The Biomass Crop Assistance Program: Orchestrating the U.S. Government s First Significant Step to Incentivize Biomass Production

Transcription

1 The Biomass Crop Assistance Program: Orchestrating the U.S. Government s First Significant Step to Incentivize Biomass Production Jody M. Endres, J.D., M.A. Senior Regulatory Associate The Energy Biosciences Institute Presented at: 7 th Annual Bioenergy Feedstocks Symposium January 12, 2010

2 Notice: This presentation is intended d to supply general information. i While the author strives to provide accurate information, the author cannot guarantee that this information is accurate. Laws change quickly, and the reader should always ensure that legal information of any typeisup to date p and accurate before relying on it. The legal information provided in these slides is general, and not specific. The reader should never assume that this information applies to his or her specific situation without t consulting competent counsel in his or her home state. This information is not intended to be a solicitation, and the information contained herein is for informational purposes only. The author retains all rights to the information contained in these slides. Broad dissemination is prohibited without the express consent of the author.

3 Biomass Demand Transport fuel US Renewable Fuel Standard 100 million gallon cellulosic mandate in billion gallons in 2022 UK Renewable Transport Fuel Obligation (5%/2013) EU Renewable Energy Directive (10% by 2020) Electricity Renewable Portfolio Standards in over 30 states possible federal RPS in climate change legislation UK Renewables Obligation (9%/2009) EU Renewable Energy Directive (10% by 2020)

4 Biomass Supply The success of a Biomass Conversion Facility depends on predictable: Quantities i 50 mil. gal. plant= approx. 600,000 tons biomass/year, or approx. 40, acres miscanthus at 15 ton/acre yield Quality (standardization) Delivery BUT: Supply system not currently well developed Producers reluctant to enter market due to risk (e.g., perennials require long term commitment, novel agronomic practices, unique harvesting equipment, no carbon incentive)

5 The Biomass Crop Assistance Program (BCAP) First supply side side incentive program for energy biomass Authorized by 9011 of the 2008 Farm Bill Funding through 2012 Implemented by USDA through USDA/CCC/FSA Regulatory yprogram is rapidly evolving Triggers legal considerations at many different levels

6 The Biomass Crop Assistance Program 2 part program: Collection, Harvest, Storage, Transportation ti (CHST) Project Areas (PAs) )(biomass production)

7 BCAP: Collection, Harvest, Storage, & Transportation ti Direct, matching payment to eligible ibl material owner (EMO) upon delivery to qualified biomass conversion facility (BCF) BCF: heat, power, advanced biofuel, or bio based products BCF does NOT receive a CHST payment BCF and EMO transaction must be entirely separate legal entities and at arms length (with exception of cooperatives)

8 Land Type CHST Eligible Material Definition of Renewable Biomass Federal Land Materials from Same preventative or restorative treatments only, pursuant to forest management plan Private and Indian land Feed grains, other commodities, other plants and trees, wastes*, algae CHST Eligible Material NO: Title I crops Algae Animal Wastes Food Wastes MSW *CHST eligible wastes: crop residues (20% limit), wood wastes and residues

9 Steps to Receive Payment Collection, Harvest, Storage, & Transportation ti BCF must complete MOU with FSA (template online) 315 qualified, 100 applications pending EMO must submit application in advance at county FSA office (computerized, not online) FSA verifies whether delivery is to qualified BCF EMO delivers eligible material to BCF Invoice with signature delivered by EMO to FSA Invoice with signature delivered by EMO to FSA, and completes application (verifies delivery)

10 Payment: Collection, Harvest, Storage, & Transportation ti $1 paid by FSA to EMO per $1 dry ton paid by BCF, up to $45 Producer eligible for 2 years from time of first payment py CHST payment reduced if receive a Project Areas payment FSA has stated that it will maintain a publically available list of BCF s and their material needs

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12 CHST Implemented Without Rulemaking The Administrative Procedures Act (APA) requires informal or formal rulemaking procedures to implement federal programs May 5, 2009 Presidential Memorandum gave FSA 30 days to implement CHST portion of BCAP FSA is implementing through Notice of Funding Availability (NOFAs) for the time being No draft rule issued yet but payments are going out

13 CHST without NEPA Analysis The National Environmental Policy Act requires federal agencies to evaluate whether environmental effects of proposed action may be significant (CEQ implementing regulations + agency regulations) If significant, EIS NOI, scoping, draft, comments, final, record of decision If uncertain, EA (FONSI or EIS) Must comply unless law expressly exempts Relief can be sought under APA

14 CHST Budgetary Outlays Farm Bill says funding as necessary 2009: $25 million Apportionment request for 2010 (Nov 2009 March 2010: $514 million

15 BCAP Project Areas Program Before payments for biomass production may issue, USDA must first designate project areas Need a BCF and producers within an economically feasible distance that can supply BCF s biomass needs The proposal: 1. Letter that BCF will buy crops 2. Demonstration of sufficient BCF equity 3. Any other information to support viability 4. Description of eligible land and eligible crops

16 Project Area Eligible Land and Materials Eligible Land Eligible Material Definition of Renewable Biomass*, EXCEPT for: Only private land Title I crops No native sod after Nothing noxious (federal 5/22/08 and state law determination) No CRP, WRP, GRP *Renewable Biomass: certain by products from federal forests, and organic material (commodity crops, plants, trees, and residues), wastes (food, animal, yard), algae

17 The Project Areas Program: Application Evaluation Volume of biomass within and outside PA Sustainability: Economic impacts Producer and local ownership of BCF Participation i rate by beginning i and socially ill disadvantaged farmers Soil, water and related impacts Variety of agronomic and cropping practices No GHG requirement

18 The Project Areas Program: Agreements Once a PA awarded, form a written contract between producer and USDA that: Information to promote production and conversion Observe highly erodible land and wetlands conservation requirements Implementa forest or conservation stewardship program

19 BCAP Project Areas Program: Payment Direct payment to biomass producer for: Perennial establishment (up to 75% of costs) Perennial or annual production (not determined) Contract duration <5 years (annual/perennial) <15 (woody biomass) Must implement a conservation or forest stewardship dh plan

20 The Project Areas Program: PEIS Draft issued (8/10/09) / No action v. targeted v. broad implementation Impacts analyzed through hpolysys modeling: dli Socio economic Biological diversity Air/Water/Soil quality Recreation

21 Alternative 1: Targeted Implementation of BCAP BCFs supported by BCAP project areas are limited to producing energy. Alternative 2: Broad Implementation of BCAP All bio based products produced by a BCF in BCAP project areas can be supported. No new non agricultural lands allowed for BCAP project area crop production. Cropland acres enrolled in the program would be capped at 25 percent of cropland acres within a given county. New non agricultural lands allowed for BCAP project area crop production. Cropland acres enrolled in the program wouldnot be capped. Advanced biofuels produced by BCAP project area BCFsmust meet the greenhouse gas test. Only new BCFs are allowed to be part of BCAP project areas and only newly established crops on BCAP contract acres are eligible crops. Advanced biofuels produced by BCAP project area BCFs do not need to meet the greenhouse gas test. Existing BCFs that meet BCAP eligibility requirements are supported. Only large commercial BCFs would be allowed in BCAP project areas. Small and Pilot BCFs would qualify for BCAP project areas. Payments would be limited to provide some risk Payments would completely replace lost mitigation. Copyright Jody Endres potential 2009, All income Rights from non BCAP crops.

22 Targeted Implementation: Top 5 Locations Based on Cost to BCAP Program and Feedstock Abundance

23 Targeted Implementation: Top Projects in Each hstate to Support a BCF

24 Targeted implementation option: Economic Impacts No significant change in net farm income or land use shifts Assumed d$60/dry ton to establish tblihcrop, with $90/dry ton CHST matching payment, for a total of $30/dry ton enticement fee No net return to communitybecause of reduction in input purchases Broad implementation option: Assuming $1.76/gallon fuel price, $51 per dry ton purchase price, cost of production at $53/dry ton, and CHST matching payment Net farm income rises, due in part to increase in commodity crop prices $29.2 billion to national economy, and jobs

25 Biological Impacts Used a 50mileradius around each BCF (where transportation costs become prohibitive) Limited cultivation to 25% of land within a county Impacts depend on agronomic practices and crop selection (concludes that native, diverse species cropping preferable) Recognizes, at minimum, landscape will change Recommends avoidance of high conservation value areas, and marginal land use Asks whether Environmental Benefits Index used by NRCS in CRP program could be incorporated into agreements Control of noxiousness properties must be fully addressed

26 Air/Water/Soil Impacts Broad implementation would provide substantial GHG mitigation effects Under either scenario, significant positive impacts on soil erosion and reduced inputs, which enhances water quality In top five areas, has potential to reduce need for irrigation Air quality impacts depend on agronomic and harvest practices; EPA is currently conducting air quality testing on different biomass materials so that air permits for BCFs can adequatelycontrol air pollutants

27 Concluding Thoughts on the PA PEIS The EIS does not contain any references to the public input gathered during the scoping process POLYSYS model is only capable of examining switch grass and residues Lack of data, but high stakes results No separate miscanthus evaluation, or evaluation for SRWCs (e.g., poplars) EIS estimates GHG savings, presuming agronomic carbon practices in absence of carbon standards

28 Concluding Thoughts PEIS, continued... Project Area application evaluation Results in a mini NEPA for each site Who carries the burdento generate information? Note technological and budgetary challenge faced by NRCS, and CSBP work Why an EIS for biomass and not other crop subsidies?

29 Overall Concluding Thoughts FSA is in the process of writing a handbook for state/local FSA offices Biofuels IWG: toward consistent, optimal definitions and practices, e.g. the definitionof of renewable biomass Oneregulation for both CHSTandPAs shouldbe issued shortly, with a comment period Note: unlike EPA, FSA does not place comments on regulations.gov; must FSA with specific requeststo to review

30 Thank you for your time and attention! Jody M. Endres University it of Illinois i Energy Biosciences Institute (217) jendres2@igb.uiuc.edu