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Non-Farm Use of Farmland
by Jeff Mollet

As energy costs in the United States have started to rise beyond the (apparent) current production supply of fossil fuels, exploration other sources of energy have greatly expanded. This exploration has led to the rapid development of supposedly renewable energy sources, such as ethanol, biodiesel, and wind energy. It has also made other, previously more costly to obtain forms of energy (coal, domestic oil, natural gas/methane) cost-attractive again. For example, when coupled with the technological advances that have taken place, coal, both low and high sulfur, is once again perceived as an economical alternative energy source.

All of these issues tend to lead, in one way or another, to some relationship with a specific plot of Mother Earth. Since farmers own much of the land which will be affected by these new developments, it stands to reason that your clients may begin to see some additional stresses placed upon their operations. As a service provider for these operations, it makes sense to keep current on these issues and how they affect your customers.

Here in Illinois, the combination of technological advances, economic issues and timing have led to an increase in the search for energy in the central part of the state. According to the Illinois State Geological Survey, the coal reserves there hold more BTUs than all of Saudi Arabia's and Kuwait's oil reserves combined. With this Illinois coal (and the large reserves in Appalachia and the Great West) 52% of the nation's current electricity generation comes from coal generation. Even at our nation’s current usage, the coal resources of the United States should last for more than 250 years. With some 120 million tons of $25 per ton coal in just one of the 6 main coal veins in the area, one can quickly understand the increased interest in this resource.

Another related energy source for the Midwest is methane. Methane gas is trapped both in the layers of coal throughout the region and in certain layers of shale lying thousands of feet below the surface. The economics and technology are now such that coalbed methane (CBM) is a viable option. Again, in Illinois alone, it is estimated that 11 trillion cubic feet or more of coal bed methane estimated to lie within the state’s coal resources. CBM now accounts for approximately 11% of current methane production.

As to the “renewable” energy sources, wind power, ethanol and biodiesel are leading the way. Wind generation is rapidly gaining momentum in the plains states as the wind patterns and topography make this region an attractive location for wind farms. This “pollution free” form of energy is also seen as a significant benefit to the ecology of the planet. The reduction in emissions and particulate matter alleviate “acid rain” issues, and not using one form of non-renewable energy (coal for example) to produce another (electricity) is arguably one major method to reduce greenhouse gases and prevent global warming (whether we believe it is occurring or not).

Finally, ethanol and biodiesel are the “more established” renewable energy sources, with ethanol having led the way for many years through government subsidies and tax incentives. With the increase in petroleum based fuels, ethanol and biodiesel are now poised to become attractive and economically viable alternatives. Thus, the push is on throughout the Midwest to build more and ever larger ethanol and biodiesel production facilities.

But why is this important to you? It is a matter of economics (as much as I hate to say that my economics classes were useful) and, perhaps, physics. For every action, there is a response, and in some cases, an unforeseen or unintended consequence. Each of these energy sources can and will take productive farmland out of production. Whether from subsidence due to coal mining or the dedication of the surface to other uses (production plants, wind turbines, well sites, tanks, pipes or pumps) agriculture will be losing acres. Add to this the dedication of many acres of corn and soybeans to feed the ethanol and biodiesel plants and we see that agricultural activities dedicated to the production of food will decrease. Fewer acres likely means fewer farmers buying fewer inputs and less equipment.
Clearly, all in the future and the transition will be gradual. But, as with all things that change, it is easier to identify the change, watch it and try to adapt as the change takes place rather than be caught in the end trying to catch up.

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