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.

For the 2009 REAP program, the USDA has tried to address this problem by changing how it allocates award funds. Now, each individual state Rural Development office has been provided an allocation of funds for its state. This will speed up awards of some grants and all loan guarantees. USDA has allocated a total of $27.7 million (46% of overall funding) to the states.

Enhancement made by Congress to the program, including energy technical assistance and feasibility studies, will also help states that have lagged in winning funding. In depth program information can be found at our “REAP Frequently Asked Questions” page.

If a given state’s allocation is exhausted, it can request additional funds from the national office “reserve,” but only for loan guarantees or grant-loan guarantee combinations. After the state allocation is used up, only loan guarantees will be funded from the state. The reserve has a total of $11.9 million (20% of overall funding).

If a state doesn’t use its allocation by September 8, 2009, the funds are pooled with other allocations and returned to the national office for distribution in final awards for FY2009.

The state allocation is one of five allocations created by the USDA to implement the new program enhancements added in the 2008 Farm Bill. The following table shows how the USDA has allocated total program funding:

REAP Budgetary Allocation, Fiscal Year 2009

The budget for each state can be found at the back of this official notice on the allocations.

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.

Legislative language in the 2008 Farm Bill specified eligible recipients as “agricultural producers and rural small businesses.” As not all “agricultural producers” are located in rural areas, the USDA rules excluded legitimate agricultural producers.

After hearing from members of Congress, ELPC, and non-rural agricultural producers from around the country, the USDA has now agreed to make the REAP program benefits available to all agricultural producers regardless of location. (Small businesses will still need to be located in rural areas). Unfortunately, they cannot implement this change until FY2010.

ELPC commends the new leadership at the USDA for this action to repeal the “rural restriction.” The restriction excluded many dairies, fruit and vegetable growers and other growers of specialty crops from participating in this program. Many greenhouse growers were also excluded from REAP.

As it happens, the ag sectors most affected by the restriction have special needs for energy efficiency and opportunities to develop renewable energy such as wind, solar and manure digesters. They are potentially good REAP candidates who can make the program more successful.

ELPC commends Secretary Vilsack for this decision and looks forward to more clean energy projects as a result.

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.

Comments on the proposed rules were due on December 15th. ELPC submitted comments with 21 other organizations interested in the continued success of this key farm energy program. You can download those comments here (PDF format).

Part of the proposal would shift the program to be under the same umbrella as similar USDA programs. Other changes would restrict program eligibility in favor of loan guarantees at the expense of grants and continue to exclude agricultural producers who are not located in rural areas. A powerpoint summary of the proposed rules is available here: Summary of USDA’s REAP Grant Program Proposed Rule (PDF format).

A summary of the comments from ELPC and our allies follow.

Common Grant Platform

ELPC is opposed to using a common grant platform for all USDA programs. The proposed system is confusing for the applicant, does not increase efficiency and may actually hinder efficiency. Instead of consolidation, USDA should concentrate on simplification and web delivery of services.

Loan Guarantee Requirement

ELPC strongly opposes USDA’s proposal to limit eligibility for grants of more than $50,000 to projects that cannot otherwise secure a loan guarantee for the project. This provision effectively caps grants at $50,000 and hardens the USDA preference for loan guarantees – a policy that has clearly been rejected by the public and ought to be removed rather than reinforced. It will likely result in a large amount of unused REAP funding since there is such low demand for loan guarantees.

Rural Area Requirement

USDA’s proposal continues to limit REAP eligibility to agricultural  producers in rural areas. There is no justification for this exclusion. The 2008 Farm Bill deliberately changed the eligibility for REAP from “farmers, ranchers and rural small businesses” to “agricultural producers and rural small businesses” in order to be more inclusive. Therefore, agricultural producers, such as greenhouses, that are not located in rural areas should be eligible for REAP.

Funding Notifications

Notifications of funding availability (NOFAs) should be widely and  aggressively publicized. Also, NOFAs should be issued within 30 days of the beginning of the fiscal year and should not be delayed if an exact funding amount is not known at the time of the release due to delays in the Congressional appropriations process. Information on the priority categories for applications should also be released much sooner than the proposed 30 days in advance of the first ranking or application date.

Pre-Applications

The USDA process for dealing with pre-applications should be better defined in the rules. The process should include:

• A specific time to submit pre-applications up to a reasonable deadline (perhaps March 15).
• Specific pre-application requirements.
• A deadline for USDA to respond to pre-applicants (perhaps within 30 days).

Application Process

The USDA website should be the main source for project application information.

Additionally, the USDA should not follow through with its proposal to pre-screen applications for “feasibility.” This initial screening is not in statute and gives USDA too much discretion to discard applications before they are scored on their full merits.

Ranking Applications

In addition to a number of criteria that are used to create a score that allows USDA to rank applications, the Department has proposed adding 2 more criteria to use in determining a grant award after this score has been calculated. ELPC opposes both criteria. Those 2 criteria include:

• The size of the request relative to the available grant funds. ELPC opposes this criterion because it could distort the ranking process by giving smaller projects an advantage over higher-ranking larger projects if less money is available.
• The availability of other funds to finance  the project. ELPC also opposes this addition. USDA is already planning to include financial need in the scoring criteria and project feasibility – another scoring criteria – is also likely to include whether funding beyond a REAP grant is available. Projects should not be rejected for a grant under REAP simply because other funding options may be available.

Other Comments:

• Rules should spell out standards for feasibility studies.
• Grant applications should be accepted on a rolling basis.
• USDA should set specific standards for a simplified application process.
• Administrator categories should be eliminated or points awarded for them reduced from 10 to 5.