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February 10, 2010

Biomass Crop Assistance Program to Spur Production of Renewable Energy

The U.S. Department of Agriculture (USDA) has proposed new regulations for the Biomass Crop Assistance Program (BCAP), which is designed to boost production of non-food biomass crops for renewable energy. The new proposed rule was one of three measures to boost biofuels that were announced by President Obama on February 3. Authorized in 2008 by the Food, Conservation, and Energy Act, BCAP provides incentive payments for those investing in new first-generation energy crops that can displace fossil fuels. The BCAP program has already begun to provide matching payments for the collection, harvest, storage, and transportation of biomass to eligible biomass conversion facilities. The new proposed rule terminates those payments and as of February 8, the USDA is no longer accepting applications for matching payments. The program will start up again when the final rule is in place.

BCAP funds two main activities, one of which provides up to two years of matching payments for eligible biomass materials sold to qualified biomass conversion facilities that produce heat, power, biobased products, or advanced biofuels. The new rule offers three potential options for structuring payments, all of which are aimed at reducing payments to facilities that already use biomass and providing incentives for new uses of biomass (see page 6285 of the Federal Register, or page 23 of the PDF file). BCAP will also provide payments to producers of eligible biomass crops for up to 75% of the cost of establishing the perennial crops, followed by annual payments for up to 15 years of crop production. These crops must be located in designated project areas, which can be proposed by biomass conversion facilities or by groups of biomass producers. Annual payments are limited to five years for annual crops and non-woody perennial crops.

The USDA intends to cap the cost of the BCAP program at $2.6 billion, including $2.1 billion for matching payments for biomass materials over the next four years, $306 million for crop establishment over the next three years, and $219 million for annual payments over the next 17 years. The funds come via the Commodity Credit Corporation (CCC) a government-owned and operated entity that was created to stabilize, support, and protect farm income and prices. The proposed rule was published in the Federal Register on February 8 and is open to public comment until April 9. See the USDA press release, the BCAP Web site, the CCC Web site, and the proposed rule (PDF 185 KB). Download Adobe Reader.

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