“BCAP is an important and unique program that develops new biomass energy crops that can boost farmer income while providing a new energy source for the nation. It has potential across the country,” said Steve Falck, Senior Policy Advocate for the Environmental Law & Policy Center (ELPC).

The USDA will review the proposals and select producers or biomass facilities for the BCAP Project Areas. The growers will qualify for establishment or annual payments.

BCAP was first created in the 2008 Farm Bill. In FY2011, USDA selected nine project areas, approving more than 860 grower contracts for camelina, hybrid poplar, warm season grasses and giant miscanthus on almost 50,000 acres. The total investment in those projects is estimated to be $55 million.

In November 2011, Congress passed appropriations for 2012 limiting the total amount of BCAP funding to $17 million, reducing the potential number of projects and investments.

The Request for Proposal and additional information can be found at http://www.fsa.usda.gov/bcap.

To apply for a BCAP grant:

1.    Go to www.grants.gov.

2.    On the left side of the page, click on “Apply for Grants.”

3.    Click on “Download a Grant Application Package.”

4.    Type “10.087” in the box with the heading “CFDA Number” and click on “Download Package.”

“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

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.

ELPC Reaction to Final BCAP Rule

ELPC welcomes publication of a BCAP rule that will finally and fully implement the entire BCAP program.  However, ELPC is disappointed that the final rule fails to ensure the majority of program resources will support sustainable perennial energy crop production.  No funding limitations are placed on the collection of existing biomass materials and the final rule does not require a competitive review process to give priority consideration to the most environmentally and economically sound BCAP projects.

A scoring or similar system is critical to the long-term success of the BCAP program. ELPC believes that given limited resources and time to implement the BCAP program through 2012, incentives for the most environmentally beneficial projects is necessary to maintain public and Congressional support for BCAP.

Addtionally, the final rule projects that the majority of BCAP funding will continue to support the collection of biomass feedstocks regardless of their environmental impact, rather than establishing new sustainable energy crops. Finally, ELPC is puzzled by USDA’s decision to bias the crop establishment program in favor of biofuels development over other uses like biopower production.  As the very name of the Biomass Crop Assistance Program indicates, USDA/FSA should focus on the feedstock rather than the product.

Bottom line:  the final BCAP rule leaves a lot of detail to be determined or developed during the implementation process. Therefore, ELPC will be actively involved in BCAP implementation going forward and will continue to advocate for the development of an economically and environmentally sound program that is sustainable over the long-term.

BCAP Background

Congress enacted BCAP in 2008 as part of the Farm Bill’s Energy Title.  BCAP provides incentives for bioenergy feedstock development to support the production of advanced biofuels and renewable energy.  To achieve this goal, BCAP provides financial support for the following activities:

1. The collection, harvest, storage and transportation (CHST) of biomass materials for conversion to heat, power, advanced biofuels or bioproducts; and
2. The establishment and production of energy crops in project areas for use at facilities that convert biomass to heat, power, advanced biofuels or bioproducts.

Unfortunately, BCAP has been subject to delays and controversy.  In June of 2009, in advance of any rule-making or environmental review, USDA issued a Notice of Funds Availability (NOFA) for CHST, making matching payments available for the delivery of biomass to qualified conversion facilities.  No funds were made available for establishing energy crops.

USDA soon spent more than $200 million under the NOFA, primarily for non-Federal woody biomass that was being collected prior to BCAP.  This vastly outstripped Congressional projections of $70 million for the entire program through 2012 and led to Congressional spending limitations of $500 million in 2010 and $400 million (approx) in 2011.  Few BCAP dollars were spent to develop new biomass feedstocks, despite Congressional intent for the program.

For further background information, you can browse FarmEnergy BCAP stories here.

BCAP Timeline

Biomass Crop Assistance Program (BCAP) Final Rule

The final BCAP rule makes few substantive changes to the draft rule.  Most changes were made to the CHST provisions to address, in part, concerns raised about adverse impacts of the CHST program on wood markets and the lack of adequate and enforceable sustainability standards for biomass harvest.  Additionally, USDA/FSA secured a waiver of the required 60-day Congressional review period for major rules, allowing the rule to go into effect immediately.

Highlights and Changes From Proposed BCAP Rule

CHST Matching Payments:

• Restricts materials that will qualify for CHST matching payments to renewable biomass:

1. harvested and collected from the land, and/or separated from a higher-value product before delivery to a Biomass Conversion Facility (BCF);

2.  that does not supply a distinct local market for higher-value products ;

3.  that is harvested in accordance with an approved conservation plan, forest stewardship plan, or equivalent plan;

4.  for wood, only material that is diseased, unsuitable for timber harvest, or removed to reduce fire risk or restore ecosystem health.

Comment on woody biomass:  These restrictions apply to all woody biomass material collected from BOTH federal and non-federal lands (outside of BCAP project areas).  Previously, limitations on qualifying woody biomass applied only to woody biomass (or residues) sourced from federal lands.

• The rule does not tier CHST matching payments based on energy or environmental considerations, or type of material.  All eligible materials may receive up to $45/dry ton, regardless of environmental impact.

Establishment and Annual Payments:

• FSA will accept project area applications on a continuous basis (which FSA compares to the continuous sign-up process under the Conservation Reserve Program (CRP)), with no deadlines or competitive selection process.  No changes or additions were made to the selection criteria although “additional selection criteria may be developed.”

• A project area proposal must identify specific geographic boundaries and must be physically located near a BCF. FSA will decide on a case by case basis an appropriate location for the BCF relative to the proposed project area; the project area proposal must also describe sources of renewable biomass.

• Small and pilot-scale facilities are eligible for the program.

• Establishment payments will comprise an actual or average 75% cost-share for the “cost-effective” establishment of an “eligible practice.”  FSA, in accordance with CRP protocols, “will” establish market-based rates for standard practices such as land preparation, seed purchases and chemicals, etc.  Therefore, the actual establishment payment received by a producer may be less than 75% of their total cost.

• No change was made to the calculation of annual payments, which will be based on CRP regulations and “as determined” by FSA. Specific annual payments will be posted at FSA county offices as FSA still says it would be too complicated to post online.

• No explicit process was established for setting annual incentive payments (except “as determined by” USDA/FSA). Individual project area sponsors or producers will be responsible for proposing and justifying incentive payments.

• If a producer harvests and sells an eligible crop while still receiving annual support payments, these payments will be reduced in a tiered fashion depending on whether the crop is sold to produce cellulosic biofuels (payment reduction of 1%); advanced biofuels (payment reduction of 10%); heat, power, or biobased products (payment reduction of 25%); or for any other purpose (payment reduction of 100%).  FSA says the cellulosic biofuels preference is intended to further the goals of the Renewable Fuel Standard.

Conservation and Forest Stewardship plans:

• Plans are now required for all BCAP participants receiving CHST matching payments and establishment and annual payments.  Definition of conservation plan changed somewhat to include BCAP specific terms.

• Plans must be implemented and prepared in accordance with BCAP guidelines to be “established and determined” by FSA.  ELPC is monitoring that process.

• FSA states it will use the Natural Resource Conservation Service and state foresters, or private technical assistance providers, to provide assistance with conservation and stewardship plans.  Individual plans will be “site-specific.”

• FSA retains the authority to waive conservation district review of individual producer conservation plans, in the event a district declines to review or approve a plan.  This does not mean the requirement for a plan is waived.  However, FSA does not directly address what happens if a district declines to approve a plan saying only that farmers shouldn’t be harmed if a district declines to review a plan.

• Some site-specific environmental review will be required, both of project area proposals and individual producer contracts.

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.

To help meet the fast-growing interest in farm energy, Congress allocated a total of $60 million for REAP in FY2009, and more funding is possible next year. Even so, demand for REAP’s funds far exceeds available funding.

This year, USDA announced record awards for 2009 for the Rural Energy for America Program (REAP). USDA awarded these funds as grants and loan guarantees to over 1,500 farmers, ranchers and rural small businesses across the country for renewable energy and energy efficiency projects.

For the first time ever, REAP awards include funding for feasibility studies to “get new projects in the pipeline.” A total of $1.3 million was awarded for 51 feasibility study grants.

REAP also now includes funding for Energy Technical Assistance, which helps farmers and rural small businesses understand how to cut energy costs and develop clean energy projects.The Energy Technical Assistance program proved popular with $2.2 for 22 projects around the country. An example is the Kit Carson Electric Cooperative of New Mexico, which received New Mexico’s first ever REAP grant in 2009 for $100,000.  The grant is for energy efficiency and solar projects, and will provide more energy audits and technical assistance. The grant helps the coop provide more energy audits and technical assistance for energy efficiency and solar electric development efforts.

USDA continues to release news on awards and we will continue to keep you posted.  You can find a full listing here and breakdown by state follows.

2009 REAP awards summarized by state.

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

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.

Today, May 26, 2009, USDA issued a Notice of Solicitation for Applications (NOSA) for Rural Energy for America Program (REAP) grants, loan guarantees and feasibility study funding.  Applications are due on July 31.

The full Federal Register notice can be found here.

This year’s program highlights, including changes made in the 2008 Farm Bill, include:

Types of Funding Assistance

REAP provides loan guarantees and grants or combinations of the two.  Grants for feasibility studies are a new feature this year, with application instructions and ranking criteria explained in the NOSA.  NOTE: USDA is currently requesting comments on its feasibility study guidelines.

Maximum awards  are as follows:

• Renewable energy system grants – $500,000 or 25% of eligible project costs, whichever is less.
• Energy efficiency grants – $250,000 or 25% of eligible project costs, whichever is less.
• Loan guarantees – $25 million or 75% of eligible project costs, whichever is less.
• Feasibility studies – $50,000 or 25% of eligible study costs, whichever is less.

Small Grants, Feasibility Studies, Ocean/Hydropower

• 20% of REAP funding is set aside for grants of $20,000 or less (assuming it is used); USDA will add 10 points to the application score for these projects.
• 10% of REAP funding is set aside for feasibility study grants.
• Ocean and small hydropower projects (30 MW or less) are now eligible for REAP funding.

Applications and Scoring

The NOSA provides for four types of applications: loan guarantee only, grant only, loan guarantee plus grant (combo) and feasibility study only.  The official combo and feasibility study application options are new.

Although most applications can be submitted electronically through the Grants.gov website, applications for loan guarantees and combos must be submitted in hard copy form.

USDA has made a few changes to the scoring criteria, in part to reflect changes in the 2008 Farm Bill:

• Project “replicability” is removed as a scoring criterion.
• The expected energy efficiency of a renewable energy system is added as a criterion.
• For a combo application, the grant portion must score at least 20 points out of 35 for technical merit in order for the project to be considered eligible.

USDA also has added new application requirements:

• Only one type of application can be submitted for any one project -a feasibility study only, loan guarantee only, grant only or combo application.
• Projects can use either pre-commercial or commercial technologies, including foreign technologies, as long as an applicant can provide proof that the technology works and there are people available who can adequately install and service the project.

Loan Guarantee Changes

The maximum loan guarantee has increased from $10 million to $25 million. USDA will guarantee:

• 85% of a loan up to $600,000.
• 80% of a loan greater than $600,000 and up to and including$5 million.
• 70% of a loan greater than $5 million up to and including $10 million.
• 60% of a loan guarantee over $10 million.

Loan guarantees and combos cannot exceed 75% of project costs – this is an increase from 50% of project costs in previous years.

The annual fee for loan guarantees for 2009 is a 1% origination fee with annual renewal fee of 0.25% of the loan amount.