Dial 9011 for crop assistance

Section 9011 of the Farm Bill – the Biomass Crop Assistance Program – USDA deploys $9.6M in new investments in bioenergy crops as questions revolve around the program’s future and effectiveness.

Is BCAP important? Will it survive? How will it change?

In Washington, Agriculture Secretary Tom Vilsack announced $9.6 million for the creation of two new Biomass Crop Assistance Program (BCAP) project areas in New York and North Carolina, and the expansion of an already established BCAP project area in Arkansas. The announcement provides the opportunity to expand the nation’s non-food, energy crops used in the manufacturing of liquid biofuels and to help meet state mandated Renewal Portfolio Standards (RPS).

The announcement comes at a time when the BCAP program  – or, Section 9011 of the 2008 Farm Bill, is under review – some would say, under siege from Tea Party Republicans. Total BCAP spending for fiscal year 2012 was capped at $17 million, and there is no guarantee, at this time, that the program will survive in the next Farm Bill, which will have at best, a reduced energy title. Overall the Senate version of the Farm bill contains $193M for Section 9011, the Biomass Crop Assistance Program.

Though the Senate and House are expected to pass Farm Bills this year, there is a spread of as much as $20 billion between the versions, and Washington insiders express doubt that the final Farm Bill will be finalized before 2013.

What is BCAP again?

The Biomass Crop Assistance Program provides financial assistance to owners and operators of agricultural and non-industrial private forest land who wish to establish, produce, and deliver biomass feedstocks.

Producers who enter into BCAP contracts are eligible for reimbursements of up to 75 percent of the establishment costs of the perennial energy crop, and up to five years of annual maintenance payments for herbaceous crops and up to 15 years for woody crops. BCAP can provide matching payments of up to $45 per ton for harvesting, storing and transporting biomass. BCAP has eleven project areas approved so far.

Why BCAP?

“Because most energy crops are perennial and take time to mature before harvest,’ said USDA Secretary Tom Vilsack, “BCAP is designed so that sufficient quantities of feedstock will be available to meet future demand. Most importantly: these crops can grow where other crops cannot, providing farmers with new opportunities to diversify into more markets.”

“Overall, Farm Bill energy programs have produced a high rate of return for the American taxpayer. These programs have helped farmers keep more than 150,000 acres of farmland in 150 counties across 10 states in productive use.” – Brent Erickson, BIO

Why is it in jeopardy?

For one, return on investment is long-term, difficult to precisely quantify, and many House Republicans want to get the US government out of the business of supporting bioenergy, in general.

Supporters of the program are saying that an immediate effort will be required by the friends of BCAP to communicate its benefits in job creation, rural economic development, and the extent to which, by solving potential start-up “chicken and egg” problems in generating affordable feedstock for biorefineries, unlocks investment for biorefineries.

In May 2011, the House Appropriations Subcommittee on Agriculture, Rural Development, Food and Drug Administration, and Related Agencies voted to eliminate funding for the Rural Energy for America Program (REAP) and the Biomass Crop Assistance Program (BCAP). The programs are the mechanism by which the USDA has been stimulating the production of dedicated energy crops for biofuels, as well as expend market access for ethanol via blender pumps.

Rumblings about the end of BCAP started up in January 2011, when sources indicated that, in talks over budget-deficit programs, that the Biomass Crop Assistance program was at risk – being looked at as a “$500 million quick grab”. Supporters of the program are saying that an immediate effort will be required by the friends of BCAP to communicate its benefits in job creation, rural economic development, and the extent to which, by solving “chicken and egg” problems in generating affordable feedstock for biorefineries, unlocks investment for biorefineries. “Just as BCAP hits its stride…” mused one of the Digesterati.

Who runs it?

USDA’s Farm Service Agency (FSA) administers BCAP.

What are the new BCAP areas just announced?

One of the two new BCAP project areas is sponsored by Chemtex International Inc., targeted for the heart of North Carolina, where it will grow more than 4,000 acres of Freedom Giant Miscanthus and switch grass. The crop production will support Chemtex’s Project Alpha, a cellulosic biorefinery with an expected annual production of 20 million gallons of bioethanol and downstream sustainable chemicals, as well as onsite biogas for power generation. Project Alpha expects to create 65 direct jobs and 250 indirect jobs. The crop propagations, planting and mitigation and monitoring plan for Freedom Giant Miscanthus, a crop based on strains developed by Mississippi State University, will be coordinated by REPREVE Renewables LLC. REPREVE Renewables, based in Georgia, also is the sponsor of the project’s accompanying environmental assessment. Enrolled producers will receive establishment assistance and five years of annual production support under BCAP.

The second new BCAP project area ramps up efforts in upstate New York to meet the state’s goal of sourcing 24 percent of electric and power generation from renewables by 2013. The BCAP project area, sponsored by ReEnergy Holdings LLC, seeks to enroll up to 3,500 acres in fast growing shrub willow to generate more than 100 megawatts of electricity. ReEnergy Holdings LLC, has three committed facilities dedicated to purchasing from growers in the project area. This project complements USDA’s Wood-to-Energy Initiative; it seeks to build a forest restoration economy by integrating energy feedstock within the larger forest products sector to sustain rural jobs and prosperity. The project area dedication is expected, according to industry estimates, to create 144 jobs — direct and indirect — and support these shrub willow establishments over the course of 11 years. Outreach for this Area will include access to the region’s “Come Farm With Us” campaign, which targets new & beginning farmers and the St. Regis Mohawk reservation located 15 miles from one of the committed facilities.

Additionally, BCAP Project Area 2 in northeast Arkansas will expand its area within three counties, bringing enrollment up to nearly 8,000 acres of Giant Miscanthus. This Arkansas BCAP project area is sponsored by MFA Oil Biomass LLC, in Columbia, Mo. MFA Oil Biomass and partner Aloterra Energy LLC, operating in Ohio, will continue to coordinate the crop propagations, planting and mitigation and monitoring plan. These crops support the expected production of fuel pellets for export and in-farm heating and biobased packaging. MFA Oil Biomass and Aloterra Energy are predominantly locally owned and have sponsored three additional BCAP projects in Missouri, Ohio and Pennsylvania, investing more than $6 million in the operation. Continuing enrollments in this project area will contribute to an industry-estimate of 750 new jobs, indirect and direct, to be created.

BCAP’s reach and spread

Last July, Secretary Vilsack announced the creation of four additional Biomass Crop Assistance Program project areas in six states to expand the availability of non-food crops to be used in the manufacturing of liquid biofuels.

Two of the new BCAP project areas, targeted for California, Montana, Washington and Oregon, will grow camelina at a significant scale. Camelina, an oilseed, is a rotation crop for wheat that can be established on marginally productive land. The project has a target of 51,000 acres. The sponsors are Beaver Biodiesel, LLC and AltAir Fuels LLC. The project areas are near biomass conversion facilities in Bakersfield, Calif., Tacoma, Wash., and Albany, Ore.

Another BCAP project area, part of an effort sponsored by cellulosic biofuels company ZeaChem, will encourage growth of hybrid poplar trees in Oregon. The goal is to enroll up to 7,000 acres. This project is part of a series of measures that comprise USDA’s Wood-to-Energy Initiative. It seeks to build a forest restoration economy by integrating energy feedstock within the larger forest products sector to sustain rural jobs and prosperity. The project area surrounds a biomass conversion facility in Boardman, Ore.

Additionally, a BCAP project area in Kansas and Oklahoma, sponsored by Abengoa Biofuels, has been designated to grow up to 20,000 acres of switchgrass. The project area surrounds the future facility’s biomass conversion facility in Hugoton, Kan.

In May 2011, the USDA announced an award of $15 million to the Show Me Energy cooperative in Missouri, in a grant aimed to foster development of switchgrass and other perennial energy crops as biofuels feedstocks. 20,000 acres will be planted in 38 counties across Missouri and Kansas in the initial phase of the program, increasing to up to 50,000. With expected yields of up to 10 acres of biomass per acre, the land cultivated under the program could  support up to 500,000 tonnes of switchgrass production, enough to support a  small cellulosic refinery in the 35 million gallon range.

The rural revival impact

Back in spring 2010, the USDA reported that it had approved 4,605 agreements for the delivery of more than 4.18 million tons of biomass and paid eligible biomass owners $165,274,695 in matching payments under the first phase of the Biomass Crop Assistance Program. FSA service centers across the country have issued payments of up to $45 per dry ton for eligible biomass deliveries.

By all accounts, the BCAP program originally conceived as a support for biofuels as much as the burning of biomass for power generation, has been generally converted into a support for burning biomass for power generation, especially welcome in states with Renewable Power Standards that call for aggressive renewable energy targets and a lack of solar or wind capacity.

According to the USDA, Hardwood Products Company General Manager & Chief Operating Officer Terry Young said BCAP enabled his company to hire 62 employees in Maine’s poorest county where unemployment rates were the highest.  “This beneficial program has created a snowball effect, which has provided other Maine businesses critical operating revenue to sustain their businesses,” Young said. Co-generation of lower cost electricity are among those benefits, Young said, along with reduced heating costs at an area textile plant that employs 400 people, and lower costs for an area wood pellet manufacturing company, which enabled them to remain competitive in selling pellets to thousands of Mainers for home heating.

Last month, BIO Executive VP Brent Erickson, writing in the Digest, observed, that “ZeaChem recently started up a demonstration biorefinery in Boardman, Oregon, that will scale up biotechnology breakthroughs to convert fast-growing poplar trees to chemicals and cellulosic ethanol. The Biomass Crop Assistance Program (BCAP), also created in the 2008 Farm Bill, helps farmers in the county surrounding the facility to grow the trees that will feed both the demonstration project and a commercial facility planned to be completed in the next few years.  ZeaChem’s commercial biorefinery will employ 100 people and invest several hundred million dollars in local infrastructure; it will also provide employment opportunities to another 442 people in Central Oregon.”

The Bottom Line

There is broad agreement that BCAP does good. There seems to be a general consensus that further reform of the rules will make it more effective, more targeted.

A broader understanding of how BCAP creates the biomass infrastructure that can be tapped into, should oil prices skyrocket or shortages occur because of supply disruptions, might be helpful. Here at the Digest, we like the term Strategic BioEnergy Reserve, more than we like Biomass Crop Assistance Program – makes it sound more like it is, a necessary hedge that the United States should build, rather than a government hand-out program.

Further, the US government might find a way to measure how its program leverages investment in the private sector – providing stimulus that is a multiple of public capital, by unleashing private capital.