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10/15/2009
Biomass Crop Assistance Program |
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The Biomass Crop Assistance Program (BCAP), which is part of the 2008 Farm Bill, "supports the establishment and production of crops for conversion to bio-energy," and assists with the collection, harvest, storage, and transportation (CHST) of eligible material for use in biomass conversion facilities. It provides financial assistance to producers who deliver eligible material to conversion facilities and the Farm Services Agency (FSA) will provide assistance with CHST. The program is part of the 2009 "Presidential Directive to USDA to Expand Access to Biofuels." The directives mission is to increase the availability of renewable biomass to the renewable fuels market.
How exactly does this subsidy work? The funding is administered by the Commodity Credit Corporation and allows for a $1 subsidy for every dollar per dry ton paid by the power plant or other "biomass conversion facility" to the owner for delivery of eligible material in an amount not to exceed $45 per dry ton. For example: if a producer is paid $30 per dry ton for biomass by the conversion facility, the producer would be eligible for a $30 per dry ton payment for the costs associated with collecting, harvesting, transporting, and storing the product. "Eligible material" means "renewable biomass" such as wood fiber and is different from the "eligible crop" mentioned in the Farm Bill's language. The "eligible material owner" is the person having the right to collect or harvest eligible material and has delivered the material to a CHST qualified biomass conversion facility. "Biomass conversion facility" is defined as one that produces heat, power, or bio-based products. As such, a pellet plant or ethanol refinery could qualify as a wood-fired power plant.
There are five steps to qualify for and receive this subsidy. First, the consuming plant must apply for and meet the requirements set forth by the Farm Bill. Next, the eligible material owner (logger or landowner) must apply for admission to the program. The biomass can then be delivered. A subsidy payment application must be submitted, after which the matching payment will be issued by the Commodity Credit Corporation. For a plant to qualify and receive payment, the managers or owners must submit a Memorandum of Understanding (MOU). The plant must use renewable biomass to produce heat, power, bio-based products or advanced biofuels, or any combination of these products. The producer (a logger, trucker, or landowner) arranges for the sale and delivery of the renewable biomass product to the qualifying plant. The application is then filed at the USDA office in the county where the biomass will be harvested. The material is sold and the producer is given an invoice to take to the USDA county office where they initial filing occurred, at which point the matching payment will be made.
BCAP is not without its criticism, though. There still seems to be a lot of uncertainty about aspects of the program, such as questions regarding the funding levels involved in BCAP and the process by which USDA is promulgating its rules. Some wonder how USDA will deal with issues like the "arms length transaction requirement" (where a transaction between ready, willing, and able disinterested parties who are not affiliated with or related to each other and have no security, monetary, or stockholder interest in each other, except that members of an association of agricultural producers, farmer cooperative organizations, or a farmer cooperative, may deliver and sell eligible material at market rates to BCF's owned by such associations, organizations, or cooperatives) and how that will feed into the eligibility of by-products like bark and sawdust.
Farm Services Agency will be moving forward with more program rules this year. For more information, click here to go to the FSA website or call your local Farm Service Agency office. The state office of FSA can be contacted by calling (318) 473-7721.
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