ready a proven technology, so farmers, cooperatives, and large grain companies quickly responded to the strong market signal. Production capacity increased dramatically to more than 6 billion gallons in 2007. Still today, this represents only 3.5 percent of U.S. transportation fuel.

Congress and the Executive Branch have encouraged even greater production through the Energy Act of 2005, continuation of the ethanol subsidy at the current rate of $0.51 per gallon, and by direct payments to farmers for corn and soybeans through the Farm Bill. The Department of Energy (DOE) has projected that 30 percent of U.S. transportation fuel could be provided by biofuels, ethanol, and biodiesel from all feedstocks by 2030.

There will likely be adjustments brought about by international trade. The use of corn, soybeans, and sugar for liquid fuels is going to be affected by international production and demand for these commodities. International trade in ethanol or biodiesel will affect production of these in the United States to some extent, but the trade volumes initially will be modest at best. In the case of low-value, high-volume crops for cellulosic conversion, these are unlikely to be traded because transportation costs become limiting.

Biofuels will be an important component of the nation’s energy portfolio for at least the next several decades (Doering, 2005). As total biofuels production expands to meet national goals, the long-term sustainability of the groundwater and surface water resources used for biofuel feedstocks and production facilities will be key issues to consider. Irrigation of crops creates consumptive use of water in areas where aquifers are being depleted and/or surface water quality is impaired. Policies designed to conserve water and prevent the unsustainable withdrawal of water from depleted aquifers could be formulated.

From a water quality perspective, it is vitally important to pursue policies that prevent an increase in total loadings of nutrient and sediments to waters. It may even be possible to design policies in such a way to reduce loadings across the agricultural sector, for example, those that support the production of feedstocks with lower inputs of nutrients (see Chapter 3). Cellulosic feedstocks, which have a lower expected impact on water quality in most cases (with the exception of the excessive removal of corn stover from fields without conservation tillage), could be an important alternative to pursue, keeping in mind that there are many uncertainties regarding the large-scale production of these crops.

It should be noted that current agricultural production is not an appropriate benchmark against which to set environmental standards. As noted early, in many regions, water resources have already been stressed. Water quality has not improved markedly in key waterbodies like the lower Mis-