Farm Energy

In a recent editorial at the Argus Leader, ELPC President and Executive Director Howard Learner urged South Dakota’s public officials to take advantage of their state’s wind power resources with smart policies that will create new jobs and more clean energy.

“South Dakota should put more wind power into the sails of the state’s economy and job creation. South Dakota has the nation’s fourth-best wind power potential but only the 20th highest amount of wind power operating – 313 megawatts. By contrast, Iowa ranks 10th in wind power potential, but is second-highest in operating wind power capacity – 3,670 megawatts.

“That tenfold difference in wind power development amounts to about $7 billion of economic investment, thousands of jobs, and cleaner air. What accounts for this huge difference? Smart public policies and prioritization by leading public officials…Iowa Gov. Culver has written to his state’s congressional delegation urging their support, and Sens. Harkin and Grassley are indicating they’re on board. Here, however, Gov. Rounds and Sen. Thune have not yet expressed strong support for this key federal renewable energy legislation. It’s time to step up – for the good of South Dakota’s economy and job creation, as well as for everyone’s better health and the environment.”

Read the full op-ed here.

President Obama’s proposed 2011 budget slates Farm Bill clean energy programs for some needed growth. The Administration released its budget in early February, and in it the President boosts next year’s funding level for REAP to its highest level ever: $109 million. The budget adds $39 million of discretionary funding on top of the $70 million in “mandatory” funding in the 2008 Farm Bill.

In addition, the Obama budget provides $15 million for the Forest Biomass for Energy Program and $5 million for the Community Wood Energy Program, as authorized by the 2008 Farm Bill. The Community Wood Energy Program provides grants for rural communities to install wood energy systems in community facilities. The Forest Biomass for Energy Program provides for research on use of low-value forest biomass. Neither of these programs has received any funding since their inception in the 2008 Farm Bill.

In addition, the President’s budget calls for a small increase to the Biorefinery Assistance grant and loan guarantee program, adding $17 million.

Learn more about Farm Bill energy programs here. (more…)

(February 8) On February 8, 2010, USDA issued its proposed rule to implement the 2008 Farm Bill’s Biomass Crop Assistance Program (BCAP).  In the same proposal USDA also terminated an interim funding program under BCAP which has cost the government far more than expected.

USDA is accepting public comments on its BCAP proposal through April 9, 2010. Here is a copy of the proposal (opens in new window); otherwise, read on for more information on the proposal.

Short Summary

BCAP has become controversial in the last several months because of its exploding costs and other impacts. Congress had expected that BCAP would cost only about $70 million through 2012. Yet the program may ultimately cost more than $2 billion, in part because of an expensive interim matching payment program USDA initiated last summer. USDA is now proposing to rein in BCAP’s costs somewhat, largely through some restrictions in the types of renewable biomass materials that will qualify for BCAP funding.

As proposed, BCAP would promote two types of activities:

• Funding for farm and forest owners and others to receive matching payments for eligible crops and agriculture and forestry wastes sold to facilities which produce advanced biofuels, heat, power and bioproducts. These matching payments help offset the costs of collecting these materials and delivering them to the processing facility. Matching payments may continue for up to two years after USDA issues the first payment.

• Funding for farmers and other producers of eligible renewable biomass crops to receive establishment and annual payments to help offset the costs of establishing and producing these crops. Establishment payments may offset up to 75% of the cost of establishing eligible crops, and annual payments may run between 5 and 15 years for crop production.

Matching Payments

USDA’s implementation of BCAP has gotten off to a rocky start. In June 2009 USDA began to issue matching payments for the delivery of renewable biomass material through an interim notice of funds availability (NOFA).  Most of these payments were for ag wastes such as corn stover and forest product wastes such as sawmill dust. Most of the material is being used as a substitute for fossil fuels in boilers. The financial impact of the matching payments program is major, with payments under this interim program expected to exceed $300 million in the next two years.

Apart from financial costs, an unintended consequence of USDA’s interim matching payments program was in restricting the availability of cheap sawdust and other mill residues for the wood products and paper and pulp industries. Responding to their concern, and the unexpectedly high cost for a program that was supposed to cost only $70 million through 2012, USDA has terminated the  matching payments interim program and will replace it with the program proposed in this rule.

No Payments for Woody Biomass Materials with Higher-Value Uses

To avoid this problem in the future, USDA is proposing to disallow matching payments for wood wastes and mill residues typically used to produce higher value-added products such as particle board. USDA also is proposing several options to further restrict matching payments for all forms of eligible renewable biomass material. For example, for facilities that convert wood wastes into heat and power, USDA might allow payments only for eligible materials used to make heat or power above the facility’s historical baseline production of heat or power. USDA is seeking comment on all of these options.

In another departure from its June 2009 matching payments NOFA, USDA is dropping the 20% cap on Farm Bill Title I commodity crop agricultural residues (for example, corn stover and straw), on the basis that that the cap is inconsistent with the 2008 Farm Bill.

Establishment and Annual Payments

 USDA’s proposal is the Department’s first effort to create a framework for establishment and annual payments. As required by the 2008 Farm Bill, USDA will make eligible payments only for eligible crops within a specified BCAP “project area.” Either producers or “biomass conversion facilities” can propose BCAP project areas to the Farm Service Administration (acting on behalf of the federal Commodity Credit Corporation).

Key requirements/conditions for project areas include:

• Long-term economic viability.

• Specific geographic boundaries.

• Compliance with other criteria in the 2008 Farm Bill, including consideration of impact on soil, water and related resources.

Notably, several types of land are not eligible to receive payments, including government-owned land and land already enrolled in the Conservation Reserve Program, Wetlands Reserve Program, or Grassland Reserve Program.

Payment Amounts

USDA is proposing to pay for up to 75 percent of the establishment costs for perennial crops, including woody biomass. (Annual crops do not qualify for establishment cost payments.)

For annual payments, USDA proposes to calculate payments on a per-acre basis and based on market-based rental rates sufficient to ensure producer participation in a project area. USDA also is proposing additional incentive payments for biomass crops that are especially likely to produce highly efficient bioenergy or biofuels, that preserve natural resources or that address specific resource conservation needs.

Annual payments would last up to 15 years for woody perennial crops and 5 years for annual and non-woody perennial crops.

The Bigger Picture

Congress intended BCAP to help solve the “chicken and egg” dilemma blocking development of sustainable biomass energy sources. Without an assured feedstock supply, many producers of advanced biofuels, bioproducts and bioenergy could not invest in new biomass energy plants. By the same token, farmers would not incur the substantial costs and risks of growing new biomass crops (like switchgrass) without the assurance of a market from a production facility. By paying farmers and others to establish, grow and deliver energy crops, BCAP overcomes these obstacles, reducing financial risk for both farmers and biomass energy plants.

BCAP Will Help Biopower First, Then Biofuels

USDA expects that most BCAP payments in the early years will support existing biomass conversion facilities using woody biomass as a feedstock (presumably to produce heat and power). BCAP expires in 2012, and according to USDA most biomass conversion facilities need to be in the pipeline now in order to qualify for BCAP benefits.

Reflecting these projections, USDA also expects that matching payments will consume most of the BCAP funds. Of the total expected $2.636 billion cost of BCAP, USDA projects that $2.1 billion will be for matching payments:

These projected costs are far higher than Congress’ expected $70 million cost for the BCAP program. Notably, Congress did not explicitly limit BCAP funding in the 2008 Farm Bill, so if BCAP costs as much as USDA predicts, it will become the highest-funded program in the 2008 Farm Bill’s Energy Title.

Environmental Considerations

 BCAP’s environmental impacts, for both better and worse, will depend largely on how USDA implements the BCAP program. By emphasizing such factors as species diversity, habitat and natural resources protection, USDA would increase BCAP’s long-term success and public support. USDA is especially interested in how it takes environmental factors into account in implementing BCAP, and it is seeking comments on this issue in a number of different ways.  

 For Additional Information

• USDA’s BCAP Proposed Rule (from the Federal Register).

• USDA’s website for the BCAP program.

As many states are already learning, wind energy development presents a tremendous opportunity for economic growth. Environmental Law and Policy Center Senior Attorney John Moore says that’s especially true for the Midwest.

According to Moore, several government policies have helped spur the development of wind power in rural America. Listen to the interview on the Brian Allmer Radio Network (BARN).

In an interview on AgriTalk, National Farmer’s Union President Roger Johnson explains one reason the Farmers Union supports national climate and energy legislation: because the benefits to agriculture will far outweigh the costs. The USDA found that the agricultural offset program in the House of Represenative’s bill would create $4-5 dollars in new income opportunity for every dollar of expense to agriculture.

Listen to an audio clip of Mr. Johnson on AgriTalk

Agritalk’s podcast of the full interview also is available (44 minutes into the podcast)

Good news on a key funding victory for the Farm Bill Energy Title! On October 16, 2009, the President signed the 2010 agriculture appropriations budget into law. The bill significantly increases the Rural Energy for America Program’s (REAP) total funding by adding an additional $39.34 million in discretionary funding to the program. That funding, in combination with the $60 million in mandatory funding for next year, increases total REAP funding to $99.34 million.

The President’s action is a victory for the Environmental Law and Policy Center and other groups supporting farm clean energy development throughout the country. REAP has grown from $0 to $23 million to nearly $100 million next year. It is now hitting stride with demonstrable economic, environmental and carbon-reduction benefits.

REAP and other energy programs in the Farm Bill help farmers and rural businesses invest in locally-owned energy projects and spurs rural economic development, while helping America tackle global warming challenges.

Our 2010 Farm Bill Clean Energy appropriations chart summarizes the current funding for all Energy Title programs and compares funding to 2009 levels.