Biomass program costs soar

Dec 11, 2009

A new farm bill program originally projected to cost $70 million over five years will cost taxpayers $514 million by the end of March.

That’s how much the White House Office of Management and Budget (OMB) has allocated USDA to pay for the Biomass Crop Assistance Program (BCAP) until a final rule for BCAP is finally in place.

While OMB has approved the $514 million interim funding, the proposed rule for how BCAP is supposed to work has been at the OMB since Sept. 22 awaiting approval. Once USDA gets the rule back, the department will conduct a 60-day comment period before completing the rule.

Under the 2008 farm bill, the BCAP was going to be a small incentive to help spur the new bioeconomy by creating markets for non-food and non-feed biomass crops. That meant crop waste that had no market could then be converted into a possible revenue stream for farmers and other landowners.

The $514 million is going to a program that the Congressional Budget Office projected last year would cost $70 million over the life of the farm bill. But, as written in the 2008 farm bill, a provision dealing with the “collection, harvest storage and transportation” of bio mass has no statutory funding cap. The farm bill stated USDA can use “such sums as are necessary” to administer the program.

USDA put out a notice of funds availability for BCAP in June, though the final rules for the program had not been written. Companies that burned or converted wood waste swarmed to sign up and get their facilities certified. By early November, 140 facilities nationally had been certified. That number has ballooned to 285 approved facilities now, according to an updated list on USDA’s website.

The program pays landowners, farmers or waste haulers up to $45 per dry ton delivered to help offset costs to those approved facilities for conversion, storage or transportation. For wet or “green” wood, the payment amounts to $22.50 a ton.

Analysts in the paper industry see companies approved for BCAP able to underbid competitors, and still the landowner or contractor delivering the wood gets more money because of the matching federal payment. Industry reports state BCAP will “over-inflate the market,” with timber companies expected to be the biggest beneficiaries of the program and sawmills getting some benefit from the sale of residuals.

People are also getting BCAP payments to deliver woody biomass to companies that largely export all of their products. One South Carolina company issued a news release stating its facility was qualified under BCAP. The company converts waste wood from sawmills into briquettes that are shipped to Europe.

Acknowledging the soaring initial costs, the USDA official said other programs in the past such as the Conservation Reserve Program (CRP) have had fits and starts and seen their share of criticism, but problems were smoothed out as the CRP matured. BCAP also provides potential in several areas, such as helping Midwest states deal with possible greenhouse-gas caps on carbon emissions.

With BCAP, “The agriculture community and rural electric cooperatives could move into renewable energy without any real significant (coal plant) upgrades,” the official said.

Further, USDA officials also see potential for BCAP to address issues such as invasive plants or species. Trees killed by pine beetles could be harvested under BCAP and sold for energy, or the invasive kudzu plant could also be harvested and converted to biomass as well. — Chris Clayton, DTN