2008 Farm Bill Update

The information below was supplied to MFA by the American Forests and Paper Association (http://afandpa.org/)

Today the U.S. Senate passed H.R. 2419, The Food, Conservation and Energy Act of 2008 by a vote of 81-15 following yesterday’s passage in the House by a comfortable 318-106 margin. The President is expected to veto the measure, but given vote counts in each chamber, his veto will likely be overridden and the bill will become law.

Provisions of interest to the industry that are included in the conference report are:

TAX

ü An AF&PA supported one-year version of the TREE Act, which provides a maximum 15 percent corporate tax rate on qualified timber gain for regular tax and AMT purposes. Timber must be held more than 15 years to qualify. It also includes a number of REIT modernization provisions, also for a one-year period from date of enactment.

ü Tax deductions for landowners who take steps to conserve habitat for species listed under the Federal Endangered Species Act. These provisions provide for the first time incentives associated with taking affirmative steps to protect listed species on private land. AF&PA worked in a broad coalition including the Farm Bureau and several environmental groups in support of these incentives.

ü The conference report also includes a new, $1.01 per gallon production tax credit for cellulosic ethanol. This credit reflects a reduction from the original amount of $1.25 per gallon which was contained in the Senate passed version. Consistent with our biomass policy, AF&PA did not take a position on this provision.

ü Accompanying this provision is language which was sought by many of our members requiring an analysis by the National Academy of Sciences of the tax credit’s impact on regional agricultural and silvicultural capabilities of commercially available forest inventories, the selling price of forest products and the maximum amount of biofuels production capable on U.S. forests.

BIOMASS

ü New grants and loan guarantees for demonstration and production scale biorefineries. Consistent with our biomass policy, AF&PA succeeded in securing language that allows for consideration of the impacts of new biomass demand on existing facilities as well as the potential for new markets and rural economic development. In addition, existing wood and paper facilities will be eligible for these grants.

ILLEGAL LOGGING

ü An amendment to the Lacey Act prohibiting importation of wood obtained from illegal logging. AF&PA worked in a broad coalition of conservation and industry groups to support this language. Illegally sourced wood costs the US wood products sector an estimated $460 million annually.

FORESTRY

ü Greatly increased access to conservation programs (such as the Environmental Quality Incentives Program) for non-industrial, private forest landowners.

ü Language directing States to set priorities for the conservation of private forests, and allowing the allocation of some Forest Service State & Private Forestry funds through a competitive process.

ü Language allowing extensions and other types of flexibility to purchasers of Federal timber who have been impacted by steep declines in solid wood markets.

WOOD PRODUCTS INTERNATIONAL

ü Provisions extending the Market Access Program at the current $200 million annual funding level through 2011 and extending the Foreign Market Development program at its current $34.5 million through 2012 are included in the bill. These programs help develop markets for U.S. agricultural products, including forest products, overseas and are important components of the U.S. wood products industry’s international trade strategy

TRANSPORTATION

ü A study of rural transportation issues which includes an examination of the sufficiency of railroad capacity in rural American as well as the sufficiency of rail competition and reliability of rail service. The study, which is due to Congress 9 months from enactment, also would address reasonableness of rail prices and adequacy of a federal process for resolving rail customer grievances with the railroad.