USDA seeks comments on biomass rules - but will Congress listen?

By Jonathan H Harsch

© Copyright Agri-Pulse Communications, Inc.



WASHINGTON, April, 7, 2015 - If USDA's Biomass Crop Assistance Program (BCAP) works out as planned, the results could include up to $88.5 billion in additional economic activity and about 700,000 new jobs by 2023, with most of the new money and jobs flowing to rural America.

Yet initial comments about USDA's proposed new BCAP rules due to take effect May 28 raise concerns about changes required by the 2014 farm bill. The changes include capping matching payments for biomass delivered to a biomass conversion facility at $20 per ton rather than the previous $45 per ton cap, cutting possible payments to some BCAP participants by more than half. (To provide your own views, read the proposed new rules for BCAP and then submit your comments before the April 28 deadline for comments.)

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A major concern is that BCAP is still recovering from an original focus on using forest and crop residues rather than developing new purpose-grown perennial “energy crops” like switchgrass, miscanthus, and camelina.

Brent Bailey is the Mississippi-based State Activities Coordinator for the 25x'25 Alliance, which promotes bioenergy. He tells Agri-Pulse he's hopeful the new BCAP rules will support energy crops by solving the chicken-and-egg problem of guaranteeing landowners a market for their energy crops while guaranteeing investors that if they build a biomass conversion plant, nearby landowners will provide the necessary feedstock.

“While BCAP is definitely a useful tool,” Bailey says, “I personally think the jury's still out on (its) effectiveness.” He says that while the Midwest is using BCAP to provide a market for corn stover and other agricultural residue to produce advanced biofuels, in his Southeast region “most of the materials have gone to existing facilities” to generate heat and power, “so it hasn't really stimulated new economic development or new investment in stand-alone biomass conversion facilities to create an advanced biofuel product.” He hopes USDA's proposed rule changes will help refocus BCAP on its initial goal of developing energy crops.

Bailey's also hopeful that as ethanol industry leaders continue their work to produce cellulosic ethanol, that, as efficiencies improve in the conversion process, instead of relying on crop residues they will shift to “using dedicated energy crops.”

Greg Fogel, senior policy specialist with the National Sustainable Agriculture Coalition (NSAC), points out that BCAP rules give USDA discretion to use between 10 percent and 50 percent of the program's funding for collection, harvest, storage and transportation (CHST) payments, also known as matching payments or retrieval payments, for corn stover and other crop residues. He notes that last year, USDA used the full 50 percent for CHST, thereby limiting the funds available for helping farmers plant new perennial energy crops.

The 2014 farm bill provides up to $25 million per year for BCAP through 2018. Program supporters are concerned that congressional appropriators could cut BCAP funding from the proposed $25 million. But another risk, they warn, is that USDA might maintain the CHST portion at or near the 50 percent maximum. NSAC reports that, “Since 2008, USDA has spent $63 million to help 880 farmers, ranchers, and nonindustrial forestland owners establish and maintain bioenergy feedstocks on 53,115 acres in BCAP project areas.” During the same period, NSAC notes, USDA spent almost four times that amount -- $248 million -- on biomass collection, harvest, storage and transportation (CHST).

“We will be urging USDA to reverse course in the final rule and limit CHST payments to no more than 10 percent of total BCAP funding,” Fogel tells Agri-Pulse. He insists that paying farmers to establish and produce perennial energy crops is “far more important to stimulating the production of advanced biofuels.”

Andy Olsen, senior policy advocate at the Environmental Law & Policy Center, tells us that “developing sustainable energy crops that work in both the agriculture and energy markets is a difficult challenge.” He joins other experts in warning USDA against spending so much on CHST payments when it's far more important to support the “biomass project areas” that focus on establishing perennial energy crops. He points out that switching to these crops not only adds a new energy source and can make good use of marginal land, it can do so while improving water quality by eliminating annual planting and reducing or eliminating herbicide use.

“Even though the farm bill was only passed last year, we're very concerned that it could be unraveled in the appropriations process,” Olsen said. He urges Congress to maintain funding and wants USDA to focus BCAP on “developing new biomass project areas and supporting the ones that are out there.”

Scott Coye-Huhn, corporate development VP and chief legal officer with Texas-based Aloterra Energy, also hopes USDA will give priority to establishing perennial energy crops in biomass project areas. Those areas include 4,000 acres where Aloterra has signed up farmers to grow miscanthus in Ohio and Pennsylvania. He hopes Aloterra will be able to expand that to 50,000 acres. But doing so, he says, depends on having Congress commit to a stable funding stream rather than continue what has been year-to-year uncertainty.

 “It's a tremendous financial investment up front to try to get these unconventional perennial crops commercial,” Coye-Huhn tells us. “Corn has had 100 years to do it, soybeans have had 60 to 70 years. These perennial crops are in their infancy. With the right investment, they can catch up pretty quickly, so that's where the money should be going, in establishing these new crops.”

After having had Congress cut off funds for Aloterra's biomass projects, Coye-Huhn says that developing renewable fuels and other biomass products “revolves around the need to develop perennial crops that are much more sustainable than annual crops. But he notes that perennial crops “need a few years to develop with a dependable funding cycle.” He praises USDA for its efforts to make BCAP work despite the erratic funding provided by Congress.

Steve Flick, a farmer and board chairman of the Show Me Energy Cooperative in Centerview, Missouri, is proud that his state hosted USDA's first biomass project area - and proud that the co-op is already using its unique biomass aggregation and processing facility to supply products for the cattle-feed industry, liquid fuels research, heating and electrical generation.

Flick is an enthusiastic BCAP supporter. But one change he'd welcome is more consistent policies. He points out that he and other Missouri and Kansas farmers started planting dedicated energy crops for the BCAP program in 2012 and 2013 at a time of extreme heat, drought and low yields. He says “the disappointing thing about BCAP is that there is no replant on a BCAP acre, meaning that you have one shot to get a stand . . . There was no statutory authority to make BCAP a replant product like CRP.”

What Flick hopes for is a national decision to “develop a biofuel economy.” He says even if crude oil remains around $50 a barrel, the country needs a clear, consistent policy to develop everything from cellulosic ethanol for cars to JP8 jet fuel - and to support these biofuel products by having Congress provide stable funding. The biofuel economy won't happen, he warns, without BCAP to provide an assured feedstock supply for advanced biofuels refineries.

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