Official: Future of BCAP could impact future of energy crops

By Kris Bevill | June 19, 2012

The nearly $10 million awarded by the USDA’s Farm Service Agency to three energy crop project areas on June 13 will be the only funding distributed through the Biomass Crop Assistance Program this year and it’s unclear whether the program will be reauthorized by Congress as part of the next Farm Bill or if legislators will allow it to expire on Sept. 30.

BCAP was created by Congress in the 2008 Farm Bill to assist farmers and land owners in establishing energy crops for bioenergy production and is the only federal program of its kind. If BCAP is not renewed, the risk and costs associated with establishing significant acres of energy crops will likely fall on the shoulders of bioenergy producers—the same producers who are already saddled with enormous amounts of risk and financial burdens associated with first-of-a-kind facilities.

BCAP has provided financial assistance to 11 energy crop project areas in the two years that funding has been available for the program. Todd Atkinson, FSA chief of staff, said that without BCAP’s support, he’s not sure when bioenergy producers will be able to advance any similar feedstock efforts.  “We know the conditions in the private sector in terms of lending, and it’s even tougher for first-mover technologies,” he said. “We saw that with the corn starch ethanol industry years ago and we see it now with the second-generation industry. That’s where public financial assistance has a role. But if that financial assistance doesn’t exist, then who has to take on the financing of the crop and working with 100 to 200 producers—teaching them to develop the best standards for the crop, making sure it’s done in a sustainable and environmentally responsible way, replacing the crop if it fails? That all probably falls on the end-use facility. And I think we’ve seen that the end-use facilities have a lot of financial risk as it is, simply getting their technology up and running and getting the capital investments taken care of. The crop part of it would have to be added to that equation.”

Although BCAP was established in the 2008 Farm Bill, the program was not put into effect until last year. Congress had initially allocated $432 million for BCAP’s fiscal year 2011 budget, but by April 2011, it had reduced that amount to just $112 million, leaving the FSA with less time and fewer dollars to devote to energy crop projects. Of the 40 applications received by the program’s May deadline, nine were chosen to participate in the program. Funds had to be awarded by the fiscal year’s end on Sept. 30, but the nature of the program also required time to educate farmers and land owners and allow them a window to sign up for participation in the program. As a result, the FSA was only able to distribute $55 million of the year’s available funds. Foot dragging in Congress made it impossible for left-over money to be carried into the next fiscal year, so the program had little money to distribute this year and was able to provide funding for two new projects additional funding to one of last year’s project areas.

Despite a significantly reduced budget, Atkinson said BCAP has hit its stride and is functioning in the manner it should for those projects that were able to be funded. Last year’s awards funded a variety of crops including switchgrass for Abengoa Bioenergy’s first commercial-scale cellulosic ethanol plant in Kansas and hybrid poplar for ZeaChem Inc.’s integrated biorefinery in Oregon. Of the nine approved projects, Atkinson said the most successful awardees have been those with previously established farmer/land owner relationships. “If you did not have those relationships with producers, you did not meet your acreage targets,” he said. “You need to have these relationships in order to be successful.” Atkinson attributes crop grower hesitation to the government’s “herky-jerky” funding for the program, adding that growers will be more likely to invest in risky energy crops if they are certain that the federal government will continue to support that industry.

The government’s lack of steady commitment to BCAP has also affected end-user participation, according to Atkinson. “One of the impacts of this significantly declining budget is it deters some excellent opportunities from even applying,” he said. “They decide it’s not worth their while.” Atkinson said he’s had several conversations with interested companies who decided not to apply for funding after Congress reduced the program’s budget, opting instead to wait on the sidelines for long-term signals from legislators.

The Senate Agriculture Committee included mandatory funding for BCAP and other Farm Bill Energy Title programs in its draft, but it’s not certain that those provisions will remain in the full Senate version. The House of Representatives has yet to produce its Farm Bill draft but efforts are being made to ensure Energy Title funding is included in the bill. Atkinson said that if the program is allowed to continue, applicants would prefer to have a predictable annual funding level which will allow them to accurately calculate the economics of their projects. Given the length of time required to establish energy crops and the escalating cellulosic biofuel requirements of the renewable fuel standard, he also stressed the need for program funding to be renewed and distributed as quickly as possible. “If these are two- or three-year crops, you can see how much that inaction today pushes this stuff into the future,” he said. “A delay of just a few months can miss an entire crop year.”