[Senate Hearing 111-521]
[From the U.S. Government Publishing Office]
S. Hrg. 111-521
THE ROLE OF AGRICULTURE
AND FORESTRY IN GLOBAL
WARMING LEGISLATION
=======================================================================
HEARING
before the
COMMITTEE ON AGRICULTURE,
NUTRITION, AND FORESTRY
UNITED STATES SENATE
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
JULY 22, 2009
__________
Printed for the use of the
Committee on Agriculture, Nutrition, and Forestry
Available via the World Wide Web: http://www.agriculture.senate.gov
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COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY
TOM HARKIN, Iowa, Chairman
PATRICK J. LEAHY, Vermont SAXBY CHAMBLISS, Georgia
KENT CONRAD, North Dakota RICHARD G. LUGAR, Indiana
MAX BAUCUS, Montana THAD COCHRAN, Mississippi
BLANCHE L. LINCOLN, Arkansas MITCH McCONNELL, Kentucky
DEBBIE A. STABENOW, Michigan PAT ROBERTS, Kansas
E. BENJAMIN NELSON, Nebraska MIKE JOHANNS, Nebraska
SHERROD BROWN, Ohio CHARLES E. GRASSLEY, Iowa
ROBERT P. CASEY, Jr., Pennsylvania JOHN THUNE, South Dakota
AMY KLOBUCHAR, Minnesota
KIRSTEN GILLIBRAND, New York
MICHAEL BENNET, Colorado
Mark Halverson, Majority Staff Director
Jessica L. Williams, Chief Clerk
Martha Scott Poindexter, Minority Staff Director
Vernie Hubert, Minority Chief Counsel
(ii)
C O N T E N T S
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Page
Hearing(s):
The Role of Agriculture and Forestry in Global Warming
Legislation.................................................... 1
----------
Wednesday, July 22, 2009
STATEMENTS PRESENTED BY SENATORS
Harkin, Hon. Tom, U.S. Senator from the State of Iowa, Chairman,
Committee on Agriculture, Nutrition, and Forestry.............. 1
Chambliss, Hon. Saxby, U.S. Senator from the State of Georgia.... 3
Grassley, Hon. Charles E., U.S. Senator from the State of Iowa... 5
Panel I
Grumet, Jason, Founder and President, Bipartisan Policy Center... 13
Johnson, Roger, President, National Farmers Union................ 6
Pierce, Jo, Family Tree Farmer on behalf of the Forest Climate
Working Group.................................................. 11
Stallman, Bob, President, American Farm Bureau Federation........ 8
Panel II
Holdren, John P., Ph.D., Director, White House Office of Science
and Technology................................................. 46
Jackson, Lisa, Administrator, U.S. Environmental Protection
Agency......................................................... 44
Vilsack, Hon. Tom, Secretary of Agriculture, U.S. Department of
Agriculture.................................................... 41
----------
APPENDIX
Prepared Statements:
Grumet, Jason................................................ 74
Holdren, John P.............................................. 79
Jackson, Lisa................................................ 88
Johnson, Roger............................................... 90
Pierce, Jo................................................... 100
Stallman, Bob................................................ 106
Vilsack, Hon. Tom............................................ 119
Document(s) Submitted for the Record:
Vilsack, Hon. Tom:
``A preliminary Analysis of the Effects of HR 2454 on U.S.
Agriculture'', Office of the Chief Economist............... 124
Grumet, Jason:
``Forging The Climate Consensus--Managing Economic Risk in a
Greenhouse Gas Cap-and Trade Program'', National Commission
on Energy Policy........................................... 137
CountryMark, prepared statement.............................. 148
E.I. DuPont de Nemours and Company, Inc., prepared statement. 154
International Biochar Initiative, prepared statement......... 159
John Deere, prepared statement............................... 163
National Alliance of Forest Owners, prepared statement....... 170
National Cattlemen's Beef Association, prepared statement.... 180
National Cotton Council, prepared statement.................. 184
National Oilseed Processors Association, prepared statement.. 186
PG&E Corporation, prepared statement......................... 196
SynGest, prepared statement.................................. 199
The Dow Chemical Company, prepared statement................. 200
The Fertilizer Institute, prepared statement................. 206
The Nature Conservancy, prepared statement................... 211
Various Organizations, prepared statement.................... 215
Question and Answer:
Harkin, Hon. Tom:
Written questions for Hon. Tom Vilsack....................... 218
Written questions for Joe Pierce............................. 288
Written questions for Lisa Jackson........................... 266
Written questions for John Holdren........................... 260
Written questions for Jason Grumet........................... 255
Chambliss, Hon. Saxby:
Written questions for Hon. Tom Vilsack....................... 221
Written questions for Lisa Jackson........................... 266
Brown, Hon. Sherrod:
Written questions for Hon. Tom Vilsack....................... 230
Gillibrand, Hon. Kirsten E.:
Written questions for Hon. Tom Vilsack....................... 249
Written questions for Lisa Jackson........................... 281
Grassley, Hon. Charles E.:
Written questions for Roger Johnson.......................... 284
Written questions for Bob Stallman........................... 294
Written questions for Hon. Tom Vilsack....................... 243
Written questions for Lisa Jackson........................... 273
Written questions for Jason Grumet........................... 259
Written questions for John Holdren........................... 265
Johanns, Hon. Mike:
Written questions for Hon. Tom Vilsack....................... 231
Written questions for Lisa Jackson........................... 269
Leahy, Hon. Patrick J.:
Written questions for Hon. Tom Vilsack....................... 223
Written questions for John Holdren........................... 262
Written questions for Lisa Jackson........................... 268
Lincoln, Hon. Blanche, L.:
Written questions for Hon. Tom Vilsack....................... 228
Written questions for Joe Pierce............................. 290
Written questions for Jason Grumet........................... 258
Written questions for Roger Johnson.......................... 283
Roberts, Hon. Pat:
Written questions for Hon. Tom Vilsack....................... 230
Written questions for Lisa Jackson........................... 269
Thune, Hon. John:
Written questions for Hon. Tom Vilsack....................... 242
Written questions for Lisa Jackson........................... 278
Grumet, Jason:
Written response to questions from Hon. Tom Harkin........... 255
Written response to questions from Hon. Charles E. Grassley.. 259
Written response to questions from Hon. Blanche L. Lincoln... 258
Holdren, John P.:
Written response to questions from Hon. Tom Harkin........... 260
Written response to questions from Hon. Charles E. Grassley.. 265
Written response to questions from Hon. Patrick J. Leahy..... 263
Jackson, Lisa:
Written response to questions from Hon. Tom Harkin........... 266
Written response to questions from Hon. Saxby Chambliss...... 267
Written response to questions from Hon. Kirsten E. Gillibrand 281
Written response to questions from Hon. Charles E. Grassley.. 274
Written response to questions from Hon. Mike Johanns......... 270
Written response to questions from Hon. Patrick J. Leahy..... 268
Written response to questions from Hon. Pat Roberts.......... 269
Written response to questions from Hon. John Thune........... 278
Johnson, Roger:
Written response to questions from Hon. Charles E. Grassley.. 284
Written response to questions from Hon. Blanche L. Lincoln... 283
Pierce, Jo:
Written response to questions from Hon. Tom Harkin........... 288
Written response to questions from Hon. Blanche L. Lincoln... 290
Written response to questions from Hon. Charles E. Grassley.. 291
Stallman, Bob:
Written response to questions from Hon. Blanche L. Lincoln... 293
Written response to questions from Hon. Charles E. Grassley.. 294
Vilsack, Hon. Tom:
Written response to questions from Hon. Tom Harkin........... 218
Written response to questions from Hon. Saxby Chambliss...... 221
Written response to questions from Hon. Sherrod Brown........ 230
Written response to questions from Hon. Kirsten E. Gillibrand 249
Written response to questions from Hon. Charles E. Grassley.. 243
Written response to questions from Hon. Mike Johanns......... 232
Written response to questions from Hon. Patrick J. Leahy..... 223
Written response to questions from Hon. Blanche L. Lincoln... 228
Written response to questions from Hon. Pat Roberts.......... 231
Written response to questions from Hon. John Thune........... 242
THE ROLE OF AGRICULTURE
AND FORESTRY IN GLOBAL
WARMING LEGISLATION
----------
Wednesday, July 22, 2009
U.S. Senate,
Committee on Agriculture, Nutrition and Forestry,
Washington, DC
The Committee met, pursuant to notice, at 10:03 a.m., in
room 325, Russell Senate Office Building, Hon. Tom Harkin,
Chairman of the Committee, presiding.
Present: Senators Harkin, Leahy, Lincoln, Stabenow, Nelson,
Brown, Casey, Klobuchar, Bennet, Chambliss, Lugar, Cochran,
Roberts, Johanns, Grassley, and Thune.
STATEMENT OF HON. TOM HARKIN, U.S. SENATOR FROM THE STATE OF
IOWA, CHAIRMAN, COMMITTEE ON AGRICULTURE, NUTRITION, AND
FORESTRY
Chairman Harkin. Good morning. The Senate Committee on
Agriculture, Nutrition and Forestry will come to order.
I welcome this hearing to examine the critical challenges
in energy and global warming and the pending proposals for
addressing them. We have two strong panels of witnesses, and I
look forward to their testimony. We will have this first panel
this morning. Then, we have to take a break, and, because of
the necessity of us being on the Senate floor for a
constitutional issue at 2, this Committee will resume its
sitting with Secretary Vilsack and Administrator Jackson and
others this afternoon at 2:30.
For decades now, we have known that our American way of
buying and consuming energy is not only unsustainable but
dangerous to our future. Our heavy reliance on fossil fuels,
much of it imported, is a threat to our energy, economic and
national security.
In April 1977, when I was a second term member of the
House, President Carter called for a new course in energy
policy because he believed our very strength and future as a
Nation were in peril. He called the task the moral equivalent
of war. That speech was a grim and sober one, though remarkably
prescient. Yet, just a few years later, the warning was largely
discarded and disregarded.
Today, our energy situation is even more precarious. We
import about 70 percent of the oil we use, much of that from
nations that are unfriendly or politically unstable or both.
Repeated oil price shocks, topping at over $140 a barrel last
summer, are a drumbeat driving home our vulnerability. Our
extraction and use of coal permanently alters landscapes and
pollutes too many of our lakes and streams.
We now know that our reliance on fossil fuels was in fact
more damaging than what we had realized. The concentration of
carbon dioxide and other greenhouse gases in the atmosphere has
been rising markedly over the course of the Industrial Age,
primarily from our use of fossil fuels, to the point that the
climate and weather upon which human civilization relies are
dramatically changing and will change far more rapidly if we do
not act.
This chart here clearly shows that something is happening.
This line here is the amount of atmospheric CO2 concentration
globally.
These bars show the temperatures, the mean temperatures
globally. The 10 warmest years on record all occurred in the
past 12 years.
We see the CO2 concentration going up at a steeper slope
all the time, up to about 2000, and has gone up even more since
2000.
So we know that something drastic is happening out there
and to do nothing and to ignore it is, I do not think, an
option. So we have to do something.
I think the challenge ahead of us, if we are to honor our
responsibility to future generations, is a challenge that we
cannot sidestep. Fortunately, there are good reasons to be
hopeful.
We need to drastically increase the efficiency throughout
our energy economy, something that we have not done very well
in the past because energy was so cheap and plentiful. We need
to accelerate the transition from fossil fuels to energy
derived from domestic renewable energy resources.
Now agriculture and forestry can play a central role in
this energy transition and can earn economic rewards for doing
so. They provide feedstocks for renewable, carbon-recycling
bioenergy. Farms and ranches also provide ideal sites for wind
power and solar systems. Thus, our agriculture and forestry
lands are the resource basis for a new energy economy.
Farms, ranches and forests can also help curb greenhouse
gases in the atmosphere. Right now, crops, trees and pastures
absorb and store about 12 percent of the U.S. annual production
of carbon dioxide. According to EPA, that figure could reach 20
percent through changing agronomic and forestry practices.
Increasing the storage of carbon in agriculture and forestry
operations can earn income for producers while reducing the
economic cost of cutting greenhouse gas emissions in other
industries.
Now, with good reason, we hear a lot of concern expressed
about projected costs to consumers, farmers, ranchers and other
businesses from proposed energy and global warming legislation.
I share those concerns, and that is why I believe we must do
our best to analyze costs and find the most economical, common-
sense ways to achieve critically important results of energy
independence and reduction of greenhouse gas emissions.
I am convinced that this energy transformation holds the
key not only to economic recovery today but to major job growth
and economic development for decades to come. The history of
American agriculture is a history filled with stories of
successfully meeting and overcoming one challenge after
another. I believe that American agriculture is up to this
challenge, that we can meet this, and we can overcome it, and
we can provide income and make sure that agriculture has a seat
at the table and is not shunted aside in this debate on
reducing greenhouse gas emissions.
Chairman Harkin. With that, I will yield to Senator
Chambliss.
STATEMENT OF HON. SAXBY CHAMBLISS, U.S. SENATOR FROM THE STATE
OF GEORGIA
Senator Chambliss. Mr. Chairman, thank you very much for
holding this hearing today. Climate change and the energy
security of our Country are two very important issues facing
our Nation, and I thank our witnesses for coming forward today
and letting us have a chance to dialog and presenting their
ideas.
I am very concerned about the effect the House-passed
American Clean Energy and Security Act and the cap and trade
program it envisions will have on agriculture producers, forest
landowners and residents in rural parts of the Country. No
matter how you look at that bill, it appears to me it imposes
costs that will far outweigh the near-term and long-term
benefits. The balance between the near and long-term costs and
benefits will be of foremost importance to members of this
Committee. Agriculture is an energy-intensive industry and,
make no mistake, the chief purpose of the Waxman-Markey and the
Boxer bills is to raise the price of energy.
I say that again. The purpose of the House and Senate
climate change bills is to raise the price of energy, and that
is a pretty irrefutable fact.
I have asked USDA and Texas A&M University to conduct
economic analyses of the bill with special attention to the
effects that at the farm gate level as well as to consumers.
What we have seen of these preliminary results is that no farm
will escape the effect of this bill.
According to Farm Bureau--and President Stallman is here
with us today, and he can confirm this, I think--that by the
time this bill is fully implemented, farm income will drop $5
billion compared to the baseline. According to the National
Cotton Council, cotton producers will see $300 million to $400
million in increased production cost. Rice producers will see
their costs increase $80 to $150 per acre. Again, Farm Bureau
estimates corn and soybean farmers will see their costs
increase over $20 per acre by 2020.
With respect to cotton, our two primary competitors in the
world market today are China and India, and all of us are
acutely aware of the response that China and India have given
recently to Secretary Clinton with respect to the proposal of
their participation in the climate change issue. They basically
have said go stuff it, and we are going to be putting our
cotton farmers in particular at an unfair disadvantage in the
world market with respect to competing with countries like
India and China who are going to pay absolutely no attention to
the issue.
Equally concerning is what a climate change bill will do to
cropping patterns in the United States. According to the United
Nations, the population of the globe will increase from 6.5
billion today to 9 billion by 2050. According to the
Environmental Protection Agency, the Waxman-Markey bill will
take 40 million acres of productive farm and pasture land out
of production. According to USDA, total cropland in the United
States totals 405 million acres. So I find it puzzling why we
want to take 10 percent of our cropland out of production when
the statistics indicate that we will need every available acre
of arable land to feed a hungry world.
For what? Possibly lowering global average temperatures by
0.195 degrees Celsius by 2100 if the United States is the only
Country to act. This is not good policy. There has to be a
better way.
Since the cap and trade program will undoubtedly raise
production costs for farmers and ranchers, the offset
provisions in the House bill are a key issue for agriculture
and forestry, but there are still many questions to be
answered. For example, if Congress creates an offsets program,
there will be some producers who are able to benefit from it,
but there will also be many who are not able to benefit from
it.
If the greatest potential for sequestration is planting
trees, how much opportunity is there for your average producers
for provide offsets?
How much land is likely to be taken out of production to
plant trees and let land lay fallow?
What does this mean for livestock production and food
security?
Like most of my Senate colleagues, I want to support a bill
that provides greater energy security for Americans and
addresses climate change, but, unfortunately, the House bill is
not it.
I want to support a bill that creates all kinds of jobs,
not just green jobs. That bill should also reflect the
realities of producing food, fiber, feed and fuel in the United
States and recognize the unique aspects of rural America. I
support greater energy conservation and efficiency. I support
the development of nuclear energy, renewable and alternative
energy sources and new drilling. We can do all of these things
while addressing the environmental aspects of energy production
and use.
I am ready to work with all of my colleagues who share
similar goals.
Given the importance of this topic, Mr. Chairman, I ask you
to consider holding more hearings on this issue. This 1,427-
page bill is far too complex to address with only one hearing.
For example, I expect we will find out today that we need to
delve into the proposed agricultural offsets program. We will
need to better understand the effects on agriculture, forestry
and rural America. We will also need to carefully review the
role of the Commodities Futures Trading Commission under a cap
and trade program.
The potential long-lasting effects of this bill on the
future of agriculture and rural America eclipses the support
that we provided in the Farm Bill. We simply must have a
thorough understanding before moving forward.
So, Mr. Chairman, I thank you again for holding this
hearing. I look forward to hearing from our witnesses and for
us to have an ongoing dialog within the ag community on this
issue.
Chairman Harkin. I thank you very much, Senator Chambliss.
Before we get to our witnesses, Senator Grassley I know
wanted an opportunity to make a statement. Because he has to be
involved as a Ranking Member of the Finance Committee on
something called health care reform, I will just recognize him
briefly.
STATEMENT OF HON. CHARLES E. GRASSLEY, U.S. SENATOR FROM THE
STATE OF IOWA
Senator Grassley. Yes, I thank you very much, Mr. Chairman.
I thought I ought to ask the indulgence of you, Mr.
Chairman, to make a statement why I do not appear at one of the
most important issues that is before the Congress that is
affecting agriculture, which is this subject of cap and trade,
why I cannot be here, and it is because I am negotiating on the
Health Care Reform Bill with Senator Baucus along with a few
other members.
I wanted to express my concern about the impact that this
legislation has upon American agriculture, particularly row
crop agriculture, and to say that as a Senator from the same
State the Chairman is from, a leading agricultural State, and
as a farmer myself, that I am very concerned about it. I am
going to be very actively engaged in this through the process,
and I did not want my absence from this hearing today to show
maybe a lack of concern.
I share some of the thoughts that Senator Chambliss just
gave, but I think on the point of the United States acting
alone without some international agreement I think
Administrator Lisa Jackson said it best when she said, ``I
believe the central part of the charts are that the U.S. action
alone will not impact world CO2 levels,'' that this argues for
doing this on an international basis and not on ourselves doing
things that are going to make American agriculture or American
manufacturing uncompetitive.
So I thank you very much for allowing me to speak and the
indulgence of the other members as well and the witnesses, and
I hope to be very involved in this in later hearings. I will
submit questions for the record.
Thank you, Mr. Chairman.
Chairman Harkin. Thank you, Senator Grassley.
Without further ado, we would like to turn to our
witnesses. We have a great first panel to kick this off today.
As I said earlier, at 2:30, we will reconvene with Secretary
Vilsack, Administrator Jackson and Dr. John Holdren, Director
of the White House Office of Science and Technology, but this
morning, we have a great panel.
We have: Mr. Roger Johnson, President of the National
Farmers Union; Mr. Bob Stallman, the President of the American
Farm Bureau Federation; Mr. Jo Pierce, a family tree farmer
from Maine representing the Forest Climate Working Group; and
Mr. Jason Grumet, Founder and President of the Bipartisan
Policy Center in Washington, D.C.
Gentlemen, all your statements will be made a part of the
record in their entirety. I read them all last evening.
I have asked our clerk to give you 7 minutes on the clock.
If you run over a minute or so, that is probably OK, but let's
try to keep it to about 7 minutes.
If you could summarize your statements, I would be
appreciative. We will just start with, as I read them off, Mr.
Johnson, and we will work across.
So, Mr. Johnson, welcome again and please proceed.
STATEMENT OF ROGER JOHNSON, PRESIDENT, NATIONAL FARMERS UNION
Mr. Johnson. Thank you, Chairman Harkin, Ranking Member
Chambliss and members of the Committee, for holding this
hearing on this very important issue.
As the Chairman has indicated, my name is Roger Johnson. I
am the President of the National Farmers Union representing
about a quarter million farm and ranch families around the
Country.
The American Clean Energy and Security Act of 2009, as
recently passed by the House of Representatives, we believe is
a step in the right direction. Chairman Peterson deserves a lot
of credit for adding provisions to that Act that are favorable
for agriculture and forestry, and I want to take this occasion
to thank him publicly.
In order to address the issues of climate change, our
policy for National Farmers Union has for some time supported a
national mandatory carbon emission cap and trade system that
does a number of things: grants USDA control and administration
over the offsets programs, does not place an artificial cap on
domestic offsets, is based upon science, recognizes and treats
appropriately early actors and allows producers to stack
environmental credits.
Financial implications of this issue, climate change, are
significant. The cap and trade allows the market to find and
deploy low-cost emission reducers--that is the way we think it
ought to be structured--while mitigating increased energy costs
resulting from such a program. A cap and trade system with
offsets could provide farmers and ranchers the opportunity to
be part of the climate change solution by utilizing soil carbon
sequestration and methane capture.
The cost of no action must become a legitimate part of the
ongoing debate. Models of climate change scenarios demonstrate
increased frequency of heat stress, of droughts and flooding
events that will reduce crop yields and livestock productivity.
The risk of crop failure will increase due to rising
temperatures and variable rainfall. Earlier springs seasons and
warmer winter temperatures will increase pathogen and parasite
survival rates, leading to disease concerns for crops and
livestock. So the costs of doing nothing need to be considered
in the calculation relative to this bill as well.
Further, if Congress fails to pass climate change
legislation, current law would suggest that EPA needs to move
to regulate greenhouse gas emissions. I do not know of anybody
who thinks that would be a better alternative. A purely
regulatory approach to addressing greenhouse gas emissions will
bring all of the downsides with none of the upsides that carbon
offsets would provide for agriculture.
The agriculture and forestry sectors should not be subject
to an emissions cap as they are too small and diffuse to be
directly regulated. The House bill appropriately does that.
Agriculture, as you stated, Mr. Chairman, emits
approximately 7 percent of all U.S. greenhouse gas emissions
but has the capacity to offset as much as 20 percent--some
estimate 25 percent--of all greenhouse gas emissions from all
sectors of the U.S. economy. So it is important that we figure
out a way to get agriculture included in this.
Cap and trade with offsets provide a larger market, leading
to lower costs for everyone in our society. In addition,
offsets also provide an income opportunity to help offset some
of the increased expenses that are certain to result as a
result of this legislation.
On Page 3 of my testimony, I talk a bit about legislation
priorities, and the question is most appropriately posed.
Chairman Harkin. Mr. Johnson? Mr. Johnson, hold on a
second. Something has happened.
Mr. Johnson. Are we still on here? I got a button on.
Chairman Harkin. We blew a fuse back there. It looks like
it is back on now. There you go.
Mr. Johnson. OK. Are we back?
All right. How should this be done? USDA has more than 20
years of targeted climate change research and is probably the
premier entity in the world with respect to climate change
research relative to agriculture. USDA has the institutional
resources, the administrative structure and established
relationships with producers to oversee the offsets program.
The 2008 Farm Bill provided the Department with the statutory
authority necessary to create and administer an offsets
program.
A number of agencies at USDA are already working on this
issue and likely will continue to ramp up their work. NRCS,
CSRES, FSA, ERS and ARS are all agencies of USDA that are doing
climate change work, research or work with producers.
In addition, USDA has offices located nearby to almost all
farmers and ranchers in the Country.
An important issue for you to consider is to deal with the
question of early actors. These are folks who have entered into
voluntary legally binding contracts to reduce greenhouse gas
emissions. We believe they should be allowed to participate
under a Federal schedule that is adopted. We need to encourage
widespread adoption of practices that reduce greenhouse gas
emissions or sequester carbon, and getting these early actors
appropriately accounted for, without penalizing them or
adopting perverse incentives that penalize early actors, should
be an important goal of this Committee.
Agriculture and forestry have the ability to provide the
easiest, the least costly and the most readily available means
to reduce greenhouse gas emissions on a meaningful scale, and I
think all of us on this panel would argue that should a bill
pass agricultural offsets need to be carefully considered by
this Committee and made an integral part of the cap and trade
legislation.
Allowances: We believe that the majority of the emission
allowances under a cap and trade system should be auctioned off
with the generated revenue used to mitigate costs and to foster
the development of renewable low carbon energy sources and
technologies.
Providing a percentage of overall allowances to the
agricultural sector, as proposed in the earlier Lieberman-
Warner climate change bill this body considered, would have a
number of advantages:
It would offer flexibility for agriculture producers to
implement activities that provide greenhouse gas benefits but
may not technically fall within the scope of an offsets
program.
It would also be a funding source for research and
development that would lead to likely new offset protocols that
also could be adopted and used to reduce our emissions.
It could be used to help compensate some of those folks in
agriculture who are not currently likely to benefit as a result
of offsets. Specialty crop producers are some that come to mind
and also dealing with those pre-2001 actors who are doing the
right things environmentally and need to be rewarded.
National Farmers Union believes that 5 percent of all the
allowances should be provided to agriculture as this body has
earlier decided should be provided to agriculture.
Skipping to the bottom of Page 5 of my testimony, dealing
with renewable energy opportunities, as climate and energy
legislation moves through the U.S. Senate it is critical that
this opportunity is used to advance renewable energy
opportunities in rural America. There are two items in
particular, very briefly.
EPA should be barred from considering international
indirect land use changes. This is unsettled science. The House
bill did it. I would urge the Senate to follow.
Second, it is critical that legislation include a robust
renewable energy standard. We have abundant wind, solar and
biomass resources. We should use them.
Finally, near the bottom of Page 6, I would say also that I
would encourage the Senate to look at locally owned wind
projects and to provide incentives for them. They generate
about 2.6 times more jobs and more than 3 times as much rural
economic benefit than those that have outside ownership.
Finally, Mr. Chairman, let me say that National Farmers
Union is the largest aggregator under the current Chicago
Climate Exchange Carbon Reduction program. We have worked with
about 5 million acres that are enrolled across more than 30
States, and nearly $9.5 million has been earned, almost 4,000
producers that are voluntarily participating in this program.
We have learned some lessons that we think should be used as
you design this legislation.
With that, Mr. Chairman, let me thank you for the
opportunity to testify and for holding this hearing on this
important issue.
[The prepared statement of Mr. Johnson can be found on page
90 in the appendix.]
Chairman Harkin. Thank you very much, Mr. Johnson.
Now we turn to Mr. Stallman, President of the American Farm
Bureau Federation. Mr. Stallman, welcome and please proceed.
STATEMENT OF BOB STALLMAN, PRESIDENT, AMERICAN FARM BUREAU
FEDERATION
Mr. Stallman. Thank you, Mr. Chairman, Ranking Member
Chambliss, members of the Committee. It is a pleasure to appear
before you today on behalf of the American Farm Bureau
Federation, a membership organization representing six plus
million member families all across this Country. I am a rice
and cattle producer from Texas, and so I am intimately familiar
with the hazards that we face in the occupation of farming.
I commend you for convening this hearing today. The issue
of climate change legislation is absolutely critical to
American agriculture.
We are heartened by your statements, Chairman Harkin, that
you want to support and even improve upon the provisions that
were negotiated by Chairman Peterson and the House of
Representatives. We will certainly support you and other
members in that effort.
Any cap and trade bill must have the strongest, most
effective, most comprehensive agricultural provisions possible.
I discuss those in detail in my written statement and will be
pleased to answer any questions with respect to those during
the question session.
But let me stress that it is critically important to give
USDA full authority over the program, full authority to ensure
that conservation tillage and no-till get appropriate credit,
that credits are stackable, that domestic credits get priority
over international offsets, that early actors are appropriately
recognized and that nutritional management plans for livestock
are encouraged. In short, we want to ensure that all efforts
producers undertake that mitigate greenhouse gas emissions get
credit.
This is important for a simple reason: Even with the best,
most comprehensive agricultural offsets program, the
agricultural sector will lose under cap and trade. Under the
best estimates we can make, the House-passed bill will take $5
billion out of farmers' pockets in the short term. Senator
Chambliss referenced that.
The worst news is that upon full implementation we would
expect that number to be $13 billion out of farmers' pockets,
and it is likely that he costs could be very much higher.
In addition, we have the potential for acreage shifts,
which we experience in agriculture, but the structure of the
Waxman-Markey bill and the energy expenses would tend to
indicate that soybeans will have a preference because of less
inputs like fertilizer and energy costs.
We also have the very real risk, if carbon offset prices
are high enough, of having cropland shifted into forestry.
One thing that is not often recognized is that landowners
are often not the farmers. There are many tenant farmers in
this Country. Most of the acreage in this Country is farmed
under leases from landowners, and those landowners may have a
great incentive to put that cropland into forestry at the
expense of the farmers who are currently farming that ground.
But, truthfully, any figure I or anyone else gives you is
really not much more than an educated guess. There are so many
unknowns and assumptions and estimates that are built into this
debate. No one can look you in the face and tell you with
certainty what is going to happen.
One thing, however, does seems certain. You are not going
to make a meaningful difference in what the climate will be 40
years from now.
Mr. Chairman, your chart certainly showed the trends in
temperature and carbon concentrations, but the reality is under
the IPCC models the Waxman-Markey legislation will not alter
that trend. Administrator Jackson of EPA testified to that fact
just 2 weeks ago. Others have said as much.
Bjorn Lomborg, the Danish environmentalist and author who
has written a great deal on this topic, said: ``At a cost of
hundreds of billions of dollars annually, Waxman-Markey will
have virtually no impact on climate change. If all of the
bill's many provisions were entirely fulfilled, economic models
show that it would reduce the temperature by the end of the
century by 0.11 degree centigrade, reducing warming by less
than 4 percent.
``Even if every Kyoto-obligated country passed its own
duplicate Waxman-Markey bills, which is implausible and would
incur significantly higher costs, the global reduction would
amount to just 0.22 degree centigrade by the end of the
century.
``The reduction in global temperature would not be
measurable in 100 years, yet the cost would be significant and
payable now.''
Mr. Chairman, I hope you and all the members of the
Committee take those words to heart.
Today, the United States has more recoverable coal reserves
than any other country, over 263 billion short tons. Waxman-
Markey requires us to ration that resource.
China has 126 billion short tons in coal reserves. Russia
has 173 billion short tons, and you can add to Russia's energy
resources 60 billion barrels of oil, 3 times what we have in
the United States. Waxman-Markey puts no limit at all on how
those nations use their natural resources.
Here is the kicker. If you examine this issue from a truly
environmental perspective, the United States produces more
product per ton of emission than those other countries. We are
more efficient users of energy. The argument that China and
India are using, that per capita carbon emissions should be the
standard with which to negotiate an international agreement, is
flawed. I would think we would want to have a system that
rewarded productivity and energy use.
Waxman-Markey penalizes the best environmental steward in
terms of the U.S. and does nothing to tackle the real problem.
We strongly urge Congress to reject such an approach.
I hear from farmers all over the Country who are following
this debate, and they keep asking me: Why are they doing this?
Frankly, I do not have an answer.
As Mr. Lomborg points out, coal-fired power plants being
build today in India and China have the potential to lift a
billion people out of poverty. I think we can all agree that is
probably a good thing. But we do not have to reduce the
American standard of living at the same time, and we should
not. Make no mistake, Waxman-Markey puts a huge economic burden
on American citizens.
This issue is at a critical juncture. It is imperative that
this Committee formulate the strongest agricultural offsets
program possible, but we also strongly urge all members of the
Committee to work with your colleagues to make the right policy
choices. If those choices cannot be made, then you should
reject the overall bill, just as a strong bipartisan group did
in the House.
We hope this Committee will mark up your own provisions to
be incorporated in any bill and conduct further hearings if you
think it is advisable. If you take the time to evaluate this
issue honestly, fairly and objectively, we have no doubt you
will craft a much better bill than the one passed by the House
of Representatives.
Never forget a few simple facts: If you want to change the
climate in 40 or 100 years, this bill will not do it. If you
want the U.S. to compete internationally, this is not the
answer. If you want to make the U.S. energy independent, this
is not the solution.
Thank you again for the invitation to testify, and I look
forward to answering questions.
[The prepared statement of Mr. Stallman can be found on
page 106 in the appendix.]
Chairman Harkin. Thank you very much, Mr. Stallman.
Now we will turn to Mr. Jo Pierce on behalf of the American
Forest Foundation. Mr. Pierce.
STATEMENT OF JO PIERCE, FAMILY TREE FARMER ON BEHALF OF THE
FOREST CLIMATE WORKING GROUP
Mr. Pierce. Thank you, Chairman Harkin, Ranking Member
Chambliss, Senators, for the opportunity to come talk with you
today.
America's forests have a lot to offer when it comes to
addressing climate change. Right now, according to the EPA,
U.S. forests sequester and store 10 percent of our annual
emissions. EPA estimates can double this number, supplying 20
percent of the Nation's climate solution from our forests.
This is a solution here in our own backyards. All we need
to do is to encourage sustainable forest management. I want to
be clear, we are not looking for people to plant trees on
farmland. The problem is too many landowners who do not manage
their land the way my family does, and we have to bring them
along to do sustainable forestry.
Forest offsets are a key cost saver in cap and trade. EPA's
analysis of the House bill showed reliance on U.S. forest
offsets for over 80 percent of domestic offsets. With such
heavy reliance on forest offsets, forests are key to keeping
the costs of a cap and trade system low. Including a strong
role for forests in a cap and trade system will also provide
thousands of new green jobs in rural communities, putting
people to work harvesting the carbon in our forests.
It is not just forest owners like me that agree about the
strong role of forests in climate solutions. The Forest Climate
Working Group, a diverse coalition of groups from the Hardwood
Federation to the National Wildlife Federation, all support a
strong role for forests in climate legislation. We will submit
into the record a letter from this diverse group later in the
day.
To secure this climate benefit, climate legislation must
engage the broad range of owners of U.S. forests. Most people
think U.S. forests are owned by the Feds or big industry, but
this is far from reality. In fact, over 10 million private
forest owners in America own most of the Nation's forests. Most
of these owners are families just like me. I am a sixth
generation family forest owner managing my land for income,
wildlife and other community amenities like clean water and
recreational opportunities.
Why not for carbon sequestration too?
Unfortunately, with declining timber markets and increased
development pressures, we are losing forest land. I get four or
five offers for my land every year.
Climate legislation can set up new income streams for
forest owners to help them hang onto their land while providing
climate benefit. To fully capture the estimated 20 percent of
the Nation's climate solution from our own forested backyards
and engage the 10 million owners of U.S. private forests,
climate legislation must put the right incentives and market
structures in place.
So what are key elements of climate legislation that will
engage the Nation's private forest owners in climate mitigation
activities?
First, the legislation should establish environmentally
sound offset markets that are flexible enough to engage a broad
range of forest owners. Specifically, the legislation must:
Specify forest project types, allowing offset projects from
improvement of forest management activities with appropriate
crediting for harvested wood products, not just tree planting.
Provide flexible contracting options for landowners who may or
may not be able to commit to a very long-term contract as
required in many other offset markets right now. Reward early
actors who have already taken steps to combat climate change.
Provide a role for the USDA in offset markets.
The House-passed bill contained improvements on some of
these issues, but more can be done.
Second, legislation should provide forest carbon incentives
that capture climate mitigation benefits from forests that do
not fit in the carbon offset markets. This is especially
important for smaller forest owners who are not likely to
participate in offset markets because the up- front investment
is not likely to be recovered on small forest tracts.
Interestingly, these smaller owners hold one-quarter of the
private forest land base. So these types of incentives are
critical to fully tap the climate mitigation potential from
private forests.
Unfortunately, these incentives were not provided in the
House-passed bill even though an amendment was offered to
create them.
Third, the legislation should provide resources for forest
adaptation activities to ensure that the climate mitigation
tool we have in our forest backyard is not overtaken with
impacts from climate change like drought, fires, pathogens and
pests.
The House-passed bill is an improvement, but more can be
done.
The bottom line is the U.S. forests have a lot to offer,
and we should not miss the opportunity to deal with climate
change while also setting up incentives and markets to keep
families like me on the land and keeping it forests.
Chairman Harkin. Thank you very much, Mr. Pierce.
Now we will finish our testimonies with Mr. Jason Grumet.
Do I pronounce it Grumet or Grumette?
Mr. Grumet. Senator, shockingly, you did pronounce it
correctly. It is Grumet. Thank you.
[The prepared statement of Mr. Pierce can be found on page
100 in the appendix.]
Chairman Harkin. Yes, we have good staff working. All
right, Mr. Jason Grumet, President of the Bipartisan Policy
Center.
STATEMENT OF JASON GRUMET, FOUNDER AND PRESIDENT, BIPARTISAN
POLICY CENTER
Mr. Grumet. Well, good morning, Chairman Harkin, Ranking
Member Chambliss and the Committee.
As you note, I am Jason Grumet. I am the President of the
Bipartisan Policy Center. On behalf of our founders, your
former colleagues, Tom Daschle, Bob Dole, George Mitchell and
Howard Baker, it is a pleasure to appear before the Committee
today.
Also I want a special thanks to go to Mr. Chambliss for the
high protein breakfast snack that we all enjoy. We appreciate
that very much.
Mr. Chairman, the Bipartisan Policy Center was created to
provide both the motivation and the infrastructure for the kind
of principled compromise that you all well know is necessary
for the kind of durable policy change that we need in this
Country. Toward that end, we have projects underway on health
care and national security, regulatory reform and
transportation policy, but we have two projects that bear
directly on the inquiry here today.
The first is a project that was begun in 2001 called the
National Commission on Energy Policy. This effort has brought
together a diverse group of energy experts, chaired by former
EPA Administrator Bill Reilly, John Rowe, who is the Chairman
and CEO of the Exelon Corporation, and, until recently, by John
Holdren, who you will be hearing from later today.
Consistent with the way that you framed the challenge in
your opening remarks, we see the goal as trying to figure out
how we address the challenges of climate change consistent with
our longer-term national security and economic goals. And, in
particular, we focus on mechanisms to address, I think, many of
the very real concerns that Mr. Stallman has raised: How do you
ensure that you can address climate change in a meaningful and
sincere way without having excessive volatility in prices or
excessive impacts on the economy? I will draw from some of our
thinking in a moment.
The second project is a project that Senators Daschle and
Dole have led personally. This is the 21st Century Agriculture
Policy Project. They have been working together for several
years. They have produced two reports which have been submitted
to the record previously, but as we are down to our last 18,000
copies I have brought a few more for your enjoyment. These
reports really focused, first, broadly on the questions of what
are new opportunities for agriculture in new competing markets.
They held a series of hearings around the Country. They
conducted and sponsored a series of analysis, some by Dr.
McCarl from Texas A&M, who I know you are also working with. In
the conclusion of Dr. McCarl, the sense was that a well-
designed market that took advantage of all these opportunities
could in fact provide net benefits for the agriculture
community.
On the basis of that and their analysis, and I will quote,
Senators Daschle and Dole concluded in the first study that
``Federal action to establish a mandatory program to limit
greenhouse gas emissions is sensible and will provide
agricultural producers with significant new market
opportunities.''
They continue that ``The agriculture sector is in a unique
position to lead and benefit from efforts to address climate
change.''
The second study focused on taking that theoretical
possibility and figuring out how, in practice, to capture the
real opportunities to provide a new economic impetus for
American farming and forestry through carbon sequestration
activities.
I think the prior witnesses have done an excellent job of
framing the risks and opportunities that we have, and I think
the principal point I want to share with you is that it is
really up to you. You can design a carbon mitigation strategy
that mitigates the costs and takes advantage of those
opportunities in a way that is going to be very good for
American farming and forestry. But it is equally true that a
poorly designed program that does not address the risks of high
cost and price volatility and does not capture the very
significant opportunities for agriculture will harm the
industry.
I think it is important to move away from this kind of
binary culture war of is climate change going to be good or bad
for American farming. The answer is it depends, and I think we
have the opportunities now that I would like to reflect upon to
chart that productive course.
So, first of all, I want to embrace Mr. Stallman's
challenge, that we have to think seriously about the potential
for price volatility and the costs borne by agriculture and all
energy-intensive industries. This Committee, like those before,
has always faced the challenge of having sensible experts who
reach wildly different views on the costs of climate change
control, and that comes from the fact that you can put together
a number of reasonable optimistic or reasonable pessimistic
assumptions on the progress on technology, on future prices for
natural gas, on the availability of offsets and reach wildly
different conclusions.
This has been going on for quite some time. In the 1990's,
the Council of Economic Advisers concluded that we could
achieve compliance with Kyoto for between $14 and $23 a ton,
but the Department of Energy thought it would be $95 a ton.
We have the challenge of people coming forward and
basically having the kind of my modeler is smarter than your
modeler fight. Ultimately, of course, we do not know.
It is important, I think, to have mechanisms that do not
rely on the magic words, ``trust me'', because there is simply
not enough trust in this debate, and the stakes are too high to
gamble our future on one side or the other being right.
The good news is those mechanisms exist. Our Energy
Commission proposed many years ago the idea of a cost cap in
the early years of the climate program, called the safety
valve, in which the government would provide credits at a fixed
price to people who had a compliance obligations. By setting
that fixed price, you could provide a meaningful absolute cap
on the total cost of the program.
This idea has matured over the years, and in the Warner-
Lieberman legislation and in the recent House bill the idea of
a credit reserve, which I am happy to talk about in more
detail, is something that we have helped develop and support.
This would take credits from the future and put them in a
transparent vat that you could go access if in fact it turns
out the technology is not proceeding at the pace that we hoped.
Either of these mechanisms provide the opportunity for
predictable and transparent cost containment, which we do
believe is going to be necessary to build a meaningful
bipartisan consensus.
I will note that there are a few other mechanisms that the
House bill and prior Senate bills have take advantage of. First
of all, as I think Mr. Chambliss points out, farming is an
energy-intensive industry. As Senator Stabenow and others have
spent a great deal of time focusing on how we address the
transition for energy-intensive industries, one good
opportunity is to provide free permits for a period of time so
that companies have the resources to invest and modernize and
become more efficient. I think the House made a smart choice in
including key aspects of the agriculture sector in that energy-
intensive category--fertilizer manufacturing, wet milling and
others--and we commend you to look at those ideas.
Then, finally, issues of market design are important, and,
Chairman Harkin, I know this is a concern of yours. The words,
market-based program, are not quite the selling point that they
used to be in proposing new policy ideas since the financial
collapse.
One of the benefits of cost containment, having both a
price floor and a price ceiling, is that you reduce the market
volatility. Consumers do not like volatile prices. One group
that does like volatile prices is Wall Street. That is where,
if there is going to be mischief, that mischief can come from--
arbitraging the highs and the peaks and the valleys and the
lows.
If you have a cost collar, both a cost floor and a cost
cap, you can dramatically reduce that concern and, importantly,
do so without coming up with overly prescriptive regulations
that could actually seize the market and stop it from
functioning at all. We think you do need to be careful not to
try to be overly prescriptive in regulating the market. Having
a cost cap for the first several years, we think, is a good
opportunity.
Let me turn now in the limited time I have left to the good
news, to the opportunities to capitalize on the significant
ability of agriculture and forestry to help solve this problem.
The House debate focused greatly on which agency should
have the lead, and we commend and applaud Chairman Peterson's
efforts to demonstrate the important role that the agriculture
community and the USDA should play in leading this program.
Senators Dole and Daschle focused less on which agency should
have the lead and more on what is a program design that would
encourage the kind of collaboration and discourage the conflict
that we have seen from time to time between environmental and
ag advocates and between USDA and USEPA.
I want to very much reinforce Mr. Johnson's suggestion that
we take a two-track approach. Senators Daschle and Dole believe
that we should have unlimited access to domestic farm offsets
for projects that can be demonstrated to meet the rigorous
measurement, permanence and additionality requirements, but
they also recognize that not all programs are going to fit
easily into that set of ideas, and there is a real concern that
the high level of scrutiny could slow down the market in a way
that we cannot tolerate.
So they propose, I think similar to Mr. Johnson, that we
have a second track where we encourage more innovation and more
experimentation, and we do so by insuring the program with
emission credits. Rather than giving those credits to somebody
to emit, you hold those credits aside and you use these
allowances to essentially provide insurance against more
innovative and creative projects--projects that are more
complicated because there are early action issues that create
concern over baseline, projects in which they are brand new and
we need to learn our way through that system.
Just like we provide bonus allowances to encourage carbon
sequestration, just like we support the need for loan
guarantees for nuclear power, we need to have an opportunity to
be experimental. It is in that spirit that we are confident
that the ag and the environmental communities will work well
together.
The offsets program in its most rigorous form is an all or
nothing proposition. It forces EPA to focus on the 5 percent
that is imperfect and not the 95 percent that is perfect. So
having this alternative mechanism, we think, will enable much
greater collaboration.
So, in closing, I just want to make two points. First,
absent purpose-designed climate legislation, the government
will have no choice but to use the existing statutes that you
have all passed, that being the Clean Air Act. As Mr. Johnson
points out rightly, that obligates EPA to focus on the glass
being half empty. It obligates them to focus their considerable
regulatory authority in traditional command and control
regulation, and they do not have the ability to enable the ag
and forestry communities to capitalize on the significant
opportunities through sequestration.
Finally, this Committee has a proud history of
bipartisanship and putting the interests of agriculture ahead
of party interests. I will note that despite the tremendous
themes and theories of Purple Nation and bipartisanship in the
campaign, when I tell people these days that I run something
called the Bipartisan Policy Center, they tend to smile and
say, good luck with that.
We need more than good luck. We need real leadership, and
this is the Committee, I think, that can bring the debate back
to focus on the real substantive challenges and design a
program that is truly going to be in the best interest of
American agriculture and forestry. I look forward to the
opportunity to be able to work with you in that regard.
Thank you.
[The prepared statement of Mr. Grumet can be found on page
74 in the appendix.]
Chairman Harkin. Thank you very much, Mr. Grumet, and thank
you all for good testimonies, not only verbally but your
written testimonies.
We will start now rounds of 7-minute questions, and, if we
can get the clock reset here, I will start.
First of all, I will start with Mr. Johnson.
The Farmers Union Carbon Credit Program allows producers to
earn income by reducing greenhouse gas emissions through no-
till, anaerobic manure digester systems, tree plantings and
other sustainable management techniques. It is my understanding
that carbon sequestration methods can be implemented with
conventional farming techniques so that the agriculture
community can provide carbon offsets in a cost-effective manner
while acquiring new revenue. So I think it is not a matter of
deciding to grow carbon or crops. Producers can be growing both
crops at once on the same land.
Could you elaborate on the opportunities that a global
warming bill could bring to farmers? How large was your effort
and how many farmers have participated? What does the trend
look like? Are farmers able to adopt these practices? Those are
kind of the questions I want to get into on your carbon credit
program.
What would happen to your program? How might it accelerate
if in fact we did in fact have a cap? Right now, there is no
cap. I do not know how much your farmers are making, but with a
cap, obviously, those offsets become more valuable.
Mr. Johnson. Well, thank you, Mr. Chairman.
On Page 7, near the top of my testimony, I give you some of
the numbers: about 5 million acres that have been enrolled,
30--I think the latest number is closer to 40--States, about
$9.5 million, about 4,000 producers.
But the crux of your question really gets to what are the
opportunities and is there a difference between the voluntary
program that we operate now and a mandatory program that would
exist under a cap? Let me take those in two pieces--first of
all, the kinds of things that would and should be eligible.
First of all, we have no-till practices. There are lots of
science that says you follow no-till practices, especially in
certain areas of the Country, you clearly sequester carbon and
store it underground in the root structure at variable rates.
And so, under the program, there is a larger credit that is
given to a farmer in one part of the Country versus another
part of the Country because the science says that that is the
way it ought to be.
Precision farming is one of those that we have not yet had
approved through the CCX. This voluntary market has only been
operational for about 3 years. In 2006 is when we entered it.
So it has not been around all that long.
But, under precision farming, one of the very deleterious
greenhouse gas emissions that exists is nitrous oxide. It is
like 300 times more potent than carbon dioxide. So, by certain
kinds of fertilizer practices that reduce those gaseous
emissions of that nitrogen going into the air, you can clearly
reduce greenhouse gas emissions.
No we have not advanced the protocols yet to the point
where we are actually giving folks credit for that, but
certainly that is a good example of the kinds of R&D that ought
to be funded so that we in fact could figure out a way to
appropriately compensate folks for that, if not under offsets
then under the allowance pool that we have been talking about
as well. So there are lots of those kinds of examples.
Now, as to your question about what is the market likely to
look like in a voluntary versus a mandatory system, I think the
average price that our folks have received has probably been in
that three to four, maybe five dollars a ton range. Today, it
is well under a dollar a ton for two reasons. The economy
collapsed, No. 1. No. 2, all the uncertainty that is generated
by these debates in Congress right now lead people to wonder
whether what they are signing up for today will be eligible
under a system going forward, and so that has a severe market-
depressing impact.
Pretty clearly, under a mandatory system, that uncertainty
would go away once you have a bill that is passed and you know
what the rules. Most models suggest that the value of a ton of
carbon would go up significantly under a mandatory system.
Today, the value is determined mostly out of the
graciousness of some large companies, both national and
international companies and that are voluntarily purchasing
these carbon reductions in order to have a clean, green image
to the press or maybe they have got some attendant obligations
under Kyoto because they are a multinational company. Maybe
they just want to do kind of the right thing environmentally.
Maybe it is part of their marketing program. But, whatever it
is, it is different reasons for different companies, and it is
voluntary. So, as their income goes down, you know the
likelihood of them investing in these voluntary things goes
down with it as well.
Chairman Harkin. First of all, I just want to say at the
outset to everyone here that this whole debate, I guess if you
want to call, about whether or not early actors as we now call
them--I get all kinds of new phrases coming down here--will be
folded into the system. I can assure you they will be. I have
spent too many years on this Committee and in the House
committee watching programs come up that require a farmer to
tear up conservation practices in order to redo them to
qualify.
Mr. Johnson. Exactly, exactly.
Chairman Harkin. It ain't going to happen. OK?
Mr. Johnson. Good.
Chairman Harkin. There are very few things I can guarantee
but on that one, we are going to make sure.
Mr. Johnson. All right.
Chairman Harkin. We did that in the conservation
stewardship programs, saying that if you were doing these
practices you were eligible for it just as much as anyone else.
So I want to make that very clear, and I think we will find
probably a pretty good consensus here on this Committee and in
the Senate for that.
The other thing, does it makes sense right now for your
farmers to adopt some of these practices, economic sense, Mr.
Johnson? You are talking about a dollar a ton?
Mr. Johnson. Yes. At that price, certainly, that is not at
a high enough level to sort of induce people to do something
that they otherwise would not do, and that is one of the
fundamental precepts of an option, by the way, of the various
protocols that are involved. It is the principle of
additionality. You want folks to do something that they would
not otherwise do in the absence of that offset opportunity. So
that is something that we are really struggling with, with the
market as low as it is right.
But, over the last weekend, I met with a dairy farmer in
southern Virginia who is very seriously looking at putting in a
methane digester, a fairly sizable dairy producer. Well, it is
not economical today. I mean you just cannot make it work just
on dollars and cents.
He wants to do it for all the right reasons. He likes the
environmental impacts. He is in an area where he has got a lot
of neighbors. They would appreciate the fact that the odor
problem largely disappears with methane digesters. If you have
a significant value that can be attached to the reduction of
that methane, the destruction of that methane by burning it,
that is probably enough to tip a number of folks over into
adopting those kinds of practices that have a multiplicity of
benefits for the environment.
Chairman Harkin. Well, thank you.
I, obviously, have questions for other panelists. I will
have to wait until my second round. Now I will turn to Senator
Chambliss.
Senator Chambliss. Thank you, Mr. Chairman.
Mr. Stallman and Mr. Johnson, both of you represent large
producers from different parts of the Country, but the
testimony of the two of you differs substantially on the costs,
the benefits and the other likely impacts of the House bill on
production agriculture. I would like for both of you to comment
on that.
What is the reason for this difference, Mr. Johnson?
Mr. Johnson. Well, you know I think it is important,
Senator Chambliss, that maybe we talk about where we agree. You
know Mr. Stallman can certainly have a chance to respond to
this after I do, but I think on pretty much all the kinds of
things, if you listen closely to my testimony and to his
testimony and the testimony of the other witnesses, these kinds
of things relative to agriculture, if they are folded into a
bill, these are all things that we agree on.
Where our fundamental disagreement lies is whether we ought
to pass a bill like this or not.
You know I can only speak for myself and for my members.
Our policies are adopted by all of our members as they come
together in the national convention, and we have had this
policy for a number of years. It has been longstanding policy.
I would say a couple of things. First of all, we take
seriously this threat that EPA may at some point, under
existing law, go out and try to regulate what is going on in
agriculture. We do not like that idea very much.
Under the Clean Air Act, you now have a Supreme Court
decision that basically compels them to do it. You have an
endangerment finding that fits into that. You have a regulatory
threshold under the bills that are being contemplated that is a
thousand times larger than the regulatory threshold under the
Clean Air Act.
That is why farmers, most farmers and ranchers are excluded
under the cap and trade legislation. They are provided these
optional opportunities. Under EPA, that may be that we may be
required to do a whole bunch of things. And so, we take that
very seriously.
We also think that we believe the science. I mean the
science seems compelling. It says climate change is happening,
mankind is having an impact on it, and we need to do something
about that. Now whether it is all this bill or something else,
you know there is a lot of room for us to come together on
different parts of it. We think something needs to be done, and
we want to be helpful in that debate, and we would be delighted
to work with you.
Chairman Harkin. OK. Mr. Stallman?
Mr. Stallman. Senator, with respect to our economic
analysis, we were trying to figure out some common set of
numbers or assumptions to use, and so we used the EPA's
analysis of the Waxman-Markey bill which we view as a very rosy
scenario in terms of impact on energy costs. That is what gave
us our $5 billion reduction in net farm income and up to $13
billion reduction in net farm income. So our economics team
used that as the basis for trying to analyze the impact on
agriculture.
Once again, you can pick other assumptions. You can pick
higher energy costs, which we feel are more likely than not
given the EPA's assumptions about the Waxman-Markey bill and
how fast things like nuclear and solar and wind-generated
electricity will come online, and come up with much worse
numbers.
We do disagree with my colleague here relative to a couple
of issues. One is we are focusing on the Waxman-Markey bill and
what the impacts of that are going to be. Once again, that
bill, even by proponents of the global warming crowd, will do
little or nothing to address this problem. And so, then our
question becomes why are we burdening the U.S. economy with a
bill that admittedly will not do anything to address the
problem that it is purported to address? So that is one area
that we disagree with pretty substantially.
On the EPA regulation issue, currently, under the
endangerment finding in the Massachusetts case, EPA has the
obligation to regulate basically auto emissions. All of the
rest of their proposed regulation is very speculative.
I find it very difficult to believe that this Congress
would give them the amount of resources necessary to come out
on a farm by farm basis and regulate agriculture. It may
happen. I am not saying it cannot happen, but that would be so
burdensome and onerous. I think there would be an outcry that
this Congress would address. So I am not as concerned about
that as my colleague sitting next to me is.
Those are some of the fundamental differences that we
think, but it really comes back to looking at the specifics of
the Waxman-Markey bill and trying to determine what those
impacts will be, not only on agriculture but on America in
general.
Senator Chambliss. And, again, I assume this is not Bob
Stallman's opinion. It is the opinion of your membership in
some sort of formalized way.
Mr. Stallman. Well, absolutely, Senator Chambliss. I did
not talk about our decisionmaking process, but we actually
start out at the county level with proposals that go up to a
State level meeting and then ultimately to our national
meeting, all decided upon by our delegates that are there
representing their respective members at each level. It is a
very democratic, grassroots process, and it allows for a lot of
debate. In fact, it allows for about 5 months worth of debate
every year on these issues, and that is how we derive our
policy positions.
Senator Chambliss. Mr. Johnson, I can appreciate the
willingness of your members to want to address climate change.
However, in your testimony, you do not address the cost aspects
of the House bill and a cap and trade program. Yet, these costs
are likely to be significant for producers in every rural part
of America.
Has NFU done an analysis of those costs and what do you
think about the other studies that have been done that are
going to project these high costs on your membership?
Mr. Johnson. Senator Chambliss, we are concerned about the
costs. We are convinced that there will be some increased costs
to producers. Energy costs are going to go up. I do not think
there is much debate about that. As a result, you are likely to
see fertilizer prices, particularly nitrogen fertilizer prices,
go up. So you are going to see costs go up.
We have not done our own independent studies. Lots of
studies have been done, as you know. Mr. Stallman talked about
their in-house study. Ohio State just did and released a study.
The FAPRI released a study. Most of these have been
considerably lower than what the Farm Bureau study result has
been.
All of these have not included the costs of doing nothing,
and that is a real challenge that I think all of us have. We do
not have the resources to do that, but I hope that this
Committee will figure out, will try to sort out is there a
methodology to quantify these additional costs to risk
management, to insurance companies, to disaster payments that
Congress is likely to authorize as a result of the increased
flooding and droughts and fires and pestilence--those sorts of
things that pretty much the body of scientific evidence
suggests is the outcome that we are likely to see more and more
of in increasing amounts as global change continues to happen.
Those are difficult things to get your arms around, and so
we do not have an internal study that we have looked at, but
there are have been a lot of studies out there. I think the
FAPRI study basically said the cost to the average person is
like 50 cents or something like that. There was another study
that says it is going to be less than $5 an acre on average,
much higher for some crops, lower for others. So they are kind
of all over the board.
Senator Chambliss. Mr. Pierce, quickly, you talked about a
small forest landowner not really being able to participate in
the House-passed design. What are we talking about with a small
forest? Are you talking about 50 acres, 100 acres, 200? What
range are you looking at there?
Mr. Pierce. We are talking about 100 acres or less. It just
does not pay to do all the auditing and the setting up of a
carbon sequestration program.
Senator Chambliss. OK. Thank you, Mr. Chairman.
Chairman Harkin. Thank you, Senator Chambliss.
I might just add that I just received this morning a
preliminary analysis of the effects of H.R. 2454 on U.S.
agriculture from the Office of the Chief Economist at USDA. It
was just delivered this morning. I think this would be a good
point just to read the executive summary.
They said that USDA performed a preliminary economic
analysis of the impact of the House-passed bill. The analysis
assumes no technological change, no alteration of inputs in
agriculture and no increase in demand for bioenergy as a result
of higher energy prices. Therefore, the study overestimates the
impact of the climate legislation on agricultural costs in the
short, 2012-2018, medium, 2027-2033, and long term, 2042-2048.
In USDA's analysis, short-term costs remain low in part
because of provisions in H.R. 2454 that reduce the impacts of
the bill on fertilizer costs. In fact, the impact on net farm
income is less than a 1 percent decrease. In the short run,
agriculture offset markets may cover these costs. Over the
medium term and long term, cost to agriculture rise but remain
modest, 3.5 percent and 7.2 percent decreases in net farm
income respectively over the medium and long term.
However, benefits to agriculture from an offsets market
rise over time and will likely overtake costs in the medium and
long term.
Other studies that account for the impact of higher energy
prices on input substitution and demand for bioenergy find that
H.R. 2454 leads to higher agricultural incomes even without
offsets.
In summary, USDA's analysis showed that the agricultural
sector will have modest costs in the short term and net
benefits, perhaps significant net benefits, over the long term.
Their table that they had here showed that the effects in
the short term from 2012 to 2018: Total expenses, 0.7 billion;
fertilizer and lime, less than 0.1. So the total of fuel, oil
and electricity is about 0.7. So about seven-tenths of a
percent increase in farm expenses from the 2012 to 2018
timeframe.
So this is USDA's analysis. I am sure you will be reading
about it today, but I thought this would be the appropriate
place to mention that we just got that to the Committee today.
Now, in order of arrival, Senator Johanns, Senator Lugar,
Senator Stabenow, Senator Roberts, Senator Klobuchar, Senator
Lincoln. So I will recognize Senator Johanns.
Senator Johanns. Mr. Chairman, let me start by just
expressing my appreciation not only to the witnesses but to the
Chairman for calling this important hearing. I do appreciate
it.
Mr. Johnson, let me start with you. The legislation is so
complex that I could probably spend 2 hours with each witness,
and we do not have 2 hours. We have 7 minutes in the first
round at least.
But I was struck by the fact that one of the things you
said at the start of your testimony was that Waxman-Markey was
a step in the right direction, and I want to drill down a
little bit deeper on that. One of the things that I understand
about Waxman-Markey is that it does not help out the early good
actors. Is that your understanding also?
Mr. Johnson. Senator Johanns, I think Waxman-Markey could
be improved by this Committee significantly on the question of
early actors, and that is really one of the things. They just
did a tiny something, like a quarter of a percent of the
allowance allocation. That is one of the reasons why we have
asked for a 5 percent of the allowances to go to USDA to figure
out how to appropriately deal with early actors.
The early actor question is a really difficult question
because the purists--and I do not mean that pejoratively--when
dealing with offsets, will argue that you should not pay
someone for doing something that they would have done anyway.
If you do, you are violating this principle of additionality.
But most of us who live in the real world would say, well,
the last thing you want to do is to incent someone to plow up
no-till so you can redo no-till or to take land out of CRP so
you can put it back into permanent grass.
To deal with those things, there are a couple of ways you
do it. You either bend that definition of additionality. What
we would argue is you use a baseline, and the House did that,
of 2001. For practices beginning after 2001, going forward,
they are eligible. That bends that definition a little bit.
But, beyond that, you need to provide another pool of resources
so that you can put policies in place that do not provide these
sorts of perverse incentives.
Senator Johanns. To date, there is a real deficiency here.
It is not only in the legislation, but it is also in what USDA
is saying. USDA, in testimony before EPW, says ``To ensure that
carbon offsets result in real atmospheric benefits, carbon
offsets must be additional. That is carbon offset credit must
not be awarded for actions that have happened in the absence of
the offsets policy.''
So, at least to date, this Waxman-Markey bill is a very
serious problem for agriculture. Would you agree with that?
Mr. Johnson. Well, no, I do not know that I would.
First of all, what I would agree with is that definition
that you just read from the Secretary, I think, very accurately
summarizes the principle of additionality that proponents of
offsets insist upon being met.
Senator Johanns. That very well summarizes the position of
the USDA.
Mr. Johnson. Well, you will have to ask the Secretary. I am
sure you will later today. But I suspect that it does. It is on
the record. And, it is for that very reason that you need
another pool of money to deal with these early actors.
To get to the premise of your question initially, it was
about my statement that the bill was a step in the right
direction. There is a lot of things sort of built into that
summary statement, if you will.
One of the things that I think and I hope will happen in
the Senate is that you will have the benefit of looking at the
language well in advance of having to make decisions and will
have the ability to make lots of adjustments that many of us,
as we were involved in testifying on the House side, we just
simply did not have that advantage. Language arrived late. It
is sort of the nature of the process. I understand that.
But, hopefully, the best news I heard out of this was
announcements by your Chairman and other chairmen over here
saying that they intend to use the language of the House as a
starting point. I think that is wise because it is complicated
language. Undoubtedly, there is lots of room for improvement.
Senator Johanns. What other areas, as you have now had a
chance to review and analyze the bill, would you say we should
reject, pay attention to? What other deficiencies do you see in
Waxman-Markey?
Mr. Johnson. If you will look at my testimony beginning on
Page 3 and through Page 5, I summarize, and, again, the focus
that we have taken here is on the agricultural and forestry
offsets. I summarize a number of the principles that we think
are very important.
We think in the case of early actors they did not go far
enough. We have already talked about that.
On the question of unlimited domestic offsets, they have a
limit that is imposed. In fact, this is another area where I
think Mr. Stallman and I would agree. We think there ought not
be a limit there, and we think you ought to devise a system
that gives preference to domestic as opposed to international
offsets.
We think while there was some language in there trying to
deal with this, the international trade issue, that is an
enormous for us. If we go down this path and major emitters
like China and India do not, then we are at a significant
competitive disadvantage. You need to have some provision,
whether it is through the use of tariffs or something, that
will sort of level that playing field, if you will. And, it
would probably need to be country by country because much of
the rest of the world were signatories to Kyoto, and so they
are embarking on something not identical but probably similar
to what we are talking about here.
Senator Johanns. Let me stop you there, Mr. Johnson.
Mr. Johnson. OK.
Senator Johanns. What if we do have a tariff system on
China? China has basically said: We are not going to agree to
caps. Take a hike.
So, if we have a tariff system on China's goods, whatever
the goods are we want to put a tariff on or some kind of trade
barrier or whatever, what do we do when China says, we do not
want your soybeans?
Mr. Johnson. Well, you know you raise a really good point,
and the point is about the integration of our policies with
respect not only to this legislation but with respect to our
negotiating positions at the WTO and those sorts of things as
well. You need to. That is something that we do not have a lot
of expertise in. We just think that that is something that you
need to deal with.
My guess is that what China is saying and what India is
saying is going to be muted and defused as the years go by, in
fact, as the months go by, leading up to the big conference in
Copenhagen in December. Some of this is probably positioning.
Some of this is making sure that different countries have the
moral authority to stand up and argue one way or another way.
It would be my hope that what happens, depending upon where
this legislation is in this Country, that our Administration
will go to Copenhagen and argue with as much passion as
possible that the rest of the countries of the world need to be
joining in this fight because a ton of greenhouse gas
emissions, whether it comes from the U.S. or China, has the
same impact.
Senator Johanns. Let me wrap up because I am out of time,
but I will say this. With many years of experience in dealing
with them, they are not positioning. Ask our pork producers.
Ask them about poultry. They are not positioning. On the last
day, China will look out for China.
Chairman Harkin. Thank you very much, Senator Johanns.
Senator Lugar.
Senator Lugar. Well, thank you, Mr. Chairman.
Let me just say at the outset that when asked by the press
whether I would have voted for Waxman-Markey if I had been in
the House, my answer is no. Now this does not mean that I am
opposed to our Committee writing a bill, and I look forward to
working with the Chairman and the distinguished Ranking Member.
But we have just touched upon one reason why we really have a
danger zone, and I understand the problems of dealing with
China and India and the fact that they are not very cooperative
but there is already a little bit of a protectionist tendency
in our governmental policies perhaps because of the recession,
loss of jobs and so forth. It is sort of an easy throw to gain
support for something that really ought not to be in the trade
area.
In addition, I would hope that even though persons were
pleased that you could pass any bill on cap and trade or
climate change and therefore exult really in the legislative
success, I am not convinced that the impact upon CO2 or
greenhouse gases is very substantial even over the long run of
this, in part because so many compromises had to be made to
draw one person after another across the line. So it is there,
but maybe we better really try again.
It is in that spirit that I listen carefully today, and I
appreciate some thoughts that have arisen from this panel, one
of which was that ag emits maybe 7 percent of the problem but
could contain 25 percent under certain circumstances . That is
truly remarkable. If American agriculture alone is able on a
net basis to take care of 18 percent of the problem, that is a
good bit more, I think, than the whole Waxman-Markey bill will
be finally evaluated as. So we ought to listen carefully as to
how that is going to occur.
Now one of the ways that it occurs is, for instance,
through the early actors guarantee that you have talked about,
Mr. Johnson, and you have talked about, Mr. Pierce.
Let me just admit that I have been intrigued by this issue
for a while. As Chairman of the Foreign Relations Committee, we
had hearings in 2005 and 2006, and you participated in one of
those, Mr. Grumet. We appreciated that.
Clear back when I was Chairman of the Agriculture
Committee, in 2000, we had a hearing on this issue, a long time
ago. One of the things that came from that was Chicago Climate
Exchange testimony, and on one occasion I was asked by Mr.
Sandor to become a client or a partner or what have you of the
Exchange. So people came out to my farm and measured trees that
had just been planted.
Now here we have, of course, the problem of the early actor
business. We have hundreds of acres of trees that had been
planted, but they are off the reservation. Nonetheless, they
were measured, and so I have been an active participant and
looking at the web site of CCX almost every day. It is only
about 55 cents a ton. Now I have had some good days. It was $7
a ton back 2 or 3 years ago. It even got to four during the
last climate change debate with Warner-Lieberman or what have
you.
So I have been appreciative of the National Farmers Union
group coming for celebrations here, with the tree people and
the no-till planting people, with the Farmers Union aggregated
farmers.
There are forestry groups now I am pleased to see, and you
might comment about this, Mr. Pierce, that are prepared to do
some aggregation of forest owners, the small people, the people
that might not ever get the measurements or will get into an
argument over early actors or all the rest of it.
In other words, in order for ag to come into play, we
really have to begin to think through the rules of the game so
that people can participate. So I am storing tons of carbon in
the trees that have been planted. I get a reading each year
from CCX, and I am much interested in this. A lot of farmers in
Indiana are too but feel cheated of the opportunity really to
get in, in this respect.
Now let me finally mention I think since a third of my farm
is also in trees, a third in corn, a third in soybeans, I am
interested in the fertilizer problem. You have touched upon
this today, and we want to follow that very closely because
this is a cost factor obviously for anybody who is in that
business.
But, at the end of the day, this could be a very
constructive Committee because we may be able to solve a good
part of whatever the climate change problem is without arguing
the cosmic issues of whether there is a big problem, a small
problem, one now or here, and do constructive things.
I just want to ask you, Mr. Pierce, for an additional bit
of testimony. How would you go about, in the early actor
business, of using either of our two great farm organizations
if they were to aggregate people? And, maybe that is not a good
idea, but how do we get forest owners, all these hundreds of
thousands and what have you that you have mentioned into the
ball game?
Mr. Pierce. Well, the American Forest Foundation has two
pilot programs right now which are trading carbon credits on
the CCX. So there is aggregation going on.
We need to have any program administered and the rules
written by the USDA. They are the people we trust. As one-third
of your farm is in trees, it is more like 95 percent of my
farm. But I still farm about 35 acres, and I deal with USDA.
You know they are down the street, so to speak.
We need flexibility. We need flexibility as to areas of the
Country being treated differently. There are different
practices that would sequester carbon in different areas of the
Country.
We need flexibility in length of contract because family
forest owners want to have a length of contract that is
comfortable for them. I have heard of very long contracts that
would go beyond my lifetime. I cannot commit to what my son's
practice will be.
Yes, we need to reward the early actors. I practice, I
think, the best forestry that can be practiced in Maine, and I
do not think I should be left out of the program.
Senator Lugar. My time is about concluded, but let me just
add one sort of editorial comment. A mention has been made
because frequently it is sort of dragged into this, that, by
golly, if we do not act, why heaven help us because EPA will
come into this and EPA with the Supreme Court ruling will take
care of this.
No, I think no one of us--there are 100 Senators--can set
the law. But I would just say I believe I could get a majority
of Senators to repeal whatever is in the EPA act to eliminate
EPA out of this picture--the audacious idea that somehow or
other we have to be pressed into this kind of legislation
because somebody at EPA finds that things are askance. I am
outraged by the measurements of corn ethanol being done by EPA
using extraneous events, and the House bill tried to meet that,
and I appreciate that fact. But it is outrageous.
So I would just say that we would have another debate in
another committee perhaps, dealing with EPA, but we ought to be
dealing with agriculture in a very straightforward way.
I thank you, Mr. Chairman, for giving us this opportunity.
Chairman Harkin. Well, thank you, Senator Lugar. I remember
when you started these hearings back when you were Chairman of
this Committee. So you have always kind of been in the
forefront of this sort of effort, not only on agriculture but
on foreign relations, and I look forward to working with you
and tapping into your expertise on how we as an agriculture
committee move forward on this.
As you know, I guess we made some kind of a tentative
agreement. I do not know if it is tentative or actual, but we
made an agreement that by September 28th that we would submit
to the EPW our recommendations. So, hopefully, our staff and
your staff can work together on this, with other members of the
Committee of course.
Now, Senator Stabenow.
Senator Stabenow. Well, thank you very much, Mr. Chairman,
for your leadership and welcome to all of the members that have
joined us from very important perspectives and organizations.
Let me just start by saying that it has been a pleasure to
work with the Chairman, your staff and others in the last year
since the subcommittee that I chair held a hearing on offsets
when the previous bill was up before consideration. At that
time, I began to really focus and understand how important an
offsets program is and how important it is that agriculture be
participating as part of the solution and benefit from anything
that is done as it relates to a new clean energy policy. And
so, everyone who has been involved in working with us and all
the staff, we very much appreciate that.
One of the things that struck out to me at the time was,
and the numbers can vary a little, but EPA has said that 20
percent of the greenhouse gas emissions in the U.S. can be
sequestered in agriculture and forest lands. And so, whether
that is 15, whether that is 20, whether that is 25, I think
that is very significant and is something that certainly I know
we as a Committee want to make sure happens from a positive
standpoint.
All of us struggle around the cost issues. Whether I am
here with my agriculture hat or I am in other committees
focused on manufacturing, my goal and I know other goals of
colleagues is to make sure this is a net winner, not a loser,
and it has to be in terms of the economy moving forward.
I am struck, though, by a couple of studies, and the
Chairman just talked about the USDA analysis. But Iowa State,
and I would like for the record to say I graduated from
Michigan State, Mr. Chairman, but Iowa State has suggested that
the cost of corn will increase $4.52 per acre but with offsets
the benefits would be $8 an acre. So that is what we want to
have happen. If that in fact is accurate, that is the direction
we want to go in.
Also, Texas A&M agriculture researchers said that there
could be a net profit benefit, a net increase in profits of as
much as 24 percent after taking in consideration of additional
costs.
So, Mr. Chairman, I know that our goal is to make sure
those numbers are the numbers that happen and that we are not
in a situation where agriculture is hurt by this policy.
I have a lot of questions, but, Mr. Grumet, let me start
with you first. I think it is important to ask a question just
in general. We have heard a lot about the Waxman-Markey
legislation and whether or not it will make a difference in
climate change. I mean does that bill make a difference? Is it
worth building on that?
Mr. Grumet. Well, Senator Stabenow, I think it is fair to
understand that action of the House and action that the Senate
could take is going to be heroically important to the global
process. I think Administrator Jackson's quote has been
referred to a few different times, that U.S. action alone is
not going to make a significant ecological difference in global
temperature, and that is, I think, so profoundly obvious it is
not clear to me why people think it is a gotcha point.
We live in a global commons, and the question we have to
ask ourselves is what role do we see the United States playing
in that arrangement? Unilateral action by the United States
will not solve terrorism. It will not solve world hunger. It
will not prevent nuclear proliferation, and it will not prevent
climate change because these are collective action problems.
In 1992, the first President Bush went to the Rio Accords
and identified, I think, the right answer which is the notion
of differentiated commitments, that the U.S. has an obligation
and an opportunity to lead but that we should not be chumps. We
should not take steps three, four and five without recognizing
that the rest of the world is going to have to come with us.
So, the challenge for us is to design a program which, as
you point out, capitalizes on the incredible opportunities for
agriculture. The opportunities are in fact bigger than the
risks. So, if we capture those opportunities, we put together a
program which is good for U.S. agriculture on its merits, but
it brings us back into a very different position in the global
arrangement.
Dr. Holdren will be with you later today. He has come back
from China recently. I would encourage you to ask his ideas
about this.
But, again, the situation is much more complex than I think
some would like us to believe. I have not heard China say, we
do not care about climate change and we never plan to be part
of that solution.
The Chinese are nothing if not practical. They have four
times the population that we have on two thirds of the arable
land and much less ability to manage the hydro flows from the
snow melt than we do. They recognize that they are in very
significant jeopardy from the impacts on climate change.
They also are terrific in appreciating markets. As their
major clients in Europe and the United States, as major
consumers like Wal-Mart and others start to identify
sustainability standards, the markets for these products are
going to shift, and the Chinese pay very close attention to
that.
The Chinese recognize that they are in a more insecure
position vis-a-vis oil dependence than we are in the United
States, and they recognize that, just as we do, the vast
majority of actions that we take to address our greenhouse gas
emissions will also diversify our energy supply and make us and
them more secure.
They recognize that modernization--the point that Senator
Johanns and others made earlier, that to have a more efficient
economy you produce more goods for less carbon--is also
consonant with their long-term interests. So they have passed
vehicle fuel economy standards which are more aggressive than
we have. They have energy efficiency and renewables programs
that are more aggressive than we have.
I do not want to imply that it is going to be easy to
convince the Chinese to come with us; it is clear that this is
a great problem. We are a great Nation, and great nations take
steps to solve those great problems. I believe if we do lead we
can count on the Chinese to follow.
Senator Stabenow. Thank you. I want to get in one other
quick question. I do want to say, though, that enforcing those,
it is great to have it on paper with China, but we have to make
sure that that is enforced if it is going to work.
Regarding early actors and one of the things that we have
been working on in language is not only an offsets program but
what I think is really important, which is a USDA incentive and
support program so that there would be set aside allowances
from the cap that would relate to USDA activity, to help both
fund early actors who have built up carbon stockpiles and fund
emission reduction projects and for those that are looking for
new opportunities.
There are some areas, certainly of agriculture currently
now, that would net benefit from this. And, how do we make sure
that we do research and development and have new opportunities
that maybe are not currently available made available for
certain sections of agriculture?
My question, I guess I would address it to you as I close
the first round: Does it matter at this point, as it relates to
early actors, whether we are rewarding them through the offsets
program or through an allowance set-aside program at this
point?
Mr. Grumet. Thank you, Senator.
I think it does matter, and I commend you for your efforts
there and also will acknowledge that your conclusions are very
consistent with the conclusions that Senators Dole and Daschle
reached on our behalf.
The traditional offsets approach is, by design, a very
rigid approach. You are either 100 percent right or you are
flawed. On issues such as early action and additionality, it
draws out these kind of philosophical questions about what
would have happened otherwise, and it does create, as a number
of panelists have mentioned, some tricky perverse incentives.
If you try to, and I will use a technical term, ``jam''
those ideas into a traditional offsets program, you run a real
risk of diminishing the credibility and integrity of that
program. And so, one of the concerns that we have, one of the
necessities of having this alternative pathway is not to
undermine the public confidence in the traditional offsets
program because there are a host of activities--flaring,
capturing and flaring methane and other programs--which are
easy to discern, to measure, and those can move through the
system quickly, and they should be unlimited.
But we do need to have this creative space where we can be
a little bit more innovative and a little bit more
experimental, where we can look at the glass being half full
more than half empty. Taking credits and having a set-aside
program to do that, I think, will enable us to have the
learning to get the momentum behind this program that we need.
I think we have a real concern that absent that program we will
not realize the full potential as quickly as we need to.
The last point I will make is that it is within that
program that I think there is tremendous opportunity for real
collaboration between EPA and USDA. Where we are going to have
fights is over that last 5 percent, and I think that will
really undermine the spirit of this entire enterprise.
The idea of a kind of a separate but equal offsets program
with EPA having its own program and USDA having its own program
is not likely to create the kind of cordial comity and shared
interests that we are ultimately going to need. I think that
reinforces the divisiveness, and I think that would be a
problem in the long term for the agricultural offsets program.
Senator Stabenow. Thank you, Mr. Chairman.
Chairman Harkin. Thank you, Senator Stabenow.
Senator Roberts.
Senator Roberts. Thank you, Mr. Chairman, and I especially
want to thank you for holding these hearings. I know we are
going to have a second round. I know we are going to have
testimony from the Administration, both EPA and the USDA this
afternoon, and that is a very good thing.
I would urge you, sir, and I am going to plead with you to
have more hearings on this bill. I think Senator Lugar made a
very good point. We can be part of the answer, not part of the
challenge, in trying to take the best aspects of this bill if
that can be done. I have some concern about that, but we will
have to do it with hearings like this. This is the first
hearing, and I certainly commend you for it and look forward to
the hearings this afternoon.
I would just like to tell my colleagues and anybody else
interested that some years ago, several years after the Senate
voted 97 to nothing against joining the Kyoto agreement mainly
because other countries were not taking part and we thought it
would harm the U.S. economy, we went to Antarctica on a CODEL.
Senator Stevens led the effort because he had such a strong
interest in it.
During that particular visit, you can actually look at the
ice corridors. Some people call them ice holes. But there is
9,000 feet of ice there until you hit ground, and you can
determine. It is like rings in a tree, Mr. Chairman, where you
can actually see there has been global warming. Now whether it
is temporary, whether it is an aberration or whatever, that is
still to be decided.
But, basically, the decision was to come back and see if we
could not be on the positive side of this, more especially in
regards to agriculture. I know I met with Secretary Glickman
who was a good friend from Kansas. We even had a press
conference down on the Mall where finally I told the Washington
Post that carbon in the air, bad, carbon in the soil, good, and
that is what carbon sequestration meant.
I know all of you here certainly understand that. So I
would hope we could have additional hearings.
Mr. Johnson, I agree with you that the USDA must be very
aggressive to take this jurisdiction, to take the lead. I am
sure Mr. Stallman agrees with that.
I am not making this up, but we have had reports of the EPA
and some people in the EPA of resurrecting the old problem of
rural fugitive dust which came along in the 1970's. They
recommended we have water trucks going out at 10 in the morning
and 2 in the afternoon to get this dust down.
I am not making this up. There is even a proposal to study
the ramification of changing the genes in cattle, so you have
cattle half size, half-size cattle. So I guess if you head them
up and move them out, you will have twice as many, but you will
still have a lot of dust and will still have a lot of problems.
Now I am being a little sarcastic, but things like that do
happen with the EPA, and we need to keep it in the USDA's
jurisdiction.
I would like to associate myself with the remarks of
Senator Chambliss who I think made a very good point, Senator
Grassley who talked earlier, certainly the Chairman and
certainly Mr. Stallman. It is good to see you back in the
saddle. We have a tremendous challenge on our hands, and all of
our farm organizations including the Farmers Union.
Mr. Chairman, I think the USDA has to have more resources.
We have people working on the Farm Bill, people working on
trying to finalize the software that does not exist for the
permanent disaster program, and they are working with pencils
and, thankfully, they have erasers.
Here we are now going to come in and need to implement this
tremendous program and see what cropping practices are viable,
what cropping practices make sense, what cropping practices are
eligible, and then the great question of whether we mandate
this or not. So I really look forward to this, and I think that
the Ag Committee under your very capable leadership, sir, can
play a big part.
Mr. Stallman, in your testimony, you highlight the
potential conflicts of the proposed cap and trade scheme and
our trade obligations, and we have talked about that. If
passed, would the United States be more vulnerable to
challenges before the WTO? That answer to me is yes.
If so, is it possible that the very countries that are
major contributors of global greenhouse gases would initiate
these challenges? And, I am talking about China.
Mr. Stallman. We believe they would. In fact, India has
already said as much. China has already talked about what
border tariff barriers would mean to them and how they dislike
them. We expect a full range of challenges of those kind of
border measures that are included in Waxman-Markey and may be
further included here in the Senate.
You know what we have done is have the bill in the form of
Waxman-Markey that puts energy costs on this Country and this
Country alone. That makes us less competitive. And then, we try
to flip around and figure out how to protect our industries,
the trade in the international market. It is like we are trying
to do two wrongs to make a right, and it is just we do not
believe it is going to work.
Senator Roberts. Thank you for that answer. I think it is a
very common-sense answer and very candid.
I do not see the value of putting a tariff on any Chinese
product. My word, former Chairman Greenspan, talked before one
of our conferences and indicated he thought we were at a
tipping point with the economy. By that, he meant China would
not buy our bonds, our paper, and then interest rates would go
up to the point that it would make it more attractive.
If you put a tariff on China, Senator Smoot and Senator
Hawley might vote for it, but I think that is very dangerous.
Mr. Johnson, your testimony states that carbon credit
income potential is significant for your members.
The effects of this bill worry me that while all producers
will have to pay more for input costs, not all producers will
receive any offsetting income since not all producers can go to
a no-till operation or plant trees or afford two to three
million dollars for a digester. So my question to you is will
not this bill create winners and losers among your members?
That is the thing we have to determine in this Committee.
What regional or crop-specific analysis has the Farmers
Union done to determine which producers win and which producers
lose?
Mr. Stallman, you can answer that question too.
Mr. Johnson. Well, Senator Roberts, thanks for the
question.
As I indicated earlier, we have not done a separate
analysis. We have looked at a lot of the analyses that others
have done.
Clearly, I mean any time you pass legislation, you create
winners and losers. I do not think there is any other way to
look at it. I mean there will be some farmers who will be in a
very strong position. They will have the opportunity to do lots
of offset income, and there will be others that will have
minimal opportunity, so will face increased costs. I really do
not think there is much debate about that.
I would suggest that maybe the best way to look at that is
to dig into the bowels of the economic think tanks, the USDA
study that apparently was just released and try and figure out
who those winners and losers are. That is one of the reasons
why we argue that you need to set aside a chunk of these
allowances so that if you need to design a practice to
compensate some of the losers you can do that with those
monies, without making them overburdened.
Finally, this question about China is a real intriguing
question. Fundamentally, it is why many of us have argued in
the trade arena that we need to have environmental standards
and labor standards and others, those kinds of things
negotiated as part of the trade agreement.
I think we would all agree that it is not fair competition
to have one country producing things and externalizing a lot of
the costs of production by dumping them on the rest of either
their society or, in the case of greenhouse gases, the world
while other countries follow the rules and have higher costs.
So that, I mean this is a more a trade issue than it is a
greenhouse gas issue.
Senator Roberts. Well, pardon the interruption. My time has
run out.
Mr. Stallman, do you have any other comment real quickly?
Mr. Stallman. Quickly, on that particularly, in terms of
international negotiations including labor and environment, I
cannot wait until we have the EU standards imposed on us as a
Country because that is what we are talking about if you are
talk about international standards. So we would oppose that
approach.
Offsets, the price that farmers get, as that price goes up
for those offsets, a limited group of farmers, that also means
the cost of energy is going up for all farmers.
Senator Roberts. I have never quite understood why we
cannot settle the labor or try to settle the labor problems
that are challenges we have with other countries, more
especially China, with the International Labor Organization,
the ILO, rather than putting in some kind of trade agreement.
The chances of China accepting a trade agreement by us
dictating certain standards for their labor decisions are slim
and none, and slim left town.
Chairman Harkin. Thank you very much. Thank you, Senator
Roberts.
Senator Klobuchar.
Senator Klobuchar. Thank you very much, Chairman Harkin,
and thank you to our distinguished witnesses for being here.
I want to first of all say that I would agree with the
Chairman that we need to make some additional changes to this
bill.
Agriculture is incredibly important to my State, the fifth
in the Country. We are the No. 3 hog producer, a major producer
of corn and soybeans, wheat, sugar beets and, of course, No. 1
in turkeys. So a lot of my focus in this area has been jobs in
the ag area and energy jobs and introducing renewable energy
standards that include waste energy and allow our farmers to
have a piece of the action, and I actually think that has
benefited in our State.
As you know, Mr. Johnson and Mr. Stallman, that we have a
gross renewable energy standard, but we also have a very
aggressive biofuels program. I think part of why some of these
energy issues have been more bipartisan in our State is that
people feel that they have a piece of the action, that they are
going to profit from some of these energy jobs, that it is not
just about people on Wall Street or somewhere else. So that is
why I appreciated all of your comments here.
I first wanted to start with the ethanol blend issue, that
this is a possibility that we could do this with this bill. I
see homegrown biofuels as a piece in a lot of the future here.
I think that the way to do it may be with higher blend amounts
to go up to, say, 15 percent, and I do not see why we could not
do this as part of this bill. I think it has been taking too
long at the EPA. I also see our growth into cellulosic ethanol
is a much bigger way that we can produce ethanol.
But I wondered, Mr. Johnson, Mr. Stallman, if you could
comment on that.
Mr. Johnson. We would certainly support that.
Senator Klobuchar. OK. Mr. Stallman?
Mr. Stallman. As would we.
Senator Klobuchar. All right, very good. Thank you for
going on, so I can now go to my next question on that.
Mr. Johnson, you talked about making the case for
allocating some of the allowances. What criteria do you suggest
using to determine eligibility for those allowances?
Mr. Johnson. Well, that is a really good question, Senator
Klobuchar, and I think it is helpful to think of this in the
context of offsets. OK?
We heard earlier testimony about the importance of
maintaining the integrity of offsets. While I agree with that,
I would also want your Committee to think very closely about
how you distribute the revenues. OK?
Our view is that under this bill USDA should be put in
charge of the offsets program. They should the empanel the
scientific experts who establish the protocols. And then, they
should have their delivery agencies, the ones that are close to
the farmers and ranchers, that are out there verifying and
monitoring and perhaps auditing to make sure that the rules are
being followed.
But, as far as the distribution of money, they do not need
to be involved in that with offsets. That can be handled
through the marketplace just like the CCX is doing it right
now. Aggregators do it, I would argue, much, much more
efficiently.
Now that does not sound like it answers your question, but
the problem is this: When you try to mirror offsets with these
allowances and run them through USDA, I think you need to think
creatively about whether there is not a methodology that would
allow you to get those payments that are made through the
market system as opposed to having these folks with pencils and
erasers having to write out checks now too.
We are real concerned about adding to the bureaucracy at
USDA. It is overstretched. It is strained. It is under enormous
pressure. So we want to minimize that to the degree that we
can.
It is a long way of answering your question, but,
fundamentally, we want these allowance dollars to be used for a
number of things. To deal with the early actors, that gets to
all the stuff I have said about offsets. OK? So, as closely as
you can mirror what the offset market is, that is what you want
to do with the early actors, using these allowances dollars for
the folks that do not technically qualify for an offset. OK?
We want you to use these dollars for R&D. We think there is
tremendous opportunity through new technologies to demonstrate
that agriculture will significantly reduce the emissions, but
we need to research and develop it and establish with
scientific certainty, to the degree that those two words go
together, that in fact what we are doing makes sense so that
you can roll these new things onto the options market and
provide new income opportunities as well. So, R&D is really
critically important.
Of course, anything that provides a perverse incentive to
do the kinds of things that the Chairman has worked for most of
his career to avoid, any of those kinds of things that are
identified in this process, hopefully, you create some sort of
a mechanism to eliminate them.
Senator Klobuchar. OK. I assume by your comments and Mr.
Stallman as well, just knowing your previous views on this,
that, paperwork or not, you both would rather have the USDA
doing this rather than the EPA with the agricultural offsets?
Mr. Stallman. Absolutely, no question, USDA is well
positioned to handle this. Much better positioned than the EPA,
I might add. I would associate myself with the remarks my
colleague has made about what we need to have USDA be able to
do to be sure that we have an adequate offsets program.
Senator Klobuchar. OK. Thank you very much.
Mr. Pierce, part of this new energy potential is biomass
from logging. Do you want to comment on that when we look at
renewable standards and making sure that we include that as a
piece of this?
Mr. Pierce. Well, I certainly hope that. Speaking as a tree
farmer, I certainly hope that we do include biomass. It is very
important to support the low end of the market in order to have
good forestry done.
Senator Klobuchar. OK, very good. Thank you to our panel. I
really appreciate your answers.
I am looking forward to working with the Chairman and with
my good friend, Collin Peterson, who worked hard to make some
improvements to this bill. He just left me a message about a
totally unrelated matter, but I will continue to work with him.
Thank you.
Chairman Harkin. Thank you very much, Senator Klobuchar.
Senator Lincoln.
Senator Lincoln. Thank you, Mr. Chairman, and thanks to you
and Senator Chambliss for holding the hearing today, getting us
started on this.
We all recognize that cap and trade would really touch
nearly every aspect of our lives, and that is especially true
for agriculture. We discussed at great length that there is
potential for landowners to benefit by tapping new revenue
streams, through implementing practices that reduce greenhouse
gas emissions.
But it is also very, very likely that farmers will face
higher costs for input like fertilizer and fuel, and it
certainly poses a challenge, I think, for Arkansas producers
that farm capital-intensive crops like cotton and rice. Our
poultry, livestock and dairy producers could also grapple with
those increases in energy costs, but they too could potentially
take advantage of some of these programs we are talking about.
The purpose of these hearings and future hearings, I hope,
is really to flesh out the costs and the benefits of a cap and
trade bill for agriculture and explore how the Senate can
improve upon what the House has done.
What is so badly needed in this debate is more detailed
economic analysis on a crop-by-crop, industry-by-industry and
regional basis. I do understand from the pieces you presented
us today, Mr. Chairman, the preliminary analysis that has been
provided by USDA this morning does provide us some of that
analysis.
But I do believe we need to take a broader look at how it
will impact obviously our producers but also impact food
prices. I hope that we will look for all of that information.
It is going to require delving into how the House bill is going
to impact the food processing industry, which includes sectors
like poultry, meat, and oil seed processing. I just hope, as
Senator Roberts mentioned, that the Chairman will consider
holding more hearings to be able to look at that, and we
certainly appreciate your leadership and all of what you have
been doing here.
Just three quick questions, and I think I will throw them
out there and let you all answer them as you may.
We have talked a lot about early action and credits for
early action. Some of you all have mentioned flexibility and
the need for that flexibility. I do not want to assume what you
are saying from that. I hope it is, but I am not going to
assume it.
We also know that there is flexibility through different
types of programs that are recognized.
In the House bill, there is some confusing language about
early actors and their offsets, whether they will count unless
they are registered with an exchange that is recognized under
State law. As I said, I do not want to assume anything, but I
hope it is that we are looking that, for us, most of our
producers and our foresters are going to be out of luck under
that House bill because the programs they use, like Senator
Lugar, the CCX, would not qualify.
I am assuming that we are hoping that when you say
flexibility you mean that multiple programs will be acceptable
as opposed to those that are just registered under States. But,
again, I do not want to assume anything. So I hope that you all
will touch on that.
Mr. Pierce, in terms of the strategy to address climate
change and how it has been shifting to increasing use of
renewable energy. Biomass, forest biomass in the production of
electricity and fuels is, I think, critical. Do you think that
the House-passed bill fully captures the potential use of
forest biomass from private forests?
Of course, private and public forests are treated
completely or pretty differently in the House bill, and I would
like you comments on that.
Then last, Mr. Grumet, one of the concerns I am hearing
from constituents is the fear that a cap and trade scheme would
create yet another market where there is opportunity for
mischief. I am hoping that you can elaborate on how the
Bipartisan Policy Center believes Congress could be most
effective in ensuring transparency in the cap and trade market.
I noticed in your testimony that you quoted limiting ``the
risk that credit-trading will lead to the enrichment of Wall
Street at the expense of Main Street.'' We have been there. We
have done that. We do not want to go there again.
So I would love your comments on either of those three.
Mr. Johnson. Well, I will start and be very brief because I
have talked a fair amount. As to the question relative to
offsets and flexibility, we would certainly agree with the
assumption that you stated as you asked the question.
We do not necessarily think that the only early actors that
ought to be compensated are those that have already enrolled in
the CCX program. In fact, we would disagree with that. We have
argued that you ought to use a baseline of 2001. There are lots
of reasons you can pick that year. It is arbitrary, I
understand. Then any changes that have happened since then
would be presumed to be additional.
Senator Lincoln. Any changes since 2001?
Mr. Johnson. Yes. That has been the position that many of
us in a number of different ag groups have sort of settled on
that. There are reasons for it. I mean that is the Kyoto thing
was happening, the Farm Bill. There are lots of things that
lined up that suggested that that is a date.
Right after that date, the CCX was formed. It was sort of
formed in anticipation of a law passing, and so you can say:
Well, let's figure out how to not penalize those guys. Let's
reward them.
Mr. Grumet. Senator, I can just pick up on that, unless you
want to go in order.
Senator Lincoln. No. That is fine.
Mr. Grumet. The duel track approach, this is really the
same question that Senator Klobuchar and others were asking,
and how we bring flexibility into the system. Then, just again,
focus on the fact that the traditional offset approach is a
brittle approach, and it needs to be because if there were
flaws in the system we would be adding more pollution to the
atmosphere than we would be reducing.
The need to have this alternative use of allowances, to
provide kind of insurance for that, provides a tremendous
amount of flexibility across the line here. It allows people to
be a little bit more innovative, a little bit more creative and
a little bit more risk-taking. That is true for early action
because you have a ton as an insurance policy against those
approaches. It is true for flexibility and diversity in program
choices.
What I would hope the USDA would say when they visited the
Lugar Farm is: Great work on those black chestnuts, Senator.
Those are measurable, and we have a protocol, and those just
go. We do not have to touch them. The marketplace is going to
decide that.
But you know you are also doing this interesting job, doing
some no-till farming and some nutrient management, and this is
a very creative idea. It is a little harder to figure out. You
can go two ways. You can either hunker down with USDA and spend
a bit of time and money really sharpening your pencils and
trying to prove the value of your work or we have this other
alternative, a place where you can come do more kind of
creative programs because essentially there is an insurance
policy behind them.
USDA could essentially provide credits that would otherwise
turn into emissions elsewhere to Senator Lugar and his family
for their good work.
I wonder if you have looked at the price of your credits
before and after this hearing to see what kind of impact we
have had on the marketplace today.
But it does seem to me that that kind of flexibility is
significant and important to get this program up and running so
that we do not spend our time biting our nails and gritting our
teeth on the tiny details.
While I have the mic, just on this very important and
complicated question of market oversight, it is certainly true
that coming to visit folks like you and saying: Senator, do I
have a deal for you? We would like to create a new $200 billion
commodity. Not to worry, the good people in New York City are
going to figure it out--is not as popular an opening statement
as it might have been a couple of years ago.
At the same time, it is critically important that we have a
functioning market, and there are really two options here. The
one that we believe is the right one is to think about the
carbon commodity as part of the overall struggle we are now
having to bring more transparency to derivatives at large.
There is really no difference ultimately between what we do
here with carbon and what we do with other financial products.
Rather than trying to put a little bit of an obstacle in
every possible pathway for nefarious action, we think if you
have good cost containment, if you have a price floor and a
price ceiling that limits the volatility, it allows you to
exhale a little bit. It dramatically reduces the possibility of
that enrichment so that we can learn our way into this market
with low risk. It is essentially a set of training wheels on
the program.
I fear if we go the other direction and try to pin down
every possible problem we will stifle the market to such an
extent that we will not have investment in these clean
technologies.
So I do not think people see cost containment traditionally
as a benefit to this kind of market oversight, but I think one
of the best advantages you get is you reduce the volatility
which consumers hate, elected officials hate and Wall Street
sometimes enjoys.
Senator Lincoln. You are saying a cap and a floor as
opposed to just a cap.
Mr. Grumet. A cap and a floor, a price collar.
Senator Lincoln. Oh, just a floor, OK.
Mr. Stallman. Senator, if I could still have a little
additional time to respond, we would support maximum
flexibility for the early actors.
But let me get down to the point that Mr. Grumet made
earlier about mitigating the negative impacts about
implementation of a carbon market. One way to do that which has
not been discussed, since that carbon market is going to be
driven by the cost of energy, is to have an off-ramp in the
legislation in case the renewable low carbon fuels and
generation of electricity through nuclear, solar or wind do not
come online as quickly as the predictions have indicated, to
point out some of the rosy scenarios in terms of the Waxman-
Markey bill.
There should be an off-ramp provision where if those
sources do not come online as quickly as project, then we
should string out or mitigate the implementation of the carbon
reductions--so, kind of have a trigger, if you will, to keep
everyone honest in terms of projections about what will
ultimately happen under the Waxman-Markey bill.
Chairman Harkin. Thank you. We are in a vote now, and the
second bells have rung on our vote.
I think it is clear this has been a good panel. I
appreciate all the testimony.
It is clear that we are probably going to have to have some
more hearings on this. I will begin consulting with other
members of the Committee on that.
As I said, this afternoon, we will have the Administration
witnesses.
I thought I just might conclude with what Mr. Grumet said
in his closing. He said, ``While we can all agree that U.S.
action alone cannot solve a global problem, it is equally true
that we have no hope of securing effective and equitable global
action absent U.S. leadership.'' I think that really is the
key.
Now we have this meeting in Copenhagen in December. The
President would like to have us pass some legislation prior to
that time. I understand on the Senate floor we were asked to
give our input by September 28th. That is why we will probably
have some more hearings on this. But we do have to provide that
leadership.
But, taking off on what Mr. Stallman just said, I have
often thought of an off-ramp, not the off-ramp that you
described in terms of what happens if we do not get the
technologies, but if we put in place a good cap and trade
system that incorporates agriculture, gives adequate offsets
and allowances to agriculture, and we go to Copenhagen and we
start down this road, if other countries do not join us, if
India and China and all these other countries we hear about do
not join in on this effort, then we have an off-ramp. That is
the off-ramp I am thinking of.
We provide the leadership. We say this is what we are going
to do. We are going to be very aggressive in this, in the
United States. We are going to push as hard as we can for clean
renewable energy resources, but we want other countries to come
in. If you do not, well, we are off the highway.
With that, the Committee will stand adjourned.
Oh, excuse me. I am sorry.
Senator Chambliss. Let's leave the record open. I have some
other questions, and other members may have to.
Chairman Harkin. Good suggestion. Oh, thank you. Thank you,
Senator Chambliss.
We will leave the record open for other comments and
testimony or other comments from members of the Committee and
also if we have some written questions that we would like to
maybe submit to you. I did not ask all my questions in either.
Perhaps, we would like to do that.
We do look forward to your engagement in this process as we
move ahead over the next couple or 3 months.
Thank you very much. We will resume our sitting at 2:30
here in this room.
[Whereupon, at 12:11 p.m., the Committee recessed and
reconvened at 2:36 p.m.]
Chairman Harkin. The Senate Committee on Agriculture,
Nutrition and Forestry will resume its sitting from this
morning, and we had a great discussion this morning. We had a
good panel this morning and a good discussion, a lot of
pertinent questions.
This afternoon, we are honored to have three distinguished
individuals, all of whom I think have a lot of expertise in
this area. That is the area of agriculture and the environment,
climate change and how it is going to impact agriculture and
the role that agriculture can play both in reducing greenhouse
gas emissions but also the role it can play in offsets, in
carbon sequestration.
So we are continuing our hearing today, and we are honored
to have the Secretary of Agriculture, Secretary Tom Vilsack,
who was sworn as the 30th Secretary of the U.S. Department of
Agriculture this year. Appointed by President Barack Obama, he
received unanimous support for his confirmation by both this
Committee and the entire U.S. Senate.
Secretary Vilsack has served in the public sector at nearly
every level of government. When I first met him, he was the
Mayor of Mount Pleasant, Iowa, in 1987 and then as a State
Senator in the Iowa Senate, and then in 1998 he was the first
Democrat elected Governor of Iowa in more than 30 years, an
office he held for 2 terms.
As Secretary of Agriculture, Secretary Vilsack has been
candid and direct about the challenges and opportunities facing
farmers and ranchers across America and the importance of
fulfilling the vast missions as a champion of rural America and
as a steward of the environment. So we are honored to have him
here.
Also, we have EPA Administrator Lisa Jackson, again
nominated to lead the Agency by President Obama and confirmed
by the Senate in January. Administrator Jackson lists among her
priorities: reducing greenhouse gas emissions, improving air
quality, managing chemical risk and cleaning up hazardous waste
sites and protecting America's water.
Before becoming EPA's Administrator, Administrator Jackson
served as Chief of Staff to New Jersey Governor Jon S. Corzine,
a former member of the U.S. Senate. Prior to that, she was
appointed by Governor Corzine to be Commissioner of the State's
Department of Environmental Protection in 2006.
We have Dr. John Holdren, Assistant to the President for
Science and Technology and Director of the White House Office
of Science and Technology Policy. Prior to joining the
Administration, Dr. Holdren was the Teresa and John Heinz
Professor of Environmental Policy and Director of the Program
on Science, Technology and Public Policy at Harvard
University's Kennedy School of Government as well as a
professor in Harvard's Department of Earth and Planetary
Sciences and Director of the Woods Hole Research Center.
Well, we are honored to have you here.
This morning, we had a good discussion. I will point out, I
will just bring up the chart that I started my comments with
this morning on, one, we have to do something.
But this chart basically just shows we have to do
something. This goes back to 1880, and it shows the global
temperatures here and what has happened. We know that the 10
warmest years on record occurred in the past 12 years. People
always say, well, gee, I had a cool summer. Well, those little
odds and ends happen. The fact is no one can deny that the
Earth is heating up at a rapid pace.
Also, the concentration of CO2 corresponds directly with
that, and it is going up at an ever increasing rate.
So to do nothing is not an option, and there are some
concerns about the role of the United States and whether we
should do it. And. what about other countries? What about
China? What about India? What about Brazil? What about the
European Union?
We cannot do it all by ourselves. We cannot really bend
that curve down if only we do it, but other countries have to
be involved also. And so, that is, I think, one of the
challenges facing us. How do we provide that leadership but
then how do we get other countries onboard also to help us?
That is sort of the big picture, but the picture we are
concerned with here is the role of agriculture, our farmers and
ranchers in this country and how we are going to be involved,
how they are going to be involved in this process.
The House has passed its bill. This Committee will be
holding other hearings on this, and we will be involved with
the Environment and Public Works Committee in the Senate
beginning at the end of September and into October and probably
November in fashioning a bill. I know the President wants
something out of Congress before the Copenhagen meetings in
December, and we will do our darnedest to try to meet that
deadline, and the goal of the President is to get something
done.
But we want to know, what is the role of agriculture? What
is going to happen to farmers and ranchers? We hear a lot of
estimates on cost, how much the costs are going to go up.
Secretary Vilsack, I know, will talk about this. We just
got the analysis from your Department this morning that is a
little bit different than what we have been hearing out there.
Then, what role we can play in the environment and with EPA
in agriculture and how we can work together both to meet the
goals of decreasing our greenhouse gas emissions but also
becoming more energy independent in this country--we have those
two goals. And, what is the role of agriculture?
With that, I would recognize my good friend and our
distinguished Secretary of Agriculture. Thank you again for
being here.
All of your written testimonies will be made a part of the
record in their entirety. If you could sum it up in seven or
eight, 9 minutes, something like that, I would appreciate it.
We will start with Secretary Vilsack, go to Administrator
Jackson and then Dr. Holdren.
Secretary Vilsack.
STATEMENT OF HON. TOM VILSACK, SECRETARY OF AGRICULTURE, U.S.
DEPARTMENT OF AGRICULTURE
Secretary Vilsack. Thank you, Mr. Chairman, and to Senator
Chambliss and other members of the Committee, thank you for
this opportunity to discuss with you today the role of
agriculture and forestry in global warming legislation and
climate change legislation.
Climate change, I believe, is one of the great challenges
facing the United States and the world. President Obama
believes it is important that America show international
leadership on climate change. The Administration looks forward
to working with the Senate to craft legislation that creates
jobs, reduces our dependence on foreign oil, increases national
security and reduces the risks associated with climate change.
Climate change has enormous implications for farmers,
ranchers and forest landowners. Drought, more intense weather
events, forest fires and insect and disease outbreaks are just
some of the potential effects of a warming climate that could
subject landowners and rural communities to enormous potential
costs.
At the same time, farmers, ranchers and forest landowners
have a very important role to play in addressing global
warming. In fact, by effectively exploiting opportunities
within the agriculture and forestry sectors, we can
significantly reduce the cost of meeting our climate policy
goals.
I also believe that there are significant opportunities for
landowners in a cap and trade program that can help revitalize
rural America. The production of low carbon energy from
biomass, anaerobic digesters and wind will provide landowners
with new sources of revenue that have significant value in a
low carbon economy. There are also options for landowners to
reduce their energy expenditures. USDA is already working with
landowners to reduce energy costs and to improve profitability.
A robust carbon offsets market will also provide farmers,
ranchers and forest landowners with the potential for new
sources of income. Rural communities could in turn benefit from
jobs created to implement conservation practices and measure
and monitor carbon offset activities.
To be effective in addressing climate change, the offsets
market will need to accomplish two goals. First, the offsets
market must be large, with thousands of participating
landowners. To get to scale, the market will require an
infrastructure of people and agencies that can encourage
landowner participation, provide information to landowners,
manage data and resources and maintain records and registries.
Second, ensuring that agricultural and forest offsets provide
real and verifiable greenhouse gas reductions is critical not
only to addressing climate change but to maintain public
confidence in the carbon offsets program as well.
Implementing an offsets market will require a partnership
of several Federal agencies including USDA, EPA, the Department
of Interior and others. USDA has many assets that we can bring
to bear, including a network of field staff across the country
and greenhouse gas management experience with croplands,
rangelands, forests and landscapes.
Even with these opportunities, many in the agricultural and
forestry community are concerned about the potential costs of
climate change legislation. At USDA, we hear these concerns
loud and clear.
Now there are a variety of specific approaches that one can
use to achieve clean energy and climate goals. Over the last
several weeks, USDA has begun in analyzing costs and benefits
of the House-passed climate legislation for agriculture. Our
analysis demonstrates that the economic opportunities for
farmers and ranchers can outpace, and perhaps significantly
outpace the costs.
An analysis of the implications of climate change
legislation, including that of H.R. 2454, should show the farm
sector will experience both costs and benefits. Agriculture,
after all, is an energy-intensive sector with row crop
production particularly affected by energy prices. Increases in
fuel prices are expected to rise overall in connection with
annual farm expenses by over $700 million between 2012 and
2018, or about 0.3 percent. Annual net farm income as a result
of those higher energy prices is expected to fall by about 1
percent.
However, these estimates assume that in the short term
farmers are unable to make changes in the input mix in response
to higher fuel prices--an unlikely scenario, given past
history. So they likely overestimate the cost to farmers. We
believe fertilizer prices will show little effect until 2025
because of H.R. 2454's provision to help energy-intensive,
trade-exposed industries mitigate the burden that emission caps
would impose.
The agricultural sector will also benefit directly from
allowance revenues allocated to finance incentives for
renewable energy and agriculture emission reductions during the
first 5 years of H.R. 2454's cap and trade program. Funds for
agricultural emissions reductions are estimated to range from
an additional $75 million to $100 million annually from 2012 to
2016.
The conservative estimated impact of the cap and trade
provisions of H.R. 2454 implies a decline of annual net farm
income of $2.4 billion or roughly 3.5 percent in 2030, $4.9
billion or 7.2 percent in 2048. These estimates are likely an
upper bound on the costs because they fail to account for the
farmers' ability to innovate in response to changes in the
market conditions. This analysis is also conservative because
it does not account for revenues to farmers from biomass
production for bioenergy.
A number of studies have examined the effects of higher
energy costs with models that allow for the expected changes in
production management practices and switching to bioenergy
crops. Based on the analysis of Schneider and McCarl, for
example, allowing for changes in input mix and revenues from
biomass production, but without accounting for income from
offsets, it is estimated that the annual net farm income would
increase in 2030 by $600 million. By 2045, annual net farm
income is estimated to increase by more than $2 billion or 2.9
percent.
Now H.R. 2454 also creates an offset market, and we think
that will also create additional opportunities for the
agricultural sector. In particular, our analysis indicates that
annual net returns to farmers range from about $1 billion per
year for the time period 2015 to 2020 to almost $15 billion to
$20 billion in 2040 to 2050, not accounting for the costs of
implementing offset practices.
EPA has conducted its own analysis of returns from offsets
that take into account the cost of implementing land management
practices. EPA's analysis projects annual net returns to
farmers of about $1 billion to $2 billion per year from 2012 to
2018, rising $20 billion per year in 2050.
It is important to note that EPA's analysis includes
revenues generated from forest management offsets while the
USDA estimate does not.
So let me clear about this analysis and its implications.
In the short term, the economic benefits to agriculture from
cap and trade legislation will likely outweigh the costs. In
the long term, the economic benefits from offset markets easily
trump increased input costs.
An economic analysis such as ours has limitations, but
again we believe our analysis is conservative. It is quite
possible that farmers will actually do even better than we
predict as a result of technology changes and enhanced
renewable energy markets.
What does this mean for the individual farmer? A North
Plains wheat producer, for example, might see an increase of 80
cents per acre in costs of production by 2020 due to higher
fuel prices. Based on a soil carbon sequestration rate of 0.4
tons per acre and a carbon price of $16 per ton, a producer
could mitigate those expenses by adopting no-till practices and
earning $6.40 per acre. So this wheat farmer does better under
the House-passed climate legislation than without it, and it is
quite possible that this wheat farmer could do even better if
technologies and markets progress in such a way that allows for
the sale of wheat straw to make cellulosic ethanol.
We recognize that climate legislation will affect different
landowners in different ways. This is an important point, and
USDA can help smooth this transition by using our Farm Bill
conservation programs to assist landowners in adopting new
technologies and stewardship practices. It is worth noting that
the House bill also includes important provisions providing how
to adapt and increase resiliency to climate change impacts,
which will be important for our Nation's farmers, ranchers and
forest landowners.
Ensuring that landowners and communities have the tools and
the information they need to adapt to climate change is a
priority for this Administration, and USDA looks forward to
working with you as we move forward.
Thank you, Mr. Chairman.
[The prepared statement of Secretary Vilsack can be found
on page 119 in the appendix.]
Chairman Harkin. Thank you very much, Mr. Secretary.
Now we will turn to Administrator Jackson.
STATEMENT OF LISA JACKSON, ADMINISTRATOR, U.S. ENVIRONMENTAL
PROTECTION AGENCY
Ms. Jackson. Thank you, Mr. Chairman. Thank you to Ranking
Member Chambliss and members of the Committee for allowing me
to testify today. It is a pleasure to appear alongside my
colleagues, Secretary Vilsack and Dr. Holdren.
As you know, the President has called for legislation to
decrease our dependence on oil, to create millions of new jobs
in clean energy industries and reduce the greenhouse-gas
pollution that threatens our children and grandchildren. That
call to action is as much about helping rural America as it is
about helping urban America.
For example, the bill the House passed in response to the
President's call includes a program to help American auto
makers produce vehicles that use less petroleum-based fuel.
That program goes beyond the cars used in cities and suburbs to
include the trucks and non-road vehicles used in farm and ranch
country.
The House bill also includes an incentive structure to
catapult American companies forward in the burgeoning global
market for clean energy technologies. Those American employers
include not just the advanced battery manufacturer in
Massachusetts and the solar panel installation firm in Arizona.
They also include the wind tower manufacturer in Iowa, the
biodiesel processor in Ohio and the bio-based insulation
producer in Arkansas.
Finally, I would note the recent report by the U.S. Global
change Research Program. It projected the impacts that we would
see in America over the course of this century if we allow
global warming to continue unchecked. Those impacts would not
be limited to the urban coast of South Florida and the arid
hills of Southern California. The Great Plains would experience
more sustained droughts and increased infestation of insect
pests. The Southeast would experience declines in livestock
production due to heat stress and more frequent and intense
wildfires, and the Midwest would experience reductions in water
levels in the Great Lakes, more frequent spring flooding and
more severe summer drought.
So, rural America is very much on the President's mind as
he urges Congress to send him a bill that gets America running
on clean energy. Meeting that goal will require each of us to
make a modest investment. I applaud USDA for its ongoing work
to quantify the investment that Americans raising crops and
livestocks would be called upon to make. For its part, EPA
projects that if the bill recently passed by the House were
enacted, then gasoline and diesel prices would be 17 cents per
gallon higher in 2020 than under business as usual.
But the House-passed bill includes provisions designed to
soften many of the cost impacts that worry farmers. For
instance, the program would distribute free emission allowances
to energy-intensive, nitrogenous fertilizer manufacturers and
wet corn millers. It also would distribute the value of
emissions allowances to propane consumers such as the farmers
who use it in drying corn.
Overall, EPA projects that the House-passed bill would
entail an annual average per household cost of between 22 and
30 cents a day over the life of the program. CBO projects 48
cents per day in 2020. The costs would be higher in States
where people regularly drive long distances and rely almost
exclusively on coal for electricity, but, as CBO has explained,
these regional differences likely would be small. And, even if
the costs borne by the average household in a particular State
were double the national average projected by CBO, that would
still be less than a dollar a day in 2020.
Now the modest costs would be exceeded by the direct
financial benefits that American farmers would receive. Under
the House-passed bill, American farmers, foresters and ranchers
would be the beneficiaries of a new, voluntary free-enterprise
program in which they could, if they chose, receive money for
offsetting other's emissions by increasing carbon sequestration
on their lands or reducing methane emissions from their
operations. EPA projects that the offsets generated by American
farmers, foresters and ranchers in 2020 alone would have a
market value of nearly $3 billion, and the amount would
increase very year.
Fortunately, the U.S. Government is in a good position to
establish a robust domestic offsets program. USDA has a network
of field offices across rural America. Both EPA and USDA have
scientific expertise in greenhouse gas management with
croplands, rangelands, forests and livestocks.
For instance, since 1993, EPA has run the AgSTAR Program in
which the Agency's technical experts work with farmers to find
opportunities to capture methane gas and put it to profitable
use. And, through its Climate Leaders Program, EPA has
developed a series of offsets methodologies that now have
undergone extensive review and testing.
The development of an offsets market will require a full
partnership between relevant Federal agencies including USDA,
EPA, the Department of the Interior and the Department of
Energy. EPA looks forward to continuing an intensifying that
partnership.
I thank this Committee for its constructive engagement with
the agricultural community on clean energy and climate
stewardship.
Thank you again for inviting me to be here today, and I
look forward to answering your questions.
[The prepared statement of Ms. Jackson can be found on page
88 in the appendix.]
Chairman Harkin. Thank you very much, Administrator
Jackson.
Now we will turn to Dr. Holdren.
STATEMENT OF JOHN P. HOLDREN, Ph.D., DIRECTOR, WHITE HOUSE
OFFICE OF SCIENCE AND TECHNOLOGY
Mr. Holdren. Chairman Harkin and Ranking Member Chambliss
and members of the Committee, I certainly very much appreciate
the opportunity to testify at this important hearing.
My mic was off. Did you get that?
Chairman Harkin. Try it again.
Mr. Holdren. Chairman Harkin, Ranking Member Chambliss,
members of the Committee, I do very much appreciate the chance
to testify today at this important hearing.
My written statement for the record and my short oral
statement here are focused on the scientific aspects of the
relation between global climate change on the one hand and
agriculture and forestry on the other. That relation is a
multifaceted one. Farming and forestry practices are
significant sources of the emissions that are driving global
climate change as well as points of particular vulnerability
where climate change imperils human well-being by reducing the
productivity of the land. With appropriate management, on the
other hand, farms and forests can become the locus of increased
carbon storage that draws down the atmospheric load of carbon
dioxide, and they can serve as sources of renewable low carbon
biofuels.
Although it is the case today that climate change has
benefited farms and forests in some places while harming the in
others and that mixed pattern may persist for some years more,
there can be little doubt that the larger temperature increases
expected by 2030 and beyond on a business as usual trajectory
of climate change are going to put substantial stresses on
farms and forests in most places.
Those stresses can be alleviated to some extent by
adaptation efforts of a variety of kinds, of course, including
development of heat, drought and pest-resistant crop strains,
more efficient water management strategies for agriculture and
more. We absolutely need to make well-focused and effective
investments in these kinds of adaptation measures.
But adaptation becomes more difficult, more costly and less
effective the larger are the changes in climate to which one is
trying to adapt. The need to restrain climate change to a level
with which affordable adaptation measures can plausibly cope is
what has led so many analysts of this problem to conclude that
every effort should be made to avoid exceeding a global average
temperature increase of 3.6 degree Fahrenheit, that is 2
degrees Celsius, above the pre-industrial level.
Looking at the numbers on what would be required to achieve
that goal makes clear that the agriculture and forest sectors
simply must be part of the program. We will need the reductions
in emissions that can be had by reducing tropical deforestation
and by modifying the agricultural practices that currently
account for significant methane and nitrous oxide emissions. We
will need the increase in absorption of carbon dioxide that can
be had from afforestation and reforestation and improved
management of agricultural soils. And, we will need the
contributions that expansion of sustainably produced biofuels
can make to reducing our dependence on carbon dioxide-emitting
coal, oil and natural gas.
All of these opportunities are sufficiently well understood
scientifically to support implementation of policies and
activities to help us get from the farm and forest sectors the
contributions needed from them if the challenge is to be met.
At the same time, continuing to improve our scientific
understanding of the relevant processes, including our capacity
to measure and monitor them quantitatively on local to regional
scales, will be valuable for increasing confidence that the
performance specified in policy and international agreements is
indeed being achieved, for developing improved understanding of
some of the currently less well-researched options in the
agricultural and forest sectors for both mitigation and
adaptation and for refining our policies in the decades ahead.
Achieve the high confidence that decisionmakers and the
public will want concerning offsets and the reality of
emissions reductions or uptake increases claimed for other
initiatives in the agricultural and forest sectors will have to
rely in substantial part on existing tools such as the EPA's
National Greenhouse Gas Inventory, land use data, carbon cycle
modeling and the project-based monitoring approaches that have
been developed by EPA and USDA.
At the same time, our current observation networks for
emissions and absorption of carbon dioxide and other heat-
trapping gases are not adequate for some kinds of the
monitoring that would be desirable, and a continuing effort to
strengthen the network of ground-based, air-based, ocean-based
and space-based measurements of those fluxes is warranted.
The many approaches for deriving clean fuels from plant
material differ in their state of technological development,
the efficiency of energy conversion, their requirements for
land and water and other inputs such as pesticides and
fertilizers, their cost, their net benefits in reducing
greenhouse gas emissions when all of the inputs, as well as
influences on soil and vegetation where the material is grown
and elsewhere, are taken into account and other environmental
and social impacts, positive as well as negative.
While much is known about those factors, the technologies
are evolving and so is our understanding of their full range of
characteristics. I believe we know enough to define appropriate
metrics to help with choosing options and regulation, but we
will get better at it as our scientific understanding of the
details improve.
Continuing to strengthen the scientific foundation for
policies and strategies in this domain going forward is going
to bring significant rewards in terms of our confidence in the
performance of the approaches that are put in place, in terms
of the ability to improve those approaches over time and the
capacity to develop additional options for farm and forest-
based climate change mitigation and adaptation for the future.
The White House Office of Science and Technology Policy is
energetically engaged, together with the full range of relevant
Cabinet departments, other Federal agencies and White House
offices and with our partners in the wider research community
and the Congress, in ensuring that this happens. My colleagues
in the White House and I look forward to working with this
Committee and the rest of the Congress to that end.
I thank you for your attention. I will be pleased to try to
answer any questions you may have.
[The prepared statement of Mr. Holdren can be found on page
79 in the appendix.]
Chairman Harkin. Thank you very much, Dr. Holdren.
We will begin a series of 7-minute rounds here, if we get
our clock going here right.
Mr. Secretary, first of all, thank you very much for
getting the analysis to us that you did on this. I would just
like to ask again and have you expand a little bit on this,
that what you are saying basically in this analysis is that for
the near term--let me look at my table again here--for the near
term, 2012 to 2018, that the increase in total expenses on
agriculture would be $0.7 billion it looks like. I think that
is right. Is that $0.7 billion per year?
Secretary Vilsack. Senator, that is correct, but that is
not necessarily the net farm income number if that is what you
are looking for.
Chairman Harkin. So it would be an increase of $700 million
per year in real dollars on average.
But then you are saying that on the other side of the
equation is that the offset markets could cover these costs. Is
that right?
Secretary Vilsack. Senator, that is correct, but if I can
just expand on it just a bit.
It is somewhat difficult to conduct a full and complete
analysis because there are many, many variables. What we tried
to do is to come up with a very conservative estimate of the
impact, and, by conservative, I mean we did not take into
consideration in looking at the expense side.
There are basically two components to it. There is the
direct and indirect energy costs. Direct costs would be fuel
for tractors and combines. Indirect would be fertilizer.
We did not ask ourselves or try to include in the
evaluation what changes would be made if fuel prices were going
to go up, so that farmers would end up figuring out how to use
less.
Now, since 1970, we have seen a fairly consistent pattern
of farmers basically figuring out how to do more with less, but
we did not factor that in nor did we factor in any technology
changes that could potentially impact fuel usage nor did we
figure in the impact of increased opportunities on the
bioenergy side. So there are things that would potentially
impact and affect this expense number which have been evaluated
in other studies, and other studies would obviously see this
total expense number lower.
So, depending upon, what we tried to do is give you a
range, and the most conservative estimate is you are looking at
$700 million on the expense side. On the more inclusive
evaluation, that number is significantly lower. In fact, we
think that there is a possibility of increase in net farm
income in the early years as a result.
Chairman Harkin. I take it from your testimony, Mr.
Secretary, that you actually feel pretty bullish about this,
that really there are more opportunities out there for farmers
and ranchers to actually gain income from a cap and trade as
long as there are decent offsets and as long as we have some
other provisions I assume that I have not talked about in
there, and that really the farmers, while their expenses may go
up a little bit, they have more to gain from offsets.
Secretary Vilsack. Senator, I think that is true.
You know some will suggest that there is a difference
between a farmer who is raising corn and a farmer who is
soybeans and one who is raising rice. There are regional
differences. There are product commodity differences.
But, on the whole, farming and agriculture in this Country,
I think, will benefit. And, I think also the rural communities
that farmers support and live in will also benefit because we
are not factoring into any of this the job creation
opportunities that are presented in rural communities.
Chairman Harkin. Ms. Jackson, in the 2007 Energy Bill, we
committed to a steadily increasing supply and use of biofuels
as a key element of our national strategy to reduce dependence
on petroleum. We need to make sure the marketplace can
accommodate that increasing supply, and the key issue today--
the key issue--is what we call the blend wall for ethanol. The
amount of ethanol being produced soon will exceed the amount
that can be used as 10 percent, E10.
Your Agency is considering a request to grant a waiver that
would allow ethanol blends of up to 15 percent to be used in
gasoline-fueled vehicles.
Now, again, the 10 percent, I went back and looked. How did
we ever get to 10 percent? That was just plucked out of thin
air in the Clean Air Act, and I remember when that was passed.
We have had a lot of data, and I have seen a lot of
information come in that it could be as high as 20-some
percent. That would have no effect whatsoever on present state
internal combustion engines.
We were talking about just a waiver up to 15 percent which
would give us half again as much use of the ethanol being
produced. When can we expect a ruling on that request and could
you address yourself to the possibility of increasing the blend
wall to 15 percent?
Ms. Jackson. Sure, Mr. Chairman. The public comment period
on the waiver request to increase the ethanol content of
gasoline from 10 to 15 percent actually closed just a few days
ago on July 20th. EPA received thousands of comments, and, as
we are required to do, we are evaluating those comments as well
as data from several sets of tests, engine tests that are being
performed jointly with the Department of Energy and some
information that we are getting from the Department of
Agriculture. The Clean Air Act gives the Administrator up to
270 days which would end on December 1st of 2009 to render a
decision.
Chairman Harkin. Ms. Jackson, you just came onboard EPA,
but there is a feeling among some of us. I always speak for
myself. I cannot speak for any other member of this Committee,
but I talk to a lot of people around in agricultural circles,
obviously. I have been on this Committee a long time.
There is a sense. I will be very frank with you. There is a
sense among a lot of us that there is a built-in bias within
EPA against biofuels, that there is a bias somehow that an
initial mistake was made when we first started our biofuels
program and that we need to put an end to it as soon as
possible.
Now that could be wrong. I am just telling you in all
frankness there is that sense and that feeling among a lot of
us, that there is some bias at EPA against biofuels.
I hope that you will not take that as any kind of a bad
remark. After all, you just got there. I am not talking about
you. I am just talking about going back 20 years and some of
the battles that we have had with EPA going back that time on
ethanol.
So I hope that we can expect this ruling on the request,
and, of course, we will take a close look at it, very close to
make sure that it is really scientifically based when it comes.
But you think we will have that ruling before when?
Ms. Jackson. Well, the deadline in the Clean Air Act is up
to 270 days, and there are two crucial pieces of information.
The first is the public comment period which has just recently
closed, and the second are the results of the engine tests that
will, I think, provide the scientific and factual background
that can support a determination of what the impact would be on
engines.
Chairman Harkin. So, by December?
Ms. Jackson. That is what we are looking for. December,
yes.
Chairman Harkin. It could be before?
Ms. Jackson. It could be before, sir. But we did get lots
of comments, and we do need the results of the testing from
DOE.
Chairman Harkin. Thank you very much, Administrator.
I now turn to Senator Chambliss and then in order of
arrival, as has always been the procedure in this Committee,
Senator Nelson, Senator Bennet, Senator Johanns, Senator
Stabenow, Senator Leahy, Senator Casey and Senator Roberts.
Senator Chambliss. Thank you, Mr. Chairman.
Secretary Vilsack, as I understand it, what you do is you
model these analyses based on history, I assume, of input costs
as well as revenues that are generated, and that is the way you
came up with your overall analysis relative to the impact of
the House-passed bill on agriculture. Am I correct in stating
that?
Secretary Vilsack. I think that is correct, Senator. We
also, obviously, utilized information from the EPA as well.
Senator Chambliss. OK. Now Administrator Jackson said that
she anticipates that by 2020 you are going to have a 17 cents
per gallon increase in gasoline. Is that the input cost that
you used on gasoline?
Secretary Vilsack. We used the EPA numbers relative to
fuel, and then we utilized them within a simulated model that
USDA has used for quite some time to factor in other expenses
and other income opportunities.
Senator Chambliss. OK. I understand that your analysis only
models the impact on nine crops, and that does not include a
discussion on specialty crops and no mention on the impact on
livestock, which are the two sectors that generate the greatest
amount of farm income annually. Can you explain why those two
sectors were excluded?
Secretary Vilsack. Senator, I think that there was a
discussion and review of crop prices and its impact on
livestock. So the evaluation does discuss livestock.
The issue of specialty crops, we are in the process of
obviously continuing these evaluations in a continuing
analysis. We tried to get as best we could information on the
crops that were relatively easy to calculate.
Senator Chambliss. The USDA analysis estimates the gross
revenues associated with offsets and yet tries to compare those
with the costs incurred by farmers and ranchers. Could you
please explain if the offset income noted in the long-term
analysis is for soil sequestration by row crop agriculture or,
if as EPA does or EPA notes, does the majority of the benefit
go to afforestation?
Secretary Vilsack. As you can see--I do not know if you
have the chart in front of you--on Table 8, the estimated
revenues look at afforestation and soil carbon long-term
methane and nitrous oxide reductions. The combination of those
two on the long term, we are talking about roughly $20 billion,
and then forest management is another $8.2 billion.
Senator Chambliss. I am sorry. Run through that again with
me, Mr. Secretary. My brain does not operate that quickly here.
I am looking at Table 8 right now.
Secretary Vilsack. Well, if you look at Table 8, there are
three items, two under the Ag Offsets category, if you will,
and one under Forest Management. The Ag Offset category is
afforestation and soil carbon and then methane and nitrous
oxide reductions. I mean there are multiple strategies here for
addressing how offsets can be calculated.
We understand and appreciate that EPA was making certain
projections relative to forests and the amount of tress that
would be grown. That is part of the equation. It is, by no
means, the only equation.
There are a number of farming practices that could be
adopted that would ultimately qualify for credits as the bill
is currently drafted. We would anticipate that in partnership
the Federal agencies would probably, as we learn more about
this, expand the list of practices and be more specific about
the practices, but based on the bill as it exists today this is
our estimate.
Now there are other estimates that show an even better
picture for agriculture because they take into consideration
technology changes. They take into consideration bioenergy
opportunities. They take into consideration strategies that
farmers might embrace to reduce their input costs which has
been historically what farmers have done.
Senator Chambliss. Given the quick pace of the House's
consideration and passage of the American Clean Energy and
Security Act, I understand that there was not much time to
think through the implementation aspect of the agricultural
offsets program.
Now that you have had about a month to think about it, how
do you envision the Department would operate the offsets
program, what agency or agencies would administrate the program
and how would the Department interface with producers who want
to participate?
Secretary Vilsack. Well, Senator, we obviously recognize
the role that the Senate is going to play in the crafting of
this proposal. I will say that we are prepared to work in
partnership with other Federal agencies. Several have been
mentioned today. And, I think it is going to be appropriate to
have that partnership.
This will be a significant undertaking, and each department
has individual and unique assets that allow it to have
expertise and knowledge. In our particular case, we have field
staff in every county, virtually every county in the Country,
which allows us to have eyes and ears on the ground for
verification purposes.
Certainly, EPA and USDA have expertise in terms of the
calculations and determinations of precisely what is being
absorbed and what is being sequestered and how agriculture is
being impacted by all this, and so I would see a partnership
between our agencies. The Department of Energy will be
involved. The Department of Interior will also be involved. So
I think it is a partnership that we envision, and USDA is
prepared to take the roles that are assigned to it by
policymakers.
Senator Chambliss. We had a discussion with the panel this
morning relative to the potential for tariffs to be imposed on
those countries that do not follow the lead of the United
States if some sort of cap and trade legislation is enacted.
Very clearly, it is going to impact our ability to export in
the world market, and I am one of those who has long advocated
the fact that the future of American agriculture and our
ability to make a profit depends on our ability to export our
products.
China and India, two countries that are probably the
biggest competitors for our cotton farmers here, have already
stated flatly that they do not intend to take any action
irrespective of what we do.
Mexico is not likely to take much, if any, action. A
country like Mexico that has a huge export of agricultural
products into the United States would be one of those countries
that was discussed this morning that might potentially have
tariffs imposed on it.
What is your thought about other countries we deal with and
whether or not tariffs ought to be imposed on agricultural of
those countries that do not participate in some sort of cap and
trade program?
Secretary Vilsack. Senator, I would agree that it is in the
long-term best interest of farmers and ranchers in this Country
to have robust trading opportunities globally. Clearly,
agriculture is one of the bright spots in terms of trade, and
we have a trade surplus of roughly $12 billion. Obviously, it
will be up to USDA to work with our farmers to make sure that
that continues.
I am not sure that I am willing with respect to acknowledge
the foundation of your question which is that countries
internationally will not do anything on this area. I think the
reality is that many countries, as I have traveled extensively
last year for the Council on Foreign Relations report on the
international consequences of cap and trade and climate change
and in visiting with international leaders, with foreign
leaders, with dignitaries on this issue, I got the sense that
they were waiting for the United States. They wanted to see
action. They wanted to see leadership from the United States.
My view of this is that the world is waiting for us. When
and if the United States moves, I think we will create, along
with many other nations, a significant amount of momentum.
Will what other countries do be precisely what we agree on
or precisely in the process, I do not know. But I would be
very, very doubtful that countries as large as China and India
will essentially do nothing on this. I really expect them to be
participating in some form or another.
Senator Chambliss. Well, obviously, if anything is enacted
here, I would hope you would be correct in that prediction. But
the fact is, Mr. Secretary, they, this week, have told
Secretary Clinton that basically we can do whatever we want to,
that they do intend to do nothing.
You know from the standpoint of competing in the global
market, they are tough competitors and they are direct
competitors with our farmers.
I think that question obviously is a difficult question to
answer except, from the standpoint of tariffs, I just hate to
see us get into a contest where we are throwing rocks at other
countries for their failure to take action and knowing that we
are going to be put at a disadvantage because they are going to
retaliate in some sort of similar activity. So I hope if as we
move down the line, and we will have other discussions about
this, that we can have some additional conversation about what
might happen if that does come about.
Thanks, the Chairman.
Chairman Harkin. Thank you, Senator Chambliss.
Now we will turn to Senator Nelson.
Senator Nelson. Thank you, Mr. Chairman.
Thank you for being here, Secretary Vilsack, Administrator
Jackson and Dr. Holdren.
I know the frustration is there of how to improve the
environment without adversely impacting the economy and to do
so in the reality of a world where, as my colleague from
Georgia has indicated, some other countries have shown little
or no interest in assuming some of the costs in curtailing
their emissions. And so, I hope that we can pursue the most
economically prudent model. The question is with a cap and
trade, in my opinion, is whether that is the model.
Has either of your agencies or the White House done any
kind of analysis of just instituting a straight cap on
emissions without a trading mechanism which I quite honestly
feel will create a new monetary system, trading in these
credits? Do we have any modeling just on a cap without trade?
Ms. Jackson. Senator, EPA has not. We know that it would be
expensive, but we have not done an analysis of that situation.
Senator Nelson. Well, when you know it would be expensive,
what does that mean? More or less expensive than cap and trade?
Ms. Jackson. Well, since I have no analysis to back up my
statement, I do not want to say relatively. But we know that
EPA in its regulatory roles on other contaminants knows that
there is always a cost to regulating a contaminant.
Cap and trade has proven an opportunity to involve the
marketplace in mitigating costs. The offsets program discussed
earlier is one example of a way to mitigate those costs.
Senator Nelson. Well, my mail is running about 99 to 1
against that. I use the parade analogy as well. That is what
are people yelling at you when you are walking in a parade? It
is no to cap and trade.
So I am concerned that if this is going to be the approach
that is taken, that it be the most benign method of dealing
with the importance of balancing the economy and the
environment. It is not just about agriculture. It is about
individuals who turn on the lights at home and business as
well.
Is it possible? It seems to me, and you do not have the
data to back this up, so maybe I just state this in a positive
way as opposed to a question. It seems to me that a cap without
the trading piece is likely to give us a more levelized
increase and less volatile rise in energy prices over the
volatility that the market is going to experience with the
allotment of allowance and market of trading credits.
In Nebraska, which is 100 percent public power, unique--no
other State is 100 percent public power--I am told that the
cost of the credits will add significantly to the cost of
electricity generation in the State. It is not just
agriculture. It is across the board. So, obviously, I am quite
concerned that whatever we do, if anything, that it be the
least invasive in terms of raising the cost of electricity in
the State.
I just think that a more resounding effect would come from
a cap without trade over a reasonable period of time to
transition to the kind of technology, and maybe Dr. Holdren is
the person to talk about the technology, to develop the
technology to overcome the growing emissions.
Mr. Holdren. Senator, maybe I can just take a very brief
crack at this.
The different options for achieving reductions in
greenhouse gas emissions have certainly been looked at in the
White House largely on the basis of the existing economic
literature, which is very large, and what that literature says
is that the cost of a straight cap without trading will be
higher than the cost of achieving the same emissions goals with
the cap and trade system. The reason is the cap and trade
system allows people to look for and exploit the lowest cost,
most efficient emissions reductions that are available,
including reaching into the area of offsets in the agricultural
and forest sectors. So the idea really is to find the most
economical way of achieving the emissions reduction targets
that we are interested in.
Senator Nelson. Secretary Vilsack, in doing the modeling at
the USDA, did you follow the modeling set forth by EPA? I guess
perhaps you did as it related to some of the analysis, but was
there any other modeling done that might provide additional
insight as to what the impact of this program might be?
Secretary Vilsack. Senator, what we did is we took
information from EPA and we utilized a model that we have been
using at USDA for some time to model impacts and came up with
what we think is a relatively conservative view about this
because we did not factor into it, as I said earlier,
technology changes, adaptation by farmers and ranchers. We did
not look at the potential impact on bioenergy and the positive
aspects of that. We did not look at the impact of the renewable
energy standard that might create more opportunities. None of
that was calculated.
Now there have been other models, Senator, outside of USDA
that actually attempted to calculate the impact of those
changes. Obviously, they came up with less expense and more net
farm income than our model, and the offsets would be something
in addition to that.
So we are looking initially at the impact directly on
farming and then income opportunities from the offsets program.
Our view is in the short term it is a plus for agriculture. In
the long term, it is a significant plus.
Other studies have suggested in the short term it is an
even bigger plus than we have calculated, and in the long term
it is roughly equivalent to what we calculated. EPA has done
its own analysis, and I think we have created what, for you, is
a range, is a sense.
I think what I would like to say is it is my view that, all
things being considered, what we know today is agriculture and
rural communities will benefit in the long term from this
approach. And, I have great confidence in American farmers and
ranchers to be innovative and to be adapting and to be
embracing technology. That has been their history. That is
going to continue to be their history.
Senator Nelson. Thank you.
Thank you, Mr. Chairman. Thank you all.
Chairman Harkin. Thank you very much, Senator.
Senator Stabenow and then Senator Bennet, Senator Johanns
and on down the list.
Senator Stabenow. Well, thank you, Mr. Chairman, and
welcome to all of our witnesses today. We appreciate all of
your work in so many different areas.
Mr. Chairman, thank you again for this very thoughtful
hearing today.
Let me start with Administrator Jackson. I want to talk
about the role of the USDA and the EPA because it is so
important as we move forward on what is an essential part of
this bill, offset bill, and I believe also an incentive program
under USDA. But as we are working through drafts and looking at
language as it relates to an offset title, one of the biggest
issues really is clarifying the roles between the two agencies,
the two departments.
The result has to be the fact that we have assurances that
we are going to have projects that are backed by scientific
integrity, no question about that, but we also need to have
certainty to the regulated community that offsets will in fact
be available.
I understand that the EPA will be one of the agencies that
will ensure the operability of a cap and regulatory
obligations, the agency. It is also critical that USDA
implement the agriculture and forestry offsets program and that
in fact it be more than consultation, that in fact it be the
agency that is implementing the program.
So, as we are working out all the details, I wonder if you
might just speak about the EPA's history of working with other
agencies. We have two agencies. There has been concern about
the different cultures or perspectives of the two agencies. But
I wonder if you might talk about how you view working together
to implement this very important section and what has been the
agency's experience in joint cooperation with other agencies as
well.
Ms. Jackson. Thank you, Senator.
First, I would like to say that if our agencies can work as
well together as I do with Secretary Vilsack I think we will be
in very good stead. I have enormous respect not only for his
knowledge of his industry, of agriculture, but his knowledge on
this issue, on the environmental aspects and the potential
benefits for the environment as a whole as well as what we can
do for our agriculture. And, I obviously think we both have
important roles to play.
We have history, and it troubles me to know that there is
some bad history. But there is also some very good history, and
I am committed to bringing that forward.
We have worked with USDA Natural Resources Conservation
Service under the EQIP Program to help growers in California
who are in severe on-attainment areas for ozone, a big issue
because obviously their operations impact ozone levels. What we
have done together is work on replacement of older diesel
engines that have high levels of NOx emissions that are
creating ozone problems, and we have worked on new certified
diesel engines together to address that issue.
We work very well together on the Food Quality Protection
Act where each of our agencies has co-chaired separate
committees that consulted extensively during the promulgation
of the FDA rules, where EPA's role there is actually written
into the statute--very effective process.
We work very well together, I think, on international
limits and domestic issues related to pesticide residues. That
is not to say that we do not come at it from different angles,
but we find invaluable the input from USDA on those programs.
We work with other agencies as well. We have worked
collaboratively on any number of issues with FDA and certainty
with the Department of Energy.
Senator Stabenow. Thank you very much.
Mr. Secretary, to you now, a similar kind of question, but
I want to speak about the capacity of the USDA to focus on
climate change and the offsets program.
I understand that the Global Climate Change Office has been
studying agriculture's role for some time and has even been
contributing currently to our international efforts. I also
know that the USDA is developing the Office of Ecosystem
Service and Markets to look at methodologies and standards for
carbon projects such as offsets. I joined with Senator Lugar
and 10 other Senators in a letter supporting the work of these
two offices recently, encouraging you to continue to develop
both of those.
But I wonder if you might talk about and assure the
Committee that the USDA has the history, the capability to
implement an offsets program and that it can be done with
strong scientific integrity so that we and the private sector
will be able to depend on the fact that there will be offsets
for quality projects.
Secretary Vilsack. Senator, first of all, let me join with
the comments of Administrator Jackson in terms of our personal
working relationship. It cannot be closer, and it is a very
solid relationship. The respect that she has for me is
certainly equal to the respect that I have for her and her
background and her knowledge and her way of approaching
problem-solving, which I think is important for agencies to be
able to do, to be able to work things through when there are
difficulties or differences of opinion. So I value that
friendship and that relationship.
I would say that I am very proud of the extraordinary
outreach efforts that we have within USDA. We have a lot of
hardworking folks working in communities all across this great
Country, and they are anxious to be part of this process if
you, the policymakers, make a decision that there is a role for
USDA. We are prepared to accept that role, but, obviously, that
is your decision.
These are folks who, because of their work in conservation
programs, are somewhat familiar with the capacity to verify
activities that take place. We have been criticized for some of
our efforts in conservation in terms of some of the work that
has been done recently. We are aware of those criticisms, and
we are in the process of responding to them. So I think we will
be an even stronger agency than we have been in the past by
virtue of the Inspector General's report. So we are prepared.
I would also say that it is important for us to do our work
well. To Senator Nelson's comments, part of the capacity of a
market to work is that people have confidence in the market. In
order to have confidence in the market, you have to know that
when a credit is being given and value is being assigned to it
and it is for sequestering a certain amount of carbon, that in
fact that is occurring.
I think it is important, relevant, that we understand the
significance of our work connected to the significance of the
quality of the market, the validity and the merit of the
market. So we are anxious to be helpful, and we are anxious to
work in partnership with other Federal agencies if that is the
decision you all make.
Senator Stabenow. Thank you, Mr. Chairman.
Chairman Harkin. Thank you, Senator Stabenow.
Senator Bennet.
Senator Bennet. Mr. Chairman, thank you for holding this
hearing and thank you all for coming and giving us your
testimony.
This is one of the most complicated issues, I think, that
we are going to face in the Senate, and I think no one has a
monopoly on wisdom on these issues. We are going to have to
hear from a lot of people, a lot of different ideas.
I, for one, look forward to working with my colleagues here
and others on what is a tough, tough challenge, but I was
reminded this week. You know in Colorado water is everything,
especially for agricultural producers.
Dr. Holdren, I wanted to ask you because on Monday a new
study from the University of Colorado at Boulder, one of our
Nation's premier research universities, was published,
indicating that there is a one in two chance that the water
reservoirs of the Colorado River will dry up by 2050. I do not
know if I will still be around, but my children certainly will,
and the Colorado River is the lifeblood of communities across
Colorado, Arizona, Utah, Nevada. It enables agriculture in
California's Imperial Valley not only to exist but to flourish.
So, Dr. Holdren, in your testimony, you talk about climate
change shifting weather and water patterns. Is this the kind of
phenomena that you are talking about and could you elaborate a
bit?
Help us better understand why climate change would so
dramatically alter water flow. How would changing water
patterns affect agriculture? How are water, energy and
agriculture linked?
Why and would a climate bill make a difference?
Mr. Holdren. Well, Senator, that is a big question, but I
will do my best with it.
As I mentioned in the testimony, there are a number of
different ways in which the global climate change that is
underway influences water availability, including not only
surface runoff but soil moisture. Part of that is that changes
in relative heating of land and ocean areas produces changes in
circulation patterns which changes where the rain falls. As it
happens, somewhat perversely, the overall pattern is that
places that are already tending to be semi-arid, water-short,
over time are likely for the most part to become even more so
because of these changes in circulation patterns in the
atmosphere.
That is happening in the United States. It is also
happening in other parts of the world, for example, China,
where changes in the monsoon that the Chinese themselves have
concluded have been driven by global climate change have
aggravated flooding in the south of China and drought in the
north, which is a longstanding problem for them.
A second aspect of this phenomenon is that in a warmer
world more water evaporates. That sounds good for water because
what goes up must come down. More evaporation means more
rainfall.
The problem is that with more water in the atmosphere as a
result of more evaporation a greater proportion of the rainfall
comes in deluges, and deluges have the characteristics that a
larger proportion of the water runs off quickly in storm runoff
and is not captured in soil moisture or n reservoirs and,
therefore, is not available. The second aspect of having more
of it come down in deluges is there is typically a longer
interval between those deluges during which the higher air
temperatures that are coming from the warming phenomenon
overall increase the evaporation.
You have less of the total precipitation available, longer
periods between precipitation in which the soil moisture is
evaporating away, and the projections therefore for much of the
Western United States, and particularly the Southwest but many
other parts of the world, is a very substantially increased
incidence of drought over the decades as ahead as climate
change increases. Drought, of course, is bad for agriculture.
Senator Bennet. I get the collective action problem that
was talked about earlier, about do we go first, do we wait for
these other countries to go first, how does all that work.
What I can tell you is that in Colorado now we are
confronting these issues because of the water shortages that we
have. From my perspective anyway, if we are going to be able to
assure that another generation of Coloradans are able to farm
or one after that, we need some answer to this question on how
to reserve our water resources. This, I think, is part of it.
Mr. Secretary, I just wanted to ask you quickly if you
could speak a little bit more about the potential for farmers
in rural communities to sell offsets for practices like
improvements in soil management, optimization of crop
rotations, improvements in livestock management. All seem like
potential economic benefits. We have not seen them yet, so we
are not sure, but they could be hugely important to our rural
communities.
I wonder if you could talk a little bit more about the
economic opportunities that you see here.
I should say having seen you out in my State, on the
question of whether USDA is ready for this, if the ability to
withstand tough questioning is part of that, you certainly meet
that test. I appreciate your being out there.
Secretary Vilsack. Thank you, Senator.
Farmers and ranchers in this Country, I think, are
extraordinary innovators. When you take a look at the level of
productivity that we have seen in American agriculture over the
course of the last 30, 40, 50 years--take whatever timeframe
you wish--you are going to see an extraordinary amount of
productivity, productivity that feeds our families and helps to
provide food for the entire globe.
One of the reasons they have been successful is that they
have been adapters. They have been innovators. They have been
embracing new technologies.
We have an annual event in my hometown of Mount Pleasant.
It is called the Old Threshers Reunion. They bring out the old
steam-powered threshing machines and the old tractors, and you
compare those to the tractors and combines and farm machinery
that are being produced in John Deere plants in my home State
in Waterloo and Ottumwa and Ankeny. It is absolutely
phenomenal. So I am convinced that there is going to be
significant innovation.
What we attempted to do in this analysis was to say, look,
let's put that innovation for the time being aside and let's
see if we can get a handle, a range on how this might impact
folks.
What we concluded was that when you take everything into
consideration--the capacity for offsets, the impact on fuel
costs, the impact on indirect energy costs--the reality is for
farm and agriculture generally we are going to see opportunity.
Now folks will ask me about various types of farming in
various regions of the Country, and, obviously, there will be
differences between what farmers do in Colorado and what
farmers do in Iowa. But if we cannot participate, if our
farmers cannot participate in this particular program, then
there are a whole host of other programs that we can direct and
provide assistance for. So, between the farm programs, the
conservation programs, this, the energy title of the Farm Bill,
broadband--this is apart from your question--there is enormous
opportunity in rural America.
In fact, I would argue that what we are seeing is one of
the most significant, if not the most significant, investment
in new opportunities in rural America that we have seen in a
long, long time, maybe in my lifetime, if we take advantage of
it.
Then, if we do take advantage of it, then we are going to
see windmill manufacturing facilities in our States. We are
going to see new bio refineries being located in our States. We
are going to see companies that can make anhydrous ammonia out
of corncobs and reduce our reliance on petroleum. And, that is
all going to create jobs, and many of those jobs are going to
be located in rural communities throughout the Country.
So I think there is an opportunity side here that is often
is not appreciated. We can argue about the numbers, and we can
fiddle with the numbers. But I think at the end of the day the
innovation history of agriculture is one of America's success
stories, and I think with this we will see a continuation of
that.
Senator Bennet. Thank you.
Thank you, Mr. Chairman.
Chairman Harkin. Thank you, Senator Bennet.
Senator Johanns.
Senator Johanns. Mr. Chairman, thank you.
I must admit I was listening with some degree of amusement
when Senator Nelson was talking about our parade experiences.
As the junior Senator, I follow him in Nebraska parades, and,
yes, they were yelling at us: Vote no on cap and trade.
You are at a different point than where most of the
American people are, and I will just be blunt about that, and
let me walk you through why.
Administrator Jackson, recently, you testified, I think it
was you, and said, after you pass this, you are going to have a
very negligible impact--I am probably not using your exact
words--on temperature.
So the chart that the Chairman was using, the other facts
that have been brought to your attention, what you are saying
is if the United States passes this bill, we are not going to
impact temperature in any significant degree. Is that not
correct?
Ms. Jackson. Senator, you are referring to a question at a
recent Senate EPW hearing that asked about whether or not we
would have an impact--alone, we could have a significant impact
on global CO2 concentrations in the atmosphere. We did not
actually talk about temperature.
What I said is, alone, I did not think we could get to a
significant enough level to solve the climate change problem. I
also went on to state that I recognize that we need others to
join. I will tell you here, I do not think we have to do it all
at the same time.
Senator Johanns. But, you see, here is the problem. Poor
Tom Vilsack has to go out there with that testimony and try to
convince farmers on a hope and a prayer that somehow this is
going to work out.
I turn to my attention to you, Mr. Secretary. When you talk
about the offsets, I noticed in both the charts from the EPA
and the charts from the USDA you have clumped together farmland
and forests, and they are two vastly different things. Tell me
how much farmland is going to be taken out of production as a
result of this climate change effort if it were to become law.
Secretary Vilsack. Senator, it is funny you should mention
that. I was speaking to State foresters yesterday, and I asked
them to define for me a forest. Their view was that what you
and I would normally think of, like a national forest, was not
their view.
Their view was if you have trees on your farm. If you have,
as I do on my farm, roughly 90 acres of timber, I have a
forest. Now I would never have considered that a forest, but
those in the business do consider it a forest. So I guess there
is a definitional issue here.
You ask the question, how many acres are going to be
displaced? I do not know that anybody. I mean the EPA estimated
a number of a million acres of farmland, but my point is this.
Senator Johanns. I know your point.
Secretary Vilsack. I do not think you do.
Senator Johanns. By number of acres, just the question
asked, how many acres go out of farm production?
Secretary Vilsack. Well, the problem with that question is
that it assumes that there is no increase in productivity in
farming because if you increase productivity and you have the
opportunity to take marginal land and you create offset
opportunities from that, you have increased the possible income
for farmers as we are doing with conservation programs.
Senator Johanns. But here is the question.
Secretary Vilsack. Then the question becomes what about CRP
in terms of the options that people have? So it is difficult to
answer your question because I am not willing to concede that
there will be a lack of productivity and I am not willing to
concede that we are not going to take land that is in CRP and
use it for forests.
Senator Johanns. Mr. Secretary, I am not even asking about
productivity at this point.
I am just asking, you or maybe the Administrator can tell
me in your forecasts how many productive acres of farmland will
go out of production. We will start there, and then I will ask
other questions.
Secretary Vilsack. Go ahead. You can answer it, and then I
will be glad to add something.
Ms. Jackson. Senator, I do not have a number for you here.
I have heard numbers that are being attributed to EPA's
modeling efforts that are on the order of tens of millions of
acres. We are looking into that.
But what EPA's modeling efforts say, the analysis, the
conclusion you can draw is that if an offsets program is geared
around afforestation such that farmers could be paid
voluntarily to grow trees, there is possibly the idea that many
farmers will choose, choose voluntarily to do that. But we do
not have a firm estimate on that number with me.
Senator Johanns. In your charts, the USDA relied upon the
EPA analysis of June 23rd. In your charts, on Page 33 of that
analysis, you say this: Because overall land area in crops
declines due to afforestation, the modeling indicates--so you
had to have some acres to model it--a net decrease in total
agricultural soil carbon storage as carbon is transferred from
the agricultural soils pool to the afforestation pool.
Now the whole purpose of this hearing is just to be honest
with people what is going out of production because the
important thing about that is that affects the pork producer,
the cattle guy, and it beats living daylights out of them. Why?
Because your prices are going to go up.
They are out there saying, look, my input costs are going
to go up with electricity and natural gas and any fertilizer I
have to buy.
Just tell them how many acres are going out of production.
Secretary Vilsack. Senator, the problem is that qualifier,
how many acres are going out of production, because that
assumes that the forests are going to be planted and the trees
are going to be planted on land that is currently in
production.
What I was trying to suggest is what you are now providing
is another option to conservation programs. So it may be that
farmers choose not to take the acre where they are growing corn
out of production. They are going to take the acre that is
currently in the CRP program or another program.
Senator Johanns. I know what you are saying, Mr. Secretary,
but I read this language. I did not write this language. I am
only trying to get to the bottom of it.
Acres are going to go out of production. You used some
number in your model. What is that number?
Secretary Vilsack. Senator, I think what----
Senator Johanns. That was directed at the Administrator.
Secretary Vilsack. Oh, I am sorry.
Ms. Jackson. Thank you. Senator, I do not have a number of
acres that go out of production. I did listen carefully to the
qualitative language that you read, and the assumption is that
an offsets program that includes some incentives for
afforestation could have the impact of taking some acreage out
of production into forest production, but we do not have a
number.
Senator Johanns. The offsets there that the Secretary
speaks about would not go to the row crop person to offset his
higher energy costs, his higher fertilizer costs, his higher
other costs. It would go to the person who is planting the
forest land.
But, again, unless you can quantify this, you cannot sell
this plan because it becomes the hope and the prayer plan for
agriculture, because you cannot tell farmers and ranchers what
they are going to be exposed to in terms of their input costs,
and that is a huge issue. And, that is what I am getting to
here.
I said yesterday on the Senate floor it is no consolation
to stand with one foot in the campfire, one foot in the ice
bucket and say, on average, I am in good shape.
It is no consolation to say to farmers and ranchers, you
are going to be in good shape on average, if you do not know
the regional differences, if you do not know the crop
differences, if you cannot tell them how much land is going to
go out of production.
Yet, we have a House bill that was passed, and I find that
shocking. I just find that amazingly shocking that that would
have happened without that information being out there.
Mr. Chairman, thank you.
Chairman Harkin. Thank you very much, Senator.
Now, Senator Roberts.
Well, I will go to Senator Cochran then if you are not
ready.
Senator Roberts. You caught me off guard there, Mr.
Chairman.
Thank you for your agreement that we hold additional
hearings. Thank you for your agreement that we try to focus on
some subjects that all of us will decide on when we have a
meeting. I think that is real leadership, and I appreciate it
Mr. Chairman, thank you very much.
Senators Bennet, Nelson, Thune, the county commissioner,
mayor and Governor and Secretary and Senator Johanns and
Senator Roberts, me, we are all High Plains drifters. We are
out there on the high plains where it is pretty risky business,
and we make a great crop 1 year, lose it two and hope for the
best.
You have indicated that, well, if you are from coal
country, and we are, 73 percent in Kansas. You drive long
distances, and we sure as heck do that. And if we do not have
any trees, last time I counted there were six in Dodge City.
[Laughter.]
Senator Roberts. I am making that up. We do have trees.
That somehow we are going to go to nuclear from coal. We
have not built a nuclear plant in 30 years.
I think we are going to natural gas, which means higher
fertilizer prices, and so that endangers the wheat, the corn,
the sorghum and the soybean and even the cotton crops that we
have and then puts a real dilemma in regards to the livestock
producer and our rural communities. So that is just for
starters in regards to the indexes that you have indicated.
Secretary Vilsack, it has been over 1 year since the
Congress passed the Farm Bill. I know you are working hard on
the implementation. I know our producers are anxious for the
final rules and the decision to be made.
This bill gives you 1 year to establish the offsets
allowances programs. I just think that is going to be a pretty
heavy burden for you, if not an unrealistic task.
We know you do not have all the necessary resources for the
SURE disaster program. I understand that has been done by
pencil and paper and, hopefully, an eraser. If you do not have
the software to implement this program, which we have a good
idea of how it works, how are you going to implement this new
carbon program that demands time and understanding?
Do you have the necessary resources to do this? Are you
going to have to pull away from the Farm Bill and the disaster
program to explain the warming cap and trade program?
Secretary Vilsack. Senator, I am confident that we will be
able to get the work done.
You have alluded to the fact that we have an outdated,
antiquated computer system, and we have requested resources to
begin the process of modernizing that system. Our hope and
prayer is that we can justify to you, the policymakers and the
appropriators.
Senator Roberts. I will be very warm to that, and I
appreciate the answer.
Administrator Jackson, EPA's cost analysis has taken a good
deal of concern here. The EPA assumes 150 percent increase by
2015 in nuclear electricity production. I just mentioned that.
I think this underestimates the amount of fuel switching by
utilities, to move coal-based generation to natural gas.
Obviously, as I have stated, in the High Plains, why, we are
heavily dependent upon coal for our electricity, meaning our
farmers are heavily dependent upon coal.
Now, since we have not had a new nuclear plant in 30 years,
is it not more likely that many utilities will simply switch
from coal to natural gas as opposed to building new nuclear
plants and then how is that going to affect farmers who need
fertilizer to grow the crops that feed a troubled and hungry
world? And, it is a whole bunch of crops.
Where is my chart or is this the one with the chart?
Ms. Jackson. No, that is the other one.
Senator Roberts. Oh, there is the chart. This is a Kent
Conrad special.
That is the nuclear production that you indicate is going
to rise there. Stick your finger out there, right there.
I just do not think that is going to happen. I do not think
it is going to happen. I wish it would, and I hope it would.
Any answer?
Ms. Jackson. Yes, Senator. Thank you.
EPA did not assume nuclear power assumption. Rather, we
projected that nuclear power would expand because of a rise in
the carbon price. We constrained the ability of nuclear power
production to grow any faster than the Energy Information
Administration, which I see is also listed on your chart, has
in its reference case. So we tried to adhere to what the Energy
Information Administration says is likely to happen. So we did
not look come up with that.
Senator Roberts. I understand that.
I am not going to ask the question by Saxby Chambliss that
referred to India when he said no, and that per capita they
release less CO2 than anybody else.
But I would sure be careful about any tariff punishment,
more especially on China. We just heard from the former Fed
Chairman, Mr. Greenspan, saying we might be at a tipping point
with our economy, where he indicated that China might even buy
our paper or our bonds--if that happens, higher interest rates.
I would be a little careful. As I said before, maybe
Senator Smoot and Senator Hawley are for it, but I am not.
Finally, Administrator Jackson, I want you to come with me
to a little town in Kansas called Treece. It is down there in
the southeastern part. We can make a short walk across the
street from Treece, a town in need of a buyout, into some place
called Picher, Oklahoma, a town that received a buyout.
So, whenever your schedule allows you, we will show you a
good time down there. We will get away from that toxic waste
site. There is a lot of restaurants there, and you can take
your pick, and we will have a good time.
If not, then at least the Region 7 Administrator who tends
to be not less than cooperative but just a little stubborn or
something. I am not quite sure what the problem is down there.
Secretary Vilsack, your testimony leaves out the impact of
removing an estimated 40 million acres. That is the answer I
think or that is the answer I have, Senator Johanns, and that
is on the Farm Bureau estimate. I do not know if anybody is
going to buy that. I am sure the Farm Bureau does--of pasture
land to plant trees on the livestock industry.
Basically, I do not understand when you say there will be
no impact of these decisions on livestock producers, and I
think we have to have that answer, more especially in the High
Plains.
You do not have to answer that. I think I am over time by
26 seconds, and that is pretty good.
No, I still have time left. Go ahead. You have 14 seconds.
Secretary Vilsack. Senator, I guess I approach this from a
slightly different viewpoint about the capacity of American
agriculture to innovate, and I appreciate that you may have
some skepticism about that. But, based on history, what we have
seen is the capacity of farmers and ranchers to adapt and to
embrace technology and to be extraordinarily productive.
So, if one is suggesting that by virtue of taking pasture
land out of production, that somehow that is going to
substantially increase feed costs, that is an argument you can
make. But I think you have to take into consideration: How will
we adapt to that? What will we do in terms of feed technology?
What will we do in terms of seed technology that might reduce
inputs, that might increase productivity, that might allow us
to produce exactly what we are producing today or more on less
land?
Because the reality is that is in fact what has happened.
We have produced more. We have significantly increased
productivity in this Country.
Senator Roberts. Well, I think we have a pretty good record
on that. I mean after several Farm Bills that many of us have
worked on the productivity of the American farmer is
incredible, and precision agriculture has been incredible.
Matter of fact, we have been so incredible that production
agriculture is sort of a forgotten miracle.
But 40 million acres out of production is significant. Do
you agree with that number or not?
Secretary Vilsack. It may very well be the number that is
in the estimate, but what I do not agree, and I do not want to
belabor the point that I had with Senator Johanns.
The question is what land are we taking out of production?
Are we taking land that currently is being used to produce
crops or currently being used for grazing or are we taking out
land that is significantly marginal and is not currently being
used or is in conservation programs? That is the question.
I think what we are creating here are options. What we need
in rural America in my view is as many income options as
possible so that farmers have a chance of success and
particularly those mid-sized farmers. You know if you look at
the ag census what you are going to see is an increase in
production agriculture, units of $500,000 in sales, 41,000 more
units of farms in the last 5 years, 108,000 more farms in the
smaller category of less than $10,000 in sales. Where we need
options are those folks in the middle, and I think what this
presents is the possibility of another income option.
Chairman Harkin. Senator Roberts?
Senator Roberts. Yes, I know my time is up, and I thank
you, Mr. Chairman. Just could I ask Administrator Jackson if
she could just please come to Treece with me? It would just
be----
Ms. Jackson. I am happy to, Senator.
Senator Roberts. You will make every effort to come?
Ms. Jackson. I will make every effort to come.
Senator Roberts. Yes, ma'am. Thank you so much.
Ms. Jackson. Thank you.
Chairman Harkin. Senator Cochran.
Senator Cochran. Mr. Chairman, thank you.
I have been sitting here for quite a while, so I have had
an opportunity to read some of the statements which I found
interesting.
I want to congratulate you, Mr. Chairman, for convening the
hearing and getting our Committee to focus on the challenges,
not only the traditional ones that we talk about, using
agricultural products for energy production and some of the
other alternatives that discussions like this always drive to
consider.
I wanted to bring to the attention of the distinguished
Assistant to the President for Science and Technology, John
Holdren, that in our State of Mississippi, in Vicksburg,
Mississippi, a few years ago, an entrepreneur family who had
been in the oil and gas production business and in the
distribution of product, transporting product in the
traditional fossil fuel industries has now branched out and
become active in the production of fuels from bioengineering
experiences and trying to find new ways of creating usable
energy products and delivering them at competitive prices.
I was fascinated by the success that this one company has
had. I happen to be at the groundbreaking in Vicksburg several
years ago and really had not thought much about that business
until I got their annual report, and they are beginning to make
money. But more than that, they have invented and are creating
new ways of producing and distributing energy in our State and
throughout the Southeastern Region.
This is the old Lampton-Love Company. Two families joined
together to start the business. But they now have a high-tech
name, and I cannot remember it. It is an acronym, two or three
letters together, Inc.
But I am going to send you a copy of the annual report just
to encourage you that leadership in the innovative approaches
to dealing with older problems is being experience around our
Country, I think. I think this is an indication of a new
industry that gives us all hope for the future, that it is not
all doom and gloom.
We do have challenges in the agricultural area, and I know
you are interested in that too, but I think you might be
interested in this.
But I want to thank the panel too for being here and
helping us explore other issues that we need to be familiar
with, so we can work in a cooperative way. This is not a
partisan deal. We are all in this together. So we want to make
sure that we have programs, government policies that encourage
the successful operations of not only farms and agribusinesses
but other energy companies as well, similar to the one I just
mentioned.
Thanks for conducting the hearing, Mr. Chairman.
Chairman Harkin. Thank you, Senator Cochran. I do not know
if there are any responses from the panel to that or not.
We are expecting two stacked votes. If we can hurry, we
will not have to come back then. So next would be Senator
Thune.
Senator Thune. Thank you, Mr. Chairman, and I want to thank
you for holding today's hearing. I hope it is the first of many
hearings that the Agriculture Committee conducts on climate
change. If that kind of a law is enacted, a cap and trade
program would have sweeping implications for agriculture and
for the entire economy.
I would say that in past years, when I have traveled across
South Dakota, what I traditionally hear from agriculture
producers has to deal with market and weather conditions. It
has to do with USDA, price support, conservation programs,
export opportunities, those sorts of things, the traditional
topics of conversation that reflect the challenges of making a
living in agriculture.
But today, it seems to me at least the attitude among
farmers and ranchers has shifted dramatically, and it seems
like the issues that they are bringing up have more to do with
things that the government is doing that they think is making
agriculture production more costly, less productive, less
competitive. And, they are concerned about the cap and trade
system proposal that they view would increase already high
input costs for fertilizer and diesel fuel and electricity.
They are concerned about food safety laws that invite FDA
inspectors onto their farms and ranchers.
They are worried about EPA studies that make ethanol look
like a worse polluter than gasoline. They are worried about
efforts to dramatically expand the Clean Water Act or regulate
every ditch and puddle and stock dam and creek bed and stream
on their land. And, they are worried about the EPA regulating
greenhouse gases under the Clean Air Act and what that would
mean for the future of production agriculture.
So, in a few short months, it seems to me at least that the
government is being viewed more and more to folks in production
agriculture as almost an adversary as opposed to an ally.
My view is that Congress and the Administration should be
helping farmers and ranchers compete in a global marketplace
and not hamstringing their everyday production decisions, and I
hope as the Ag Committee moves forward with these issues that
we will keep that very simple principle in mind.
Administrator Jackson, do you believe that increased
renewable fuel production is better for our economy and our
environment than relying on traditional gasoline made from
imported oil?
Ms. Jackson. Senator, I believe that renewable fuels by
law, and that is what I am bound to implement. The Energy
Independence and Security Act says that we should be moving
toward renewable fuels and requires EPA to do certain
rulemakings around that.
Senator Thune. Will the EPA in its RFS2, final RFS2, limit
that regulation to just domestic indirect land use changes when
associated with renewable fuel production as opposed to
international land use changes?
Ms. Jackson. Senator, that regulation was out in draft. The
public comment period has closed, and we are now in the middle
of a peer review that is being conducted over the summer. We
are waiting for the results of that peer review, and that will
certainly also inform our decision--specifically the peer
review, specifically on the issue you raise which is the
international indirect land use implications of certain
biofuels.
Senator Thune. The other issue, and I guess I would ask
this, and I do not know if this is contemplated in your
rulemaking, but will the EPA include in its RFS2 rule the
indirect land use changes that are associated with increased
oil production?
Ms. Jackson. Yes, because they were already considered in
the draft rulemaking. So, in looking at petroleum fuel, there
was a look at indirect land use production with respect to
international impacts there as well, Senator.
Senator Thune. For petroleum?
Ms. Jackson. Right. We applied the same kind of modeling to
petroleum fuels that we did for renewable fuels.
Senator Thune. OK. Well, I guess I would hope that, if in
fact when the final ruling comes out. But if it does
contemplate using international land use changes, Mr. Chairman,
I would hope that this Committee would work toward making a
change because that, to me, is not something that ought to be a
part of any equation or calculation of the carbon footprint of
renewable energy.
Secretary Vilsack, I am interested in the role that Federal
forests can play in a safe and reliable source of renewable
electricity and biofuel, and I am interested in your thoughts
about what role Federal forests can play in the climate change
policy and biofuels in terms of renewable energy production and
energy security.
My question, I guess specifically, is do you believe that
the Farm Bill definition of renewable biomass or the current
RFS2 version of biomass is a better way to promote renewable
energy?
Secretary Vilsack. Senator, we have obviously been
supportive of the definition of biomass that the Senate and the
House worked extensively on during the course of the Farm Bill
discussions.
We know that on public lands the current House bill will
allow for removal of trees and other materials except from
national parks, but we also are working within the Recovery and
Reinvestment Act to utilize opportunities in our forests for
woody biomass demonstration projects to show the feasibility
and opportunities. So a combination of those two programs, I
think, will allow us to fully utilize our forests.
I would also say that we are looking at a strategic view
relative to our forests that focuses on a comment that Senator
Bennet made earlier, and that is maintaining them so that we
make maximum use of their capacity to retain water and to
improve the quality of water. So that requires us to look at
maintenance a little bit differently, and that creates, I
think, additional opportunities for supplying biofuel
production from woody biomass and energy production from woody
biomass.
Senator Thune. There is a different definition in the Farm
Bill, however, than exists in the Energy Bill which many of us
have tried to rectify. The current definition in the Energy
Bill and the RFS2 would preclude some of the areas of the
Country that might participate in renewable fuel production,
and the Black Hills of South Dakota comes to mind.
Now people in that area of the State are very much
supportive of taking some of these forest residues and waste
materials that generally contribute to fuel loads for fires in
those forests and using them for a beneficial use which would
be production of renewable energy.
So I guess what I would suggest, and I hope that before
this process is completed that we will be able to get a biomass
definition that is consistent with the one that we passed in
the Farm Bill because I think that is the correct one. It makes
it possible for many of these areas of the Country to
participate in renewable fuel production. I guess I make that
as an observation.
I mean your answer to me sounds like you are sort of more
along the lines of the RFS2 and the Energy Bill definition. I
know there have been various permutations of that as the
process has moved forward, but right now all those definitions,
with the exception of the one in the Farm Bill, preclude areas
like the Black Hills of South Dakota from participating.
Secretary Vilsack. Senator, I guess if I might just suggest
to you or indicate to you my thought about this, and I think we
have been fairly consistent publicly about this. We think the
Farm Bill definition of biomass is a good one.
Having said that depending upon what the policymakers
decide, if you decide collectively to make a different decision
on this as it relates to the Climate Change Bill, I still think
that there are opportunities for the utilization of the woody
biomass that can be created in the forests that you referred
to. I think there are still opportunities within the energy
title of the Farm Bill, within some of the recovery and
reinvestment projects that are also being funded.
So I think there are still opportunities, and I think it
will be part of how we maintain our forests properly in order
to preserve water.
Chairman Harkin. Thank you very much, Senator.
There are two votes now. The first vote was called at 4:14.
I assume the first vote will be 15 minutes and the second vote,
10 minutes. They are back-to-back votes.
Senator Lincoln is next. I am going to leave and go vote,
but you are probably going to have to leave pretty soon too. Do
you want to go vote and come back?
I am trying to figure out what to do here as we have two
votes. If it was one vote, it would be easy.
Senator Brown. I cannot come back.
Chairman Harkin. Pardon?
Senator Brown. I cannot come back. I have meetings about
half an hour, 15 minutes from now. So, Senator Lincoln, it is
her turn. So she can go.
Chairman Harkin. Well, but she can----
Senator Lincoln. I will be brief.
Chairman Harkin. All right. Why do we not go ahead and you
proceed?
Senator Brown. I have just one.
Chairman Harkin. Go ahead.
Senator Lincoln. Yes, I will just throw mine out there.
Thank you, Mr. Chairman. We appreciate you and Senator
Chambliss for bringing us here, and we do hope there will be
more of those hearings.
We want to thank the panel. We are grateful to you for
being here today, but we just need you to know we have to have
you through this whole process in terms of coming through and
really doing something that is meaningful but also something
that is respectful of the economic conditions we are in right
now and certainly from the different, diverse areas that we
come from in this Country. So we appreciate your all being
here, and we look forward to working with you.
Just three questions basically: Secretary Vilsack, you have
discussed that an agricultural offsets program will provide new
revenue sources for agricultural producers across America. I
guess my question, though, is do you believe that that will be
the case for all agriculture producers?
As you well know, my State is a State that produces a
tremendous amount of rice. They do it efficiently and
effectively, and they feed the world. But many rice producers
will see their input costs increase with no opportunity for
mitigation on those costs. We would certainly rather have a
rice field than a parking lot.
If you have any recommendations for mitigating cost
increases for those producers that are ineligible for the ag
offsets programs, I hope that you will express those to us
either here today or in writing.
The other question I would have for you would be the USDA's
analysis, which we got this morning. I have not had the
opportunity to go through it thoroughly. But are there
estimations of how many acres of cropland are going to be
converted to forestry over the life of this bill and what are
the impacts of those acreage shifts to the cost of grain and
crops and particularly food prices?
That question has another second part to it which is we
hear these questions over this debate and concerns about
potential increases in the cost of fuel and the cost of
electricity. We do not hear much about the potential increases
in the cost of food and feed that may be indirectly impacted. I
am certainly interested in the potential impact of climate
legislation on food processing, the food processing industry
which includes sectors that are important to us in Arkansas,
whether it is poultry, meat, oil seed processing and others and
would certainly like to have your comments on that and
wondering if we would provide.
I mean there is going to be little assistance in the form
of free mission allowances in the initial years of some of
these programs. So I just worry if you have taken the kind of
look at USDA at the potential impact of the House legislation
on the food processing industry and the disproportionate cost
on that industry that could really high, higher food prices in
these difficult economic times.
Secretary Vilsack. Senator, let me see if I can quickly
respond in light of the schedule here.
As far as rice is concerned, I think there are steps that
rice producers can take to potentially qualify for offsets.
Obviously, there are differences in terms of crops. Some people
have more opportunities. Some people have less. Those who have
less or those who have no opportunities, the bill that is
currently before you does provide for additional allowances for
those who cannot take advantage, to help them transition. So
there is potentially some additional income source and
opportunity from allowances for those who cannot participate.
That presupposes that innovation, presupposes that our
knowledge stays static. That will not stay static. We will
continue to innovate, and I think we will find a multitude of
ways that we do not know of today to take full advantage of
this.
As it relates to crops and trees, I think Senator Roberts
said 40 million. I am not willing to concede that that
necessarily will take cropland and will necessarily result in
acre for acre reduction of feed and therefore increase costs
for livestock producers.
The reason I am not willing to concede that is because this
gives farmers a choice. They may decide to take unproductive
land. They may decide to take land that is currently in
conservation programs and utilize the offset opportunities that
forestry may present. So I think there are options here.
As it relates to food processing, I do not know that we
have done an evaluation of this, but I do know that the bill
was designed and created in a way to try to provide for
opportunities for energy-intensive industries to receive some
sort of assistance and some sort of opportunity to transition
to more efficiency and greater efficiency, which hopefully over
time will lead to less input costs and hopefully be able to
stabilize what we currently enjoy in this Country, which is
relatively inexpensive food relative to other countries.
Senator Lincoln. I would just say that these are problems
that I think we have not fully addressed, and I hope that you
will work with us to address these. They come as a big
complication for our State and our population, also working
with the Hunger Caucus here in the Senate, understanding
difficult times, and the availability of food at reasonable
prices is a critical issue.
Just to put on all of your minds, I hope, we have talked
about early actors and the importance of what early actors have
done. I hope that we will in some way adequately ensure that
there is not an incentive for those owners to stop doing the
good things that they have done.
I know my dad. I come from a rice farmer and a seventh-
generation Arkansas rice farm family. I have never known a
better conservationist than my dad, and I look around our
State, and I see what farmers are doing, using the existing
programs and others to really do the best job they can, whether
it is clean water or whether it is conservation, planting trees
and a whole host of other things.
So I hope we will disincentivize the good things that are
happening, and I hope that all of you all will look at whenever
we do push on these things sometimes we get unintended
consequences.
So I look forward to working with you.
Thank you, Mr. Chairman.
Chairman Harkin. Thank you very much, Senator Lincoln.
Senator Brown. Can I have 30 seconds?
Chairman Harkin. We have about 4 minutes left.
Senator Brown. Oh, do we have it? OK. Thank you, Mr.
Chairman.
We have how long left?
Chairman Harkin. We have about 4 minutes.
Senator Brown. I wanted to ask a question, and I will just
submit it in writing to Secretary Vilsack.
First, welcome all three of you.
Chairman Harkin. I will leave the record open for questions
to be submitted in writing.
Senator Brown. OK. I appreciate that.
I wanted to ask about the two major industries in my State
are manufacturing and agriculture, and there are six major
energy-intensive manufacturing nationally. All of them are in
Ohio, and one of them is chemicals. I wanted to and I will put
a question in writing about nitrogen fertilizer and the
analysis that you are doing and its impact on climate change
and on the legislation. So I will put that in writing and get
it to, and I appreciate your thoughts on it.
Thanks.
Chairman Harkin. I am sorry, Senator. I think by the time
we go and come back, we have these two votes, and it is not
fair to keep these people here for that. I apologize.
But we will submit these in writing. I would ask you to
please respond as rapidly as possible. I will leave the record
open for Senators who were not here, and, Senator Chambliss, I
think, has some follow-up questions that he wanted to submit in
writing in also.
Ms. Jackson. Mr. Chairman, can I just correct the record? I
gave an inaccuracy. The public comment on the renewable fuels
rule has not closed. That is important to many of your
constituencies. We extended it recently, so I just wanted to
make sure I corrected the record on that.
Chairman Harkin. I appreciate that very much.
I thank you all very much. It was a good exchange.
The Committee will stand adjourned.
[Whereupon, at 4:29 p.m., the Committee was adjourned.]
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A P P E N D I X
July 22, 2009
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DOCUMENTS SUBMITTED FOR THE RECORD
July 22, 2009
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QUESTIONS AND ANSWERS
July 22, 2009
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