The New Kid on the USDA Block

U.S. Secretary of Agriculture Ed Schafer is optimistic about the Farm Bill and the support it will provide for biofuels. Shortly after he was appointed, the former North Dakota governor talked to EPM about his new role and the Farm Bill negotiations.
By Kris Bevill | May 09, 2008
Ed Schafer was sworn in as the 29th secretary of the USDA on Jan. 28. EPM caught up with the two-term former governor of North Dakota in March when he was in Fargo, N.D., for the state Republican Convention. This was his first trip back to his home state after accepting his federal appointment.

Q: How did your role serving as governor of an agricultural state such as North Dakota help you prepare for this job?
A: As governor you manage a number of agencies with different missions. The USDA has 28 separate agencies and three budget slots. So, from a management standpoint, that has all worked out well. Having been in the middle of the policy-making processthe interaction with the executive and legislative branchesis immensely helpful, especially going through the Farm Bill negotiations.

Agriculture is 15 percent of [the total] Farm Bill. It's also food and food nutrition, energy, telecommunications, utilities all of which I dealt with in the governor's office. There are rural parts of every state, but agriculture and rural are probably married. Having the Midwest background and growing up in that rural arena and having had a chance to operate both in the public and private sectors and seeing how it relates to everything is amazingly beneficial.

Q: What is your role as secretary of agriculture when it comes to crafting a new Farm Bill?
A: I kind of got parachuted down into the midst of it. There are several rolesmy first role is to represent the administration. We're developing our team to interact with Capitol Hill to craft a piece of legislation that the administration would recommend to the president to sign. That includes one-on-one time with senators, meeting with negotiating teams on both the U.S. House and Senate and whatever there may be externally. Chuck Conner is our lead negotiator, but I've still been pretty involved. (Conner was acting secretary of agriculture before Schafer came on board.)

It's kind of unfair in a way because the administration went through a couple of years of the process before I got there. A lot of work has been donea million meetings, a lot of angstand I come in as the new kid on the block and say, How does that really work?'

Internally, we have USDA departmental experts in almost every conference committee meeting. They're there to provide technical expertise. Of the seemingly hundreds of conference meetings that take place every week, we're there. We have a Farm Bill meeting every day at the USDA to see what's on the agenda, where we are with negotiations and how we need to represent the technical facts about how things work as well as the direction of the administration. Internally, it's mostly putting our arms around the team. Externally, it's whatever needs to be done whether its phone calls, personal meetings or whatever needs to be done with the leadershipDemocrat and Republican, in the House and the Senate.

Q: It's clear that you have a personal relationship with President George W. Bush. How much influence does your relationship have when it comes to the passage of a new Farm Bill?
A: I don't know. At first I was kind of shocked whenI think it was the second or third day I was at USDAthe president was up in the helicopter and he relayed a message through somebody at the White House to ask me what I thought about something. I thought, Really? He wants to know what I think?' He's very engaged. He understands farm policy. I think he's got a strong confidence in the USDA and values our opinion. I'm the one who has the access to him and carries the message.

Certainly our relationship is helpful, and when he nominated me for this we talked about the fact that we could work together. When I went through the interview process, one of the things I was concerned about was that I wasn't interested in just being a token or a mouthpiece for the administration. I wanted to be involved in policy and the direction of the agency. And he agreed.

Can we influence him? He's taken some strong stances. He wants us to pass a Farm Bill that meets the needs of the taxpayers, protects farmers, ranchers and landowners with a good, strong safety net, and he wants to do it without raising taxes. The expertise lies at the USDA and I think he'll strongly consider our recommendations.

Q: What have been some of the major difficulties in drafting a final version of the Farm Bill?
A: I was just talking to [Rep.] Earl Pomeroy, D-N.D., and told him how I got parachuted down into seemingly one of the most contentious negotiations ever. He said that's because the administration's been involved. In previous Farm Bill negotiations, Congress just went off and wrote the bill. This time the president said no, we're going to generate the Farm Bill, put it on the table and let them debate it.' That's caused some turf issues, directional issues and anxieties about who's running the show.

Jurisdictional issues remain between the House and Senate. The House Ways and Means Committee isn't interested in running the Farm Bill. In the Senate, the Finance Committee wants to run the Farm Bill. So you've got those kinds of things going on. They need to solve that.

I think the biggest difficulty that we have is differences between the House and the Senate. In the initial versions there were big differences in spending levels. There were big differences in funding sources. We've been able to narrow that down quite a bit.

The administration has moved toward the hill on the level of funding over baseline. We started out at $4.5 billion; we pretty quickly went up to $6 billion over baseline. Now the House and the Senate are kind of narrowing in on $10 billion and we've built a pathway to show them how to get to $10 [billion]. If they get there I think we can come together. We've moved on some of the reforms of the adjusted gross income. We started with $200,000 now we're looking at $500,000.

Funding sources are a big issue. The Senate has different ideas than the House on how to fund the $10 billion.

Sixteen months ago, USDA provided Congress with a detailed Farm Billand followed up with complete text for the bill. Throughout the past year, USDA attended the agriculture committee meetings and provided specific funding suggestions of reform that producers told us they expected. During all that time, the Farm Bill expired in September of last year, and Congress passed several extensions, and as you are putting this article into publication (the last week of April), they have passed another extension. We have provided the suggested funding sources to offset the increased spending, and made clear we will not accept gimmicks that are funded in part by additional tax revenues. They must provide reform to better focus Farm Bill support where it is needed and in the most effective manner of support.

Q: Were you familiar with renewable fuels before you became the U.S. ag secretary?
A: When I was governor we had two ethanol plants in North Dakota that we championed, and a corn syrup plant that was convertible to ethanol. I called a special session to provide some incentives to put that facility in place and in doing so, kind of became immersed in why ethanol, why high-fructose corn syrup and what difference does it make if you can convert the plant or not. There's also a soy biodiesel and canola plant in North Dakota.

It's a huge interest of mine coming from an agriculture arena. Certainly I didn't know anything about it on the national level, but I knew the process and the products.

Q: Do you get a sense that there's bipartisan support for increased funding for biofuels?
A: Very much so. I think we're looking at it as a pathway. We understand the feed versus fuel issue and the ethanol capacity restrictions right now. There's a huge effort in the new Farm Bill to provide money for cellulosic ethanol research pilot projects. If we're going to meet the goals set forth, our researchers and economists say we're at maybe 25 percent of the corn crop today going into ethanol. By 2012, we'll see that up at maybe 33 percent or 34 percent and then it will level off because then you'll start to get into biomass.

I've been saying that we import 4 billion barrels of oil annually in this country, and often from countries we're not particularly friendly with. If we could in 10 or 12 years convert a quarter of that to renewable fuels it would double the farm income in this country. If you double the farm income in this country, you revitalize rural America. It's important not only from a national security standpoint but from the economic value that could be created in this country. Lights were first installed in the cities and trickled out into the rural areas and telephones were installed in the cities and trickled out to the rural areas. Now you'd be seeing power generated in rural areas and being sent into the cities. It reverses everything that goes on here. I think renewable fuels could change the face of agriculture and the economy in this country.

Q: Is there any funding for biodiesel, or to increase the efficiency of corn ethanol in the Farm Bill?
A: Yeah, big time. We're doing fermentation studies now and there is funding to continue that. That's huge in trying to get more ethanol out of an acre of corn. It's the same with biodiesel. We're looking at canola crushing and soybean crushing and trying to figure out how to do it better.

We've spent $12 billion in the past seven years on renewable energy in this country. People think the United States is far behind. Well guess what, we're not. I'm pleased at the research and the funding and our ability to manage our way through the changes that are going to come as we focus more on renewables.

Q: What's your opinion of the food versus fuel debate?
It's one of those unfortunate byproducts of what's going on in the industry. Agriculture prices are the highest they've ever been. Exports are the highest they've ever been. That causes some pressure on crop prices. Weather has been a big factor. Australia's wheat crop was in the tank last year. Europe was in the tank. South America had bad weather. The reality is that only about 25 percent of the corn is used in ethanol production, so it's not driving the market, but it's affecting it. There's no question that a portion of the food price increase is due to an increased demand for corn, but fertilizer costs are high, fuel is high, input costs are going through the roof. It's not just corn. We need to keep that in perspective.

Q: In your opinion what is the long-term outlook for biofuels?
A: I'm extremely excited about the long-term outlook for biofuels. One of my three goals this year is to create the USDA as a department that's on the leading edge of agriculture and energy. As I mentioned, some of the changes that will take place with the economic output of this country from rural areas are huge. We can't even imagine what is ahead. The more we're out there, the more research gets done, the more we bring biomass into the deal we have trouble running buses on biodiesel in the winter in North Dakota because it's cold. They're going to solve that. And the more that we can become a less dependant nation on foreign oil sources, the more people are going to say, Yeah, that's a good deal and I support it. Let's put money into that.'

The trick is to continue to invest in the present while we do a lot of investment for the future. We've got to keep things going today. We can't abandon traditional fuels. But we can manage the current while we sock the investment into the future. And I think it's going to accelerate. You start [by] solving some of the technical, infrastructure and delivery problems, and you get biomass into the arena. Then you have more than one feed source, which means it's a market-driven feedstock and not just a singular-driven feedstock. In the minds of the citizens as to where our public policy and our public dollars ought to be going, in my opinion, that just gets better and better.

Q: Do you see cellulosic ethanol production overtaking corn-based ethanol or will it have to remain a combination of cellulosic, biodiesel and traditional ethanol?
A: I don't know. What I'm excited about is that I think the marketplace will sort that out. I'm a big free-market, supply-side economics supporter. From a government standpoint I think we need to provide the public policy so that those options are in the marketplace. The market will sort it outwhat's the most efficient, what's the least costly and what runs best in their cars. That's market stuff and consumers will figure that out. They're pretty astute at it.

Kris Bevill is an Ethanol Producer Magazine writer. Reach her at kbevill@bbibiofuels.com or (701) 373-0636.