A Free-Market Energy Blog

Energy Mischief at the Rural Utilities Services (USDA): Climate Hubs, Efficiency Mandates, Fuel Switching Rules

By -- March 25, 2014

As stated at the website of the Rural Utilities Services (RUS), a division of the United States Department of Agriculture (USDA), “the Federal government is the majority noteholder for approximately 700 electric systems borrowers in 46 states.” So many members of Congress represent districts with electric coops that are “regulated” by RUS. And as Public Choice economics might predict, there will be pork-fests in such situations.

This post reviews the little known “clean energy” and “climate action” activities of the USDA. More specifically, this article looks into the just-enacted Agricultural Act of 2014 (a.k.a. Farm Bill) as it pertains to the RUS’s energy efficiency programs. (RUS is USDA’s tributary to electricity issues.)

USDA’s ‘Climate Hubs’

On February 5, 2014, USDA Secretary Tom Vilsack announced the creation of seven new “climate hubs” as “part of the President’s Climate Action Plan to responsibly cut carbon pollution, slow the effects of climate change and put America on track to a cleaner environment.”

The rationale for the seven regional hubs [1] for “risk adaptation and mitigation to climate change” was given as follows:

“Climate Hubs” will address increasing risks such as fires, invasive pests, devastating floods, and crippling droughts on a regional basis, aiming to translate science and research into information to farmers, ranchers, and forest landowners on ways to adapt and adjust their resource management.

USDA Secretary Vilsack explained:

For generations, America’s farmers, ranchers and forest landowners have innovated and adapted to challenges. Today, they face a new and more complex threat in the form of a changing and shifting climate, which impacts both our nation’s forests and our farmers’ bottom lines. USDA’s Climate Hubs are part of our broad commitment to developing the next generation of climate solutions, so that our agricultural leaders have the modern technologies and tools they need to adapt and succeed in the face of a changing climate.

Alarmism is in the air. USDA’s February 5th news release continues:

Across the country, farmers, ranchers and forest landowners are seeing an increase in risks to their operations due to fires, increases in invasive pests, droughts, and floods. For example, in the Midwest, growing seasons have lengthened by almost two weeks since 1950.

The fire season is now 60 days longer than it was 30 years ago, and forests will become increasingly threatened by insect outbreaks, fire, drought and storms over the next 50 years. These events threaten our food supply and are costly for producers and rural economies.

Drought alone was estimated to cost the U.S. $50 billion from 2011 to 2013. Such risks have implications not only for agricultural producers, but for all Americans.

Farm Bill’s Energy Efficiency Program ($375 million)

On February 7, the President signed the “farm bill” into public law. Within this $ 956 billion/959-page behemoth, the majority of which goes to food stamps, is funding for the USDA’s new energy-efficiency program through its RUS Electric Program, Section 6205 of which states:

There is authorized to be appropriated to carry out this section $75,000,000 for each of fiscal years 2014 through 2018’ [totaling $375 million].

Details of this program were published as “Energy Efficiency and Conservation Loan Program final rule” on December 5, 2013. Section 6101 enhances RUS authority to make loans for energy efficiency.” This program portends to “fulfill an important component of President Obama’s Climate Action Plan to build a cleaner and more sustainable domestic energy sector for future generations by reducing barriers to investment in energy efficiency and potentially cutting energy bills for American families and businesses in the process” (emphasis added).

One such “devils in the details” of this loan program is taxpayer subsidized 3% “energy efficiency” loans. These loans include specific language that incents consumers to switch from other fuels to electricity as long as the switch “does not increase direct greenhouse gas emissions.” Thus even switching to electric resistance heat qualifies for a loan.

Rural Electrification Administration…

The Rural Electrification Administration (REA) was created by the Roosevelt Administration through Executive Order 7037 as part of his “New Deal” initiatives to aid economic recovery from the Great Depression.

The original concept was to provide electricity for underserved rural communities and the farming and ranching operations that provided their major sources of employment. Congressional appropriations were made for the REA and it was given its own statutory authorization by the Rural Electrification Act of 1936.

In 1939 the REA was placed under the United States Department of Agriculture (USDA). The basic program was to fund and develop “electric cooperatives (co-ops) through low-interest loans to finance the installation of electric power generation and distribution systems.”

… to Rural Utilities Services

Along the way, the REA also acquired the mission of providing telephone services, and now the REA is a division of the USDA called the Rural Utilities Services (RUS).

The USDA’s Rural Development (RD) website describes its present programs and offices:

· Rural Business-Cooperative Service: Provides Leadership in building competitive businesses including sustainable cooperatives that can prosper in the global marketplace.

· Rural Housing Service: Helps rural communities and individuals by providing loans and grants for housing and community facilities.

· Rural Utilities Service: Helps rural utilities expand and keep their technology up to date, helping establish new and vital services such as distance learning and telemedicine.

· Office of Community and Economic Development: Demonstrates how every rural community or region can achieve self-sufficiency through innovative and comprehensive strategic plans developed and implemented at a grassroots level.

· State Offices

· USDA Service Centers

Fuel Switching Edicts vs. Sound Science

The USDA website includes a NOTICE OF FINAL RULEMAKING for the new Energy Efficiency and Conservation Loan Program and its own press release.

Both of these web pages have links to the December 5th 2013 actual Federal Register for this final rule.

On page 73361 of this rule it clearly indicates support for and approval of fuel switching as shown below:

Fuel Switching

Comment: Twelve comments strongly supported fuel switching. Fuel switching is essential for some borrowers to handle peak demand. Response: RUS has modified the regulation to allow fuel switching. Many of the 12 comments in support of fuel switching were associations that represent over 1,000 electric cooperatives and millions of households, including NW Energy Coalition, Midwest Energy Efficiency Alliance, Utility Geothermal Working Group, Iowa Environmental Council, The Mountain Association for Community Economic Development, and the National Rural Electric Cooperative Association.

Yet, on page 73364, it states:

RUS does not support one technology or fuel source. No changes will be made to the regulation.

Then, on page 73365, it states:

One comment asked RUS to explicitly state combined heat and power projects are an eligible energy conservation activity under the regulation. Response: RUS believes our regulation provides enough flexibility to allow these forms of activities, without specifying every eligible activity in the regulation.

Eligible fuel switching is defined later on page 73368 as follows:

(9) Fuel Switching as in:(i) The replacement of existing fuel consuming equipment using a particular fuel with more efficient fuel consuming equipment that uses another fuel but which does not increase direct greenhouse gas emissions. (emphasis added)

Then, a few lines of text later it states:

Fuel switching to fossil or biomass fueled electric generating equipment is expressly excluded.

Summary & Conclusions

The consequences of this wording is that converting from a propane or natural gas-fueled furnace, range, or water heater to their electric resistance counterparts is allowed simply because these electric counterparts have no greenhouse gas emissions at the point of use.

Furthermore, the exclusion of fuel-switching to biomass or fossil-fueled or fueled electric generating equipment stands in stark contrast to the previously cited provisions on pages 73,364 and 73,365 that ostensibly allow for combined heat and power (CHP) which is a major energy efficiency improvement to conventional separate heat and power.

At least arguably, this is not a big subsidy as currently practiced. However, it dismisses scientific integrity that the President’s “clean energy” and “climate change” policies are supposed to be based on.


[1] The seven hubs are as follows:

    • Midwest: National Laboratory for Agriculture and the Environment, Agricultural Research Service, Ames, Iowa
    • Midwest Sub-Hub in Houghton, Michigan
    • Northeast: Northern Research Station, Forest Service, Durham, New Hampshire
    • Southeast: Southern Research Station, Forest Service, Raleigh North Carolina
    • Southeast Sub-Hub in Rio Piedras, Puerto Rico
    • Northern Plains: National Resources Center, Agricultural Research Service, Fort Collins, Colorado
    • Southern Plains: Grazinglands Research Lab, Agricultural Research Service, El Reno, Oklahoma
    • Pacific Northwest: Pacific Northwest Research Station, Forest Service, Corvallis, Oregon
    • Southwest: Rangeland Management Unit/Jornada Experimental Range, Agricultural Research Service, Las Cruces, New Mexico (Southwest Sub-hub in Davis, California)


An engineer by training, Mark Krebs has been involved with energy efficiency design and program evaluation for more than twenty-five years. He has served as an expert witness in dozens of energy-efficiency filings, which he summarized in a Public Utilities Fortnightly article, “It’s a War Out There: A Gas Man Questions Electric ‘Efficiency’” (December 1996).

Mr. Krebs previous post for MasterResource was titled Gas Furnace Rule: Beware of “Scorched Gas” Policy.

Comments are closed.