USDA announces changes to bioenergy programs

By Erin Voegele | February 16, 2011

The USDA has announced interim rule changes to three renewable energy programs authorized by the 2008 Farm Bill, including the Biorefinery Assistance Program, the Repowering Assistance Program and the Bioenergy Program for Advanced Biofuels. The programs are intended to create jobs in rural areas and increase the production and use of renewable energy.

“These changes contribute to the Obama Administration’s efforts to revitalize our rural economy and meet our energy challenges,” Vilsack said. “It’s part of our effort to ‘win the future.’ USDA’s renewable energy programs provide new sources of farm income, increase domestic energy production and develop a domestic renewable energy industry, which will create jobs and reduce America’s dependence on imported oil.”

The rule changes allow nonrural locations to be eligible for funding and remove prior citizenship requirements for borrowers. Information published in the Federal Register specifies that the interim rules are effective March 16 and will remain in effect until the USDA adopts final rules for the programs. In addition, all provisions of the regulations adopted in the interim rules are subject to a 60-day comment period. Comments must be received on or before April 15.

The Biorefinery Assistance Program is designed to support the development and construction of commercial-scale biorefineries, as well as the retrofit of existing facilities using eligible technologies. According to information published in the Federal Register, “eligible technology” is defined by the rule as any technology that is being adopted in a viable commercial-scale operation of a biorefinery that produces an advance biofuel, as well as technologies that have been demonstrated to have technical and economic potential for commercial application in a biorefinery to produce an advanced biofuel.

Specific alterations to the program include:

- The maximum percent guarantee provisions of the program have been revised to allow for a 90 percent guarantee for loan amounts of $125 million or less under certain conditions

- Refinancing has been added as an eligible project purpose under certain conditions

- The requirement stipulating the project must be located in a rural area has been removed, but is still included in scoring criterion

- The citizenship requirement has been removed for borrowers

- The minimum retention requirement has been revised to 7.5 percent of the loan amount

The Repowering Assistance Program makes payments to eligible biorefineries to encourage the use of biomass to produce process heat or power. Payments can be provided to biorefineries that were in existence when the 2008 Farm Bill was enacted. According to information published in the Federal Register, changes to the program include:

- The removal of the citizen requirement for applicant eligibility

- The requirement stipulating the project must be located in a rural area has been removed and replaced with a scoring system that awards points to projects located in rural areas

- Participating biorefineries are now able to request and receive reimbursement payments for eligible project costs no more often than monthly during construction, and up to 90 percent of the total award may be dispersed prior to a project’s completion

- Under the scoring system, scores for the percentage of reduction of fossil fuel has been modified through the addition of a provision that deducts 5 point when any of the fossil fuel being replaced is natural gas

- The scoring criterion was revised by decreasing points awarded from 10 to 5 and by changing the requirement that would have mandated an applicant demonstrate 100 percent of control over its feedstock for 3 years to a requirement that the applicant demonstrate it has on site available access to biomass or an enforceable third-party commitment to supply biomass fuel for at least 3 years

- Eligibility criteria have been revised to require successful applicants to be awarded at least minimum points for cost-effectiveness and percentage of reduction for fossil fuel

- Scoring for cost effectiveness was revised to add a fourth level to the estimated simple payback period

- In addition to providing information on the biofuel production, applicants are now required to provide information on any biobased product produced at the facility

- The requirement to provide receipts for drop shipments of and use of renewable biomass has been removed from the application content requirements

- Annual reports are now required to be submitted for the first 3 years after the completion of the project

The Bioenergy Program for Advanced Biofuels allows USDA Rural Development to enter into contracts with advanced biofuel producers to pay them for the production of eligible advanced biofuels. In order to be eligible for payments, the advanced biofuels produced must be derived from renewable biomass—excluding corn starch. Under the interim rule:

- The citizenship requirement for applicant eligibility has been removed

- The definition of  “larger producer” and “smaller producer” has been amended to include a determination level of 150 million gallons of liquid advanced biofuel per year

- The provision that would have allowed payment for an advanced biofuel used onsite has been replaced with a provision that an advanced biofuel must be sold to a third party through an arm’s length transaction in order to be eligible for payment

- Requirements have been removed that dealt with supporting documentation requirements associated with enrollment requirements and BQ-9000 certification while RIN requirements have been clarified, and the woody biomass documentation requirement has been revised to apply to just National Forest system lands and public lands

- Payment provisions have been revised to provide payments for actual production and incremental production, calculating actual production payments rates each quarter rather than annually, determining payments each quarter based on the actual amount of advanced biofuel produced in the quarter, requiring participating producers to submit payment applications each quarter, and adding payment limitations for advanced biofuels produced from forest biomass

According to information published by the USDA in the Federal Register, applications from the Advanced Biofuel Payment Program Fiscal Year 2010 funds will be accepted from February 11 through April 12. Applications received after this deadline will not be considered for Fiscal Year 2010 payments.

Additional information on each interim rule can be found in the Federal Register

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