R2010-128 AUTHORIZING AMENDMENT TO AGRICULTURAL WATERSHED INSTITUTE LOCAL BIOENERGY INITIATIVE AGREEMENT

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,' ,� Walton Family Foundation Proposal Narrative Agricultural Watershed Institute — Local Bioenergy Initiative A. PURPOSE OF THE GRANT,GOALS�ACTIVITIES AND ANTICIPATED RESULTS Summary and purpose: A grant is requested to expand the scope and increase the level of effort far the Local Bioenergy Initiative (LBI, or the Initiative). The Initiative is a collaborative project to begin growing and using perennial energy grasses in Central Illinois to produce clean, renewable energy and environmental benefits including clean water, soil conservation, plant biodiversin� and wildlife habitat. Walton Family Foundation(WFF)grant funds will be used for • Personnel - a full-time program director and student internships; • Custom farming operations and pilot testing of ecosystem service payments; • Purchase of a mobile pellet mill; • Cost share assistance for home or commercial scale grass pellet fumaces; and • Related direct and indirect expenses. Background statement, need/problem to be addressed: Tile-drained cropland in Illinois, Io��-a, Indiana, and Ohio has been found to be a significant source of nitrate loads in the Mississippi River Basin and Gulf of Mexico. Efforts are ongoing by producers, scientists, conser��ationists, and the fertilizer industry to improve fertilizer management practices, but such efforts are not expected to eliminate the problem of nitrates reaching surface waters via drainage tiles. Federal energy policy ca11s for increasing annual U.S. ethanol production from 7 billion gallons in 2007 to 36 billion by 2022, with most of the increase coming from cellulosic feedstocks such as woody biomass, crop residues, and perennial grasses. This policy creates both challenges and opportunities to reduce nutrient losses and enhance water quality in agricultural watersheds. The 2007 report of the EPA Science Advisory Board's Hypo�ia Panel, Hypoxia zn the Northern Gulf ofMexico, found: "E�pansion and intensification of corn production to support grain-based ethanol production and impacts of ethanol co-products from the animal production sector are likely to cause major increases in N and P losses in the [Mississippi-Atchafalaya River Basin]." The report notes that switchgrass, other perennial grasses, or woody biomass provide substantial environmental benefits and could become the dominant feedstock depending on investment, policy, and market conditions. It recommends R&D focusing on "biofuel production svstems that are both economically viable and ecologically desirable". This situation underscores the urgency of developing cropping systems and business enterprises to grow, process, and use perennial grasses for bioenergy as quickly as possible. As detailed in this proposal, use of perennial energy grasses for heat and/or power represents an opportunit�� to create viable local markets in the near term to begin growing these beneficial grasses on the agricultural landscape. By drawing on the Local Food model, the Local Bioenergy Initiative seeks to link renewable energy, sound land stewardship, and increased farm income. Agricultural Watershed Institute—Local Bioenergy Initiative proposal narrative—2/26/10—Page 1