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.

Secretary of Agriculture Tom Vilsack recently visited the Flick Seed Company and Show Me Energy Cooperative as part of the Obama Administration’s Rural Tour. Secretary Vilsack praised the operation as a model to “create new opportunities in rural communities and new markets for farm products.”

Shortly after Secretary Vilsack’s visit, Show Me Energy Cooperative became the first in the nation to be approved under the USDA’s Biomass Crop Assistance Program (BCAP), providing a working model for sustainable biomass energy. Flick and his partners have developed an agricultural enterprise that provides jobs and increased income for growers – all while helping to slow global warming.

Show Me Energy Cooperative’s story began after founder Steve Flick decided to turn the waste material from his seed company, Flick Seed Company, into an alternative energy source. With the help of a Rural Energy for America Program (REAP) grant, Flick Seed developed a biomass pellet plant. Flick then worked with local farmers to start Show Me Energy Cooperative, a pioneering producer of energy crops, to add prairie grasses to his biomass mix for high energy pellets.

The biomass pellets have diverse uses. Show Me Energy markets for home heating fuel, fuel for small businesses and for generating energy at universities and utility companies. One ton of pellets contains as much energy as 190 gallons of propane, making it a useful renewable energy source.

In 2008, the co-op completed a 150-ton pellet co-firing test run at a coal power plant, keeping over 253 tons of CO₂ out of the atmosphere. The co-op’s partnership with Kansas City Power & Light may lead to biomass pellets entirely replacing other fossil fuel sources to generate electricity at that power plant in the future.

Local Benefits: Jobs and Income

The co-op’s operations reflect its mission to support the local community and economy. The 400 members’ farms provide biomass for the pellets and they are all within a 100 mile radius of the production plant, keeping energy use and transportation costs low. When using crop resideus, Show Me only accepts materials where at least 30% of residues were left on field. Show Me Energy also helps local businesses by blending in biomass residues from local commercial operations. Show Me Energy’s business model benefits local farmers and residents most by creating green jobs, new revenue streams for farmers, and a secure, clean energy source.

Economic Benefits and Global Warming Solutions

As Flick points out, the co-op’s model works for lots of different energy uses, from advanced biofuels, to heating and power—creating both economic and environmental progress. With this flexibility, Show Me Energy’s model could bring economic progress to communities across Rural America while helping us all cut carbon pollution that causes global warming.

For more information

• See Flick Seed Company’s FarmEnergy.org Success Story
• Articles about Secretary Vilsack’s visit
  • “Vilsack: Rural America heart and soul of country”
  • “Vilsack tours biomass facility, holds Rural Tour forum in Sedalia”
• Show Me Energy Cooperative website
• Obama Administration’s Rural Tour website

The control room at Show Me Energy's plant

Biomass pellet bags being prepared for delivery

A truck picks up a shipment of pellets to deliver to Northwest Missouri State University

The Notice of Funds Availability was issued on June 11th, and USDA is now accepting applications from both farmers and biomass conversion facilities wishing to participate in this part of the program.  Applications will be considered on a rolling basis and no deadline for applications has been set.  See your county Farm Service Agency (FSA) office for more information on applying for BCAP CHST payments.

The regulations and funding for payments for energy crop establishment are under BCAP are expected later this year, in time for sign-ups to occur for the 2010 crop year.  The USDA is currently in the process of preparing a Programmatic Environmental Impact Statement for BCAP and plans to issue proposed rules for the establishment portion of the program rather than another NOFA.

Sign up for updates from FSA on Twitter.

Almost 60 percent of people taking the survey preferred the that USDA implement the program on a broad basis rather than the more limited implementation option described in the scenarios USDA created for the purposes of performing an Environmental Impact Statement (EIS).

Many comments left by those supporting broad implementation were similar to the specific comments of one respondent, who said, “Farmers need a variety of options because conditions are so different from state to state, region to region. The program needs to try a variety of tactics to see what works and what is less successful.”

Many of the survey questions results were fairly balanced, but overwhelming consensus emerged on one particular question.  When asked to rank the importance of the various selection criteria included in the law that created BCAP, 98.9% of the people who took our survey rated soil, water and related resources as either “very important” or “important,” with 91.1% classifying it as “very important.”  No other question response came even close to that level of agreement amoung participants.

You can see the results of the closed-ended questions here, but the open-ended questions also yielded some very interesting results.

When asked what other land types besides those listed in the statute should be included, 76 people responded and the most common responses included:

• 23 people thought that reclaimed mineland or other reclaimed land should be included
• 21 people opposed including mature forests, wetlands or lands that were not previously used for agriculture
• 10 people supported the inclusion of marginal lands, non-tillable lands and roadsides

Sixty-nine people responded to our question about what types of conservation considerations should be included in forest stewardship and conservation plans that are required for land enrolled in BCAP:

• 29 favored inclusion of habitat conservation and management or avoiding harvesting during nesting and brooding seasons
• 17 listed water quality
• 13 mentioned nutrient management
• 13 listed erosion control and soil conservation

When asked how USDA could use existing programs and infrastructure to implement BCAP, 26 people responded:

• 12 favored modification and use of existing programs such as EQIP
• 10 listed use of Natural Resources Conservation Service (NRCS) and Farm Service Agency (FSA) staff and infrastructure with appropriate additional training and personnel

Finally, we asked people to provide any other general comments.  The 36 people responding to this question provided a variety of input.  While there was no theme voiced by a majority, the 3 most common responses were:

• 6 people said that the life cycle greenhouse gas footprint of biofuels should be considered in implementation of the program
• 5 are opposed to the BCAP program or feel priority for renewable energy development should focus on wind and solar energy sources
• 4 expressed support for finding alternative sources of biomass for energy, such as algea and switchgrass

ELPC will continue to solicit input and use input from others to inform our future comments and advocacy to USDA with the goal in mind of timely and efficient BCAP implementation that works for both farmers and bioenergy producers while protecting natural resources.

Thanks to all who took the time to send us your thoughts on this important program.

Today, June 11, USDA issued a Notice of Funds for Availability (NOFA) for the Collection, Harvest, Storage and Transportation (CHST) portion of the Biomass Crop Assistance Program (BCAP).  You can read the official notice here. Funding for the remaining components of BCAP (annual and establishment payments) will be announced in the final rule at a later date.

This NOFA is being rolled out as USDA completes a set of 6 public hearings around the country on the Programmatic Environmental Impact Statement (EIS) being conducted for BCAP.  BCAP advances sustainable energy crops — a global warming solution that provides new income opportunities for farmers.

Collection, Harvest Storage and Transportation Assistance

The CHST payments under BCAP provide biomass producers or owners with a $1 for $1 matching payment when they deliver biomass to a biomass conversion facility.  For each dollar a biomass producer receives from the facility, the USDA will pay an additional dollar, up to $45 per dry ton, for up to 2 years.  This payment is intended to help biomass producers with the costs of biomass collection, harvest, storage and transportation. A biomass producer or owner can be the owner of the land where the biomass is produced or a person with the right to collect or harvest biomass off of the land, such as a renter or contractor.

A biomass conversion facility is any facility using biomass to produce heat, power, biobased products or next-generation biofuels like cellulosic ethanol or biomass pellets.

There is broad eligibility for the types of biomass eligible for payments.  The only specific exclusions are biomass from state and federal lands, commodity grains and fibers, animal wastes and by-products, food and yard waste and algae.  However, only 20% of funding made available for CHST payments (estimated to be $25 million for 2009 but may increase) can go to residues from Title I commodity crops.

Biomass can be harvested from a wide variety of land types, including non-industrial and Federal forest land, crop land, and other privately owned lands such as rangeland and pastureland. Any forest land where biomass is being harvested for BCAP must be under a forest stewardship plan or a similar plan.  Cropland where biomass is being harvested for this program must comply with the same highly erodible land conservation requirements as Commodity Title programs.  Biomass harvest must follow all applicable state and federal environmental regulations.

Owners of participating biomass conversion facilities will enter into a memorandum of understanding with USDA that the facility can and will provide all relevant information on biomass delivery and use.  The local FSA office then considers submitted materials and qualifies facilities based on their applications.

FSA county offices will keep and distribute public listings of qualified biomass conversion facilities and the types of materials they are using in order to ensure more open market access for producers.  Then, biomass producers file an application with USDA to receive payments for providing biomass to a registered facility.  Once biomass is sold, producers must submit proof of sale materials, verified by the qualified biomass conversion facility, to FSA to receive the payment.

Stay tuned to FarmEnergy.org for more BCAP news!

Using procedures under the National Environmental Policy Act (NEPA), the Department is conducting an Environmental Impact Assessment (EIS), and is proposing two different options for implementing BCAP: limited or broad implementation.

USDA’s Proposal

USDA has proposed two options for implementing BCAP: A limited, targeted approach that would restrict acreage, scope of payments, and types of crops and facilities, or a broader approach with payments for more practices and inclusion of more project and crop types.

The following table summarizes USDA’s two alternatives for implementing BCAP.

USDA is preparing a “programmatic environmental impact statement” that will summarize the different environmental impacts of each of these two options and help guide the Department’s implementation of BCAP.

Additional Resources

• USDA’s informational/public comment page on the BCAP Environmental Impact Statement process – visit this page if you want to submit your own comments and to learn more about USDA’s proposal.
• The BCAP legislation from the 2008 Farm Bill.
• Our summary of the BCAP program.
• USDA’s Federal Register notice announcing the public meetings and written comment period for the BCAP EIS process.

This program, if taken up by local farm energy leaders, can spur a new climate-friendly and farmer-friendly energy source. BCAP, implemented well, could make a major difference for our energy future.

While a great hope for tapping energy crops centers on making ethanol, energy crops can be also be used for fuel for heat and/or power. Prairie grasses have been used for utility boiler fuel co-fired (or blended) with coal. In several instances around the country, entrepreneurs are making fuel pellets from switchgrass. BCAP can accelerate the most successful of these approaches.

Below please find a basic summary of the program, its intent and how it works.

Contents

Purpose
BCAP Funding
Timeline for Implementation
Eligibility
Energy Crop Production Incentives
Harvest, Transport, Processing and Storage Co-Pay

Purpose

The BCAP was designed to support agricultural producers in producing biomass crops and collecting biomass for sale to commercial-scale facilities that commit in writing to use the biomass to produce fuels or power.  The program is also intended to improve water quality through reduced water use and surface water protection. Environmental quality can increase with less fertilizer compared to traditional row crops and encouraging the use of perennial crops, which are better for soil, air, water and wildlife.

The program has two distinct pieces: 1) biomass crop establishment; and 2) assistance for the harvest, storage, processing and transportation of biomass materials for energy.

BCAP Funding

Unlike most programs in which Congress specifies the annual funding level, Congress funded BCAP at essentially an unlimited amount; the BCAP statute specifies simply that USDA will use whatever “sums as are necessary” to implement BCAP. This means that the BCAP funding is both mandatory and is not capped by Congress, reflecting the high value Congress placed on this program. In reality, the Office of Management and Budget, working with USDA, decides each year’s funding allotment based on projected program demand, administration priorities and other factors.

Timeline for Implementation

With new federal legislation, the USDA needs to write program rules, with input from the public as required by law. However, in the interim, the USDA can implement this program in 2009 under a “Notice of Funding Availability” (NOFA) while also preparing a rulemaking on a parallel track for 2010.

They’ve not indicated yet what their plans are for BCAP. The rulemaking process for new programs can take years, as we learned under “Section 9006″ of the 2002 Farm Bill (now REAP – the Rural Energy for America Program).

Eligibility

To participate in the biomass crop establishment portion of the program, a group of farmers or a “biomass conversion facility” (any facility that will use the biomass to make biobased products or energy (heat, power, or advanced biofuels) must submit an application to USDA that defines the borders of the proposed production area and identifies the variety of biomass crop to be used at the facility.  The application also must include a commitment from at least one biomass conversion facility in the area to use the biomass in their facility.

All biomass production must occur on either agricultural land or industrial private forest land.  BCAP excludes all land in federal land protection programs and native sod.  BCAP also excludes any crops otherwise eligible for Title 1 (Commodity) programs and noxious and invasive species.

USDA will determine whether projects meet the minimum threshold for selection, based on criteria in the statute and others to be determined by USDA (presumably through rulemaking.)  The statutory criteria include:

• The amount of crops to be produced and the likelihood that they will actually be used to produce energy
• The amount of biomass likely to be available from sources other than the crops grown with support from the BCAP
• The local economic impact of the project
• The opportunity for local investors to participate in the ownership of the facility
• The participation of beginning or socially disadvantaged farmers
• The environmental impacts of the proposal
• The variety of agronomic practices and species – including mixes of different crops – proposed within a BCAP area
• The range of crops across projects areas

If the project meets the established criteria, then it will be funded.

Energy Crop Production Incentives

Ag producers in project areas will receive a payment for up to 75% of establishment costs. Establishment costs refer to the costs to convert lands from an existing use to the new energy crop. Incentives also include an annual payment intended to compensate the producer for the opportunity cost associated with growing an energy crop on the land.  Land that was formerly in a row crop will likely receive more than land that was fallow or pasture.  The annual payments can continue for up to 5 years if the producer is growing a perennial grass and up to 15 years if the crop is trees.

Ag producers are required to implement a conservation plan on the enrolled land and to agree to provide information to USDA for research purposes.

Harvest, Transport, Processing and Storage Co-Pay

Any person collecting and selling biomass crops or agricultural or forest waste for energy is entitled to receive this payment. The payment is structured as a match; whatever the biomass collector (whether the farmer or some other person) is paid by the biomass user facility, USDA will match dollar for dollar, up to $45 per dry ton.  Materials not eligible for this payment include animal waste and byproducts, food and yard waste and algae.

ELPC will follow, and report on, the rulemaking process closely.

See also the story REAP clean energy with prairie grasses today.

Rather than wait for cellulosic ethanol, grass pellets are today fueling space heating, power generation and other high efficiency uses. This approach “primes the pump” for developing energy crop economies so that they will be more ready to deliver when cellulosic ethanol is market-ready.

Agrecol has gone beyond studying this technology to adopt it technology within their operations. They’ve planted their own acres of switchgrass and are using it for space heating.

REAP and Grass Pellets

Today, this technology is providing an economical option for consumers and producers who are also helping to build a clean energy economy. Federal grant and loan programs like REAP (Rural Energy for America) are driving this technology forward.

Agrecol claims bioheating systems that use pellets made from native grasses like switchgrass are more efficient and more economical than propane (LP gas), oil, electricity, and corn-based biomass (the cost per MMBtu for propane is $26.57 compared with $12.82 for switchgrass pellets). Native grasses, which can be grown and harvested with common farming technology, require few chemical inputs and less tillage but are perennial and can be grown on marginal lands.

The development of switchgrass as a source of heat energy also significantly reduces global warming pollution. Converting a single acre of corn to grass production would reduce 1.3 Megatons of global warming pollution annually on the cropping side. Using switchgrass pellets for energy also cuts global warming pollution considerably compared to the same energy from fossil fuels like heating oil and natural gas.

Examples of Projects

Pork & Plants, a greenhouse in southeastern Minnesota, was seeing sharp increases in natural gas prices for heating their greenhouses over a number of years.  With funding from REAP, the group was able to purchase a pellet boiler that produces 2000 MBTUs per year. While they currently are using corn in the boiler, they are now working on making their own pellets from native prairie grasses, corn stover, and other materials.

Missouri Bioenergy (a.k.a. “Flick Seed Company”) is also advancing grass pellets with the help of REAP. Learn more about their efforts in our Success Stories section.

The Rural Energy for America Program (REAP, formerly Section 9006), part of the recently passed Farm Bill’s Energy Title, has already funded pellet production projects and a number of pellet boiler installations. REAP could also become a prime resource for those who want to begin using energy crops for heating.

Following are some of the businesses that have invested in pellet production or boiling with help from REAP:

See also:

• Support for Energy Crops Taking Shape
• BCAP: New Farm Bill Program Can Advance Energy Crops