Establishment and Annual Payments Program

From the November 2010 Forest2Mill newsletter.

Project Areas

Because sawtimber and pulpwood have significantly higher value than biomass, converting timberland to energy crops is not feasible. If landowners have marginal land that is currently unproductive, however, participating in this portion of the BCAP program could provide an additional revenue stream.

The new rule provides a list of potential crops that includes, but is not limited to, switchgrass, miscanthus, fast-growing woody poplar, jatropha, algae, energy cane, and pongamia.

The process to qualify for establishment and annual payments begins when project sponsors — groups of producers and/or biomass conversion facilities — submit a detailed proposal that is evaluated by the Credit Commodity Corporation (CCC), the finance arm of the USDA. The ideal project area will be made up of procurement zones for one or more bioenergy facilities.

Each proposal must include:

  1. A description of the eligible land and eligible crops of each producer that will participate in the project area, including a narrative and maps which show the location of bioenergy facilities, current land use, roads, railroads, rivers and barge access, proposed land use change and resource inventory maps.
  2. A letter of commitment for the biomass conversion facility stating that it will use the eligible crops produced in the project area
  3. If the facility is not operational at the time of the proposal, information demonstrating it has the equity it needs to operate by the time the crops are harvested, including documentation of the projected construction, start-up, operation, and maintenance costs, estimated cash flow, existing resources and short- and long-term financing.
  4. An analysis of the economic impacts of the proposed project area, including the anticipated timing and number of jobs created.
  5. Proof of long-term economic viability and the ability to comply with all environmental and regulatory requirements, and sufficient quantity of eligible crops in the procurement zone.

Once a proposal is received, its acceptance will be based on the:

  • Volume of eligible crops
  • Probability they’ll be used for BCAP purposes
  • Volume of renewable biomass available from non-contract acreage
  • Anticipated economic impact
  • Opportunity for producers and local investors to participate in biomass conversion facility ownership
  • Participation by beginning or socially disadvantaged farmers or ranchers
  • Impact on soil, water and related resources
  • Variety of biomass
  • The range of eligible crops

Once a project area proposal has been accepted, facilities and producers within that area can then contract with the CCC to be eligible for establishment and annual payments. The CCC will accept proposals on a continuous basis.

Payments for New Energy Crops

Establishment payments: Producers can get up to 75 percent of the costs of establishing a perennial crop (not including equipment). Annual crops are eligible for annual payments only.

Annual Payments: Biomass producers in BCAP project areas can receive annual payments up to 5 years for herbaceous biomass and up to 15 years for woody biomass, based on soil rental rates (for forests, these rates will be adjusted). Reductions to annual payments will be made upon the sale of the crop. How much they are reduced depends upon the type of bioenergy facility receiving the feedstock. Payments are reduced by:

  • 1 percent if the biomass is sold for cellulosic biofuels defined by RFS regulation as having 60 percent lower lifecycle greenhouse gas emissions
  • 10 percent if the biomass is sold for advanced biofuels
  • 25 percent if the biomass is sold for heat, power or biobased products
  • 100 percent if the biomass is sold for anything other than heat, power, biofuels or biobased products.

In addition to establishment and annual payments, producers may also be eligible for matching payments when they harvest the biomass and deliver it to the qualified biomass conversion facility. That year's annual payment will be reduced appropriately, however.

Additional Stories from the November 2010 Forest2Mill Newsletter:
Economic Outlook
Housing Market Update
BCAP Final Rule Released: Overview
New Rules Governing the BCAP Matching Payments Program

Register for the Free Forest2Mill Newsletter