Citing high delinquency rates and other factors, the Agriculture Department has put a 90-day hold on loan guarantees for projects involving biodigesters and controlled environment agriculture, according to an agency memo.
In the memo, Rural Business-Cooperative Service Administrator J.R. Claeys said the service had identified "elevated rates of project underperformance, loan delinquency and operational failure" among those projects.
Claeys said $102.6 million worth of loans for anaerobic biodigesters are in delinquency – about 27% of the total $386.4 million in loans made. Meanwhile, $135 million of controlled environment agriculture (CEA) loans are currently delinquent, representing 43% of the $311.9 million of loans in the agency's portfolio.
Claeys said RBCS has seen an increase in problems with the loans at the same time it has experienced an increase in applications for CEA and biodigester projects. Controlled environment agriculture includes vertical farming, hydroponics, aeroponics, and aquaponics.
RBCS administers the Rural Energy for America Program, which provides grants and guaranteed loans to help with costs from installing on-farm renewable energy projects like solar, biomass, wind and geothermal, as well as energy-efficient technologies like grain dryers.
Patrick Serfass, the executive director of the American Biogas Council, told Agri-Pulse that REAP is a helpful program for farms looking to install biogas systems, particularly for small- and medium-sized farms that could have a longer return on investment due to their scale. He said the pause had an "immediate impact" on some projects, including two that were immediately cancelled while in the process of closing on financing.
He also noted that the USDA's count of delinquencies represent only a fraction of biogas projects in USDA's loan portfolio.
"I don't want to minimize the impact of projects defaulting, but it was less than a handful of projects," Serfass said.
Serfass also said REAP awardees only represent a small share of the biogas industry as a whole.
In total, 219 total new biogas facilities have been constructed on farms over the past thee years with $2.7 billion in capital investment from various funding sources, according to data from the American Biogas Council.
Bruce Knight, the principal and founder of Strategic Conservation Solutions and a former chief of the Natural Resources Conservation Service, called the decision to close down loan access based on what category of projects they fell under "disillusioning." He noted that the Farm Service Agency doesn't stop lending to all farmers of a certain commodity based on defaulting by some who grow that crop.
"It is highly concerning to have Rural Development say no to all digesters and not even consider the merits of individual projects," he said.
The environmental community has largely criticized digesters. Claeys' memo is dated Jan. 14, the same day more than 30 environmental groups petitioned USDA to stop funding digesters under REAP.
A statement from a USDA spokesperson said the decision was based on a review of RBCS's portfolio that included "delinquency rates, project performance, and operational sustainability, all of which indicated losses to taxpayers." The statement noted that the pause "only applies to the acceptance, processing, and awarding of new loan guarantees for biodigester and certain [CEA] projects."
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