serve to hurt small farms more than hurt big farms. According to a previous blog post that explored the USDA Census of Agriculture, a survey stated that 75% of farms in the U.S. are still operating under 50k a year.

Farm Size

‘Farmed and Dangerous’ is beyond misleading in that what it attempts as satire is actually misguided facts about industrial agriculture. The series takes the smallest portion of the industry and distorts it to relay a message. Chipotle makes attempts to bring in customers by advocating for local farming. Since the majority of farms are still small and local, it is hurting them more than helping them. The only winner in this scenario is chipotle, as the marketing plan is not about eating responsibly — but to eat at Chipotle.

While it is important to utilize sustainable agriculture and conservative techniques, it is also important to gain truth based on facts and information. In the U.S., there is a good chance that you are eating locally grown food, so keep on eating. Just remember that you are already helping out the local farmer without having to buy at Chipotle.