The Wood and Fiber Supply Chain Experts
News Regarding the Biomass Crop Assistance Program
From the January 2010 Forest2Mill newsletter.
Payment Sharing — Reports from our contacts in all parts of the supply chain indicate that
the financial benefits of the BCAP matching payment program are being negotiated between parties.
The terms of the contracts vary widely but generally involve the sharing of the payments between
the landowner and the dealer or logger.
First Quarter 2010 Funding for BCAP Raises Concern; Delay in Releasing Rules — Just like
the list of qualified biomass conversion facilities, the cost of the BCAP program has exploded:
funding for the first quarter of 2010 has been reported at $500 million dollars. Why so high? The
2008 Farm Bill did not set a specific limit for funding the program. Instead, to determine the
funding level for 1Q2010, the Farm Service Agency (FSA) added up the quarterly feedstock needs of
all the qualified facilities. They then requested that level of funding from the Credit Commodity
Corporation (CCC). The CCC apparently approved the request. And the controversy quickly followed.
Among the first to object following the announcement was the
Composite Panel Association (CPA). The group asked the White House's Office of
Management and Budget (OMB) to review the program’s funding and rules. Their concern? Included in
the eligible materials list are classes of wood fiber already used for higher value products,
specifically the composite wood panels used in home construction, furniture, cabinets, doors, and
flooring.
The CPA argues that if those harvesting, manufacturing, and/or delivering sawdust and wood
chips are incentivized to transport them to bioenergy companies, makers of composite wood panels
(who spent $400 million last year on their fiber supply) would disappear from the market, causing a
loss of $68 billion in annual sales and 350,000 manufacturing jobs. To solve this problem, the CPA
suggests restructuring the program to meet its original intent by removing any wood fiber used to
make higher value products from the eligible materials list.
Tom Harkin, the senator from Iowa who chaired the Agricultural Committee when the 2008 Farm
Bill was passed, objects to the direction the program has taken. Harkin attributes the mushrooming
cost of the program is a result of the number of timber companies and other wood manufacturers who
applied for qualification as biomass conversion facilities. Because there are so many of these
facilities and because they use large amounts of wood fiber to generate heat and electricity, the
cost of the program has grown well beyond expectations. At the time of passage, the Congressional
Budget Office forecast the program would cost $70 million over five years. The gap between $70
million over five years and $500 million over three months is monumental, especially as the U.S.
budget deficit climbs. As a result of the cavernous gap between expectations and reality, Harkin
has said he would ask his colleagues to review how the USDA is implementing the program after the
first of the year.
This controversy may be the answer to the question we've be asked time and again: when are
the program rules going to be published? In a joint conference call about the BCAP program
sponsored by the
American Forest and Paper Association
(AF&PA) and the
Forest Resources Association (FRA) on
October 29, representatives from the USDA told us the rules would be available within a couple of
weeks. Today, nearly eight weeks later, the rules are still at the OMB, where they are being
reviewed.
One USDA official told a
DTN reporter that program costs would likely be trimmed by the time the rules
came back from the White House.