Legal Commentary

Another Biomass Blunder

By Jonathan H. Adler

The federal government?s love affair with ethanol subsidies drove up food prices, depleted plains state aquifers and subsidized the destruction of water fowl habitat.  Today?s Washington Post reports that that Biomass Crop Assistance Program is having similarly untoward and unintended consequences.

In a matter of months, the Biomass Crop Assistance Program ? a small provision tucked into the 2008 farm bill ? has mushroomed into a half-a-billion dollar subsidy that is funneling taxpayer dollars to sawmills and lumber wholesalers, encouraging them to sell their waste to be converted into high-tech biofuels. In doing so, it is shutting off the supply of cheap timber byproducts to the nation?s composite wood manufacturers, who make panels for home entertainment centers and kitchen cabinets. . . .

A range of renewable materials can be converted into energy sources: Wood pellets, rice hulls and fiber from sugar cane can produce electricity; algae and corn cobs can be converted into liquid fuel. The federal government is actively working to support the growth of as many of these biomass crops as possible, in part to meet requirements under the 2007 energy bill: The country must produce 5.5 billion gallons of advanced biofuels annually in five years, and 21 billion gallons by 2022. Right now, almost no U.S. land is devoted to raising biomass crops; according to congressional estimates, by 2022 the country will need between 22.2 and 55.5 million acres for this purpose. . . .

The federal government can provide up to $45 a ton in matching payments to businesses that collect, harvest, store and transport biomass waste to an authorized energy facility. That means sawdust or wood shavings may be twice as valuable if a lumber mill sells them to a biomass energy company instead of to a traditional buyer.This is bad news for the composite panel industry, which turns these materials into particleboard and medium-density fiberboard, and outranks the U.S. biomass industry in terms of employees and economic impact, with 21,000 employees and annual sales of $7.9 billion, according to 2006 U.S. Census data.

The biomass subsidy program could ?wipe us out,? said T.J. Rosengarth, the vice president and chief operating officer of Flakeboard, the largest composite panel producer in North America. ?You can say, ?I?ve made more alternative energy,? but at what expense??

Full post as published by The Volokh Conspiracy on January 10, 2010 (boomark / email).