A Force Multiplier for Bio-Investment in Federal Opportunity Zones: The BDOZ Initiative

By Jordan Solomon, President, Ecostrat Inc.

Special to The Digest

Fifty-two million Americans live in economically distressed communities—many of which are in rural areas. These communities are plagued by a lack of investment capital. In 2017, the US government launched the largest tax incentive program in the history of the US to change that dynamic: The Opportunity Zone Program is a powerful federal tax incentive designed to spur economic development and job creation in these areas. While over $11B has been driven into OZs since the program’s inception, almost none of that investment has gone to clean-economy plants that produce biofuels, biochemicals, and biomaterials.

But all this could change beginning with the first BDOZ ratings in Oregon and South Carolina slated for issue in Q1 2021.

First BDOZ designations slated for OR and SC

Beginning with the Sherman County OZ in Oregon and the Barnwell County OZ in South Carolina, Ecostrat (www.ecostrat.com/standards) is launching the US Bioeconomy Development Opportunity Zone (BDOZ) Initiative to powerfully leverage the job creation ability of the federal Opportunity Zone Program, driving billions into biobased economic development and renewable energy jobs in OZs.

The BDOZ Initiative identifies the subset of US federal Opportunity Zones that are best positioned for low-risk bioeconomy project development. Like credit ratings, BDOZ Ratings typically range from “AA” to “BBB”. Unlike credit ratings however, a BDOZ Rating scores risks related to three OZ attributes that are crucial for biobased development: 1) a surplus of biomass, 2) low-risk supply chains to deliver it, and 3) suitable infrastructure to support an operating plant. A BDOZ rating signals that the OZ has undergone rigorous and extensive due diligence using over 100 standardized, transparent and validated risk indicators based on the BSCR Standards for biobased investment.

A force-multiplier for the federal OZ Program

The BDOZ Initiative enables OZs to leverage biomass assets to serve as anchors for revitalization. BDOZ ratings create efficiencies and value for local OZ communities, for project developers, and for investors and lenders looking to deploy capital in low-risk areas. They drive biobased economic development in OZs by leveraging a powerful pre-existing network to promote BDOZ designations made up of hundreds of local chambers of commerce, economic development organizations, state and federal economic development bodies, as well as local, state and national biobased organizations. Finally, BDOZ Ratings drive investment by tapping into an investor network of 65 key capital markets with over $60B in biobased capital deployable where BDOZ Ratings are “A” or better.

Why is the BDOZ Initiative needed?

There is a simple reason why almost none of the $11B that has funded development in OZs has gone to fund biobased plants: not all OZs are equal. Some have huge surpluses of biomass, others have none. Some have well developed infrastructure, while others do not. The problem is that without a BDOZ designation, there is no way for investors or developers to quickly tell the difference. As a result, the potential of the OZ tax incentive to catalyze bioeconomy development has not, to date, been realized.

Over 160,000 jobs and $29 billion in direct and indirect economic impact

It is imperative that the ability of the OZ program to catalyze biobased development be harnessed. The economic benefits of doing so are simply too substantial to ignore.

When it comes to potential direct and indirect job creations, very little comes close to biomass. Our data suggest that of the 8,745 total existing Opportunity Zones, over 1,000 could qualify for BDOZ designations for woody biomass, agricultural residues, food waste, or municipal solid waste. Projections for the economic impact of a single biobased plant in even 500 BDOZs are impressive: 160,500 direct, indirect and induced jobs and over $29B annually in direct and indirect economic benefits.

The fact of the matter is that biomass supply chains create economic benefits and stability in rural areas that materially move the job-creation needle. Biofuel, biochemical and bio-material production creates employment for tens of thousands of forestry workers, farmers, equipment suppliers, truckers and other ancillary services.

When a plant uses corn stover to create cellulosic ethanol, it gives local farmers an additional source of income and contributes to on-farm stability. When a new wood pellet plant buys residual wood chips from a sawmill that previously had no market for them, it adds an additional revenue stream, positioning it to better withstand a downturn in the housing construction market. When a cheese factory sells its DAF waste to a biodigester to produce renewal natural gas, it reduces its disposal costs. Those cost savings drop directly to its bottom line, and it too becomes better equipped to withstand economic headwinds.

The BDOZ Initiative leverages these impacts to supercharge the potential of the federal OZ program for biobased economic development.

Canadian BD Zones: “A” Rated BD Zone Designation for City of Melville, SK.

The Canadian sister to the BDOZ Initiative, the “BD Zone Initiative”, led the way in December with the issue of an “A” Rating for wheat straw for the City of Melville. The “A” Rating is expected to drive new market development for over 300,000 ODT of reliably produced wheat straw that is generated by farmers in the region each year. “The City of Melville approached the BD Zone initiative because we are interested in attracting clean technology opportunities to Melville” says Ron McCullough, City Manager.

Promotion of the BD Zone Ratings will begin in Q1 by the City of Melville and Economic Development Saskatchewan. The federal government (Invest in Canada) will also promote the rating through its 140 offices around the globe.

Coming Soon to an OZ near you: BDOZ Designation

The BDOZ Initiative has a goal of driving biobased infrastructure development and creating biobased jobs within OZs through the issuance of 1,000 BDOZ Ratings over the next 3 years. We believe the initiative is consistent with many of the goals of the Biden Administration, and that it can garner bipartisan support as a shovel-ready, actionable initiative that drives clean energy job growth in rural communities. We are working strongly to garner support for a nation-wide rollout.

OZs with a surplus of biomass that think they may qualify for a BDOZ designation should contact Ecostrat.

Contact: Ashleigh Ooi, Head of Special Projects ([email protected]) 

About the Author: Jordan Solomon is President and CEO of Ecostrat Inc. He leads the USDOE/BETO funded project to develop the US Standards and Ratings for Biomass Supply Chain Risk. He has overseen development and operation of biomass supply chains for over 5,000,000 tons of feedstock over two decades for bioenergy, biofuel, and biochemical projects. www.ecostrat.com. He can be reached at jordan.solomon@ecostrat.com