REAPing the Benefits?

USDA program for blender pumps leaves out urban sites
By Kris Bevill | May 12, 2011

Much hype has been made over the USDA’s modification of its Rural Energy for America Program to allow fuel retailers the chance for grants and/or loan guarantees to install blender pumps. The changes are, undoubtedly, an important step toward expanding ethanol infrastructure, and the USDA deserves credit for finding ways to continue to provide financial support for domestic biofuels during difficult economic times. But there’s a hitch to the fresh funding: retailers must be located in communities of populations of 50,000 or less. This has some fuel retailers, such as Propel Fuels Inc. CEO Matt Horton, doubtful of the overall effectiveness of the program.

“We are hugely supportive of what the USDA is doing,” Horton says. “I think it will inspire some retailers to install blender pumps. Unfortunately I don’t know that it’s going to be, on its own, a big enough incentive to get the kind of adoption that we really need in this country. Our experience has shown that the highest-performing fuel stations don’t tend to be in those rural areas. So a lot of the best real estate is not eligible for this program, which is a bit disappointing.”

USDA’s Under Secretary for Rural Development Dallas Tonsager agrees that it would be beneficial if  REAP funding could be used for alternative fuel pump installations in urban areas, but says much of the traffic moving through those higher-populated areas originates in rural areas. Adding blender pumps as an eligible project to REAP is one step in “keeping the ball moving” toward continued biofuels growth, he says.

While the USDA funding is a positive step, Propel believes the best way to drive retailers to install flex-fuel pumps is to extend and expand federal tax credits. The federal government currently offers an infrastructure tax credit of 30 percent, up to $50,000, for alternative fuel dispensers. The credit is scheduled to expire at the end of the year. Propel would like to see the tax credit offer extended and expanded to offset up to 50 percent, not to exceed $100,000, of the total project costs. The company would also like the program to be modified so that the tax credit can be claimed based on the entire cost of the project, rather than the incremental cost of the equipment, as is currently the case. “We talk a lot in this industry about grant programs, and we like grants, we’ve benefited from grant programs, but they take a long time to implement and are very cumbersome for individual retailers,” Horton says. “A tax credit is a more straight-forward way to incentivize the industry.”

Horton says Propel plans to file applications for REAP assistance in its home state of California as well as other states where the company has identified promising rural locations for its pumps. And, while he says he hopes the REAP funding will be “the first round of a long-lived program,” he also hopes the USDA will consider waiving the rural requirements as it has done for other programs in order to open up greater possibilities for urban expansion.  —Kris Bevill