Moderated by ELPC Staff Attorney and Policy Advocate Karen Bridges, the briefings focused on the federal Farm Bill’s Biomass Crop Assistance Program, or “BCAP.” Sustainable biomass and biofuel crops could become an important clean energy resource, but farmers want to be sure there’s a market for these crops before they plant them, and power producers want to be sure there’s a supply of these crops before they buy them. BCAP was intended to help break this “chicken and egg” dilemma by offsetting a portion of the costs of growing and harvesting new energy crops and other biomass feedstocks.

Congress passed BCAP in the 2008 Farm Bill, and the U.S. Department of Agriculture (USDA) is just starting to fully implement it. USDA work is off to a somewhat rocky start, and very little of the program’s resources are being directed to new, sustainably grown energy crops. Although a wide variety of views was presented, the speakers agreed that BCAP was a program worth “getting right,” and that it’s time for USDA to redirect resources to the production side of the program.

With this briefing and related activities, ELPC is seeking to persuade USDA to hard-wire strong environmental protections in the BCAP rules and prioritize the right energy crops for development. If grown and harvested correctly, BCAP can boost on-farm income, help rural communities, and improve environmental quality.

Click here to view presentations on BCAP from National Wildlife Federation, Anna Rath, Show Me Energy Cooperative and University of Illinois.

For more information on BCAP and other Farm Bill Energy Title programs, please click here .

Energy Technical Assistance was created under the 2008 Farm Bill and provides ways to identify cost-effective opportunities for energy efficiency and renewable energy measures by rural agricultural producers and rural small businesses. A total of $2.4 million is available under this program for 2010 and the maximum grant is $100,000.

The eligible organizations under this program include units of State, tribal, or local government; land-grant colleges and universities and other institutions of higher education, rural electric cooperatives; and public power entities.

Applicants should follow the guidelines in the Notice of Funding Availability (NOFA) carefully. The NOFA provides the criteria for scoring the competitive applications and information on how the application should be organized.

The NOFA can be downloaded here. (PDF format)

As described in the short summary of the American Power Act:

Additionally, the bill supports the Rural Energy for America Program, which has already reduced costs and created thousands of new clean energy jobs across rural America.

To help spur the development and deployment of clean energy technologies economy wide, the American Power Act will include REAP at a level nearly three times the FY2010 funding of $99.34 million. The American Power Act seeks to jumpstart our transition to a clean energy economy, creating jobs and investment nation-wide and reducing our dependence on fossil fuels.  The bill would also provide direct support to energy consumers and incentivize energy efficiency and renewable energy development.

Though the REAP program was included in the official bill summaries, it was inadvertently omitted from the discussion draft and will be included in later revisions.

This Congress has pledged to pass either a climate or a clean energy bill. REAP serves the goals of either type of bill:

• REAP cuts carbon pollution with energy efficiency and renewable energy deployment through rural economic development.
• REAP helps energy independence and energy security by reducing energy waste with energy efficiency and increasing distributed – and resilient – energy systems.

One program that’s made thousands of new clean energy projects possible is the USDA’s Rural Energy for America Program (REAP). ELPC’s Farm Energy Success Stories report highlights clean energy projects on farms and rural small businesses across the country that are saving money, creating new income and reducing pollution. ELPC is advocating to expand REAP and other farm energy programs. Listen to the interview here.

A total of $87 million is available for renewable energy and energy efficiency improvements, leaving $9.9 million for energy technical assistance and $2.4 million for feasibility studies. Key: The deadline for applications to be submitted to state rural development offices is June 30, 2010.

Following are some key changes in this year’s notice:

• No mention of loan guarantee preference. In previous years the USDA placed a high preference on loan guarantees, effectively requiring them as a condition for preferential scoring of the grant applications. We see no mention of this and will seek and publish clarification soon.
• No extra points for smaller projects. Last year for the first time the USDA awarded 10 extra points for applications for grants of $20,000 or less, in response to Congressional support for these projects. The NOSA removes the extra points, since the REAP statute already creates a funding pool for these projects. No other changes for point scoring are found. (Clarification: Small projects already received points under the previously existing permanent rules).
• No repair for the rural restriction. Previously, the USDA has not allowed agricultural producers in non-rural areas to be eligible. We had understood that the USDA was committed to ending this restriction. It does not appear to be fixed in this NOSA.
• Clarification for eligibility and technical reporting for small hydropower.

And you may find their main page here.

Farm Energy Success Stories highlights clean energy projects that were made possible with grants and loan guarantees from the Farm Bill’s Rural Energy for America Program (REAP).

Download an electronic version of the report here.

For a hard copy, send a request with your full information contact to ELPC.

“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.

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.

If the President’s budget holds through the appropriations process, more agricultural producers, rural small businesses and communities across the country will be able to cut costs with energy efficiency and develop new revenue with renewable energy. That means more clean energy projects, a better environment, and a stronger federal commitment to make the program work.

REAP continues to be extremely successful, with over 3,000 project awards in nearly every state. Even with the President’s proposal, farmer and rural business demand for REAP financing continues to outpace available funding.

Next steps: The House and Senate Ag Appropriations Committees must each recommend funding levels for REAP and other Energy Title programs. Stay tuned for updates!

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.