A proposal in the Senate farm bill to promote cellulosic ethanol could open up more ethanol opportunities for the West River area, according to a spokesman for Sen. John Thune, R-S.D.

Thune announced this week that the farm bill being taken up by the Senate Agriculture Committee includes his provision for incentives to grow switchgrass and other grasses and to promote biomass material such as wood chips for the production of ethanol. Thune is a member of the Senate Ag Committee.

So far, most ethanol production has come from corn, which has benefited farmers primarily in the eastern part of South Dakota, Thune spokesman Kyle Downey said. "The whole cellulosic thing could open it up to the entire state," Downey said.

A planned ethanol plant in Belle Fourche will begin using corn, but company executives are also looking at developing ways to produce cellulosic ethanol in the future.

A Rapid City company, KL Process Design Group, has built a new plant on the outskirts of Upton, Wyo., that produces ethanol from wood chips, sawdust and logging refuse. The plant has been operating for about 30 days now, KL president Randy Kramer said Tuesday.

Kramer said the cellulosic ethanol incentives would enhance ethanol production. "This is an opportunity, if funded, to take it to the next level. There's much more biomass - the most abundant resource on the planet now - than there will ever be grain," he said.

The incentives would definitely benefit his business, Kramer said. "We're producing ethanol from ponderosa pine. The same technology can be used for switchgrass and other biomass that's out there."

Thune said the Biofuels Innovation Program would provide $200 million in incentives for producers to grow energy-dedicated crops in conjunction with construction of bio-refineries. The biofuels program would provide a cost-share payment and a per-acre rental payment to producers who make a commitment to grow energy-dedicated crops for local bio-refineries, Thune said in a conference call with reporters Tuesday morning.

The bill also would provide payments to producers of biomass, such as corn cobs, perennial grasses and wood chips, as incentives to produce approximately 100 million gallons of cellulosic ethanol, Thune said.

"The intent is to jump-start the cellulosic ethanol industry," Thune said.

He said ethanol from such materials as native grasses and wood chips would complement corn ethanol production.

The farm bill passed by the House last summer includes a similar provision.

Research is being conducted on converting switchgrass into ethanol at South Dakota State University with the help of the Sun Grant Initiative. Ongoing funding for the Sun Grant Initiative is included in the Senate farm bill, Thune said.

Thune also updated reporters on other farm bill issues, including:

* Payment limits. Thune said there aren't enough votes in the Senate Ag Committee to lower caps on commodity payments. He said an effort to lower the cap to $250,000 per producer, which he backs, will be made when the farm bill gets to the Senate floor.

The current limit on subsidies is $360,000 a year for a couple, but loopholes have allowed some farmers, particularly in the South, to receive more than $1 million a year.

Sen. Tim Johnson, D-S.D., favors a cap of $250,000 for a married couple and $125,000 for an individual producer. He also would eliminate the current loophole allowing triple entities for one operation.

Thune also wants to lower the income threshold for eligibility for farm payments from the current $2.5 million and from the $1 million adjusted gross income level in the House version of the farm bill.

Thune said both proposals to limit farm payments face a tough fight on the Senate floor.

But, he added, "There's a different climate now, and a lot of attention has been focused on people who have taken advantage of the farm program, multi millionaires who are not directly engaged in farming."

* Country of origin labeling. Thune said he requested that the House-passed country-of-origin labeling language be amended to clarify that all categories of red meat would require labeling. "There were some 'mays' rather than 'shalls' in the (House) language. We have rectified that," Thune said. "Now, implementing it should be clear, concise and beyond legal challenge."

* Sod saver. A provision would eliminate federally subsidized crop insurance, and therefore, disaster aid for virgin prairie that is plowed up for cropland.

* Permanent disaster fund. Proposed by the Senate Finance Committee, the provision establishes a permanent fund for disaster aid.

* Packer ownership. Thune backs limits on meatpacker ownership of livestock, but he said there aren't enough votes to support such as provision in the Senate Ag Committee. He said an attempt will be made on the Senate floor to add packer ownership limits.

Contact Steve Miller at 394-8417 or steve.miller@rapidcityjournal.com