Course: BFM 101 Biofuels Fundamentals

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Federal & State Incentive Programs
Federal & State Incentive Programs

Federal Incentive Programs

The Biomass Crop Assistance Program (BCAP) was enacted in the 2008 Farm Bill to support the production of advanced biofuels and renewable energy. The legislation provides two components of support for biomass used for conversion to heat, power, advanced biofuels or bioproducts:

- CHST Matching Payments – Matching of market prices paid (dollar for dollar, up to $45/bone-dry-ton, for a period of up to two years) for biomass by qualified biomass conversion facilities (BCFs) for the collection, harvest, storage and transportation (CHST) of eligible biomass.
- Crop Establishment and Annual Payments – Payments made to farmers for energy crops to be delivered to BCFs, consisting of reimbursement for some establishment costs (up to 75 percent for either perennial herbaceous crops or woody crops) and annual contract payments for land use for up to 5 years for herbaceous crops (both perennial and annual) and up to 15 years for woody crops.

Under the initial program implementation (Notice of Funds Authorization, June 2009 to January 2010) for the CHST component, the USDA spent about $250 million, far more than the $70 million Congress projected for the program through 2012. Less than $1 million of this went to agricultural crops. Virtually all funds were paid to previously established forest product converters who were already collecting woody resources and wastes. This was authorized by the legislation, but is not its primary intent. USDA suspended new CHST enrollment in February 2010, and published a revised, final rule on October 27, 2010. The Farm Service Agency (FSA) published final guidelines and application documents on December 15, 2010.

The final rule provides guidelines intended to limit the eligibility of woody materials to those collected from the land for this purpose, rather than as byproducts from wood processing. But no guidelines are offered for allocating funds between woody resources and wastes versus agricultural crops, and it is possible that the bulk of funds could continue to be allocated to woody biomass.

Prior agreements and contracts are required to be eligible for these payments. Cropland enrolled and planted with eligible (non-Title I) annual bioenergy crops is only eligible for annual payments, not cost-sharing. Both BCAP components require agreements to deliver biomass to qualified BCFs, a list of which will be available at http://www.fsa.usda.gov/bcap

BCAP Project Areas. Eligibility for payments is initiated when a “sponsor” (a group of crop producers or a BCF) applies through the FSA for selection as a “BCAP project area.” The application specifies the geographical area, the crops, the potential participating landowners, and the method for determining payment amounts, and also certifies the commitment of the BCF. Only private lands within project areas are eligible, and conservation or stewardship plans must be included in the proposal. Proposals are then evaluated and selected by USDA.

BCAP Contracts. Producers within a project area enroll contract acreage for the production of eligible crops, for up to five years (15 for woody biomass). The enrollment contract must include a conservation plan. Eligible crops include switchgrass, Miscanthus spp., poplar, Jatropha spp., algae, energy cane as well as some annual crops (consult with your local Farm Services Agency office to determine eligibility).

Procedures for setting rates for establishment costs and annual payments are similar to those for land enrolled in the Conservation Reserve Program (CRP). Rate information is to be posted at county FSA offices. Annual payments are reduced by 1 percent for biomass sold to cellulosic ethanol facility, 10 percent if the biomass is sold for advanced biofuels and by 25 percent if sold for heat, power or bio-based products (i.e., biomass for cellulosic biofuels receives a preference). The entire annual payment will be forfeit if the biomass is sold for anything other than renewable energy conversion.

CHST Matching Payments. The assistance offered is a one-to-one matching payment of up to $45 per bone-dry ton to eligible material owners (EMOs) of the biomass, after the material is sold to a biomass conversion facility (BCF). The FSA pays the EMO, who harvests and transports eligible material. These payments are limited by the legislation to a maximum of two years per EMO. The EMO must receive approval in advance through an FSA county office. Each BCF must enter into a separate agreement through FSA to become qualified. BCF’s must pay the same amount for materials to any supplier, regardless of whether or not the supplier is receiving matching payments from the FSA.

Biomass must be collected and harvested under approved plans for stewardship and conservation practices. Materials eligible include many crop residues as well as specific dedicated biomass crops and woody materials. Eligibility of materials is subject to other restrictions. Final guidelines and application documents were published by the FSA on December 15, 2010.

Sources for more Federal Incentive Programs:

- The Agricultural Watershed Institute – http://agwatershed.org/
- NRCS office location – http://offices.sc.egov.usda.gov/locator/app
- Conservation district locator – http://www.nrcs.usda.gov/partners/districts.html

State Incentive Programs

There are a number programs in each state geared toward renewable energy and energy efficiency. Several states have standards in place requiring that a percentage of their energy comes from renewable sources. Cogeneration of biomass with coal is one way to achieve this. The following website has a comprehensive listing of programs by state: http://www.dsireusa.org/

Resources provided by the eXtension Farm Energy Community of Practice at http://www.extension.org/ag+energy

Analyzing Potential Markets
Conclusions