The Democratic-controlled Senate on Sunday passed a historic package of financial incentives for cutting U.S. greenhouse gas emissions, including a dramatic increase in farm bill conservation programs aimed at spurring farmers to adopt climate-related farming practices.

The House is briefly returning from its August recess on Friday to consider the bill, which would represent a major victory for President Joe Biden, who has pledged to slash U.S. emissions by more than half by 2030. Speaker Nancy Pelosi, D-Calif., has expressed confidence the House will pass the bill.

"This bill is going to change America for decades," Senate Majority Leader Charles Schumer, D-N.Y., exulted after Vice President Kamala Harris cast the deciding vote to pass the bill in in a moment that was almost anti-climactic after more than a year of on-and-off intra-party negotiations.

The $740 billion package, which Democrats dubbed the Inflation Reduction Act as a nod to a major political issue facing them in the mid-term elections, also includes biofuel tax provisions aimed at spurring increased usage of lower carbon biofuels for the trucking and airline industries.

In a final flurry of negotiations ahead of the weekend debate, Democrats also added $5.3 billion in farm debt relief to the package as well as $4 billion in funding for the Bureau of Reclamation to address the impact of drought on western water supplies.

With the passage of this historic bill, Americans will see their energy costs go down while we tackle the urgent threats we face every day from the climate crisis,” said Senate Agriculture Committee Chairwoman Debbie Stabenow, D-Mich. We are equipping farmers, foresters, and rural communities with the necessary tools to be a part of the solution. At the same time, we are investing in good-paying clean energy jobs to grow small towns and rural economies.”

The legislation represented the most sweeping attack on climate change that Congress has taken to date. President Barack Obama tried unsuccessfully to get Congress in 2009 to create a cap-and-trade system for limiting carbon emissions, but that proposal died in the Senate.

This effort was very much in doubt as well in the 50-50 Senate until Sen. Joe Manchin, D-W.Va., announced a deal July 27 with Schumer to dramatically pare back the House-passed Build Back Better Act.

Ahead of the final vote, Democrats stayed united in fending off a long series of largely symbolic amendments offered mostly by Republicans to highlight concerns with the legislation or put the other party on the spot.

The GOP amendments voted down included one by Tennessee Sen. Marsha Blackburn to bar federal funds from helping the Chinese Communist Party buy U.S. farmland and another by North Dakota Sen. John Hoeven that would have kept the bill from taking effect until inflation was back to pre-2021 levels. 

Meanwhile, a Democratic amendment failed to get the 60 votes necessary to keep in the bill a $35 cap on insulin costs in private insurance plans. 

The bill contains about $18 billion for four conservation programs, starting in fiscal 2023, with direction to the Agriculture Department to prioritize projects that "mitigate or address climate change through the management of agricultural production." 

The Environmental Quality Incentives Program, which has long been oversubscribed, would get $8.45 billion, starting with $250 million in FY23, which begins Oct. 1.

The Regional Conservation Partnership Program would receive $4.95 billion, an amount that was trimmed in the final version of the bill; the Congressional Budget Office had estimated that USDA would have been unable to spend a large portion of the $6.75 billion that was originally allocated for the program. Under the budget reconciliation rules used to move the legislation through the Senate without the need for GOP support, all of the funding authorized by the bill must be spent before fiscal 2032. 

Because of revisions made to the final version of the bill to speed the delivery of the funding, CBO still expects USDA to spend about the same amount of money through RCPP over the 10-year period. 

Another $3.25 billion would go to the Conservation Stewardship Program, and the Agricultural Conservation Easement Program would get $1.4 billion. 

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An additional $1 billion would be provided to USDA’s Natural Resources Conservation Service for conservation technical assistance and $300 million is allocated to USDA for measuring the impact of agricultural practices on greenhouse gas emissions.

Also included in the bill:

  • $9.7 billion in assistance to rural electric cooperatives for renewable energy and energy efficiency projects and another $1 billion in loans for renewable energy projects in rural areas. 
  • About $2 billion for USDA's Rural Energy for America Program, which funds renewable energy and energy efficiency projects. 
  • $500 million for blender pumps and other biofuel infrastructure. 
  • More than $5 billion for wildfire prevention and climate resiliency projects in public and private forests.
  • $3.1 billion in assistance to "distressed" borrowers who hold direct or guaranteed farm loans. 
  • $2.2 billion in payments to farmers who had experienced discrimination in USDA loan programs. The payments would be capped at $500,000 per producer. The debt relief provisions would be paid for by repealing a debt relief program authorized by the American Rescue Plan in 2021 and later blocked by the courts. 
  • $4 billion in Reclamation funding that would be used as compensation to water users for temporary or multi-year reductions in water usage; projects that reduce use of or demand for water supplies, or provide environmental benefits, in the Colorado River Basin; and for ecosystem and habitat restoration projects that address drought impacts.
  • The $1-a-gallon tax credit for biomass-based diesel would be extended through 2024 and then replaced by the clean fuels tax credit that would vary according to the carbon rating of the biofuel. A temporary tax credit would be created for sustainable aviation fuel to serve as a bridge to the implementation of the clean fuels credit in 2025. The new clean fuels credit would be in effect only through 2027.
  • Rural electric cooperatives would get direct payments for the benefit of renewable energy tax credits. Electric co-ops, which are organized as non-profits, currently have to work with third parties to get the benefits. 

The USDA spending provisions are estimated to cost $34.7 billion over 10 years after the impact of automatic cuts required by the 2011 Budget Control Act are taken into account, according to the CBO, which still doubts that USDA can spend all of the conservation funding before FY23. 

The legislation is largely funded through a 15% minimum tax on corporations, a new excise tax on stock buybacks and a provision that would allow Medicare to negotiate drug prices. While the bulk of the spending in the bill is climate-related, it also would extend expiring Affordable Care Act subsidies. 

Republicans concentrated much of their criticism of the bill on the tax increases. 

"This bill does nothing to address the significant inflation we are facing, or to ease burdens born today by low- and middle-income Americans. Rather, it promises higher taxes, more reckless spending, higher prices, a supersized IRS and prolonged stagflation," said Idaho Sen. Mike Crapo, the senior Republican on the Senate Finance Committee. 

Farm groups had remained relatively mum in the wake of the Schumer-Manchin deal and the resulting GOP outcry. 

But Jim Mulhern, president and CEO of the National Milk Producers Federation, issued a statement Sunday calling the measure a "game-changer" for the dairy industry. "The funding increases in this package will better position dairy farmers to effectively implement the dairy sector’s Net Zero Initiative and fulfill its 2050 environmental stewardship goals."

Dave Puglia, president and CEO of Western Growers, welcomed the $4 billion in drought funding. 

“Not only does the Colorado River supply the water and power needs of nearly 40 million people across the West, it sustains the agricultural output of Yuma, Arizona and California’s Imperial Valley. Without fast and serious federal assistance, a significant portion of the nation’s food supply hangs in the balance," he said. 

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