Final BCAP Rule Gets Thumbs Up

By P.J. Heller

     Mulch producers appear pleased with the federal government’s final rule for the Biomass Crop Assistance Program but say more assurances are still needed to close loopholes in the measure, according to an industry spokesman.
     “The devil is in the details,” said Bob LaGasse, executive director of the Mulch and Soil Council. “We’re not sure we’ve seen all the little devils yet.”
     Overall, however, LaGasse described the final BCAP rule, issued by the U.S. Department of Agriculture/Farm Service Agency as “a great improvement” over the initial proposed rule.
     BCAP was designed provide financial assistance to owners and operators of agricultural and non-industrial private forest land to encourage crop production for biofuels. Among the goals was to reduce U.S. dependence on foreign oil.
     Payments for forest products — those used primarily in the manufacture of mulch, wood composites, paper, pulp and packaging — were a key concern early on to those industries.
     LaGasse and others argued that the payments — nearly $250 million has been paid out for the collection, harvest, storage and transportation of eligible material delivered to qualified biomass conversion facilities, far exceeding Congressional projections — created an uneven playing field, prompting suppliers to take higher government payments rather than selling to mulch producers and other businesses.
     “It would have put a lot of people out of business,” LaGasse said. “There also would have been a tremendous downstream impact as well because one soil producer may service hundreds of nurseries.”
     The final rule, issued Oct. 27, specifies that materials such as mulch, fiberboard, nursery media, lumber and paper, would not qualify for the matching payments if they have a “higher value” due to an existing market in a “distinct region.”
     LaGasse said that until there are clear definitions of what constitutes an “existing market” and a “distinct region” and there is clarification on who will make those determinations, a battle could rage over biofuel materials.
     “The argument (of forest and land owners) will be that there is no existing market,” he said. “Our argument is that there has been an existing market for 20 years.
     “Until that and other gray areas are resolved, we don’t believe the issue is done,” LaGasse said. “The devil is in the details that have not been specified as to how they’re going to determine all of those things and who will determine them.”
     To address those “gray areas,” the Mulch and Soil Council has joined with a consortium of other groups under the umbrella of a new organization, the Wood Fiber Coalition.
     “We’re coordinating our efforts to make sure the market does get properly recognized and our members do have access to the marketplace and that there will not be any inappropriate diversions of raw materials from existing markets to biofuels,” he said.
     Members of the coalition, in addition to the Mulch and Soil Council, include the Composite Panel Association, the American Home Furnishings Alliance, the American Nursery and Landscape Association, the Business and Institutional Furniture Manufacturer’s Association, and the Society of American Florists.
     In a November letter to Congress, the coalition stressed that rather than diverting forest and wood-mill byproducts for energy use, officials should “focus on expanding the sources of renewable biomass to ensure that existing industries are not deprived of wood fiber.”
     “The expansion of America’s energy options is a laudable goal, particularly if it leads to reduced dependence on imported fossil fuels. Therefore we support Congressional efforts to promote the development of new, renewable energy sources,” the letter said. “However, as the recent experience with the USDA Farm Service Administration’s Biomass Crop Assistance Program (BCAP) has shown, industries that rely on existing markets for wood fiber supplies may suffer irreparable harm if good judgment is not exercised in the development of comprehensive federal energy policies.”
     It noted that wood mill byproducts such as bark, chips, sawdust, shavings and trim have been used for decades in the production of “valuable bio-based consumer products.” Those products include mulch and potting soils, commercial growing media, landscape materials as well as composite wood panels, wood-based furniture and flooring and architectural moulding and millwork.
     “Without a reliable supply of these raw materials, and with no viable alternatives available, the supply chain of thousands of American businesses would be put at immediate risk — along with millions of domestic jobs in predominantly rural communities,” it said. “To prevent this from happening, federal policy must recognize that forest and wood mill byproducts are essential feedstocks supplied through an established, competitive and sustainable domestic free market.”
     Corey Connors, a spokesman for the coalition, said the organization would continue to monitor energy legislation and push to ensure that wood fiber was not diverted from existing markets.
     “As long as we’re talking about energy and biomass and renewable energy, wood fiber is always going to be front-and-center in terms of the things targeted to meet those broad energy goals,” said Connors, vice president of policy and communications for the Composite Panel Association.
     “We continue to have concerns over the diversion of these materials away from existing markets,” added Connors, who was previously with the American Nursery and Landscape Association.
     Connors agreed with LaGasse about the need for more clarification on BCAP, including how the program was going to be administered and exactly who would determine whether a higher-value market exists. That decision could be made at the state or local level.
     “We believe there needs to be federal oversight over what’s being administered at local FSA offices,” Connors said. “We believe the intent is clear, but we’ll see how the execution of this intent actually plays out.”
     The Composite Panel Association (CPA) has said it was pleased with the final BCAP rule.
     “BCAP has morphed from a job killing welfare program to one that now makes economic and environmental sense,” said CPA President Tom Julia. “It is now targeted to the production of new sources of woody biomass, rather than raiding established, viable markets for the wood fiber upon which a wide range of American industries rely.”
     “The final BCAP rule is a good example of how America can achieve its ambitious renewable energy and biofuel goals and the extra time that the Obama administration spent in reconsidering the rules of the program has been entirely worthwhile,” he added.
     The American Forest & Paper Association, which had also been critical of BCAP’s matching payments, agreed that the final rule was an improvement.
     “We appreciate USDA’s consideration of industry concerns and the modifications made in the rule-making process that will minimize market distortions and focus on supply,” said Donna Harman, president and chief executive officer of AF&PA.  “USDA’s revised approach on BCAP helps preserve existing jobs while also increasing renewable energy development particularly in rural communities.”
     Agriculture Secretary Tom Vilsack said industry concerns were taken into account when crafting the final rule. More than 24,000 letters were submitted on the plan.
     “In crafting the final rule we paid attention to the concerns of industry and environmentalists, particularly with respect to woody biomass,” Vilsack said. “Assistance for woody biomass will only be provided for materials removed from a forest for ecosystem restoration and forest health purposes.”
     Under the final rule, Vilsack explained, producers will receive financial help to defray the cost of producing, storing and transporting alternative fuel stock. Assistance could be as much as 75 percent of the cost of establishing a new crop as well as annual rental payments to help cover the costs of transitioning from current cash crops. Delivery of biomass to a renewable energy or biofuel facilities will generate matching payments to help reduce the costs that come from the logistical challenges facing the new industry.
     Even as the government moves ahead with BCAP, some energy companies have pulled the plug on biomass plants. Among them was Xcel Energy, which announced it was canceling plans to build what would have been the largest wood-burning power plant in the Midwest. The company cited increased costs and declining costs for other generation methods.
     FirstEnergy Corp. cited falling market prices for electricity for its decision not to repower to units at its plant in Shadyside, Ohio. Both of those units are expected to be shut down by the end of 2010.
     Plans to construct biomass plants elsewhere have been announced. Government officials say BCAP addresses the “chicken-and-egg” challenge faced by the industry.
     “If commercial-scale biomass facilities are to have sufficient feedstocks, then an established, large-scale energy crop source must exist,” they say. “Conversely, if profitable crop production is to occur, then a viable consumer base must exist to purchase the product.
     “With the enactment of the updated federal renewable fuels standard, which requires 36 billion gallons of advanced biofuels in the national fuel supply by 2022, new crops must keep pace with these revised federal targets,” they say. “Many bioenergy crops need several years to become established. Many bioenergy facilities need several years to reach commercial scale. BCAP serves as catalyst to unite these multiple dynamics by reducing the financial risk for landowners who switch from familiar, revenue-generating crops to new, unconventional crops in preparation for these emerging markets.”