By Loni Kemp, consultant to the Institute for Agriculture and Trade Policy
While the Biomass Crop Assistance Program designed to help farmers plant new energy crops languishes in administrative limbo—the BCAP that NSAC and others fought so hard for in the 2008 farm bill—the other BCAP has grown into a monster. What started out as a couple of paragraphs in the law to help pay for collection, harvest, storage and transportation of biomass has, under the hand of the Farm Services Administration, morphed into another commodity entitlement program, this time for the wood products industry.
It caught the eye of the Washington Post this weekend, as the unintended ripples from the biomass subsidy program went public. It turns out that the vast majority of the 300-some renewable energy facilities approved on FSA’s list are pulp, paper, and wood companies, most of which have burned their own wood wastes for energy for decades. Some have seen declining sales to biomass energy facilities which are now turning to cheaper energy supplies. USDA gave away $24 million last year in matching biomass payments, and announced they are giving away $514 million this year—the vast majority of which won’t support any new biomass or new renewable energy, but instead is free money for a struggling pulp and wood industry. They didn’t lobby for it, Congress certainly didn’t intend it, and yet once the loophole was opened, the industry has come rushing in for it.
In a flash BCAP went from an estimated $70 million cost over five years, to $514 million in 2010 alone, and that is without the core program to help farmers plant energy crops.
Yet not all industry is happy. Composite wood manufacturers charge that BCAP is taking their feedstocks away by paying double the established market price for residual wood that can also be made into furniture, flooring, and construction material, according to the Composite Panel Association. Others are concerned that established markets for all biomass are being destroyed, and will result in chaos when each facility comes to the end of their two year eligibility period.
How could FSA have gone so far astray? They seem to have interpreted the law itself in a number of unusual ways. They claim the program is an entitlement and that they have to make the full payments, despite the fact that BCAP says they “may” — not “shall” — provide payments of “not more than $45 per ton.” They could have limited payments to biomass with no higher-value products, no adverse environmental impacts from over-harvest, and not already being used for energy. The draft environmental impact statement failed to consider impacts from the matching payments. Requirements for biomass removal only under a Forest Stewardship Plan or conservation plan do not seem to be monitored or enforced.
The opportunity for the Obama Administration to fix all of these problems is at hand. A draft rule covering both the matching payments and crop establishment is going to be released in the next couple of months. While the money for 2010 will probably be gone by then, USDA could put in place requirements for a sensible program that furthers renewable energy without the pulp and wood products boondoggle.
This article was written by an irresponsible author who has not read the full BCAP law in the 2008 Farm Bill and obviously not familiar with USDA. The Farm Service Agency is labeled the “Farm Services Administration”.
Statements are made that “They could have limited payments to biomass with no higher-value products, no adverse environmental impacts from over-harvest, and not already being used for energy.” Where is the authority in the Farm Bill to do all this? The matching payments provisions in Title IX has no such wording. To discriminate against certain otherwise eligible payment recipients, or implement a sliding scale payment scheme requires legal authority. Nowhere does the law target payments for only new biomass conversion actions or certain types of biomass.
USDA is following the law. USDA Office of General Counsel approved the Notice of Funding Availability as did OMB attorneys. If the intent of the law was to target these payments as this author believes should have been done IN THE LAW – – where are these legal requirements?
There is no guidance about this in the House/Senate Conference Managers’ Report that accompanies the 2008 Farm Bill either. Clearly if Congress had intended for USDA to do all these things this report would have reflected it – – many other comments about BCAP were written here.
The Matching Payments provision in the law does include the word “shall” when first directing the Secretary to make these payments…. “The Secretary shall make a payment for the delivery of eligible material to a biomass conversion facility.” The author of this article needs to read and understand the definition of “Eligible Material” biomass in the law.
Like many others who do not understand this program – – Eligible Material biomass is clearly defined in Section 9001 of the Energy Title IX, (and not in the BCAP section 9011), and FSA used it to implement this program properly.
Because CBO estimated the program at a bogus cost of $70 when the law passed and then… “In a flash BCAP went from an estimated $70 million cost over five years, to $514 million in 2010 alone,…” reflects poor OMB budgeting and not improper implementation.
The author also contends that….”the core program is to help farmers plant energy crops.” Where is this written in the law – -there are 2 purposes mentioned; neither is a “core” or given more purpose than the other.
How could a supposedly knowledgeable author gone so far astray?
(These views reflect my own and not USDA’s)
By Loni Kemp, consultant to the Institute for Agriculture and Trade Policy in response to a comment by FSA employee Paul Harte on the article “BCAP Boondoggle” from January 11, 2010.
Mr. Harte from USDA is quick to accuse, but the BCAP law is quite clear about where there is discretion that the Farm Service Agency should use. It is also clear where they are directed to do certain things. (Excuse me on the FSA’s proper name.)
Specifically, the definition of eligible materials is renewable biomass, as defined in Section 9001 to include materials from national forests and public lands “that would not otherwise be used for higher-value products.” Thus the law says FSA should not provide payments for materials from these lands that other industries can make into furniture and building supplies.
While it is true that the law first states that “in general” USDA shall make a payment for the delivery of eligible material to a biomass conversion facility, two sentences later it explicitly states that USDA “may provide matching payments… in an amount equal to not more than $45 per ton.” Clearly, FSA can decide whether to make payments and what the amount should be.
The manger’s amendment described the core purpose of the final bill this way: “The Managers also intend that the primary focus of the BCAP will be promoting the cultivation of perennial bioenergy crops and annual bioenergy crops that show exceptional promise for producing highly energy-efficient bioenergy or biofuels, that preserve natural resources, and that are not primarily grown for food or animal feed.”
Several Agriculture Committee members who supported BCAP have told us they were astonished to see the four sentences creating the collection, harvest, storage and transportation payments morphed into the monster subsidy it has become. Meanwhile, the four pages directing the FSA to implement the crop establishment program have received no action whatsoever. It is called the Biomass Crop Assistance Program, is it not? It is not called the Forestry Biomass Subsidy Program.
As for environmental requirements, the manager’s amendment did describe the House bill as saying “Forest land owners are eligible for this Matching Payment if acting under a forest stewardship plan.”
FSA should have taken the advice provided in comments to the agency to include the matching payments in the programmatic environmental impact statement now under review. The matching payments would then receive extensive environmental and economic analysis to guide effective rulemaking.
We stand by the article. Perhaps the time has come for FSA to realize that not everything is an entitlement.