Room 105, First Floor Conference Room

MINUTES

AGRICULTURAL ADVISORY BOARD

RachelCarsonStateOfficeBuilding

Room 105, First Floor Conference Room

Harrisburg, PA

October 10, 2007

Betsy E. Huber, PA Grange, called the meeting to order.

Attendance – Members

Dr. Doug Beegle, PennsylvaniaStateUniversity

Jay Howes, representing Representative Art Hershey, PA House

Barry Frantz, Natural Resources Conservation Service

Betsy E. Huber, PA Grange

Keith Masser, Vegetable Producer

Cathy Curran Myers, PA Department of Environmental Protection

Senator Michael O’Pake, PA Senate

Walt Peechatka, PennAg

Brenda Shambaugh, PA Association of Conservation Districts (PACD)

Andrea Sharretts, PA Farm Bureau

Thomas Williams, Dairy Producer

Agencies, Advisors, and Guests

Karl Brown, State Conservation Commission

Grant Gulibon, PA Builders Association

Deputy Secretary Dan Desmond, Doug Brennan, Don Fiesta, Bob Gibson, Marge Hughes, Linda Nguyen, David Reed, Frank Schneider, Rick Shertzer, Steve Taglang, PA Department of Environmental Protection

Introductions

Ms. Betsy Huber called the meeting to order. Everyone in the room introduced themselves.

Deputy Secretary Cathy Curran Myers extended her thanks and thanks from Secretary Kathleen McGinty to Mr. Walt Peechatka for his years of service to the AAB and congratulations on his semi-retirement from PennAg Industries. She stated that he will be getting a letter of appreciation in the mail. Mr. Peechatka responded that it’s been a labor of love and he thanked them. He also reminded the board, that he is in semi-retirement and will be PennAg Industries Senior Advisor, and plans to continue to be active.

There was not a quorum present, so approval of the June and August minutes was tabled...

Ms. Huber asked for concurrence on the proposed 2008 meeting dates. All members in attendance concurred with the dates.

Deputy Secretary Myers mentioned that the Agricultural Advisory Board (AAB) has been discussing impaired waters in their meetings and there has been a lot of interest. She asked if the AAB would like to hold their April 2008 meeting in the MontourCounty area for a possible field trip to view impaired reaches of streams. They could meet with a person that does stream assessments to see what is looked at and what is looked for. The majority of the members present agreed to hold the April 2008 meeting somewhere in or around MontourCounty, to view impaired reaches of streams.

The 2008 meeting dates are as follows:

February 20, 2008 - 10:00 am - Room 105 RCSOB

April 16, 2008 - Somewhere in or around MontourCounty

June 18, 2008 - 10:00 am - Room 105 RCSOB

August 27, 2008 - 10:00 am - Room 105 RCSOB

October 15, 2008 - 10:00 am - Room 105 RCSOB

December 17, 2008 - 10:00 am - Room 105 RCSOB

Resource Enhancement and Protection Program (REAP) – Karl Brown, Executive Director, State Conservation Commission (SCC)

Mr. Karl Brown gave an overview of the REAP program. He stated that they’ve worked with many other state agencies and other tax programs to help them implement this program. He also advised that Ms. Mary Bender is the new REAP administrator.

He stated that REAP was created by Act 55 of 2007. It was established to encourage implementation of agricultural best management practices (BMPs), planting of riparian buffers, and remediation of legacy sediments. It allows farmers and businesses to earn tax credits in exchange for installing BMPs that protect natural resources and enhance farm production.

He stated that REAP is administered by SCC and credits are granted by the PA Department of Revenue. Tax credits of 25 percent to 75 percent are available for SCC-approved eligible projects. There is a $150,000 cap per eligible applicant. There is $10 million in tax credits available in FY 2007-08.

Mr. Brown also stated that there are three ways to participate in the REAP program.

First, a farmer can implement eligible agriculture BMPs and receive tax credits directly to reduce a state tax bill (for up to 15 years).

Second, a farmer can sell tax credits to another PA taxpayer.

Third, a farmer can work with a sponsor that will help finance a farmer’s BMPs. The farmer would be compensated for making improvements and the sponsor will receive the tax credit.

Any farmer or business that is subject to taxation by the Commonwealth of PA is eligible to participate. Agriculture operations must have a current conservation plan, agricultural erosion and sedimentation (Ag E&S) plan, and a nutrient management plan, if required. The cost of developing these plans may be included for the tax credit. Animal concentration areas (ACAs), must be treated to prevent nutrient and sediment runoff (as per SCC standards), and uncompleted BMPs required in Ag E&S plans and nutrient management plans must also be completed first, before other BMPs can generate tax credits.

Mr. Brown stated that October 24 is an important date, because it is the effective date of the Act. Tax credits can only be awarded to projects completed after this date. SCC expects to have the REAP guidelines available on December 1, 2007.

Mr. Brown highlighted some of the steps that people can do to get ready for REAP. This is a first come, first serve program. Producers are encouraged to make sure all of their plans (E&S, conservation plan, Nutrient Management Plan, etc.) is together before the applications become available. Mr. Brown encourages everyone to read the law.

Mr. Peechatka asked about uncompleted BMPs. Mr. Brown advised that uncompleted BMPs would have to be completed to move forward in the application process, but they are eligible.

Dr. Doug Beegle had some questions on compliance and Mr. Brown reiterated that the cost of the development of plans (E&S, conservation plan, Nutrient Management Plan) can be used to generate tax credits.

Dr Beegle also asked about the phase in approach for BMPs. Mr. Brown explained the process. First, the application is approved. For multiple year BMP systems, all the tax liability is tied to the tax year that the application was approved in and the tax credits will be generated as the BMPs are completed.

Mr. Tom Williams had a question on the $150,000 cap and how that applies to phased in projects. Mr. Brown stated that the $150,000 cap is a lifetime cap and that a producer can not exceed that limit. Mr. Brown also stated that a producer can take portions of the tax credits generated, in different years, up to 15 years.

Mr. Williams also inquired about conservation districts being able to charge for their services and if that is included in the $10 million that is allocated to REAP in this fiscal year. Mr. Brown stated that of the 10 million dollars, no specific money is earmarked for conservation districts but that the conservation districts can act as a Technical Service Provider (TSP) and charge the operation for the services rendered.

Ms. Betsy Hubler asked about sponsorship and if Mr. Brown thought it would be dollar for dollar. Mr. Brown stated that with sponsorship, the tax credit will go directly to the sponsor and that the maximum tax credit is 75 percent of the cost to install a BMP. The direct cost to the operation and how much a sponsor funds, will be up to each individual operation/sponsor. Mr. Brown also explained that there are tax credit brokers that will help operations sell their tax credits. Typically the broker sells the tax credits for 85 percent to 95 percent of the market face value.

Mr. Jay Howes commented that the SCC has set up a good framework and that REAP is the first program like this in the country. He personally thanked Mr. Karl Brown and the SCC for great work.

No-Till and the PennSecurity Fuels Initiative – Dan Desmond, Deputy Secretary, Office of Energy and Technology Deployment

Deputy Desmond began by giving an overview of the current oil prices. He stated that prices have risen to $82 per barrel and they used to be $28 per barrel when the Governor took office. As of today, our country has about a 19-day supply of gasoline in the system. We now have a historic low and we would run out of oil in about 19 hours, not 19 days.

He stated that if someone was to buy gasoline and diesel in Harrisburg, part of that has come from as far away as India. He stated that we are at a record high (66 percent) for dependency on foreign oil. The U.S. is now importing about 13 percent of our liquid fuels from abroad.

Deputy Desmond stated that the U.S. is more at peril from terrorist and weather-related disruptions than we were before Hurricane Katrina and before September 11, 2001. He stated that most government officials are oblivious to this.

Deputy Desmond turned his discussion to the topic of Biofuels. He stated that it is not enough to argue whether or not biofuels is a good idea for the U.S. or to argue whether or not PA should be putting money into biofuels, but do we have enough biofuels in the system, particularly for Homeland Security needs. We cannot continue to ignore the reality that global reserves of oil are running short.

The Governor has put forth a very ambitious and achievable plan for alternative fuels. His plan states that by 2015 we want to displace a billion gallons of refined product with biofuels. A billion gallons is just about what PA is importing from the Middle East currently. We think that PA should play a role and not export more than one penny more than is necessary to unstable regimes in the Middle East.

He stated PA knows what is possible and currently has about a half dozen biodiesel plants operating in PA. Three ethanol plants are in various stages of construction.

The Governor’s proposed legislation has market driven triggers built into it, including the 2 percent introductory standard for biodiesel, going up to 20 percent ultimately. The 20 percent does not kick in until both DEP and the PA Department of Transportation can certify that there is a manufacturing and distribution system that can deliver it.

Deputy Desmond stated that one of the frustrations with promoting biofuels is the “fuel for food” argument. People have the mistaken belief that converting food to energy is terribly inefficient. Deputy Desmond stated that Department of Agriculture Secretary Wolff has said that PA farmers are now 51 percent invested in no till agriculture. Their energy use with no till farming is one quarter that of conventional farming.

Ms. Brenda Shambaugh asked how farmers and conservation districts are going to be funded in this program. Deputy Desmond advised he will forward this comment to the Governors Office. He stated that they will continue to lobby for farmers that want to make this change. He also mentioned that DEP, PA Department of Agriculture, and The Pennsylvania State University need to educate people and get the word out

Ms. Andrea Sharretts asked if there was a plan to hold off on the 2 percent biodiesel mandate until we have a reserve of 30,000 gallons and the infrastructure is in place. Ms. Sharrets also wanted to know if there is a plan for an in-state incentives program. Deputy Desmond advised that the mandate does not kick in until the infrastructure is in place. Deputy Desmond also advised that there are no plans for an in-state incentives program. On of the reasons for no incentives program, is that the state does not want to attract the largest investors, who will eventually overtake the market.

Mr. Tom Williams asked what percent of ethanol is additive and not replacement of fuel. Deputy Desmond advised that MTBE is being replaced by ethanol as an additive and that the oil industry wants this because MTBE is found to be a contaminate and that ethanol raises the octane rating. Mr. Williams than asked if ethanol lowers the miles per gallon (mpg). Deputy Desmond advised that it does lower the mpg, because it is not as energy efficient. He advised that at 10 percent ethanol, you will not see a difference in mpg, but at higher concentration, a difference may occur. Deputy Desmond mentioned that more efficient vehicles are needed. Mr. Williams also asked if new technology will lead us to use shale oil. Deputy Desmond advised that once oil hits $100/barrel, that shale and tarsand oils will start to become competitive with traditional oil sources.

Ag Impaired Stream Update – Rick Shertzer, Chief, Water Quality Standards Division

Mr. Rick Shertzer gave an overview of PA ag impaired streams. He stated that the largest issues are high nutrients and siltation in surface waters. Siltation affects the physical habitat of the invertebrate community. He stated that sometimes sediments carry nutrients with them or arrive by other mechanisms. In some cases, it causes depletion of oxygen.

He brought up MontourCounty, because it has been a topic of recent discussion and it doesn’t differ greatly from the rest of PA. He stated they mostly have siltation problems.

He stated that agriculture is the number two problem in regards to stream pollution, behind abandoned mine drainage (AMD).

Mr. Barry Frantz asked how much of PA has been evaluated. Mr. Shertzer replied that all of PA has been evaluated with the exception of the large non-weighted rivers and a few hundred miles of deep water rivers. Mr. Shertzer advised that it took roughly 10 years to do all the assessments.

Mr. Karl Brown asked if the same protocol was used throughout the state. Mr. Shertzer replied that the same standardized process and procedure is used throughout the state. Mr. Brown also questioned why the numbers for sources of pollution for Montour county do not add up. Mr. Shertzer explained that some evaluators do not used detailed descriptions for the sources of pollution. All evaluators follow EPA guidelines but some add more detail to the description, which is why we have more differing numbers. Mr. Brown then asked how we know if the pollutants came from cropland, streambank erosion, etc. Mr. Shertzer explained that the set assessment protocol is general, but a new protocol that was developed for reassessments, will be more in-depth, so we can retrieve better numbers and direct our efforts towards the right source of pollution.

Mr. Tom Williams asked if it is a goal to eliminate siltation. Mr. Shertzer replied that siltation is natural and that the goal to eliminate accelerated erosion..

Mr. Walt Peechatka asked if it was possible that agriculture rises to the top, as a source of impairment, because agriculture is the largest land use. Mr. Shertzer responded that to a point the answer is yes, but that the new protocol should help to address this issue.

Ms. Andrea Sharrets asked if sediment is characterized as to where it comes from. Mr. Shertzer replied that DEP does not look at the sediment to see what land use it came from or to see if it is sediment that has be redistributed in the water. Ms. Sharrets than asked if the new protocol will take another 10 year cycle to assess every stream. Mr. Shertzer replied that DEP will continually revisit streams. Non-impairment streams will have a “quick hit” assessment while impaired waters will have more in-depth assessments that will tie in closely with TMDL’s and NPDES permits.

Regulatory Update – Steven Wm. Taglang, Chief, Conservation Districts and Nutrient Management Division

Mr. Steven Wm. Taglang presented a Regulatory Update to the AAB. He first spoke about the Concentrated Animal Feeding Operations (CAFO) Technical Guidance Document. The final version of the guidance was published in the PA Bulletin on September 1, 2007. The purpose of the guidance was to clarify 2005 changes to Chapter 91 and 92 regulations for operations that generate or apply manure; improve the quality of permit applications; and improve the consistency of permit reviews across DEP regions. This guidance is intended for DEP staff and permit applicants.

The guidance was developed by DEP with the assistance of SCC. It was brought before the AAB at the June 2006, December 2006, April 2007, and June 2007 meetings. Revisions were completed by DEP with assistance by SCC and Natural Resource Conservation Service (NRCS). Staff training, on the guidance document, was completed in October 2007.

Next, Mr. Taglang spoke about Chapter 102 - Erosion and Sediment (E&S) Control for Agriculture. DEP is developing the agriculture portion separate from the remainder of Chapter 102, at this time, but we will bring them all together, once both portions are complete. He stated that DEP will be presenting agriculture portion language to discuss at the December 2007 AAB meeting. The proposed schedule for revisions include: develop draft language; meet with stakeholders; present regulatory language to AAB at December 2007 meeting; present to Environmental Quality Board (EQB) as “proposed regulations” in May 2008; and publish in the PA Bulletin in August 2008.

Mr. Grant Gulibon asked if there was a time frame when it would be presented to the other advisory committees. Mr. Taglang advised sometime between now and February 2008.

Comments/Issues/Concerns of the Board

Mr. Walt Peechatka commented that someday we will find that agricultures role, as a defined culprit in water pollution, has be overstated.

Mr. Tom Williams asked if anyone from DEP would be attending the hearings on the odor management regulations. Mr. Karl Brown replied that those hearings are being held by the SCC and that a public hearing is standard practice for new proposed regulations. He advised that the hearing is open to anyone that would like to discuss the odor regulations. Mr. Williams asked Mr. Brown if there is a physical device that can measure odors. Mr. Brown stated that the regulations used an odor site index which takes out some human error, but that there is no physical device available at this time.