Farm Energy

Show Me Energy Cooperative proposes extensive plantings of perennial grasses for energy in Missouri and Kansas

On May 5, 2011, USDA Secretary Tom Vilsack announced the approval of the first Biomass Crop Assistance Program (BCAP) project area, covering approximately 50,000 acres in 38 counties in Missouri and Kansas.  The project area application was designed and submitted by the Show Me Energy Cooperative of Centerview, Missouri, which now has more than 612 producer owners.

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(April 20, 2011) USDA issued a notice yesterday setting a deadline of May 27, 2011 for submission of Biomass Crop Assistance Program (BCAP) project area proposals for Fiscal Year 2011.  State-level USDA teams are required to complete their review of submitted applications by June 10. The deadline for a final, national-level review of applications sent up by state offices is June 24. This is a change from the final BCAP rule published last October, which anticipated USDA accepting applications on a rolling or on-going basis with no deadlines.

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(April 14, 2011) Today USDA issued the FY2011 funding notice for the Rural Energy for America Program (REAP) and also issued the long-awaited Interim Rule for all components of REAP. Both the funding notice and the Interim Rule address: 1) grants and loan guarantees for clean energy projects; 2) grants for feasibility studies; and 3) grants for energy audits and renewable energy development assistance.

To help the public understand the new REAP rule, ELPC is holding a webinar on Wednesday, April 27, at 3:00 pm Central Time. The webinar will be recorded for later viewing if you are unable to participate. This article summarizes the funding notice and the Interim Rule.

Funding Notice

The Notice of Funds Availability (NOFA) announces the availability of $70 million in REAP funding this year, based on the 2008 Farm Bill’s mandatory allocation of the same amount. USDA will issue a supplemental NOFA for additional funding if Congress allocates additional discretionary funding in the still-uncertain FY2011 budget

Application deadlines are as follows:

• June 15 for clean energy project grants and combined grants and loan guarantees;
• June 15 for loan guarantees only;
• June 30 for renewable energy Feasibility Studies grants;
• June 30 for Energy Audits and Renewable Energy Development Assistance grants.

Please read the NOFA for additional important application information. Since it is based on the REAP Interim Rule also proposed today, the remainder of this article summarizes the Interim Rule.

Interim Rule

The REAP Interim Rule is effective today and issued on an emergency basis to reflect changes made three years ago in the 2008 Farm Bill. Although effective immediately, USDA is requesting comments on its proposal and may change the rule in response to comments. The deadline for comments is June 13, 2011.

Here are highlights of the new rule’s requirements, focusing primarily on changes from the existing REAP rules and prior funding notices. Please check back on FarmEnergy.org soon for a more comprehensive summary of all of the rule’s requirements.

ELPC also is holding a webinar on Wednesday, April 27, at 3:00 pm Central Time to discuss the new rule. The webinar will be recorded for later viewing if you are unable to participate.

Key points in the rule include:

General

• Flexible fuel retail blender pumps are now eligible for REAP grants and loan guarantees. To qualify for a REAP award, gas stations must be owned by a rural small business. These pumps dispense gasoline blended with ethanol or biodiesel. (Biogas pipelines, transmission lines from wind farms, and other conveyance equipment are not included in this proposal.)
  • Note: Blender pump applications can receive up to 25 scoring points unique to pumps, based on number of additional pumps and USDA’s discretionary authority.
• Eliminates the “rural restriction” for agricultural producers located in non-rural areas – for example, commercial nurseries.
• Includes ocean energy and small hydropower (under 30 megawatts) as eligible technologies. Removes the financial need requirement (was not in 2008 Farm Bill).
• All REAP agreements terminate 2 years after signing unless USDA agrees to extension.

Renewable Energy and Energy Efficiency Grants and Loan Guarantees

• Higher funding limits for loan guarantees – up to 75% of total project costs; and the maximum amount of the loan guarantee was increased from $10 million to $25 million.
• USDA makes clear that applicants also can use the production tax credit (PTC) and other passive third-party equity contributions (although tax rules still cause a “haircut” to the total PTC).
• Energy efficiency improvements are exclusively for existing capacity improvements – USDA will not issue grants or loan guarantees to support capacity expansion (intended to address use of REAP to purchase larger grain dryers).

Feasiblity Studies and Audits/Development Assistance

Apart from the changes discussed in “General” above, the rules for the feasibility study grants and the energy efficiency audits and renewable energy development assistance grants appear to be similar to prior agency guidance contained in funding notices. We will summarize those requirements in a forthcoming article.

What the Interim Rule Does Not Address

• No streamlined applications for smaller, “off-the-shelf” pre-certified equipments such as wind turbines and solar panels.
• Did not eliminate the costly and unnecessary “two meter” requirement for farms that install wind turbines and solar panels where some small portion of the power generated may flow to the home.
• No increase in feasibility study grant limits (currently $50,000 per project, which is very low for large community energy developments).
• Non-profit entities are not eligible to conduct energy efficiency audits and renewable energy development assistance.
• Unclear yet if USDA eliminated the application preference for loan guarantees.

We invite you to attend one of three informational workshops being sponsored by USDA Rural Development, Environmental Law & Policy Center, and the South Dakota Farmer’s Union and hear from staff regarding opportunities available to farmers, ranchers, and rural small businesses.  The Rural Energy for America Program (REAP) can provide guaranteed loans, grants or a combination loan and grant to eligible applicants for eligible projects and costs.  These free workshops will provide information about REAP as well as its use to fund ethanol blender pumps.  Eligible projects for renewable energy systems include production of energy from wind, solar, biomass, or geothermal systems, hydro power, hydrogen-based sources.  The projects can produce any form of energy including; heat, electricity or fuel.  Energy Efficiency projects, for example, can be such things as upgrading grain dryers, insulation, or heating, cooling and  lighting upgrades.

Most rural projects that reduce energy use and result in savings for the agricultural producer or rural small business are eligible as energy efficiency projects, including lighting, insulation, or purchase and replacement of equipment with more efficient units. Some use REAP incentives to upgrade to more efficient ventilation, pumps, coolers, insulation, or heating and cooling systems. Others now generate their own energy with solar panels, wind turbines, biogas or biofuels.

If you would like more information about these programs, please plan to attend one of the following five workshops:

• Tuesday, March 29, 2011…Bath, SD at Northern Electric Coop, 9456 – 133^rd Street, beginning at
  1:00 p.m. CT
• Wednesday, March 30, 2011…Huron, SD at South Dakota Farmers Union Auditorium, 1410 Dakota Avenue South, beginning at 1:00 p.m. CT
• Thursday, March 31, 2011…Pierre, SD at USDA Office, Boardroom, 1717 North Lincoln, Pierre, SD; beginning at 9:30 a.m. CT

These workshops will provide information for prospective applicants on the USDA Rural Energy for America Program, including:

• Eligible Loan/Grant Purpose
• Financial Information
• Application Tips
• Eligible Applicants
• Maximum Loan and Grant Amounts
• Application Deadlines

After the general workshop staff will be available for one on one discussion if needed.  For additional information, please contact Matt McLarty, Environmental Law and Policy Center at (605) 274-7060 or mmclarty@elpc.org.

USDA, under its Rural Development mission area, administers and manages more than 40 housing, business and community infrastructure and facility programs through a network of 6,100 employees located in 500 national, state and local offices. These programs are designed to improve the economic stability of rural communities, businesses, residents, farmers and ranchers and improve the quality of life in rural America. Rural Development has an existing portfolio of more than $134 billion in loans and loan guarantees.

- USDA -

(March, 2011) USDA Secretary Tom Vilsack recently announced grants were awarded to 68 American farmers and rural small businesses to conduct renewable energy feasibility studies under REAP – the Rural Energy for America Program.

“The Obama Administration is committed to helping our nation become more energy independent by helping rural businesses build renewable energy systems,” said Secretary Vilsack. The grants provide assistance for rural small businesses and agricultural producers to conduct feasibility studies for renewable energy system installations.

Feasibility studies help farmers and rural small businesses identify ways to cut energy costs and get new clean energy projects in the pipeline. The REAP Feasibility Studies Program pays up to 25% of the costs of the study.

The 68 feasibility study grants totaled $1.6 million and fund studies in 27 states and territories. A number of larger-scale geothermal power projects in the American West were funded, including one for 500 kw and one for 10 MW. Direct geothermal electric technologies have long planning times, where this support makes a big difference. Ohio had the largest number of awards – 10 – for digesters, solar and wind.

Table 1: Breakdown, by state, of the number of projects and the total amount of funding for those projects

Click on charts to zoom.

Breakdown of 2010 REAP Feasibility Study Funding, by Technology

Number of 2010 REAP Feasibility Study Awards, by Technology

(Feb 28, 2011) USDA recently issued interim final rules for two Energy Title programs in the 2008 Farm Bill: Repowering Assistance Payments to Eligible Biorefineries, and the Advanced Biofuel Payment Program.

USDA is accepting comments on the rules through April 12, 2011. However, by issuing the rules as “interim final rules” rather than “proposed rules,” the Department can implement the regulations now, and then adjust them as necessary after receiving comments.

Repowering Assistance for Eligible Biorefineries

This program implements Section 9004 of the 2008 Farm Bill, Repowering Assistance. Its purpose is to help to “green” ethanol plants with funding for existing facilities to convert their on-site power plants from fossil fuel to renewable biomass. The carbon savings can be significant, with larger plants reducing greenhouse gases by 100,000 tons or more annually. The 2008 Farm Bill committed $35 million in funding for Repowering Assistance.

ELPC commented extensively on USDA’s first proposal for Repowering Assistance, and we are pleased that the Department has agreed in whole or in part with most of our recommendations. For example, the rule largely drops the “rural restriction” requirement that plants had to be located in rural areas.

However, we remain concerned that the program does not sufficiently reward the greatest carbon reductions in funding proposals, so we will comment on the interim final rule as well.

The Interim final Rule is available here, and comments are due April 12, 2011. Please feel free to contact Andy Olsen at ELPC if you have any questions about the Repowering Assistance Program.

Advanced Biofuel Payment Program

This program implements Section 9005 of the 2008 Farm Bill, the Bioenergy Program for Advanced Biofuels. Its purpose is to encourage production of lower-carbon biodiesel and cellulosic ethanol. Corn starch ethanol is not eligible. It offers production payments for biofuels based on several factors, and we expect that most of this funding will be used for soy biodiesel in the first several years of the new Farm Bill, along with some funding for other oilseed crops. The 2008 Farm Bill included $300 million in mandatory funding for this program.

Key points in the Interim Final Rule include:

• Two-tier payments for both total annual production and yearly increases, with the incentive first prioritizing total production and then, by 2013, equally dividing the incentive payments between total and incremental production.
• Discouraging use of forest biomass in several ways, notably by limiting payments for fuels produced from forest biomass to only 5 percent of total annual funding.
• Encouraging carbon savings with a “BTU bonus” for biofuels that meet U.S. EPA renewable fuels standard (RFS) requirements.

 The Interim final Rule is available here, and comments are due April 12, 2011.