Biomass Crop Assistance Program Matching Payments

From the September 2009 Forest2Mill newsletter.

The Obama Administration’s acceleration of the Biomass Crop Assistance Program (BCAP) Matching Payments Program is working. The comment period on the implementation process ended on August 10. Three weeks later:

  • The agency that administers the program, the Farm Service Agency (part of the USDA), announced a list of companies that have qualified as biomass conversion facilities. Of the nine facilities currently qualified, eight use wood as at least part of their feedstock. Of those, one— Dixie Pellets—closed the day after the notice was made public.
  • Secretary of Agriculture Tom Vilsack announced that the first matching payments had been made. The payments went to suppliers delivering biomass to Show Me Energy, a Johnson County, Missouri pellet manufacturer. Show Me Energy was the first facility to qualify under the program.

Here is the August 31 list of the qualified facilities that accept wood biomass:

Biomass producers 1 that supply these facilities are eligible for matching payments—a dollar for dollar payment on a per dry ton basis. For details about how the program will work, read the latest issue of Forest2Fuel.

The biggest question now is: who will benefit from the matching payments?

According to the intent of the legislation that created BCAP, the purpose of the program is to incent biomass owners to collect, harvest, store and transport biomass to bioenergy plants. The payments are scheduled to be made to suppliers over a two-year period and are meant to help establish a stable biomass supply over the long term. Still, in these early stages, it is unclear who will benefit. The possibilities:

  • Loggers, dealers and brokers—those who own the harvested materials according to the terms of most supply agreements. Loggers, already under the strain of shrinking profitability, will need to invest in the equipment to harvest biomass efficiently; these payments may encourage more loggers to expand their operations to meet the demand for biomass.
  • Landowners—most supply agreements today transfer ownership of timber when it is severed from the stump. This is convention, not law. Supply agreements could be written so that ownership transfers once the harvested material crosses the gate. Loggers will still need to be paid, though, so perhaps a more likely scenario is that buyers and sellers could agree in certain cases to share BCAP payments.
  • Bioenergy companies—BCAP’s intent is not to subsidize the cost of raw materials for bioenergy companies and even prohibits payments being made directly to them. Despite legislative intent; however, they will undoubtedly try to lower the delivered prices they pay to biomass producers in order to improve their cost structures.

Ultimately, the market will decide who benefits from the program. In the short term, the beneficiaries will be determined on a case by case basis, one supply agreement at a time. And since the program is only funded for two years, it may not be around long enough to accomplish its goal of creating a stable supply of biomass.

1 For a list of products that are considered eligible biomass, go to: www.fsa.usda.gov.
Additional information and forms can be found at: www.fsa.usda.gov/FSA.

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