January 11, 2010
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.
Categories: Conservation, Energy & Environment