[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
HEARING TO REVIEW THE IMPLEMENTATION OF THE 2008 FARM BILL ENERGY TITLE
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON CONSERVATION, CREDIT,
ENERGY, AND RESEARCH
OF THE
COMMITTEE ON AGRICULTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
SECOND SESSION
__________
JUNE 9, 2010
__________
Serial No. 111-51
Printed for the use of the Committee on Agriculture
agriculture.house.gov
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COMMITTEE ON AGRICULTURE
COLLIN C. PETERSON, Minnesota, Chairman
TIM HOLDEN, Pennsylvania, FRANK D. LUCAS, Oklahoma, Ranking
Vice Chairman Minority Member
MIKE McINTYRE, North Carolina BOB GOODLATTE, Virginia
LEONARD L. BOSWELL, Iowa JERRY MORAN, Kansas
JOE BACA, California TIMOTHY V. JOHNSON, Illinois
DENNIS A. CARDOZA, California SAM GRAVES, Missouri
DAVID SCOTT, Georgia MIKE ROGERS, Alabama
JIM MARSHALL, Georgia STEVE KING, Iowa
STEPHANIE HERSETH SANDLIN, South RANDY NEUGEBAUER, Texas
Dakota K. MICHAEL CONAWAY, Texas
HENRY CUELLAR, Texas JEFF FORTENBERRY, Nebraska
JIM COSTA, California JEAN SCHMIDT, Ohio
BRAD ELLSWORTH, Indiana ADRIAN SMITH, Nebraska
TIMOTHY J. WALZ, Minnesota DAVID P. ROE, Tennessee
STEVE KAGEN, Wisconsin BLAINE LUETKEMEYER, Missouri
KURT SCHRADER, Oregon GLENN THOMPSON, Pennsylvania
DEBORAH L. HALVORSON, Illinois BILL CASSIDY, Louisiana
KATHLEEN A. DAHLKEMPER, CYNTHIA M. LUMMIS, Wyoming
Pennsylvania ------
BOBBY BRIGHT, Alabama
BETSY MARKEY, Colorado
FRANK KRATOVIL, Jr., Maryland
MARK H. SCHAUER, Michigan
LARRY KISSELL, North Carolina
JOHN A. BOCCIERI, Ohio
SCOTT MURPHY, New York
WILLIAM L. OWENS, New York
EARL POMEROY, North Dakota
TRAVIS W. CHILDERS, Mississippi
WALT MINNICK, Idaho
______
Professional Staff
Robert L. Larew, Chief of Staff
Andrew W. Baker, Chief Counsel
April Slayton, Communications Director
Nicole Scott, Minority Staff Director
(ii)
?
Subcommittee on Conservation, Credit, Energy, and Research
TIM HOLDEN, Pennsylvania, Chairman
STEPHANIE HERSETH SANDLIN, South BOB GOODLATTE, Virginia, Ranking
Dakota Minority Member
DEBORAH L. HALVORSON, Illinois JERRY MORAN, Kansas
KATHLEEN A. DAHLKEMPER, SAM GRAVES, Missouri
Pennsylvania MIKE ROGERS, Alabama
BETSY MARKEY, Colorado STEVE KING, Iowa
MARK H. SCHAUER, Michigan RANDY NEUGEBAUER, Texas
LARRY KISSELL, North Carolina JEAN SCHMIDT, Ohio
JOHN A. BOCCIERI, Ohio ADRIAN SMITH, Nebraska
MIKE McINTYRE, North Carolina BLAINE LUETKEMEYER, Missouri
JIM COSTA, California GLENN THOMPSON, Pennsylvania
BRAD ELLSWORTH, Indiana BILL CASSIDY, Louisiana
TIMOTHY J. WALZ, Minnesota ------
BOBBY BRIGHT, Alabama
FRANK KRATOVIL, Jr., Maryland
SCOTT MURPHY, New York
WILLIAM L. OWENS, New York
WALT MINNICK, Idaho
EARL POMEROY, North Dakota
Nona Darrell, Subcommittee Staff Director
(iii)
C O N T E N T S
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Page
Goodlatte, Hon. Bob, a Representative in Congress from Virginia,
prepared statement............................................. 3
Holden, Hon. Tim, a Representative in Congress from Pennsylvania,
opening statement.............................................. 1
Peterson, Hon. Collin C., a Representative in Congress from
Minnesota, prepared statement.................................. 2
Smith, Hon. Adrian, a Representative in Congress from Nebraska,
prepared statement............................................. 3
Witness
Cook, Cheryl, Deputy Under Secretary for Rural Development, U.S.
Department of Agriculture; accompanied by Jonathan W. Coppess,
J.D., Administrator, Farm Service Agency, USDA; and Carmela
Bailey, National Program Leader for Biobased Products and
Bioenergy, National Institute of Food and Agriculture, USDA,
Washington, D.C................................................ 4
Prepared statement........................................... 6
Submitted questions.......................................... 41
Supplementary material....................................... 41
HEARING TO REVIEW THE IMPLEMENTATION OF THE 2008 FARM BILL ENERGY TITLE
----------
WEDNESDAY, JUNE 9, 2010
House of Representatives,
Subcommittee on Conservation, Credit, Energy, and
Research,
Committee on Agriculture,
Washington, D.C.
The Subcommittee met, pursuant to call, at 10:00 a.m., in
Room 1300 of the Longworth House Office Building, Hon. Tim
Holden [Chairman of the Subcommittee] presiding.
Members present: Representatives Holden, Herseth Sandlin,
Dahlkemper, Schauer, Kissell, Boccieri, McIntyre, Bright,
Murphy, Owens, Minnick, Pomeroy, Goodlatte, Moran, King,
Neugebauer, Schmidt, Smith, Luetkemeyer, Thompson, and Cassidy.
Staff present: Nona Darrell, John Konya, James Ryder, Anne
Simmons, Rebekah Solem, Liz Friedlander, Patricia Barr, Tamara
Hinton, Josh Maxwell, Mary Nowak, Jamie Mitchell, and Sangina
Wright.
OPENING STATEMENT OF HON. TIM HOLDEN, A REPRESENTATIVE IN
CONGRESS FROM PENNSYLVANIA
The Chairman. This hearing of the Subcommittee on
Conservation, Credit, Energy, and Research to review the
implementation of the 2008 Farm Bill energy title will come to
order. I would like to welcome our witnesses and guests to
today's hearing. I hope this hearing will provide the Members
of this Subcommittee and the public with a better understanding
of the progress USDA is making toward full implementation of
the 2008 Farm Bill energy title and programs. The Food
Conservation and Energy Act of 2008 expanded many of the
renewable energy programs originally authorized in the 2002
bill and introduced many new provisions intended to ensure that
agriculture will play an important role in moving this country
toward energy independence.
This Committee crafted a bill to encourage and move to
advanced biofuels by promoting research, development, and
demonstration of biomass based renewable energy, and by
providing over $1 billion in investments needed to show a
promising but fragile industry that we are committed to
renewable energy production. Two years later, however,
implementation of these energy title programs has been slow and
many are not yet operating under a final rule. Money has been
awarded under some programs while final rules are still being
worked out causing confusion and uncertainty in an industry we
intended to strengthen and support.
I hope our witnesses today will speak to this delay in
implementation and address our concerns that some of the
programs do not seem to be following the intent of Congress.
Over the past few decades, we have seen an expanding list of
initiatives on not only the Federal, but also the state and
local levels that have helped encourage renewable energy
production and use. The Department of Agriculture has a
successful history in providing support for these programs and
should remain the leader in driving our renewable fuel
industries. It is important to remember we must all work
together to ensure that taxpayer dollars are being spent wisely
and as intended if we are to expand domestic production of
renewable energy and decrease our dependence on foreign oil. I
look forward to hearing from our witnesses today.
And the Ranking Member is on his way. Mr. Moran, do you
have any opening statement you would like to make in his
absence?
Mr. Moran. Mr. Chairman, until the arrival of the Ranking
Member, my suggestion is that you proceed with the hearing.
The Chairman. I thank the gentleman.
The chair asks all other Members of the Subcommittee to
submit any opening statements for the record.
[The prepared statements of Messers. Peterson, Goodlatte,
and Smith follow:]
Prepared Statement of Hon. Collin C. Peterson, a Representative in
Congress from Minnesota
Thank you, Chairman Holden, for calling today's hearing. The energy
title of the 2008 Farm Bill is a good example of why this Committee
chose to start farm bill hearings earlier this year. Writing the 2008
Farm Bill took longer than expected, resulting in a shorter
implementation cycle for the Administration and its agencies. A short
implementation cycle can force agencies to rush money out the door, in
some cases undoing some of the hard work that goes into preparing a
farm bill.
This time, I hope we can produce a bill that USDA can implement
more fully before we have to start considering the next version of the
farm bill. By doing this, we can avoid wasting precious taxpayer
resources, and Congressional intent can be better followed. One example
of what can happen when we combine a good idea with an inadequate
implementation process is the Biomass Crop Assistance Program. Congress
had the right intentions with BCAP, but due to incomplete
implementation, BCAP has turned into more of a boondoggle than a boon
in many people's eyes.
Compounding the issues surrounding implementation is the fact there
is no CBO baseline set for the energy title in the next farm bill, and
that is a serious issue we are going to face when we start work on the
next bill. Writing good policy and ensuring correct implementation is
now even more important given the greater need for Federal investment
in renewable energy development. It is important that we take the time
to receive feedback, evaluate existing programs and make appropriate
changes as we begin that process. In writing the new farm bill, I
expect to get policy done the right way, in regular order, and followed
by timely implementation. We are committed to investing in energy
efficiency and renewable energy production while also ensuring that
funding is spent wisely.
Proper oversight and efficient rule making are essential to the
sustainability of the energy title and the support of taxpayers. We are
never going to see the full potential and promise of renewable energy
fulfilled without consistent, reliable, and well-timed investment. It
is common knowledge that the renewable energy industry is working in a
tough financial environment, and we are asking USDA once again, what
can be done in today's credit situation to get these programs working
for the bioenergy facilities they were designed to help? We need to
consider how to better use existing and new programs to get us further
down the road towards energy independence as an industry and nation.
Thank you, Chairman Holden, and I yield back my time.
______
Prepared Statement of Hon. Bob Goodlatte, a Representative in Congress
from Virginia
Mr. Chairman, I would like to thank you for holding today's hearing
to review the implementation of the 2008 Farm Bill energy title.
The 2008 Farm Bill expanded on the previous energy title by
increasing funding for programs for the development of advanced
biofuels, and created new policies that would advance next generation
biofuels and reduce our reliance on corn ethanol as the only viable
commercial biofuel.
Advanced biofuels have enormous potential to create renewable fuel
outside of the Corn Belt. Almost \2/3\ of the Commonwealth is forested,
as is much of the southeastern U.S. Trees are an abundant resource and
are available for conversion into both paper and biofuels year-round.
Let me also add that, like forestry biomass, Virginia's many
agricultural commodities and animal waste products also have the
potential to be essential and beneficial resources of a renewable fuel.
It is crucial that a diverse market of feedstocks and next generation
renewable fuels are developed to meet the renewable fuels mandate that
is currently in place.
In May of 2009, President Obama made a directive to USDA to push
2008 Farm Bill energy title dollars out of the door within 30 days. I
appreciate the President's enthusiasm to get these programs functional;
however, throwing money at the problem is not the solution. It is
unfortunate that 2 years after the adoption of the farm bill and 1 year
after the President's directive none of the major provisions in the
title are operating under their final rules.
USDA has paid out millions of dollars through programs that are not
operating the way Congress intended. For example, the Biomass Crop
Assistance Program was created to incentivize our farmers to grow
dedicated energy crops. However, USDA has paid out hundreds of millions
of dollars over the original estimated costs of the program, but no new
biomass is being grown. This is not the best use of our taxpayer's
dollars and this is not the proper way to invest in our farmers and
ranchers who provide the renewable feedstocks needed for our nation's
energy diversity.
Again, thank you, Mr. Chairman, for holding this hearing. I look
forward to hearing from today's witnesses.
______
Prepared Statement of Hon. Adrian Smith, a Representative in Congress
from Nebraska
Thank you, Mr. Chairman:
I appreciate the Subcommittee holding a hearing today on the energy
title of the 2008 Farm Bill. Nebraska's Third Congressional District is
a leader in biofuels, and I remain committed to advancing the critical,
timely development of our nation's biofuels industry while decreasing
our nation's dependence on foreign oil.
While I am confident we can forward our biofuels agenda to promote
a cleaner environment and alleviate the economic pain Americans
continue to experience, I remain concerned with the lack of urgency
shown by the Department of Agriculture, in conjunction with the
Department of Energy and the Environmental Protection Agency, in
finalizing rules to validate producers and investors. Without a strong
commitment from these agencies, our advanced biofuels industry remains
erratic, jeopardizing our nation's path to energy independence.
Again, I appreciate the Subcommittee holding this hearing to review
the implementation of the energy title, and I look forward to hearing
the observations and recommendations of our witnesses.
Thank you. I yield back.
The Chairman. We would like to welcome our panel of
witnesses to the table today, Mr. Jonathan Coppess,
Administrator, Farm Service Agency, U.S. Department of
Agriculture; Ms. Cheryl Cook, Deputy Under Secretary for Rural
Development, United States Department of Agriculture; Ms.
Carmela Bailey, National Program Leader for Biobased Products
and Bioenergy, National Institute of Food and Agriculture. Ms.
Cook, you may begin when you are ready.
STATEMENT OF CHERYL COOK, DEPUTY UNDER SECRETARY FOR RURAL
DEVELOPMENT, U.S. DEPARTMENT OF
AGRICULTURE; ACCOMPANIED BY JONATHAN W. COPPESS, J.D.,
ADMINISTRATOR, FARM SERVICE AGENCY, USDA; AND CARMELA BAILEY,
NATIONAL PROGRAM LEADER FOR BIOBASED PRODUCTS AND BIOENERGY,
NATIONAL
INSTITUTE OF FOOD AND AGRICULTURE, USDA,
WASHINGTON, D.C.
Ms. Cook. Thank you, Mr. Chairman, and Members of the
Subcommittee. Good morning. On behalf of my colleagues,
Jonathan Coppess, FSA Administrator, and Carmela Bailey,
National Program Leader for Biobased Products and Bioenergy,
National Institute of Food and Agriculture, thank you for the
opportunity to appear before you today to discuss
implementation of the farm bill energy title. In the interest
of time, we would like to submit our written testimony for the
record, and I will be delivering a consolidated opening
statement on behalf of all three of us so that we can get as
quickly as possible to a good discussion with you.
Of course, the energy title is not the only place in the
farm bill one finds provisions on energy. This year, USDA is
celebrating 75 years of rural electrification and amendments to
the Rural Electrification Act are found in subtitle B of Title
VI, particularly a new emphasis on renewables. The Rural
Utilities Service will lend more than $7 billion to the
nation's rural electric cooperatives this year. This will not
only provide reliable, affordable electricity to the co-ops 45
million member-owners; these loans and loan guarantee programs
also actually operated at negative subsidy rate meaning they
make money for the Federal Government too.
Rural Development business programs authorized in Title VI
have also been used to finance energy projects including the
Business and Industry Loan Guarantee Program, the Rural
Business Enterprise Grant Program and the Value-Added Producer
Grant Program. In total, Rural Development invested over $460
million last year in energy and energy efficiency for nearly
3,000 businesses creating 7,000 jobs.
America's energy system is in transition, Mr. Chairman. For
environmental, economic, and national security reasons, we have
to diversify our fuel supply, reduce our dependence on imported
oil, reduce our carbon footprint, and develop our abundant
renewable energy resources. The Obama Administration is
committed to these objectives, and we are grateful for the
leadership this Committee and the Congress are showing now
through two farm bills in giving us the tools to support that
effort.
Because of feedstock and siting requirements much of
America's energy future will be rural energy. Biofuels depend
on biomass feedstocks that are generated from the farm and our
forests. Utility and small scale wind, small scale
hydroelectric, solar, and geothermal developments will be
located largely in rural areas. Agriculture is energy intensive
and improved energy efficiency is as important to farmers and
ranchers as it is for other rural residents, public facilities,
and rural businesses in all other sectors.
The energy title is necessarily broad in scope reflecting a
comprehensive approach among a variety of USDA agencies that
support basic research and facilitate feedstock production,
market development, commercialization, and distribution of
renewable energy and energy efficiency technologies with
objectives that compliment USDA's core values.
First, from on-farm cost of production to cooking, cooling,
freezing, and of course transporting commodities from farms and
ranches to food processors and from processors to wholesalers
and retailers, the continuation of our abundant and affordable
food supply simply requires abundant and affordable energy
supplies.
Second, renewables can contribute to net farm income.
Renewable energy can assist with both lowering cost of
production and increasing revenues that can come from new
products and new market opportunities offering diversified
income streams and helping producers manage economic risk.
Third, renewables complement an aggressive research and
extension agenda that continues the productivity gains American
agriculture and its customers enjoyed during the 20th century.
Fourth, renewables can help in creating and sustaining high
quality jobs in rural areas, and, fifth, they help in restoring
the rural landscapes such as through manure digesters and
minimizing future risk to the environment such as by reducing
potential fuel for forest fires.
Against that background, I would like to quickly run
through the status of programs in the energy title. In our
written statement you have a longer, more detailed description.
Four of the five programs assigned to Rural Development are
currently being implemented. Our objective has been to restore
the private sector's confidence in these industries by offering
a consistent public-private partnership through loan
guarantees. In total, the Section 9003 and 9007 programs
awarded funding for over 1,500 projects last year, which we
estimate would create or save approximately 10.3 million Btu's
of energy, enough to power over 250,000 homes.
The Farm Service Agency received over 24,000 comments on
its proposed rule for full implementation of the Biomass Crop
Assistance or BCAP program. FSA is currently evaluating those
comments and starting to draft its final rule which is
tentatively scheduled to be published no later than this fall.
A draft environmental impact statement also was published for
comment in August 2009, and those comments will be addressed in
the final programmatic environmental impact study which will be
published soon.
BCAP outlays were about 26 million last year. This year,
$511 million has been made available for BCAP of which $233
million has been expended.
NIFA's Biomass Research and Development, or BRDI
Initiative, awarded $25 million last year jointly from USDA and
from the Department of Energy's Office of Biomass Programs. The
BRDI board convened in March of this year, and was briefed on
this year's funding announcement. NIFA and the Department of
Energy released that announcement on May 7 and the window for
pre-application closes July 13. Finally, NIFA's Biodiesel Fuel
Education Program provided $1 million to the National Biodiesel
Board and the University of Idaho. Contingent upon continued
success, NIFA will provide additional support to these projects
through 2012.
On behalf of all of us at USDA, Mr. Chairman, Ranking
Member Goodlatte, we would like to thank you for your
commitment to future rural economic opportunity through
renewable energy. And we would be happy to address your
questions at this time.
[The prepared statement of Ms. Cook follows:]
Prepared Statement of Cheryl Cook, Deputy Under Secretary for Rural
Development, U.S. Department of Agriculture; Accompanied by Jonathan W.
Coppess, J.D., Administrator, Farm Service Agency, USDA; and Carmela
Bailey, National Program Leader for Biobased Products and Bioenergy,
National Institute of Food and Agriculture, USDA, Washington, D.C.
Mr. Chairman, Ranking Member Goodlatte, and Members of the
Subcommittee, we welcome the opportunity to appear before you today to
discuss the implementation of Title IX, the Energy Title, of the 2008
Farm Bill.
America's energy system is in transition. For environmental,
economic, and national security reasons alike, America needs to
diversify our fuel supply, reduce our dependence on imported oil,
reduce our carbon footprint, and develop our abundant renewable energy
resources. The Obama Administration is committed to these objectives,
and we are grateful for the leadership of the Congress, and in
particular its vision in the 2002 and 2008 Farm Bills, in giving USDA
the tools to support this vital national effort.
Renewable energy and energy efficiency are important commitments
for USDA. Because of its feedstock and siting requirements, much of
renewable energy is largely rural energy. Biofuels depend on biomass
feedstocks that are generated from the farm and forest. Utility and
small scale wind, small scale hydroelectric, solar, and geothermal
developments will be located largely in rural areas. Agriculture is
energy intensive and improved energy efficiency is therefore an
important consideration for agricultural producers just as it is for
rural residents, public facilities, and rural businesses in other
sectors.
For all these reasons, we at USDA recognize that renewable energy
and energy efficiency constitute an enormous opportunity for rural
America. With rural broadband, local foods and local markets, and a
broad-based rejuvenation of rural business, renewable energy
development is among the drivers supporting the revitalization of the
rural economy--a rural economy that is more prosperous, that offers
more and better jobs, that can attract young families, and that
contributes to the nation's efforts towards energy independence and a
cleaner environment.
Title IX is broad in scope. The three USDA Agencies testifying
today--Rural Development, the Farm Services Agency, and the National
Institute of Food and Agriculture--administer a wide variety of
programs that support basic research to feedstock production to
commercialization, as well as distribution of renewable energy and
energy efficiency technologies.
Rural Development
Rural Development administers five Title IX energy programs from
the 2008 Farm Bill. Before turning to them in detail, however, it
should be noted that Rural Development's support for renewable energy
extends well beyond the ``9000 series'' programs. The commitment to
renewable energy is Agency-wide.
For example, most of Rural Development's Title VI business programs
have supported renewable energy investments over the years. These
include the Business and Industry Guaranteed Loan Program (B&I), the
Value-Added Producer Grant program (VAPG), the Rural Business
Opportunity Grant (RBOG), the Rural Business Enterprise Grant programs
(RBEG), and the Rural Economic Development Loan and Grant program
(REDLG). Similarly, the Rural Utilities Service has financed wind,
solar and geothermal investments by rural electric cooperatives.
Four of the five Rural Development Title IX programs are currently
being implemented. Rural Development is working to present a consistent
source of funding to bolster lending and project confidence for these
programs. In total, the Section 9003 and 9007 programs awarded funding
for 1559 projects during Fiscal Year 2009, which USDA estimates would
create or save approximately 10,300,000 million Btu's of energy. This
would equate to 1.76 million barrels (5.8 million Btu's per barrel of
oil) of crude oil, or enough energy to provide electricity for 250,815
homes (assuming each home consumes 40.9 million Btu's per year).
Section 9003_Biorefinery Assistance Program
The Biorefinery Assistance Program provides loan guarantees to
viable commercial-scale facilities to develop new and emerging
technologies for advanced biofuels. Eligible entities include Indian
Tribes, state or local governments, corporations, farmer co-ops,
agricultural producer associations, higher education institutions,
rural electric co-ops, public power entities, or consortiums of any of
the above.
Two Section 9003 project investments involving different
technologies have been announced to date. These projects are:
Range Fuels, Inc. received approval of an $80 million
guaranteed loan on January 16, 2009. The loan closed on
February 10, 2010. This is a cellulosic ethanol project.
Sapphire Energy received approval for a $54.5 million
guaranteed loan on December 3, 2009. The loan is expected to
close September 2010.
Looking forward, a balance of approximately $80 million remains to
be awarded under the Extension Notice of Funding Availability for
Fiscal Year 2009. The Fiscal Year 2010 NOFA provides up to $150 million
in budget authority for the Program to support loan guarantees.
------------------------------------------------------------------------
Date of Publication in
Type of Notice Federal Register Application Deadline
------------------------------------------------------------------------
Extension Notice of March 12, 2010 June 1, 2010
Funding Availability FY
2009
Notice of Proposed April 16, 2010 June 15, 2010
Rulemaking (comments)
Notice of Funding May 6, 2010 August 4, 2010
Availability for FY
2010
------------------------------------------------------------------------
The pace of applications for the Section 9003 program has clearly
been affected by the recent recession, volatility in world oil prices,
and a high level of caution by lenders in the wake of the credit
crisis. The level of interest among potential applicants remains high,
and we expect volume to increase in the year ahead as the economic
recovery gathers strength.
Section 9004_Repowering Assistance Payments
The Repowering Assistance Program provides payments to
biorefineries that use fossil fuels to produce heat and power to
replace the fossil fuels with renewable biomass. To be eligible, the
biorefineries must have been in existence as of June 18, 2008, and
applicants must demonstrate the economic, technical, and environmental
feasibility of the proposed biomass system.
As of May 14, 2010, project awards totaling $13,269,383 have been
approved and will be announced upon applicants' acceptance of
conditions and payment agreements.
Congress appropriated mandatory budget authority of $35 million
over the life of the 2008 Farm Bill. In FY 2009, the program was
allotted $20 million; the remaining funds were to be spread out to
provide support in subsequent years, and to allow the public to
participate in the regulation formulation. A balance of approximately
$6.7 million of budget authority remains from FY 2009 and is available
under the Extension Notice of Funding Availability for Fiscal Year
2009. Up to $8 million is authorized in budget authority for the Notice
of Funding Availability for FY 2010.
------------------------------------------------------------------------
Date of Publication in
Type of Notice Federal Register Application Deadline
------------------------------------------------------------------------
Extension Notice of March 12, 2010 June 15, 2010
Funding Availability
for FY 2009
Notice of Proposed April 16, 2010 June 15, 2010
Rulemaking (comments)
Notice of Funding May 6, 2010 July 20, 2010
Availability for FY
2010
------------------------------------------------------------------------
Section 9005_Advanced Biofuel Producer Payments
The Section 9005 Advanced Biofuel Producer Payment program provides
payments to producers to support and expand production of advanced
biofuels refined from sources other than corn kernel starch. To be
eligible, producers must enter into a contract with USDA Rural
Development for advanced biofuels production and submit records to
document such production.
Determination of Payments as per the Notice of Contract Proposals:
The Section 9005 program is designed to favor small producers. Five
percent of the funds are allocated for payment to producers of over
150,000,000 gallons. Ninety-five percent of the funds will be allocated
for small producers (less than 150,000,000 gallons). In Fiscal Year
2009, 156 producers applied and 141 were determined eligible and
awarded $14,711,362 in December 2009.
----------------------------------------------------------------------------------------------------------------
Awarded 12/09 Amount Percentage of
Producer Payments to: Number of Producers of Payments Payment
----------------------------------------------------------------------------------------------------------------
Biodiesel Producers 80 6,472,996 0.44
Anaerobic Digesters 41 294,227 0.02
Non-Corn Kernel Starch Ethanol:
Producers.................................. 16 7,355,681 0.50
Woody Biomass.............................. 4 735,568 0.04
------------------------------------------------------------------
Total.................................... 141 $14,711,362 1.00
----------------------------------------------------------------------------------------------------------------
Congress appropriated mandatory budget authority to this program as
follows: $55 million for FY 2009 and $55 million for FY 2010. In FY
2009, the program was allotted $30 million. Approximately $15 million
remains in allocated 2009 budget authority, and is available under the
Extension Notice of Contract Proposals for FY 2009. The remaining FY
2009 funding of $25 million, and $15 million of funding from the FY
2010 allocation, which totals $40 million in budget authority is
available for this program in FY 2010.
------------------------------------------------------------------------
Date of Publication in
Type of Notice Federal Register Application Deadline
------------------------------------------------------------------------
Extension Notice of March 12, 2010 May 30, 2010
Contract Proposals for
FY 2009
Notice of Proposed April 16, 2010 May 17, 2010
Rulemaking (comments)
Notice of Contract May 6, 2010 July 6, 2010
Proposals FY 2010
------------------------------------------------------------------------
Section 9007_Rural Energy for America Program (REAP)
The Rural Energy for America Program--known formerly as the Section
9006 ``Renewable Energy Systems and Energy Efficiency Improvements
Program''--provides loan guarantees and grants to agricultural
producers and rural small businesses to purchase and install renewable
energy systems and make energy-efficiency improvements.
Renewable energy systems include those that generate energy from
wind, solar, biomass, geothermal sources, or that produce hydrogen from
biomass or water using renewable energy, and ocean and hydroelectric
source technologies. Energy-efficiency projects typically involve
installing or upgrading equipment to significantly reduce energy use.
Energy audits and feasibility studies are also eligible for assistance.
Eligible applicants for energy audits include state, tribe, or
local governments; land-grant colleges and universities; rural electric
cooperatives; and public power entities. Eligible applicants for
feasibility studies include rural small businesses and agricultural
producers.
REAP Performance for FY 2009
----------------------------------------------------------------------------------------------------------------
# Projects Funding Type Grant Only G-Loan Only Combo Grant Combo Loan
----------------------------------------------------------------------------------------------------------------
904 Grants Less Tha$12,040,048
Thousand
199 Grants Greater than $20,000 $11,167,222
380 Combinations $27,774,710.25 $49,007,390.50
2 Guaranteed Loan Only $8,451,638
22 EA/REDA $2,173,631.00
50 Feasibility Study $1,244,600.00
------------ ----------------------------------------------------------------------
1,557 Total $26,625,501.00 $8,451,638.00 $27,774,710.25 $49,007,390.50
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
# Projects Category Sub-Category Grant G-Loan
----------------------------------------------------------------------------------------------------------------
49 Biomass Total $7,431,859 $17,372,569
14 Anaerobic Digester $4,117,368 $6,619,198
7 Biodiesel Production $674,096 $1,341,692
5 Solid Fuel Production $843,936 $754,679
23 Thermal Conversion $1,796,459 $8,657,000
1,099 Energy Efficiency $27,857,621 $18,252,122
7 Geothermal $881,279 $229,599
4 Hybrid $180,916 $133,996
4 Hydropower $464,432 $600,000
166 Solar $5,994,685 $3,399,253
116 Wind $8,171,188 $17,471,490
----------------- --------------------------------------------
1,485 $50,981,980 $57,459,029
----------------- --------------------------------------------
22 EA/REDA $2,173,631
50 Feasibility Study $1,244,600
================= ============================================
1,557 Total $54,400,211 $57,459,029
----------------------------------------------------------------------------------------------------------------
For FY 2010, approximately 75 percent of Rural Energy for America
Program (REAP) funds are being allocated to the states. The total
amount of appropriated and carry over funds for FY 2010 is $99,371,998
($39.34 million in discretionary, $60 million in mandatory, and $31,998
carryover from FY 2009). The following charts identify the allocations
and projected timelines for FY 2010.
REAP Allocation FY 2010
------------------------------------------------------------------------------------------------------------------------------------------------
Energy Audit & REDA $2,400,000
Feasibility Study $9,694,000
Grants of $20,000 or less (allocated to the states) $19,865,706
State Allocation $55,636,292
National Office REAP Reserve $11,776,000
------------------
Total $99,371,998
------------------------------------------------------------------------
REAP Timeline FY 2010
------------------------------------------------------------------------
Date of
REAP--Type of Notice Publication in
Federal Register
------------------------------------------------------------------------
Notice of Funding Availability--Rural Energy for April 26, 2010
America Renewable Energy Systems and Energy
Efficiency Improvements Loan Guarantee and Grants FY
2010
Notice of Funding Availability--REAP Energy Audits Anticipated, May
and Renewable Energy Development Assistance Grants 27, 2010
Notice of Funding Availability--REAP Feasibility Draft Pending
Studies Grants
Notice of Proposed Rulemaking--Rural Energy for Draft Pending
America Renewable Energy Systems and Energy
Efficiency Improvements Loan Guaranteeand Grants FY
2010
Notice of Proposed Rulemaking--REAP Energy Audits and Draft Pending
Renewable Energy Development Assistance Grants
Notice of Proposed Rulemaking--REAP Feasibility Draft Pending
Studies Grants
------------------------------------------------------------------------
Section 9009_Rural Self-Sufficiency Initiative
The Rural Self-Sufficiency Initiative provides grants for the
purpose of enabling eligible rural communities to substantially
increase their energy self-sufficiency. The bill authorizes funds of $5
million per year, beginning in FY 2009 and continuing through FY 2012.
The program awaits implementation. As of June 7, 2010, no funding
has been appropriated.
Farm Service Agency
The Farm Service Agency (FSA) is charged with implementation of two
programs authorized under the Energy Title of the 2008 Farm Bill. These
include the Biomass Crop Assistance Program (BCAP), and the Feedstock
Flexibility Program.
Biomass Crop Assistance Program (BCAP)
The Biomass Crop Assistance Program (BCAP) was enacted in the 2008
Farm Bill as an important component of U.S. energy, environmental and
agriculture policy. BCAP was designed to jump-start the development of
a large scale non-traditional crop base in order to provide expanded
biomass options to carbon-dominated materials used for energy purposes.
As the nation transitions further into the development of the biofuels
sector, BCAP is designed to address a key ``chicken-or-egg'' dilemma:
commercial-scale biomass conversion facilities require an established
large-scale crop base for sufficient feedstock supplies; and
conversely, crop producers require an established, commercial-scale
marketplace to purchase the non-traditional crop. Incentives must exist
for landowners to risk switching from conventional revenue-generating
crops to non-food, non-feed crops.
BCAP has two primary components. The first allows matching payments
to agricultural and forest land owners and operators for the amount
paid for the collection, harvest, storage and transportation (CHST) of
eligible biomass materials by a qualified Biomass Conversion Facility
(BCF). The second allows up to 75 percent of establishment costs and
annual payments to encourage the production of non-traditional
bioenergy crops within designated BCAP project areas. The contracts are
for up to 5 years for annual and non-woody perennial crops or up to 15
years for woody perennial crops.
The President's proposed budget includes preliminary estimates of
outlays for BCAP at approximately $263 million in FY 2010, and $479
million in FY 2011.
On June 11, 2009, FSA published a Notice of Funding Availability
(NOFA) implementing the BCAP matching payments provisions for the
collection, harvest, storage, and transportation of eligible biomass
delivered to a qualified BCF. As of May 31, FSA has disbursed payments
totaling $233,181,656 on 4,551 contracts in 31 states. On February 8,
2010, FSA published a proposed rule for the full implementation of the
BCAP program and suspended the matching payments provisions until
publication of the final BCAP regulation.
FSA accepted comments on the proposed rule until April 9, 2010, and
more than 24,000 comments were received. Public comments are being
addressed and the final rule and environmental impact statement are in
the Departmental clearance process. We are optimistic that the final
regulation to implement the full BCAP program will be completed in the
autumn timeframe.
Feedstock Flexibility Program
The Feedstock Flexibility Program, authorized as a new program
under the 2008 Farm Bill, is to be used to avoid forfeitures of sugar
to the CCC by diverting surplus supplies to bioenergy production.
In implementing 2008 Farm Bill programs, FSA has prioritized needed
regulations to best utilize staff and resources in implementing the
entire suite of programs as quickly as possible. Due to the relatively
high level of sugar prices (and low likelihood of forfeitures), use of
the Feedstock Flexibility Program is not foreseen by FSA in the near
term. Currently, the proposed rule for the Feedstock Flexibility
Program is within the internal clearance process.
National Institute of Food and Agriculture
The National Institute of Food and Agriculture administers Section
9008, the Biomass Research and Development Initiative with the
Department of Energy. The objectives are to develop technologies and
processes necessary for abundant commercial production of biofuels at
prices competitive with fossil fuels, and high-value biobased products.
These objectives are expected to enhance the economic viability of
biofuels and power; serve as substitutes for petroleum-based feedstocks
and products; and enhance the value of co-products produced--all of
which will result in a diversity of economically and environmentally
sustainable domestic sources of renewable biomass for conversion to
biofuels, bioenergy, and biobased products.
The legislation describes three technical areas that must be
addressed, including Feedstocks Development, Biofuels and Biobased
Products Development and Biofuels Development Analysis that includes
assessment of Federal land. Since 2009, NIFA and DOE have administered
Section 9008 which includes managing active projects previously awarded
through Rural Development, as well as leading the program with DOE in
2009 and 2010. This program has been very competitive since it was
first authorized in the 2002 Farm Bill. Last year, over 800 pre-
applications were received in response to the funding opportunity
announcement. Of those, 108 invited full applications were reviewed and
12 awards were made, nine by USDA and three by DOE.
As a joint program, USDA and DOE collaborate on drafting the
solicitation, selecting reviewers and administering the peer review
process. Beginning last year, the DOE Office of Biomass Program and the
DOE Golden Field Office are responsible for administering the pre-
application process and NIFA is responsible for administering the full
application process. Each agency makes final selections independently
based on program policy factors, e.g., the contribution of projects to
each agency's bioenergy portfolio.
Currently the funding opportunity announcement for pre-applications
is open until July 13, 2010. Pre-applications will be peer reviewed in
August 2010, invited full applications will be peer reviewed in early
January 2011, and awards will be made in February-March 2011. In 2010,
$28M in mandatory USDA spending is authorized, and DOE has also
committed $5M. Last year, in addition to addressing at least one of the
three technical areas, all applicants were required to give
consideration to a life cycle perspective of the technologies being
proposed.
This year, applicants are required to integrate all three technical
areas to accelerate technology implementation and to address
sustainability in the fullest sense: renewable resources, beneficial
environmental, economic and social impacts.
This year, technical areas have been expanded to emphasize small
scale conversion technologies, local-scale woody biomass-to-energy
conversion, new industrial crop and bioproduct development, and field
testing of biobased products to industry standards and specifications.
Products of interest include lubricants, hydraulic fluids, solvents and
packaging materials. We anticipate that biobased products, as well as
biofuels, will play a prominent role in reducing our reliance on
petroleum.
In addition, the FY 2010 solicitation supports models that focus on
public lands regarding the current and future potential for feedstock
development, including analysis of new policy approaches to stewardship
contracting, forest ecosystem restoration post-insect and disease
outbreaks, invasive species management, low-value or dead/dying wood,
and grassland restoration projects.
A team within NIFA has been organized to develop a post award
evaluation process to ensure we capture all the outcomes and impacts of
the program and to ensure that research results and technologies are
disseminated as appropriate. Post award evaluation will also allow us
to more easily identify knowledge gaps as we move forward.
Thank you for the opportunity to describe our successes and
challenges in implementing the Energy Title of the farm bill. We are
happy to respond to any questions at this time.
The Chairman. Thank you, Ms. Cook. Mr. Goodlatte has
indicated he will submit his opening statement for the record.
Ms. Cook, it is the understanding of this Subcommittee that OMB
does not testify at hearings outside of their committee of
jurisdiction so our request for them to appear was not approved
for today's hearing. However, it has come to our attention that
several rules and regulations sent to OMB by USDA were not
promptly acted on and were held up at OMB for months. In your
opinion, what contributed to the hold up at OMB and why did it
take months for OMB to approve some of the rules? And we are
talking about the Loan Guaranty Program and BCAP.
Ms. Cook. In my opinion, Mr. Chairman, there really wasn't
a hold up. There are capacity issues, to be sure. Understand
that in the farm bill, we had not only the Title IX energy
programs to stand up in Rural Development, we also had several
programs from Title VI, particularly the Rural Micro-
Entrepreneurship Assistance Program, and changes to the Value-
Added Producer Grant program. All of those things were moving
forward simultaneously, and they all move forward to one
employee, one examiner at OMB, who is responsible for all
things dealing with the Rural Business Cooperative Service. She
walked shoulder to shoulder with us every step of the way. I
have no complaints. There are maybe three occasions where she
has actually saved me from myself in the last 15 months in
which I have been back at USDA. I believe OMB has been a good
partner in this effort to stand up many, many programs.
The Chairman. Okay. There have been a lot of complaints in
regard to BCAP. Could you please tell the Committee for the
record why USDA chose to proceed with only making payments
under the collection harvest, storage, and transportation
portion of the program and disregarded the other portion of the
program, and why did USDA only implement and make payments on
half of a program? Is this a common practice? Mr. Coppess?
Mr. Coppess. Thank you, Mr. Chairman. We proceeded with a
NOFA on the collection harvest, storage, and transportation--
NOFA being Notice of Funding Availability--pursuant to the
Presidential directive in early May, and NOFAs are very common.
Deputy Under Secretary Cook knows this, Rural Development uses
the NOFA process quite a bit, so it is a very common process
when you are dealing with a mandatory program in which there is
little discretion for the agency or the Department. Congress
says do this series of things and that is what we go out and
do. So with a NOFA it was an opportunity to begin implementing
this program early. It certainly has been, as you mentioned, a
couple years since the farm bill has had a chance to get the
program, at least part of that program, up and running and see
how it worked on the ground. We have seen quite a bit of
interest and response to it, so it was not an uncommon process
but certainly one that has provided incredible feedback and
information for us in the rulemaking process.
The Chairman. This Subcommittee and full Committee have
been struggling with conflicting definitions of renewable
biomass with the farm bill and EISA; and we see it as a real
problem to being able to take advantage of our resources for
energy development. We have asked the Speaker to address this.
I just wonder if anyone would like to comment about how serious
a problem these conflicting definitions are for the intent of
Congress for the farm bill.
Ms. Cook. Obviously, the more we can harmonize definitions
the better. So says the Deputy Under Secretary with ten
different definitions of the term rural area. Our belief from
USDA is that this Committee and the farm bill has the right
definitions, and that is what we support.
The Chairman. Thank you. The chair recognizes the Ranking
Member, the gentleman from Virginia, Mr. Goodlatte.
Mr. Goodlatte. Thank you, Mr. Chairman. Ms. Cook, welcome.
Why was the rural area requirement included in the Notice of
Contract Proposal for the Fiscal Year 2009 and 2010 Bioenergy
Program payments?
Ms. Cook. It is consistent with Rural Development's
definitions throughout the Rural Business Cooperative Service
programs. That is how we proposed it. We specifically solicited
comments on that issue in the proposed rules on that program.
Mr. Goodlatte. It seems to me that if you are buying
biomass from farmers producing it in rural areas but they are
actually putting it into facilities that are not located in
rural areas, you are not helping farmers when you do that.
Ms. Cook. I can appreciate your position, Mr. Goodlatte. I
would encourage you and any of your constituents who share that
view to submit comments to us. The more comments we receive the
easier it is for us to make adjustments.
Mr. Goodlatte. Why was the domestic ownership requirement
included in the Notice of Contract Proposal for the same 2
years payment in the proposed rule for the Bioenergy Program?
Ms. Cook. The same answer really. That is consistent with
how we handle Rural Development programs generally. In this
economy given our interest in attracting investment of all
kinds to rural America to bring new capital into rural areas,
that is another issue on which we are hoping to receive
comments and perhaps reconsider in the final rule.
Mr. Goodlatte. Does it make any sense to restrict
assistance to biofuel facilities located in the United States
employing American workers and utilizing feedstock produced in
rural America?
Ms. Cook. Certainly, we want to create jobs and we want to
create products and market opportunities that benefit rural
people irrespective of where their project ultimately is
located.
Mr. Goodlatte. Or who is financing it, right?
Ms. Cook. I can't disagree with that either. If you think
about things like blender pumps, for example, you want those up
and down the I-95 corridor in the most densely populated urban
areas even though the producers of the biofuel that goes into
that blender pump are probably farmers and rural people.
Mr. Goodlatte. Well, was any analysis done on which to base
these requirements?
Ms. Cook. Again, that is part of the rulemaking process. We
are hoping to receive comments. We are hoping to receive
further analysis from others in the field and----
Mr. Goodlatte. I know, but you have already spent a lot of
the money without figuring out--I mean the President made this
commitment to push all the money out the door in 30 days. You
know, that is great. People want to see the money spent. But
where was the analysis on how to spend it wisely and how to get
the maximum bang for your buck, if you will?
Ms. Cook. We have been engaged in what I will call a
balancing act for the last year and a half wanting to be
thoughtful, to be careful in how we adopt final rules.
Obviously the rulemaking process that goes through the Federal
Register is transparent. Public comment is part of the process
that we have for creating program rules. But we had to balance
that with an economy in which we simply weren't getting the
private sector to participate. We had ethanol companies that
had never missed a payment to their lender calling us up to
tell us they would have their working capital cut off. We were
trying to balance the need to get capital out as quickly as we
could to create jobs, to assist with our objectives under the
American Recovery and Reinvestment Act and all of our other
Rural Development programs, with the need to go through the
public comment period and be as thoughtful as we can in
developing final rules.
Mr. Goodlatte. And you couldn't get the public comment
period accomplished in a year and a half?
Ms. Cook. Public comment period on these proposed rules
closes next week. I don't know off the top of my head how many
comments we have already received, but I can assure you we will
move as expeditiously as we possibly can.
Mr. Goodlatte. When was the regulation written that called
for the start of the public comment period?
Ms. Cook. You are asking me when the proposed rule was
published?
Mr. Goodlatte. Yes.
Ms. Cook. April.
Mr. Goodlatte. April of this year?
Ms. Cook. Yes, sir.
Mr. Goodlatte. Why did it take until April of this year to
do that?
Ms. Cook. A number of reasons mostly having to do with
capacity. We did have NOSAs out, and we were recruiting
applications. We had to process those.
Mr. Goodlatte. Capacity meaning you didn't have enough
people in your office?
Ms. Cook. Staff capacity, yes. We were also standing up the
American Recovery and Reinvestment Act with additional funding
for the Business and Industry Loan Guarantee Program at the
same time, and developing new rules for several programs out of
Title VI of the 2008 Farm Bill that also came under the Rural
Business Cooperative Service purview.
Mr. Goodlatte. And you couldn't get all those launched at
the same time?
Ms. Cook. Something had to go in order. Something had to be
first, something had to be last.
Mr. Goodlatte. You can't multi-task? That seems to be the
thing day these days, to multi-task.
Ms. Cook. We do have plenty of funding left. The notices
that are out, the applications that we are recruiting now for
these funds are not for the full amount of funding available
even in this fiscal year. Our hope is that as we complete the
process of rulemaking we will be able to put out a second
Notice of Funding Availability, second opportunities in 9003.
Mr. Goodlatte. Well, let me ask you this. If the rural area
requirement is not included in the proposed rule for the
Bioenergy Program, why would the U.S. Department of Agriculture
keep it in the subsequent Notice of Contract Proposal that was
issued for Fiscal Year 2010 payments?
Ms. Cook. I am sorry. I didn't hear your question. Would
you mind asking it----
Mr. Goodlatte. I will repeat it. If the rural area
requirement is not included in the proposed rule for the
Bioenergy Program, why would the Department keep it in the
subsequent Notice of Contract Proposal that was issued for
Fiscal Year 2010 payments?
Ms. Cook. To be consistent with the Notice of Contract
Opportunities from the previous fiscal year.
Mr. Goodlatte. But are we never going to change? Do we
always have to be consistent with the previous year?
Ms. Cook. The way to change it is through the rulemaking
process.
Mr. Goodlatte. But you started the process without the
rulemaking process and now you are saying you can't change it
without the rulemaking process?
Ms. Cook. Yes, sir.
Mr. Goodlatte. Why? If you could start it without it why
couldn't you change it without it?
Ms. Cook. We will change it in the rulemaking process.
Mr. Goodlatte. But not before?
Ms. Cook. Correct.
Mr. Goodlatte. Why weren't the rural area and domestic
ownership requirements raised by the Department for discussion
at the public hearing that the USDA held before the Bioenergy
Program Notice of Contract Proposal was issued?
Ms. Cook. I am afraid that predates me, Congressman. I
don't know. Let me confer with staff if you would indulge me
for a moment.
Mr. Goodlatte. Thank you.
Ms. Cook. My understanding is that that meeting was only a
listening forum on our part. We didn't offer comment to the
public. We listened to the public's interests on those
programs.
Mr. Goodlatte. Did anybody on your staff know that this was
a potential issue that might have been flagged for the people
in the hearing?
Ms. Cook. It was considered, yes.
Mr. Goodlatte. But not discussed publicly?
Ms. Cook. Apparently not.
Mr. Goodlatte. Okay. Thank you. Mr. Chairman, I have
exceeded my time. Thank you very much.
The Chairman. The chair thanks the gentleman, and
recognizes the gentleman from Ohio, Mr. Boccieri.
Mr. Boccieri. Thank you, Mr. Chairman. Ms. Cook, I want to
re-emphasize some quotable items in your testimony. You
suggested that renewable energy is largely rural energy.
Biomass feedstocks are generated from farm and forest.
Hydroelectric, solar, geothermal developments will largely be
located in rural areas. Agriculture is energy intensive and
improved energy efficiency is therefore an important
consideration for agriculture producers. You go on further to
say that with rural broadband local foods and local markets and
broad-based rejuvenation of rural business, renewable energy
development is among the drivers supporting the revitalization
of the rural economy. You also suggest that the implementation
of energy programs has been largely and severely delayed due to
a change in the Administration, and bottom line is that
implementation has been slow, delayed, and in some cases highly
controversial. I ask you does USDA believe in the statements
that you just made? Are there members within the agency that
don't appreciate or concur with your testimony today?
Ms. Cook. Our testimony went through the normal clearance
process which would have included the Department level review
as well as OMB and others.
Mr. Boccieri. Since the previous Administration vetoed
twice the farm bill, is it your belief that there are some left
over from the previous Administration who don't concur with the
statements that you made?
Ms. Cook. I don't know, sir.
Mr. Boccieri. I find it a little bit ironic that we are
talking about energy and conservation, and most of those are
going to be beneficial to the rural community, especially since
it is such a highly intensive energy user. Even in the energy
bill that went through the Congress this year we have seen that
there is quite a bit of investment into rural communities as
well as exemption from quite a few of the provisions of that
bill. Can you comment to that?
Ms. Cook. No.
Mr. Boccieri. Okay. Well, I know that there is a lot of
controversial talk about some of these energy provisions. I
just do not see how saving farmers money on their energy is
controversial, and I don't know how this Administration, the
``Agriculture Administration,'' is suggesting that these are in
some way controversial when they can save so much money
according to your own words.
Ms. Cook. We have already discussed one point of
controversy, which is how one defines biofuels. As I stated
earlier, our position is that the farm bill has the right
definition. There are other points of controversy, however, and
they have mostly to do with things that are beyond this
Committee's jurisdiction as well as USDA's, for example, how
quickly we can get renewable electric projects to the grid.
There are issues that are going to have to be dealt with on a
broader level by Congress. We have a structure that was
anticipating a nationwide competition in electric that just
doesn't seem to be happening, and we have a number of grantees.
We have worked closely with Committee staff on this and
appreciate their hard work. We have a number of grantees under
the old 9006 program, which is now 9007 or REAP, who are in
danger of not being able to use the funds that we have awarded
them in prior years because they simply can't get their
projects to the grid.
Mr. Boccieri. I would concur that the cheapest energy is
the energy we never use, and that is a position that I think is
widely held by a lot of farmers especially in Ohio where the
number one industry in the state is still agriculture. One of
every seven jobs is connected to it. It is an over $80 billion
business so anything that we can do to get those loans, those
guarantees out to the farmers quickly and expeditiously, I
think is of benefit for us all. I know there may be some who
may not agree with that. In fact, vetoing the farm bill twice
is a pretty strong position that perhaps they don't agree with
the remarks that you have made and the remarks that I think are
shared by many farmers in the State of Ohio. Thank you, Mr.
Chairman.
The Chairman. The chair thanks the gentleman, and
recognizes the gentleman from Kansas, Mr. Moran.
Mr. Moran. Mr. Chairman, thank you. Secretary Cook, thank
you. I want to pick up in part where Mr. Goodlatte left off. I
have been trying for a long time to get USDA to recognize their
flawed definition under the 9005 Bioenergy Program as it
relates to U.S. companies. I raised this topic in October of
2009 with Under Secretary Tonsager, who was seated where you
are seated. I raised this topic with Secretary Vilsack, who was
seated where you are seated last April, and on both occasions
was assured that they recognized there were problems with the
definition of a U.S. company under that definition, and what we
are talking about is 51 percent for an ownership. Yet, the
Notice of Contract Proposal continues to--in fact, 2 weeks
after the Secretary tells me he knows there is a problem, you
issue the Notice of Contract Proposal with the same definition
included. And, again, I guess to highlight Mr. Goodlatte's
conversation, if we know there is a problem, it is not
statutory. The problem was not created statutorily. You created
this definition on your own, why can't we fix it especially
when the notice is being apparently, I assume, written at the
same time the Secretary assures me that we are going to get
this definition--I don't want to put those words in his mouth--
indicated there is a problem and we are looking at it, we are
going to resolve it.
He didn't tell me he was going to agree with my definition
but indicated that something was going to happen. Yet, the
proposal continues to use the same definition--excluding
companies that are U.S. companies that are in the process of
creating bioenergy, cellulosic ethanol in the case of a Kansas
facility, and yet USDA is excluding them from participation in
this project.
Ms. Cook. Again, Congressman, the notice that is out
currently is not for the full amount of money that is
available. Our intent is to publish a second round after the
final rule is published. The process by which the Secretary is
able to acknowledge that there is a problem and address it is
in the rulemaking process, and that is where we will address it
based on the comments that we receive.
Mr. Moran. So the Secretary has no authority to change or
modify the second Notice of Contract Proposal. His only
authority is through rulemaking process?
Ms. Cook. I won't speak to the Secretary's authorities. I
will speak to the process by which we create a program under
the farm bill. It is through the rulemaking process with full
transparency and full opportunity----
Mr. Moran. Does USDA never change a Notice of Contract
Proposal?
Ms. Cook. I don't know the answer to that question.
Mr. Moran. Again, it just seems to me that if we recognize
there is a problem it ought not be perpetuated while the
process which is very slow and cumbersome continues, and
especially to have the definition restated 2 weeks after I am
told we are going to address this issue. Let me turn to Mr.
Coppess. Again, a concern or complaint with USDA: It is only
marginally related, I suppose, to the topic of today's hearing
but I don't have the opportunity to question the FSA
Administrator too often. But I again raised this topic with
Secretary Vilsack when he was here in April and it is the CRP
sign-up, and we are running out of time. Come July in Kansas
and other western states, as you know, Mr. Coppess, we have to
destroy cover if we are going to plant crops, and we still do
not know when a sign-up is going to occur in regard to a
general CRP program.
Mr. Coppess. Understood, and I certainly understand your
concerns. We are, to go back to the rulemaking process a bit,
we are in the final stages of that for the CRP general sign-up
expecting both the environmental impact statement and the final
regulation to come out in the near future, this summer. I do
not have a time-frame for you at this point in time, of when
that will be published and when exactly we can begin the
general sign-up. It is our goal to get there as quickly as we
can.
Mr. Moran. What is the delay in being able to announce a
date so farmers or landowners at least can know whether they
have a shot at signing up for CRP? If your sign-up date is
after July 1, we need to know that because our landowners are
going to make a different decision than if your sign-up is June
29. There is a point in time in which there is a practical
consequence to this delay in the decision which means
landowners either can participate or they can't. As long as
USDA keeps saying we are going to do this as soon as possible
no one can make a decision.
Mr. Coppess. I understand, and, again, I cannot peg a date
right now at this point in time. We are moving that as quickly
as we can. Believe me, I hear the same thing from farmers. I
hear the same thing from our county office staff. Our field
staff are hearing the questions throughout the country. There
is a significant interest in the general sign-up, and we want
to get to that as soon as we can. Obviously, our concern is if
you put a date out and you miss it then you have a problem that
way as well, so we are kind of between a rock and a hard place
at this point. What I can tell you is that we are trying to
move that as quickly as we can.
Mr. Moran. Is the EIS complete?
Mr. Coppess. The EIS is complete and should be published
soon, as I understand.
Mr. Moran. Thank you, I guess, for your answer. Thank you
for responding to me. And, again, I would just stress the
importance of this timing. There are practical consequences
that can't be overcome with this delay. Thank you, Mr.
Chairman.
The Chairman. The chair thanks the gentleman, and
recognizes the gentlewoman from Pennsylvania, Mrs. Dahlkemper.
Mrs. Dahlkemper. Thank you, Mr. Chairman, and thank you,
Secretary Cook. I want to ask you, as a Member from
Pennsylvania I am very interested in the ways that our farmers
can work to create sustainable energy resources around our
country. Recently, we have all been reminded about how fragile
the U.S. energy supply can be, and I believe it is vital to our
nation and to our national security to continue to develop
alternative sources of energy. In my district alone, I have
seen a great promise of biofuels to the agriculture community,
and I have also seen the failures of many of the programs
developed under the farm bill. In my district, we have a
biofuel producer called HERO BX, who cannot even try for loans
under the Title IX programs because they are not deemed a rural
entity. They are completely shut out because of that rural area
requirement.
HERO BX has proposed expanding the USDA population
boundaries, and this seems like a much more reasonable
definition, of a city versus 50,000 being the definition. I
know many of the other Members have concerns about the rural
classifications as well. And could you comment on any proposals
to increase the population definition of rural so that we might
include these important companies in biofuel programs, and just
for your information they are located in the City of Erie, and
the City of Erie's population is just a little over 100,000,
and so you find farms within a few miles of the biofuels plant.
So can you comment, is there any consideration at all to
changing this requirement to allow more producers to be
qualified for these loan requirements?
Ms. Cook. Congresswoman, thank you for that question. As
you know, I am also from Pennsylvania--I love my job, first of
all, let me tell you. I have the best job in the Federal
Government. But the one thing about my job that drives me
insane is trying to define rural areas. As you know, most of
our definitions are provided in the farm bill. There are a few
that go through a different committee because of the housing
programs and the Housing Act of 1949, but most of our
definitions come to us through the farm bill; the farm bill
provides the default definition, that is the business program
definition that a rural area is any place except a city, town
or unincorporated area of 50,000 or less and adjacent urbanized
areas. In a state like Pennsylvania, that can be quite a
challenge.
The farm bill goes on to define rural area in other
programs as something slightly different. For example, in our
Water and Wastewater Disposal Program, the definition is any
place except a city, town, or unincorporated area of 10,000 or
less, but without that language about adjacent urbanized areas.
So in Pennsylvania in a prior life when I had the privilege of
serving as Pennsylvania's State Director for Rural Development,
we went to many, many small towns in western Pennsylvania with
the Water and Wastewater Disposal Program to put that
infrastructure in place. We were then often unable to go back
with business programs and now with energy programs because of
the adjacent urbanized area language that made it impossible to
help with the business start-ups and expansions that would use
the infrastructure that we put in place with the Water and
Wastewater Disposal Program.
Our next opportunity to address you more directly on this
is with the report we owe you from the 2008 Farm Bill. Section
6018 asked us to provide a report back to Congress on all the
different definitions that we have, and some of the challenges
that has created for us in delivering programs. You will be
getting that as soon as we can get it into the clearance
process, but we look forward very much to working with you in
the next farm bill in addressing this, not just in the energy
title but in all of Rural Development's programs. We want to
get a better sense of what is rural, what role should rurality
play in Rural Development's programs, and try to come up with a
definition that is equally sensible in New Jersey and New
Mexico.
Mrs. Dahlkemper. Thank you. I appreciate it and look
forward to the report. I also have a question about the BCAP
program. Federally funded research through the USDA ARS found
that more than 95 percent of the bark supply in the United
States has been utilized as a value-added product that exists
in an established market. Has USDA conducted a comprehensive
economic impact study, including a thorough cost-benefit
analysis of the potential economic impacts that BCAP subsidies
will have on agriculture industries that rely on bark, bark-
based materials and mulches as value-added products for the
production of agriculture crops?
Mr. Coppess. We have done cost-benefit analysis and
economic analysis for the proposed and final rule. As I said, I
don't know if we have a more detailed set of research within
the Department on that issue. We certainly heard concerns about
that as we have operated in the Notice of Funding Availability,
and we are working in the final rule to address those issues
exactly how we do it and how that comes out. It is still under
process as we review comments and try to review the proposed
rule for a final set of parameters on that.
Mrs. Dahlkemper. So you can't tell me what the economic
analysis has found at this point, the impact analysis?
Mr. Coppess. I don't know it off the top of my head as far
as if we specifically did an analysis that you are talking
about. I have not seen that specifically on the bark.
Mrs. Dahlkemper. So has there not been or has there been an
economic impact analysis on this?
Mr. Coppess. There is a general cost-benefit----
Mrs. Dahlkemper. You are talking about bark, bark-based
materials, landscape mulch, nursery greenhouse growing medium,
those type of products.
Mr. Coppess. We have done the overall program cost-benefit
analysis. I do not know of a specific one on bark, mulch, and
that sort of connection.
Mrs. Dahlkemper. It is a big part of the agriculture
industry, and I would appreciate if you would consider doing an
impact analysis on that, and I would like to see any
information on that that you have. I would appreciate that. And
my time has expired. I yield back.
The Chairman. The chair thanks the gentlewoman, and
recognizes the gentleman from Pennsylvania, Mr. Thompson. Oh,
the gentleman from Texas has returned. I recognize the
gentleman from Texas.
Mr. Neugebauer. Thank you, Mr. Chairman. And you may have
addressed this question. I am sorry but I wanted to hear your
response. The definition of what qualifies as an advanced
biofuel in the energy title is very inclusive. That is due to
the definition of renewable biomass that many on this Committee
prefer to the one included in the Clean Air Act. I find it of
concern that the May 6 NOCP for the Bioenergy Program requires
facilities to be producing fuels that meet the RFS to be
eligible for funds. In other words, you are using the
definitions in the Clean Air Act to determine the eligibility
for a farm program. Why is USDA changing the definition that
Congress intended and is the EPA influencing the USDA
administration of these farm bill programs?
Ms. Cook. I did address this earlier. Obviously, the more
we can do to harmonize definitions the better, but USDA does
believe that the farm bill definitions are the right
definitions. They are the ones that provide the best
opportunity to America's farmers and ranchers, and it is an
area where we are hoping we get lots of comments from Members
of Congress and their constituents.
Mr. Neugebauer. But, if I understand this, the May 6
document for the Bioenergy Programs requires facilities to be
producing fuels that meet the RFS to be eligible, and the RFS
definition is different than the one in the farm bill. Why are
you requiring one that is different than the farm bill?
Ms. Cook. We did that for the sake of consistency but
please understand that that notice went out after the proposed
rule had gone out, and once the proposed rule goes out then
that process is in motion, and we are specifically requesting
comments on areas like this so that when we get to a final rule
and a permanent program, we have the best product we can for
American agriculture.
Mr. Neugebauer. So my friend, Mr. Goodlatte, is trying to
ascertain here where we got ahead of the rules and now we are
trying to come back and fix the rules, but we can't fix it
until we get the rules in place?
Ms. Cook. It is a delicate balance. What we are trying to
do is get dollars out in an economy where rural America needed
investment. We are trying to put capital out there on the
street as quickly as we could, but not all of it because we do
recognize that the way you get to a final permanent program is
through the rulemaking process. So our intent is to offer a
second bite of the apple, if you will, once we have the final
rule in place.
Mr. Neugebauer. Well, just for the record, I want to be
clear that many of us worked very hard on the farm bill, and we
thought we were making farm policy. And I am not sure I agree
with everything that the EPA is doing, and I am concerned about
this Administration using EPA to implement some things that
this Congress has not passed into law. I want to be on the
record as saying that I hope, and it is the intent of this
Committee, that you follow the farm bill for the implementation
of this program. If you want to do something different than
that, I suggest you take a legislative approach and not an
administrative approach, but this is the law that was passed.
This is the definition that was intended, and I hope that you
will abide by the law.
Ms. Cook. Thank you, Congressman.
Mr. Neugebauer. With that, I yield back.
The Chairman. The chair thanks the gentleman and recognizes
the gentleman from Michigan.
Mr. Schauer. Thank you, Mr. Chairman. Thank you for your
testimony. I will address this to you, Ms. Cook, you mentioned
an agency wide commitment to the implementation of the energy
title of the 2008 Farm Bill. Given that the issue falls under
multiple departments the ultimate question is who is in charge.
Let me give an example: Section 9008, the Department of
Energy's biomass programs in the Golden Field office have
jurisdiction as does the USDA's National Institute of Food and
Agriculture. So who is in charge, how is the coordination
happening, who takes the lead? I am from Michigan, but I think
every Member feels this way given the fact that we need jobs
and rural America is an engine, in Michigan it is a $70 billion
industry. Agriculture is the second largest industry in the
industrial sector. But given the fact that we need jobs, give
me some good news about the fact that Bioenergy Programs within
the Administration and under this farm bill can quickly create
jobs, can quickly generate jobs.
Ms. Cook. Let me answer your question which is who is in
charge. That is Tom Vilsack. Secretary Vilsack has convened an
energy council coordinating committee of all of the agencies
and offices in USDA that have a role to play in energy. That
group is meeting weekly and reporting through the Secretary's
senior advisor for renewable energy to the Secretary himself.
We are making sure that the left hand knows what the right hand
is doing, and to the extent humanly possible we are keeping
each other informed and leveraging each other's resources. And
as the BRDI process has shown, we are also reaching outside of
USDA to the extent possible to coordinate with other Federal
agencies and help them spend their money in rural America too.
Mr. Schauer. Any other comments about job creation in the
short term as a result of this title of the farm bill?
Ms. Cook. Based on investments made last year by Rural
Development in about 3,000 businesses that we have created
7,000 jobs in rural America. Equally important, though, is to
recognize that the biofuels industry especially is already big
business in rural America, and we have worked very hard to save
the jobs that are already there. As I mentioned earlier, we
have had ethanol companies in particular that never missed a
payment to their lender have their working capital cut off just
because of the state of the economy and lender nervousness. We
have worked hard through our Business and Industry Guaranteed
Loan Program to shore those businesses up and keep those jobs
in rural America. We believe that consistency and that
demonstration of commitment by USDA is what will draw lenders
into these renewable programs in Title IX.
Mr. Schauer. Thank you. Final comment. For the record, Jim
Turner, the Michigan Director, is doing a very good job as is
Christine White, the FSA Director. Thank you.
Ms. Cook. Thank you. I know them both well, and I agree.
The Chairman. The chair thanks the gentleman, and
recognizes the gentleman from Pennsylvania, Mr. Thompson.
Mr. Thompson. Thank you, Mr. Chairman, and Ranking Member,
and thanks to the panel for your testimony, and specifically
Ms. Cook for your past service in Pennsylvania with USDA and
also with the Department of Agriculture in the state there. My
question, I am always critical of any product or program that
needs huge government subsidies in order to turn a profit, and
the whole definition of what is viable. And the farm bill is
just one example of Congress authorizing billions of dollars,
obviously, for such subsidies since specifically we are talking
about alternative forms of energy, and we want to make sure it
is a proper investment going forward into the future.
So my question is how far away are we from having these
renewables be viable on their own without massive government
assistance? Essentially, if the subsidies stop today, how many
of these would truly be viable on their own in terms of being
productive cost effective?
Ms. Cook. This might require a team approach, Congressman,
but I will start if that is all right with you. Most of what
Rural Development does in the energy field, and for that matter
in business development in general, is in the form of loan
guarantees. In other words, there really is no subsidy. We are
simply co-signing the note, if you will. They are borrowing
money from a private sector lender and in the event the loan
goes bad and they are not able to fully repay that loan, we
would ask the lender to do all the normal servicing actions and
at the end of the day if there is a loss then the government
would step in and cover a percentage of that loss.
Very rarely do we have outlays in our loan guarantee
programs. I won't say never but very rarely. We believe that
that is the most effective way to use taxpayer funds. We get
the best leverage of all with loan guarantee programs and that
is why we focused on rolling those out. As to the viability of
those projects, frankly, we rely very heavily, especially in
the 9003 program on the Department of Energy and their
expertise in helping us understand the feasibility of some of
these things. Who knew you could use algae for a fuel? That is
certainly not an area of expertise for USDA Rural Development,
and so we have relied heavily particularly on the Department of
Energy to give us that guidance.
Mr. Thompson. And in terms of obviously deciding which ones
to go forward with investing taxpayer dollars, then I am
assuming there are economic studies or models that are done as
a part of vetting which alternative energies really have the
efficacy studies to say this is a good investment for America.
This is going to pay off and turn around.
Ms. Cook. We look at feasibility from a number of angles.
We look primarily at the technical feasibility and scientific
feasibility of some of these very new technologies, but
historically we look at feasibility in terms of the
competencies of the management. We look at feasibility in terms
of the regulator environment where this project is to be
located. We look at a whole range of things to ensure that we
are making as good of an investment of taxpayer dollars as we
can.
Mr. Thompson. Thanks. I wanted to just touch on unintended
consequences because those tend to happen. Actually over the
past 18 months, I have heard a fair amount from different
constituents in business regarding what appears to be an
unintended consequence of the BCAP program. You know, it is
inflating the feedstock, specifically woody biomasses can be
used for energy, also has other uses, obviously, whether it is
wall board. There are other industries that are not energy-
related that are using that, and the complaints they brought to
me is how it is driving up because of the government subsidies,
BCAP, and maybe others, I am not sure. It is actually
inflating--they tell me that when they go to market they see
the cost they are competing with to purchase that ingredient
that they need, that basic feedstock, and I don't know if you
have heard anything similar to that, and, if so, has USDA--any
response to that?
Mr. Coppess. I will take that one, I guess, on the BCAP
topic. Certainly, we have heard some of the same concerns. We
have heard anecdotally, and it has been written about in
articles. We have not seen any documented evidence where it is
driving from one area to another or that there is somebody
losing out on that, but there is a significant concern. We have
gotten very valuable information as we ran through this NOFA
process and saw the collection harvest, storage, transportation
payments out in the field and what they did, and we have taken
that into the final rulemaking and are looking at how we can
adjust that. Certainly, under the statute when it comes to
Federal lands you have a restriction on any higher value-added
purpose, but that cannot be an eligible material but does not
apply to private lands. So we are looking at that at how we can
do that in the rulemaking if there is a way to make it more
consistent and address the concerns that we have heard as well.
Mr. Thompson. Okay. Thank you. And some of the concerns I
have heard have been around private lands but also obviously
the forest lands. With those--Ms. Cook knows the Allegheny
National Forest in my Congressional district is rather large,
413,000 acres, a lot of timber there that adds a whole
different dimension to it. A lot of frustration too because
there is a lot of downed timber on those Federal lands that is
sitting there creating disease and forest fire potential and
yet because of a statute that Congress passed, they are not
able to harvest and use that. They see it as just a resource
that could be used. So thank you very much. Thank you, Mr.
Chairman.
The Chairman. The chair thanks the gentleman and recognizes
the gentleman from Idaho, Mr. Minnick.
Mr. Minnick. Mr. Coppess, I am disturbed by your answer to
Mr. Thompson's question about whether you have gotten
definitive feedback that the BCAP subsidy is not having
substantial disruptive effect on traditional users of bark and
other forest residue. I come from Idaho. It is a very heavily
forested state. I have personal experience in the nursery
industry and also in the forest products industry, and I want
to assure you that my constituents representing those two
industries are extremely upset and distressed because it is
having substantial impact on their cost structure and even
their economic viability. The USDA ARS did a study that showed
that 95 percent of the bark is going currently to value-added.
It is used as a fuel or it is used as mulch in these two
industries, and that 95 percent of the bark currently goes to
those uses.
And it is obvious if you are going to give a subsidy to
divert this raw material to other uses, it is going to cause
the traditional users to have to pay that subsidy and more to
continue to get access to this product. Now Mrs. Dahlkemper,
when she spoke, mentioned the nursery industry. The container
nursery industry is about a $17 billion industry, $17 billion,
and almost every container grown product: trees, shrubs, needs
bark in order to produce. Every forest products processor has a
boiler. Bark is a principal feedstock in that boiler so it is
obvious that whatever subsidy you provide is going to have a
substantial cost impact and impact the cost of not just what
these industries produce but indirect impacts on what everybody
pays.
Everybody uses paper. Everybody uses lumber in some form or
another and by increasing the cost through the BCAP program you
are affecting every consumer in America. So I would urge you,
one, to do that cost benefit analysis that you indicated in
response to Mrs. Dahlkemper's question you are considering,
and, two, that you have a finding as you define the end-uses to
which these products go and the sources from which they come
that allows these traditional industries to continue to have
access to the raw materials. Is that something you contemplate
doing?
Mr. Coppess. Thank you, sir, and I want to be very clear
that I wasn't downplaying it or saying that that concern
doesn't exist and the problem isn't out there. We have
certainly heard that, and I understand your point completely.
That is why in this final rulemaking process, that is one of
the main areas that we are looking to address how we remain
consistent across lands and how we address any of the issues
with competition for feedstock among various industries.
Certainly, there are jobs, there are businesses at stake, and
we do not take that lightly.
Under the Notice of Funding Availability, which has been
terminated and is no longer in operation is when we heard that
concern and we have taken that feedback and we will use that in
the final rule. So I definitely understand the concerns and we
can address that and try to deal with it in a way in the final
rule that will help avoid those sort of problems on the ground.
Mr. Minnick. In defining these final rules, are you
predisposed to try to protect the existing users of this raw
material or is it simply all up in the air? Are you inclined to
try to protect these important producers? I have paper makers
in my district that don't know whether they are going to be
able to operate because they have to make commitments with
respect to raw materials and markets that are simply not going
to wait while you engage in this rulemaking and could force
them into substantial operating losses unless you provide them
under those rules with some protection for their existing
sources of raw material.
Mr. Coppess. And that is certainly a significant
consideration and we are not ignoring that. We have heard very
loud, very clearly the concerns about that on the ground in
specific areas. Obviously, different parts of the country you
have different concerns and different issues that come up, so
what we are looking at doing is to tailor that final rule, keep
within the statutory language and the intent of Congress and
the regulation, but narrowly work on that rule to make certain
that it works in the countryside and does not have the
unintended----
Mr. Minnick. What is your time line for finalizing this
rulemaking process?
Mr. Coppess. In reviewing the comments, we are looking to
have that out in the fall, if not earlier. At this point in
time we are waiting on a few pieces of the final environmental
impact statement and there is also at the end of the--once we
put out the final rule there is also a 60 day comment period
for Congress to review the rule so there is still ample time
for that, but we are expediting this as quickly as we can get
it through. I would like to see it out as soon as possible.
Mr. Minnick. I apologize, Mr. Chairman. One follow-up
observation. If you can't protect in the final rules those
existing sources that Congressional review, I suspect given the
sentiments and the importance of these industries is going to
be quite detailed so please help us out so we don't have to put
ourselves through that this fall. Thank you, sir. I yield back.
The Chairman. I thank the gentleman, and recognize the
gentleman from Iowa, Mr. King.
Mr. King. Thank you, Mr. Chairman, and I thank the
witnesses for their testimony. Ms. Cook, I will just make a
comment that is my observation and give you an opportunity to
perhaps clarify. One of the things that I heard you say is that
problems in getting these rules published as the burden of all
the other work including the stimulus plan being something that
I characterize as, ``may have swamped the staff temporarily,''
and now you can see your way out to get this done?
Ms. Cook. We do, Mr. Chairman. We are in the home stretch
of the American Recovery and Reinvestment Act with respect to
the Business and Industry Loan Guaranteed Program, which
received a significant infusion of funding under that
legislation. We have exhausted funds available other than the
few projects that may drop out between now and the end of
September that we can bring another one in quickly and make
sure we use those funds. We have exhausted American Recovery
and Reinvestment Act funds for the Rural Business Cooperative
Service.
Mr. King. And I don't think I need to reiterate some of the
statements made by my colleagues about how difficult it is to
do planning and farming operations without an implemented farm
bill. But I notice Ms. Bailey has been kind of left out of this
discussion, so not to diminish your importance here I would
like to direct some questions perhaps to you, Ms. Bailey. And
that would be looking at Biomass Crop Assistance Program, that
is your field of expertise, isn't it?
Ms. Bailey. No, sir.
Mr. King. Okay. Then I will go back to Ms. Cook or Mr.
Coppess.
Mr. Coppess. Biomass is me.
Mr. King. Okay. Then, fine. My curiosity remains, Mr.
Coppess. Do you know how much has been distributed in funds
from that program to date?
Mr. Coppess. Under the Notice of Funding Availability, we
have paid out in both Fiscal Year 2009 and 2010 the most recent
data I have is in the $235 million range.
Mr. King. And could you break that down for me and tell me
what that is going for?
Mr. Coppess. Yes, and it is on our website, and we have
quite a long list of materials. The bulk of it, about 98-99
percent of it, has been in the woody biomass category,
everything from slash thinnings, shrubs and trees removed for
forest fire fuel efforts to a few agricultural resources, some
corn cobs, hulls, and non-digestable products, as well as
hardwood chips and a host of material like that. I can
certainly provide you this list if you would like to see it.
Mr. King. It is available on the website?
Mr. Coppess. It is available on our website.
[The information referred to is located on p. 41.]
Mr. King. And that would include pellitized wood products
for fuel?
Mr. Coppess. Yes.
Mr. King. And are you aware of any discussions or any
information that might have indicated that some of those
subsidized wood pellets could have been shipped overseas and
still been funded by U.S. taxpayers?
Mr. Coppess. There is no restriction on the shipping of at
that point it would be the biobased product made from the
eligible material.
Mr. King. So it is possible, and I am not making this as an
accusation or an allegation, just a hypothetical. I want to
make that clear at this point. But it is possible that we could
be subsidizing pelletized wood products with the U.S. taxpayer
dollars that are shipped overseas that buy down that product
for users in overseas markets?
Mr. Coppess. Well, we would be paying the matching payment
assistance for the material brought into a facility in this
country, and where that facility sells or markets its product
we have not considered that as an issue or in the rulemaking
process.
Mr. King. But your instinct on this not having an
opportunity to consider it would be that the answer is yes to
that, that it is possible?
Mr. Coppess. I would imagine it is certainly possible that
they could be selling overseas.
Mr. King. Worthy of taking a look at, would you agree?
Mr. Coppess. We can look into it.
Mr. King. It is something that we should know if we are
doing that. Also, it would be possible, what kind of safeguards
would you have in place if their subsidy for pelletized wood
products that might just be burned for the sake of receiving a
subsidy as opposed to utilization of the energy, perhaps
venting the heat rather than utilizing that?
Mr. Coppess. I am not sure I quite understand. Where we
come into this process with the BCAP matching payment is a
matching payment to the person that delivers the material to
the facility, so at that point, we are kind of out of it as far
as what it is used for. Maybe the facilities burn them on-site
or you can obviously sell them in the market and do so. So I
don't have that information on exactly where the end-user or
the end-purchaser is of the products that the eligible material
goes into.
Mr. King. And I am posing just as a hypothetical because
sometimes we get wrapped up in things that we start a program
and we have a narrow look at what that program is used for
without looking at the end result, and then the machinery just
goes in place. And just to make a case in point, as I watched
the clock run out here, I recall that about 3 years ago in this
Congress there was an effort made to take the carbon footprint
here in the Capitol complex down to zero. And that entailed
converting the power plant, about half of that energy was
produced from natural gas, the other from coal, converting it
all over to natural gas and it still left a carbon footprint
that was charged out at $89,000, and those carbon credits were
purchased then on the market out of Chicago. I traced those
carbon credits down and they went to in part to a plant that
had been subsidized for burning switchgrass, but it had been 2
years since they burned any switchgrass. They received the
subsidy anyway.
And it brings my focus to these kind of programs that I
think we need a broader follow-up to determine once we start on
these and we say our limit or our responsibility is with the
producer of the product who receives the subsidy. We do have a
responsibility to see how that subsidy is being used and what
the broader implications are. I raise that point, Mr. Coppess,
and I wouldn't require a response to that, but I appreciate
your testimony and everyone else's. Thank you, Mr. Chairman. I
yield back.
The Chairman. The chair thanks the gentleman, and
recognizes the gentleman from North Dakota, Mr. Pomeroy.
Mr. Pomeroy. Thank you, Mr. Chairman. I will start with Ms.
Cook. Ms. Cook, we had a problem with canola as a feedstock for
biodiesel. Are you familiar with that issue?
Ms. Cook. Somewhat, mostly from my prior life in the
Commonwealth of Pennsylvania where we also were looking at
canola as a----
Mr. Pomeroy. Canola is a terrific feedstock for biodiesel
production. Unfortunately, the Environmental Protection Agency
left if off the list of qualified commodities for the renewable
fuels standard. I have met with them. They have offered no
explanation for why canola did not qualify. They indicated they
would fix it, and we are looking at an adjustment probably to
be coming in August. They followed up. There was no basis
whatsoever for them to be left off the list of qualified
feedstock.
Now the problem that USDA has is picking up the EPA work as
basically the universe that might qualify for the producers
support under Section 9005 program were out of luck relative to
canola production even though on merit it should never have
been. How can we address this?
Ms. Cook. Congressman, my understanding is that canola is
going through a more formal appeals process with EPA. We are
providing information from USDA to EPA to be helpful to them in
that appeal process, but certainly we acknowledge that canola
is a useful tool in biodiesel production.
Mr. Pomeroy. Thank you for saying that. I don't think there
is any evidence in the Administration in either agency
regarding that. Now if the U.S. Department of Agriculture is
given authority by Congress to administer the Producers Support
Program, and in light of your statement that canola is a useful
commodity relative to biodiesel production, why would you
construct a rule that does not allow canola producers to
receive support under the section under the 9005 program?
Ms. Cook. Section 9005 does accommodate commodities that
are under the appeal process and so----
Mr. Pomeroy. I believe it only accommodates the commodities
under the appeals process to the extent that the appeal has
been favorably resolved. Now I am talking about canola
producers in North Dakota in the summer of 2010. Are you
telling me that there is capacity within the USDA's
administration of this program to support those producers?
Ms. Cook. If you will give me a moment to double check this
with staff, that is my understanding. Yes, in 2010. While they
are actively under appeal, they are covered in 9005.
Mr. Pomeroy. That is correct. Am I misinformed then that it
doesn't have to be final adjudication in favor of the commodity
that while under appeal?
Ms. Cook. That is correct. While they are under appeal,
they are eligible.
Mr. Pomeroy. Okay. I did not understand that. That is good
news. Thank you. The second issue, the Administration puts a
deep knife to the rural electric cooperatives recommending a
$2.5 billion cut in its budget from a $4 billion program, and
this is under the Rural Development Electric Loan Program. You
state in your testimony America needs to diversify our fuel
supply, reduce our dependence on imported oil, reduce our
carbon footprint, develop our abundant renewable energy
resources and the Administration is committed to this objective
as I believe it to be. What would be the rationale for this
depth of cut?
Ms. Cook. Again, the rural electric programs are operated
in a negative subsidy rate. In other words, they actually make
money for the Federal Government.
Mr. Pomeroy. They make money.
Ms. Cook. It is purely a matter of capacity in terms of
what we are able to put out the door and a matter of trying to
build additional program resources and particularly loan
guarantees.
Mr. Pomeroy. Now if we are trying to enhance, just for an
example, wind power, Sunday night driving around my home
county, Barnes County in North Dakota, I couldn't recognize the
place for the towers all over the place. An opportunity to
landowners that are hosting the towers, we hope to increase the
landowners' opportunity by allowing them to get even better
deals with the wind tower developers. We also want to make sure
they can get transmission to get this power out. That is where
the resources, cutting these resources for rural electric co-
oops, could diminish their ability to build out wind power,
wouldn't it?
Ms. Cook. Mr. Congressman, we are very concerned about that
entire region of the country in terms of wind power and getting
it distributed, not just our own capacity but the capacity of
MISO to get those projects reviewed and onto the grid.
Mr. Pomeroy. It is going to take some money to do it, so I
hope that that cut recommendation would not be advanced. I have
heard less than an enthusiastic defense of the budget
recommendation from you this morning. It is a bad idea. It
should go forward. There is another bad idea within it, and
that would be the one that would hold funds for natural gas
peaking stations. Now wind doesn't blow all the time even in
North Dakota, but we take a good run at it. Once in a while the
wind stops and you have to have some ancillary power source to
meet the demand for which you have contracted. Natural gas
peaking stations are a natural compliment to maximize the
potential for wind power in this country, yet now U.S. Rural
Development apparently is going to restrict any funds from
being available for natural gas peaking stations. What is the
rationale for that? It seems directly at odds with your
testimony.
Ms. Cook. Congressman, I am afraid I am not up to speed on
that issue. Let me get back to you for the record on that
question.
Mr. Pomeroy. It is an important issue. I look forward to
your response to the record. Thank you very much.
The Chairman. The chair thanks the gentleman and recognizes
the gentleman from Nebraska, Mr. Smith.
Mr. Smith. Thank you, Mr. Chairman. Mr. Coppess, I was
wondering if there is an environmental impact statement or an
analysis relating to indirect land use as to whether or not
Nebraska should stay in the Big 12 or not. I am just kidding.
Although I might be making somewhat of a statement as it
relates to the reach of certain agencies. But actually, Ms.
Cook, on a very serious note, if you could elaborate. You
touched briefly on the loan guarantee issue and how often those
are actually used and Federal dollars are expended. You said
rarely. Is that the case?
Ms. Cook. The default rate in our loan guarantee programs
generally is very low.
Mr. Smith. Do you have some more specific numbers with
that? I don't want to put you on the spot but could you
elaborate on that?
Ms. Cook. Again, I would be happy to get that to you for
the record, if you would like, program by program, because we
do have a number of loan guarantee programs. Now that the
Business and Industry Loan Guarantee Program, of course, is our
bread and butter business assistance program, but within the
energy realm both 9007 and 9003 offer loan guarantees, so I
would be happy to give that to you by program.
Mr. Smith. Okay. Thank you. And then also is it accurate
that only two awards have been made under the Bio-Refinery
Assistance Program?
Ms. Cook. That is correct.
Mr. Smith. That seems low. Could you elaborate on perhaps
what may need to be changed or what the situation is there?
Ms. Cook. I think this program perhaps more than any other
has been a victim of the general economy over the last couple
of years. We are talking about new advanced biofuels
technologies for production facilities that are very, very
expensive. The lender community simply has struggled with this.
The first of these two that we did was to Range Fuels company
in Georgia. It was one of the last deals done in the previous
Administration, and one of the first things that we had to do
was work with the lender to restructure that deal, frankly,
because even though we had already issued the loan note
guarantee they were still reluctant to close the loan. They
were that nervous about moving forward under these general
economic conditions.
We are looking in the proposed rule hopefully at comments
in a number of areas, among them the level of guarantee, which
is proposed at 80 percent. One of the things we did under the
American Recovery and Reinvestment Act and our Business and
Industry Loan Guarantee Program was set those funds aside with
a different structure. We used a 90 percent guarantee and a
lower loan origination fee, and now that those funds have been
exhausted, we are going back to look at that and see if that
did actually make a difference. Did that bring lenders back to
the table where our regular program at 80 percent with a two
percent loan origination fee didn't. We will make the same
analysis to the extent we can for 9003, and hopefully get
comments from the industry on whether that is a factor. If we
went from 80 percent to 90 percent for 9003, would that do it?
Would that bring bankers in? If we could adjust the fee
structure in some way to make the guarantee more appealing,
would that bring people back to the table? We are looking at
all of those things.
Mr. Smith. Okay. Thank you. I yield back.
The Chairman. I thank the gentleman, and recognize the
gentlewoman from South Dakota.
Ms. Herseth Sandlin. Thank you, Mr. Chairman. I thank you
and the Ranking Member for holding this important hearing. I
thank our witnesses for their testimony and responses to my
colleague's questions. I do want to associate myself with some
of those comments, Mr. Thompson's comments with regard to the
ongoing concern that we are allowing biomass on our Federal
forests to rot or to be burned releasing methane and carbon
into the atmosphere instead of utilizing that biomass
effectively for bio-refining in advance biofuels. And I know
that a number of us on this Committee have been working and
will continue to work to make those changes to the renewable
biomass definition from the 2007 Energy Bill. I think in the
unintended consequence of the interim funding program for BCAP
matching funds is the unfortunate situation that developed with
black liquor in terms of how much more cost to the taxpayers
with exploitation of a loophole in that instance for tax
credits versus the unintended consequence of those matching
funds.
You know, as we worked with Chairman Peterson to establish
the BCAP program in the last farm bill the intention really was
to help farmers establish new dedicated energy crops. My first
question would be, Mr. Coppess, despite the concerns that I
share I have heard from my constituent businesses like Dakota
Panel that Mr. Minnick and Mr. Thompson have heard and taking
into account those concerns as you develop the final rule.
Aside from that, do you have confidence that the final rule,
and some of what we have seen and how the BCAP programs have
been utilized in other areas, that the program is going to be
successful in meeting the goal of creating a dependable market
and supply for biomass feedstock?
Mr. Coppess. Thank you. And I want to point out the final
rule will encompass, which you mention is one of the major
parts of this program, is the ability to provide that
assistance to farmers and landowners to grow new bioenergy,
biomass crops, and that is a key, key component to it. I think
it is why I would hazard to use a crystal ball and how the
industry is going to grow and what it will do. I do think that
once we, based on what we have seen, once we unleash that
capability of the American farmer and the producer to work on
these crops and begin producing them that years from now we
will see some great benefits out of this and the potential of
real transformation in our energy sector because just based on
how productive we are in other crops we grow.
I think the potential of this program is incredible. The
potential for farmers is big. Certainly, that part of it was
not what we operated under in the NOFA, and so I understand
that frustration. We certainly heard that as well that farmers
want to see that potential out there. So it will be a part of
the final rule. It will be a big part of the final rule and a
major component of this program.
Ms. Herseth Sandlin. And then with regard to Mr. Pomeroy's
comments in terms of some of the President's proposed cuts as
it relates to programs that service rural electricity needs,
and the investments that our co-ops make that are community
investments that have facilitated the production of renewable
energy: I share his concerns and agree with him that some of
these proposals are bad ideas. We will be working across the
aisle with colleagues that share those concerns. It is not a
partisan issue, in many respects a regional issue, to combat
those proposals. I would like to spend the rest of the short
time I have in questions on the REAP program.
Mr. Fortenberry and I worked hard on the last farm bill as
it related to reauthorizing this important program. I think as
we look to streamline delivery of REAP to farmers and to rural
businesses, it is critical that we have funding notices that
come sooner than they came this year. When you have a final
deadline of June 30 when you had the grants and loan guarantees
notice April 26, separate funding notice for the energy audits
May 27, it is a pretty short turnaround. I understand the
importance of getting this money out the door and more jobs can
be created transitioning to a clean energy economy, energy
efficiency technology that can be deployed. But, looking ahead
to next year, is it feasible that USDA can issue REAP funding
notices for FY 2011 by December of this year, and, if not, why
not? What can USDA be doing to accelerate the REAP funding
cycle and give producers and rural businesses more time to plan
and apply for REAP funding? Ms. Cook.
Ms. Cook. Thank you for the question. The REAP program, of
course, is the successor to the 9006 program from the 2002 Farm
Bill, and it is the one area of the energy title where we did
have a pre-existing regulation. That is the good news and the
bad news. In looking at what came first and what comes last as
we are trying to prioritize our work and stand up a number of
new programs at the same time, we are really just now getting
started with a proposed rule to make changes in REAP. We are
working on it though. And as I have indicated in prior
questioning, we are done now with the Rural Micro-
Entrepreneurship Assistance Program. The proposed rule is out.
The Value-Added Producer Program is out from Title VI. We are
out with proposed rules now from everything in Title IX, so we
are at a point where I believe we can move as expeditiously as
possible on changes in proposed rules for 9007. Whether we can
do it by the end of the first quarter of the new fiscal year, I
don't know. Some of that depends on how many comments we get,
frankly, in the proposed rules that are currently outstanding.
Ms. Herseth Sandlin. I appreciate the response to the
question. I do hope that you are looking at internal time
tables to move. I understand the impact of how many comments
you may get, but I hope that you are working toward a self-
imposed deadline that can be more effective because we are
going to be doing some work this summer. Iowa has very high
success rates in getting REAP grants, and we want South Dakota
to be able to get our share of those REAP grants as well. This
kind of information is going to be very useful to us as we move
forward the rest of the summer and the rest of the year. And so
if you could keep us apprised, the Committee as a whole, and
certainly our office will be in touch with you to get as much
information in a more timely way as possible.
Ms. Cook. I look forward to that conversation. One of the
things we have had by way of directive from Secretary Vilsack
is a clear message that he wants REAP to be a national program.
And so one of the things we have done this year is distribute
more of the money out to our 47 state offices to ensure that we
get a national program. I am confident that South Dakota will
get its fair share of those funds.
Ms. Herseth Sandlin. Well, we will look forward to working
with Elsie Meeks to do that. Thank you very much.
The Chairman. I thank the gentlewoman and recognizes the
gentleman from Missouri.
Mr. Luetkemeyer. Thank you, Mr. Chairman. Ms. Cook, I was
kind of curious. How is the biofuel industry doing as a whole?
Ms. Cook. As a whole, it has been a difficult couple of
years as it has been for the economy in general. We have seen
first generation biofuel companies that have never missed a
payment to their lender finding that their working capital has
been cut off because lenders are that nervous. At the same
time, demand for biofuels is strong and getting stronger. Sale
of flexible fuel vehicles, for example, continues to grow,
particularly in this part of the country, so we know the demand
is there. We know that production capacity is there. It is a
matter of restoring the confidence of the private lending
sector to bring those things together and get those projects
going.
Mr. Luetkemeyer. With regards to the guarantees that are
issued if the industry is doing well and demand has occurred
that we can ascertain, do you take into consideration the
number of or the capacity that is already out there when you
agree to a guarantee, so that you don't over capacitize the
industry and therefore impair those individuals or companies
that are out there?
Ms. Cook. We look at the feasibility of the project from as
many perspectives as we can. That would include whether they
have a market for their product.
Mr. Luetkemeyer. But you don't look at the capacity overall
of the entire industry to see if you are adding more capacity
than what is necessary?
Ms. Cook. I don't believe we are at that point yet. If it
reaches that point that we have over-saturated the market with
biofuels then that becomes part of the feasibility of the
product.
Mr. Luetkemeyer. Well, I am not saying that the market is
over-saturated with fuel. What I am saying is we have more
capacity to produce than we have need for the product at this
point, and my concern is that we are putting people and
business that don't need to be there and, therefore, impacting
those who are already in business. And my question is are you
taking that into consideration when you do a guarantee? Is that
part of your process?
Ms. Cook. We want to start businesses that we believe will
survive. We want to start businesses that we believe will have
the ability to service their debt with us and pay their loan
back. So, yes, to the extent that it affects the feasibility of
that business to survive, we would look at that. I would add,
though, that the biggest problem that I see is the distribution
system to get biofuels to the places that it is needed. Blender
pumps are something that I mentioned earlier as an area that we
would really like to zero in on. We would like to help service
stations up and down the East Coast, up and down the West
Coast, every place that there are Clean Air Act requirements
and vehicles that need that fuel to make sure that it is
actually readily available.
Mr. Luetkemeyer. Well, part of the scenario also is our
trade policy with regards to allowing other ethanol and
biodiesel fuels in from other countries. I mean is that taken
into consideration, the trade policy, that sort of thing when
you are looking at these guarantees as well?
Ms. Cook. No, sir. We don't look at trade policy.
Mr. Luetkemeyer. Okay. Ms. Bailey, you have been left out
of the discussion here. A quick question for you here. With
regards to the food that we are looking at producing, do you do
an analysis every year or every so often of the increasing cost
of producing that food at all?
Ms. Bailey. Well, I am sorry I can't answer that question.
Within the National Institute of Food and Agriculture, I am
focused on bioenergy, biobased product research and
development.
Mr. Luetkemeyer. Well, are you interested in the cost of
what that is to the food production? In other words, in Ms.
Cook's testimony here one of the words or some of the words
were agriculture is energy intensive and the production of our
food is--energy is a big part of that production. That is not
part of your purview?
Ms. Bailey. Well, from an expanded perspective, yes, it
would be. Yes, sir. In the context of 9008, the Biomass
Research and Development Initiative, we are supporting
research, development, and demonstration of technologies to
produce biofuels and biobased products sustainably taking into
account the environmental, economic, and social implications of
those technologies.
Mr. Luetkemeyer. What do you see then about the different
impacts on food costs with all the regulations coming out? Is
it making it cheaper to produce food or is it making it more
expensive to produce food?
Ms. Bailey. Well, hopefully it would make it cheaper to
produce food as we become more----
Mr. Luetkemeyer. I am not saying hopefully. I am saying in
reality what is it doing?
Ms. Bailey. I can't address that. I am sorry.
Mr. Luetkemeyer. Okay. Thank you. Ms. Cook, we had
Secretary Vilsack in the other day, and one of the concerns
that I have is the future of agriculture and especially food
production from the standpoint of the regulation, taxation.
This money, we are talking about energy and it is a huge, huge
cost to producing our food in this country, and I am very
concerned about that as a whole. And in discussing with Mr.
Vilsack, he committed to us to continue to work with us with
regards to the EPA and other agencies that have an impact on
food production and the cost of that production, so can I get
that same commitment from you this morning?
Ms. Cook. Absolutely.
Mr. Luetkemeyer. Thank you very much. I yield back, Mr.
Chairman.
The Chairman. I thank the gentleman and recognize the
gentleman from North Carolina, Mr. McIntyre.
Mr. McIntyre. Thank you, Mr. Chairman, and thanks to our
panelists. Ms. Cook, as both a Member of this Subcommittee and
as Chairman of the Subcommittee on Rural Development,
Biotechnology, Specialty Crops, and Foreign Agriculture, thank
you for your leadership. Especially thank you for getting those
Micro-Enterprise Assistance Program rules implemented. That is
something we were excited about to help our very small
businesses which we know are the fastest job generators of all
small businesses for those that employ less than ten people.
Even Google started out with only two people, so it is a great
success story when we can help our very small businesses, and
we urge you to emphasize that as much as possible in your
offices across the country to help our economy with very small
businesses. I wanted to ask you specifically can you give some
examples of typical projects that agriculture and rural small
businesses have applied for under the REAP program?
Ms. Cook. Projects range from green dryers, things like
that, to wind power. We have done quite a bit of wind in the
upper Midwest, for example. We look forward to doing more with
manure digesters. And, as I said earlier, Congressman,
Secretary Vilsack has basically commanded that we do a better
job of making REAP a nationwide program, so I believe we will
see a much greater diversification of project type as REAP
moves forward this year.
Mr. McIntyre. Have you had any chance to work with the
National Center for Renewable Energy in Golden, Colorado?
Ms. Cook. Personally, no.
Mr. McIntyre. If you could, please, have someone under your
authority talk with them. They had told me 2 years ago when I
visited their facility in Golden that they were looking to
double the number of bio-refineries in America. They were
looking to do it primarily in rural areas, primarily areas of
high unemployment, primarily areas of large amounts of
agricultural stover, including plant and animal waste. That
sounds like eastern North Carolina to me. We are very
interested. I hosted an alternative energy summit at UNC
Wilmington July of last year, and then I hosted a green jobs
summit in April of this year at Cape Fear Community College in
Castle Hayne, just outside of Wilmington, North Carolina. And
the place was packed, and I believe those opportunities to work
with the National Center for Renewable Energy and their desire
to double the number of bio-refineries would tie hand and glove
with the jurisdiction of this Subcommittee and also with the
work that you are about. Would you have someone that would
commit to investigating that and report back?
Ms. Cook. There are two gentlemen behind me, who I am sure
would be happy to follow up.
Mr. McIntyre. Thank you. And in particular, would you have
them contact my office once they find out that result as well
as the Committee's staff?
Ms. Cook. Thank you, Mr. Chairman. We will do that.
Mr. McIntyre. Thank you. In the time remaining, I would
like to ask you, how do you see the energy audits working along
side other parts of the REAP program?
Ms. Cook. In what way?
Mr. McIntyre. Well, you talk about it is important to
include energy audits under the REAP program, so I am wondering
what is the benefit or where do you see them working for a
benefit under the REAP program?
Ms. Cook. In a number of contexts, among them helping
farmers understand that their own cost of production can be
lowered, and, frankly, to engender additional applications for
REAP in the following year.
Mr. McIntyre. Some of the complaints we have heard is that
there are not enough folks out in the field to carry out the
energy audits in rural areas. Do you know what is being done to
address this concern?
Ms. Cook. No, sir, but I would be happy to give you more
information for the record on that?
Mr. McIntyre. That would be good because obviously if the
product doesn't reach the final link of being delivered then no
matter how good the program is, it is not going to help the
people that need it. That is a concern that we have been
hearing, that there are not enough folks out and available in
the field to actually do this. So if you could give that some
attention too and let us know what efforts you can make in that
regard, that would be most helpful. With that, thank you again
for your leadership. Thank you, Mr. Chairman.
The Chairman. The chair thanks the gentleman and recognizes
the gentleman from Louisiana, Mr. Cassidy.
Mr. Cassidy. Thank you, Mr. Chairman. Mr. Coppess, I am
told that the BCAP works for--if you set up a new BCAP it works
if you want to create bioenergy, if you will, but if you have
one that is old that it doesn't apply for subsidies, does that
include expansion so somebody is burning rice hulls, if you
will. People in my state do that, have been doing it for some
time. Now apparently they don't benefit from these programs
because I gather you want additionality. If they expand, will
they benefit or have potential benefit from these programs?
Mr. Coppess. Thanks for the question. I want to point out
that at a biomass conversation facility there is no limit in
the statute for new or old. On a rice hull issue the concern
would be that the statute restricts any matching payment to
this point going for Title I commodities so I don't know if
that is----
Mr. Cassidy. I gather that Title I does not include the
stalk and the hull.
Mr. Coppess. The residue is left on the field, crop waste,
residues. Yes, those are eligible.
Mr. Cassidy. So even though it is an existing facility, it
would still potentially benefit if it otherwise meets the
provisions of the law.
Mr. Coppess. Well, the one trouble, we are still in the
final rulemaking process so I can't say how the final program
will run. Under the Notice of Funding Availability, which
matching payments, what we have been making matching payments
under, there was not a distinction made between an existing
facility or any requirement, as you said, for additionality or
building new facilities.
Mr. Cassidy. Okay. What about vertically integrated
companies? So if you own your own land and you are doing your
own residue, if you will, do you still qualify?
Mr. Coppess. In the Notice of Funding Availability, again,
not the final rule that is being finalized, in the Notice of
Funding Availability, we did have a restriction on what we
called arm's-length transaction, that you could not sell
yourself biomass and get a matching payment.
Mr. Cassidy. Now it seems though if the ultimate goal is to
decrease carbon footprint, for example, why does it matter? Do
you follow what I am saying? I mean it is there, and I either
truck it down the street and let somebody else burn it, or burn
it in my own facility and eliminate the carbon footprint of the
diesel required to truck it down the street. In a sense, we are
incentivizing people to sell their residue to someone else as
opposed to setting up a facility to do it for themselves. Does
that make sense?
Mr. Coppess. I understand what you are saying. I think our
concern has been trying to find that balance where these
incentives go in and how it works so that we do not get in a
situation that could cause issues if, in fact, the program is
being used in a way it shouldn't be. So under the Notice of
Funding Availability, we restricted that to an arm's-length
transaction so that----
Mr. Cassidy. Now arm's length, just to define that. So if
you have a holding company and one of the--so it is a holding
company, so the rice farmers, and one is energy production and
one is rice production, if you will, is that considered an
arm's length? I am trying to give you a graphic with my own
arms.
Mr. Coppess. I understand. I am not sure exactly. As I am
sitting here, I am trying to piece that together because what
we have tried to avoid--I know we ran into issues, for example,
co-ops were one in which a member of a co-op would be able to
deliver to the facility and still get that matching payment.
One of the things we are working on in the proposed rule, we
proposed or suggested changing that arm's-length restriction in
part because there was some difficulty administering it to a
related party transaction. We proposed being more flexible in
how we do that to make certain that what we are getting to is
not problematic, but also doesn't cut people out that----
Mr. Cassidy. So you are working on this. Let me kind of go
to Ms. Bailey. I am sorry. I just got a yellow light. I have to
hustle. Is there anything in here to encourage conservation? I
read that 30 percent of electricity produced in this nation is
lost in the grid because we have inadequate power lines, et
cetera. Intuitively, I know some rural communities are probably
particularly vulnerable to this because I imagine their
infrastructure is less constantly upgraded. Does this include
anything to allow municipally-owned utilities or even investor-
owned utilities focusing on the rural areas to pull down grants
to upgrade their conservation, if you will, through the power
lines, et cetera?
Ms. Bailey. In the context of 9008, sir?
Mr. Cassidy. Looking at 9009.
Ms. Bailey. Congressman, that would be a Rural Development
program. That is one of the five programs and the one we have
not rolled out yet. We have not requested or received funding
for that program. However, we do have significant investments
going into energy conservation through the Rural Housing
Service, which we actually haven't talked about at all today.
Mr. Cassidy. Now would that be for homeowners or for rural
utilities?
Ms. Cook. Rural homeowners through the Section 504 program
and through the Housing Preservation Grant Program. Also in the
Community Facilities Program of Rural Development opportunities
for nonprofit organizations, municipalities, and tribes to
apply for funding both long term loans----
Mr. Cassidy. I am sorry. So just to put a point on it,
Ruston, Louisiana, it is not my district but I know of it, has
a municipal utility. And I understand that just the inherent
inefficiencies of this you need bigger power lines and such
like that, but they are losing 20 to 30 percent to their
electrical grid. Is there anything in which you just described
that will allow Ruston, Louisiana, to upgrade their power
structure, if you will, to decrease that?
Ms. Cook. Let me start with my most fundamental question.
Are they in a city, town or unincorporated area of less than
20,000?
Mr. Cassidy. It is probably like 20,000, but it is going to
be a city or town.
Ms. Cook. I would be happy to follow up with you on that
specific question, Congressman. If you will indulge me before I
lose Congressman Luetkemeyer, I just want to revisit a
statement that I gave you before. I realize you are a very busy
man but I did speak too quickly in telling you that we don't
consider trade policy as we make these individual loan
guarantees, and I would like to provide more information for
you to the record. I am sorry, Congressman.
Mr. Cassidy. My time is up. Thank you very much, and follow
up with me, please, and I will understand it more later. Thank
you.
The Chairman. The chair thanks the gentleman, and
recognizes the gentleman from North Carolina, Mr. Kissell.
Mr. Kissell. Thank you, Mr. Chairman, and I thank the panel
for being here. This is a very important aspect of our lives
and especially in rural areas, and I would like to associate
myself with my colleague from North Carolina, Mr. McIntyre, and
the questions he asked and the response that he requested, and
we would love to have that. As he said, sounds like his
district in eastern North Carolina sounds like my district in
central North Carolina. We have also held biofuel summits with
a great deal of interest not only in the ag community but in
the communities in general because these are communities that
have been hurt so strongly with economic development in the
last few years with some of our trade deals.
That said, it was mentioned by one of you, and I apologize,
I am not sure who it was, but blender pumps, like to have them
up and down the East Coast. What do we have to do to get there?
Ms. Cook. That was me, Congressman. I mentioned that a
couple of times. At the moment, what I have to do is convince
my colleagues at HUD, EDA, and other funders who can go into
non-rural areas that that is something that they ought to be
investing in as well. We are having those conversations, but,
frankly, it is a little frustrating because Rural Development
by definition can't go to Philadelphia to the Pennsylvania
Turnpike stop right off the Schuylkill Expressway and put in
blender pumps. The pumps themselves are not that expensive. We
are talking $20,000, $25,000 per pump. Obviously, the tanks
that would go underground to support the blending process are
significantly more expensive. But our contribution in Rural
Development would be limited to cities, towns, and
unincorporated areas of less than 50,000.
Mr. Kissell. As we talk about capacities of biofuels, I
went to a hearing out in South Dakota and the good folks out
there were saying just give us a chance and we will compete
with oil and other sources of energy. Just give us the chance
to move our goods on an even basis somewhere else. And where I
am from, North Carolina, blender pumps have never been
discussed. I think it is something that would allow us to move
towards that idea of expanding that capacity and the things
that we have talked about here today. In just the couple
minutes I have left, the hearing is about implementation of
energy in terms of the 2008 Farm Bill. We are actually holding
hearings for 2012. Just real quickly for each of you, is there
a lesson that you have seen in the implementation of 2008 that
you would tell the Committee make sure you do this, or don't do
this or whatever in terms of 2012, any lessons already learned
that we need to run the flag up a little bit higher as we
prepare for 2012?
Mr. Coppess. Well, thank you. I will take first crack. I
think one of the key things for us is seeing this final rule in
place and getting more feedback on it because we have not been
able to put all of BCAP into place. We certainly have learned
quite a few lessons and are very happy to discuss those as we
go along using the NOFA process to do the matching payments and
what kind of material brings in some of the concerns that were
raised today about competing for biomass and what it means on
the ground in certain areas. I guess the short answer is I
don't have a great answer for you today because we are still
learning those lessons in this program because we don't have
the full program up and running. I do believe as we get closer
to the next farm bill, we will know quite a bit from these
programs, and I look forward to any discussions we have on
that.
Ms. Cook. I will start by echoing my colleague's comments.
We are looking forward to completing the rulemaking process,
making sure we have properly implemented the law as it exists
today before making suggestions on how to change the law. But
on some of the things we are looking at, frankly, I don't feel
we are doing enough to coordinate Federal, and particularly
Rural Development, investments with what states are doing. We
have a lot of states that are trying to invest in renewable
energy that also have passed renewable fuels standards and also
have passed alternative energy portfolio standards and are
doing their best to get those dollars out, create those jobs,
create those businesses, for all the same reasons that the
three of us are sitting here, and we really haven't done enough
to coordinate that.
The second area where I think all of us need to maybe take
a closer look is the entire energy grid. We need to look at the
amount of investment it is going to take to upgrade our
transmission lines and be able to deliver renewable energy as
we create more and more ability to generate renewable energy.
We have to be able to get it to the consumer and we are just
not there today.
Ms. Bailey. Congressman, I would like to add that 9008, we
consider that to be a successful program, is making
considerable contributions and moving cutting edge technologies
into the marketplace, and I would be happy to get back to you
with more specifics.
Mr. Kissell. Thank you, and thank you, Mr. Chairman.
The Chairman. The chair thanks the gentleman, and the chair
thanks the witnesses for their time today. Under the rules of
the Committee, the record of today's hearing will remain open
for 10 calendar days to receive additional materials and
supplementary written responses from the witnesses to any
question posed by a Member. This hearing of the Subcommittee on
Conservation, Credit, Energy, and Research is adjourned.
[Whereupon, at 11:45 a.m., the Subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]
Supplementary Information *
---------------------------------------------------------------------------
* The report was accessed on December 2, 2010 from the FSA website
(http://www.fsa.usda.gov/Internet/FSA_File/
bcap_chst_component_report.pdf).
BCAP CHST Component Report FY 2009 and FY 2010
[as of Tuesday, October 19, 2010]
------------------------------------------------------------------------
Component Contracts Payments
------------------------------------------------------------------------
Agriculture Resources: Corn cobs 15 $61,612
Grain or nut hulls, non-digestible 10 $190,176
-------------------------------
Category Total: 25 $251,788
-------------------------------
Federal Woody Resources: Bark 49 $2,776,752
Forest harvest slash (branches and 42 $3,003,327
tops)
Forest thinnings materials 29 $1,759,185
Hardwood chips 34 $1,086,877
Softwood chips 49 $2,822,513
Tree and shrub species without timber, 21 $986,615
lumber, or wood pulp value (including
fuelwood)
-------------------------------
Category Total: 224 $12,435,269
-------------------------------
Herbaceous Resources: Grasses 70 $210,572
Legumes 4 $4,466
-------------------------------
Category Total: 74 $215,038
-------------------------------
Non-Federal Woody Resources: Bark 1,362 $46,935,960
Cutoffs 26 $650,509
Forest harvest slash (branches and 366 $30,056,133
tops)
Forest thinnings materials 385 $27,239,057
Fuelwood (including types of hog fuel 727 $34,408,340
not otherwise included on this list)
Hardwood chips 765 $32,569,367
Post-disaster debris 9 $1,016,752
Softwood chips 463 $17,654,790
-------------------------------
Category Total: 4,103 $190,530,908
-------------------------------
Waste Materials: Non-edible fats, oils, and greases 11 $162,067
derived from plants
Non-edible, non Title 1 plant 53 $3,283,828
processing waste and scraps
Orchard wood waste 116 $15,015,889
Pellets 69 $5,367,939
Roadway maintenance cuttings 6 $20,327
Sawdust 350 $12,842,021
Shavings 60 $2,860,136
-------------------------------
Category Total: 665 $39,552,207
===============================
National Totals: 5,091 $242,985,210
------------------------------------------------------------------------
Notes: Contracts may exceed number of AD-245's since multiple components
may be recorded on a single AD-245. Only includes records with a valid
component code.
States with less than four facilities or less than four records are not
reported because of confidentiality concerns.
______
Submitted Questions
Questions Submitted by Hon. Tim Holden, a Representative in Congress
from Pennsylvania
Response from Cheryl Cook, Deputy Under Secretary for Rural
Development, U.S. Department of Agriculture
Question 1. You mention the commitment of renewable energy is an
Agency-wide. Given the issue falls under the jurisdiction of multiple
agencies, not to mention multiple Departments, how is the overlap being
coordinated? Is there a point Agency on renewable energy? Who takes the
lead?
Answer. There are several different renewable energy-related
programs, initiatives, and activities across the Department as well as
across the Administration. On biofuels, the President called for the
Biofuels Interagency Working group, led by USDA, DOE and EPA, though
larger in membership. In order to coordinate all efforts within USDA,
the Secretary has convened the Energy Council, which he chairs. Members
of the Council include Sub-Cabinet officials whose jurisdiction
includes energy activities. To supplement this body, the internal USDA
Energy Council Coordination Committee (ECCC) also meets weekly to
discuss all energy related activities. This group is working to
continuously improve coordination and collaboration across mission
areas within the department; to encourage increased communication and
awareness and to ensure there is not duplication of program activities.
It is very important to the Administration that these efforts are
coordinated and complementary.
The Biomass Research and Development Board (Board) was created by
the Biomass Research and Development Act of 2000, which was further
amended by the Food, Conservation and Energy Act of 2008. The Board's
mission is to coordinate federal research and development activities
relating to biobased fuels, power, and products.
Membership must include the following agencies:
U.S. Department of Agriculture.
Department of Energy.
National Science Foundation.
Environmental Protection Agency.
Department of the Interior.
Office of Science and Technology Policy.
Members for 2010 are:
Co-Chairs:
Steven Koonin, Under Secretary for Science, U.S.
Department of Energy.
Dallas Tonsager, Under Secretary for Rural Development,
U.S. Department of Agriculture.
Members:
TBD
Question 2. It has come to the attention of the Committee that some
of the regulations currently out for public comment must factor in the
amount of greenhouse emissions reduction. These factors were not part
of the statute. Can you please tell us where this consideration came
from?
Answer. To support the Administration's objectives to reduce
impacts of energy production and consumption on climate change via
reduction of GHG emissions, the proposed rules request the public to
comment on whether lifecycle GHG reduction criteria should be added for
purposes of scoring projects for funding prioritization. Efficiency is
the goal: renewable energy will be the most successful if it also
improves the environment.
Question 3. There has been discussion about the rural area
requirement that you've imposed on several energy title programs, even
though there's no statutory requirement. Is there a reason that the
energy title programs should be treated differently than the rest of
your portfolio? For instance, the biodiesel industry has developed
differently than the ethanol industry did and has plants located in
urban areas than we saw with corn ethanol. Is there a reason that USDA
programs shouldn't support the biodiesel industry that's using either
raw ag products or recycled ag waste, no matter where they're located?
Answer. The rural area requirement reflects an effort to promote
consistency with the Rural Development Mission Areas. USDA is aware
that this has raised concerns for some within the biofuel industry and
asked for comments on this issue in the proposed rules. USDA will take
the comments received into consideration in the issuance of the interim
final rules on these programs. With regard to Section 9005, Bioenergy
Program for Advanced Biofuels, the FY09 Notice of Contract Proposals
has been extended to allow producers in non-rural areas to apply.
Question 4. In your testimony you mentioned that FSA has
``prioritized'' needed regulations to best utilize staff and resources
in implementing the entire suite of programs as quickly as possible.
What factors went into the determination of how programs should be
prioritized?
Answer. Several factors can influence the implementation schedule
for regulations. However, the overall goal is always to implement
programs as swiftly as possible. Examples include, but are not limited
to, the following factors: whether the completion of a draft or final
Environmental Impact Statement is required before issuing the rule;
whether Congress has provided appropriations for the program
established by the rule; whether the program can be partially
implemented administratively before the full rule is promulgated;
whether there is statutory authority to provide for an interim rule,
rather than for a proposed final rule; whether there is a level of
urgency (i.e., the need to address a financial crisis among
stakeholders, to provide timely disaster assistance, or to meet
seasonal thresholds, such as planting or harvest periods); and the
complexity of the program, particularly new programs, which may require
the careful development of new formulas, calculations, or software.
Question 4a. Can you give us a sense of some of the challenges that
you face as you implement the energy programs authorized by the 2008
Farm Bill?
Answer. One of the major issues we are seeing when implementing our
energy programs is the reluctance among lenders to become involved in
financing loan guarantees. Lenders are reticent to lend and it makes it
very hard for many of the new technologies to get past the ``Valley of
Death'' stage between pilot/demonstration and commercial scale
facilities.
Question 4b. How has the implementation of the American Recovery
and Reinvestment Act (ARRA) affected the implementation of the energy
programs authorized by the Farm Bill?
Answer. None of the USDA Energy Programs under Title IX of the Farm
Bill received ARRA funding, so the programs were not directly affected.
Section 9002 Biobased Products
Question 5. The 2002 Farm Bill created and the 2008 Farm Bill
further called for USDA to rapidly implement a Federal Biobased
procurement program, including creation of a label that would help
consumers identify biobased products. When will USDA issue the
important biobased label?
Answer. We expect to publish the voluntary ``USDA Certified
Biobased Product'' label rule in the Federal Register this fall. In
July 2009, USDA published a proposed rule outlining a voluntary
labeling program for biobased products. Public comments have been
received. A final rule that responds to those comments is under
development. We are expecting review and publication of the rule by the
fall.
Question 6. Has Secretary Vilsack has sent requests to other
agencies asking that they comply with the Farm Bill and buy biobased.
What is the response to those requests? How will USDA follow up on
these requests?
Answer. Secretary Vilsack sent letters to his fellow cabinet
members urging support for the BioPreferred Program in February 2009
and again in April 2010. The latest call for action has been well
received; thus far six cabinet level agencies have responded and
pledged their strong support for the purchase and use of biobased
products. These include the Departments of Defense, Commerce, Treasury,
Education, the Interior, and Energy. These response letters will be
posted on the BioPreferred website for public viewing (see http://
www.biopreferred.gov). USDA believes this high level commitment to the
program from other Federal agencies will allow vendors seeking to
supply biobased products to inform procurement officials of the
commitment of their Departments' top management to the BioPreferred
Program. USDA anticipates additional letters of support, which also
will be posted as they are received. USDA is continuing the education
process regarding biobased product purchase requirements at all levels
of the Federal government. BioPreferred program staff are designing
training with the Federal Acquisition Institute and the Defense
Acquisition University to assure new and existing procurement officials
are aware of the strong government-wide support for biobased products.
Section 9003 Biorefinery Assistance Program
Question 7. You mention that you have two projects to date for this
program, but state the level of interest remains high. What do you
think is the contributing factor to not having more awards at this
point? Is the lending community hesitant or does the program needs to
be changed? And what are you doing to ensure that we start getting loan
guarantees out to these projects?
Question 8. USDA has issued the proposed rulemaking for the
Biorefinery Assistance loan guarantee program, Sec. 9003, to assist in
the development, construction or retrofitting of commercial
biorefineries. This program was established in 2008, but has only made
two loan guarantees. And, as we all know, DOE has not issued a single
loan guarantee to a biorefinery. Are requirements for loan guarantee
programs to evaluate risk of projects flexible enough to fund new
biofuel technology projects which are much different than wind or solar
projects? How will administration of the USDA program be different than
administration of the DOE program?
Answer 7-8. The Agency has received numerous inquiries and requests
to meet and discuss the Section 9003 program. USDA considers these
inquiries indicative of the keen level of interest from projects to
participate in the program. While some projects have indicated
difficulty in finding a lender to participate, an encouraging number
have successfully identified a lender of record. USDA works directly
with the lender to set up a 9003 proposal.
The risks and uncertainties of still unproven technologies are
consequential. The Agency maintains high standards of due diligence for
these inherently risky projects to ensure that these significant
investments are safe and protect the taxpayers interests. The Section
9003 loan guarantee applications undergo three comprehensive reviews
for technical, environmental, economic and financial feasibility/
viability. The most formidable challenge of these very capital
intensive projects is providing adequate private sector financing. A
partnership of technical and financial expertise from both private and
public sectors is required to bridge the developmental gaps and to
distribute the associated risks. Stringent due diligence can only serve
to encourage prospective financial partners to participate in these
worthwhile projects.
The pace of applications for the Section 9003 program has clearly
been affected by the recent recession, volatility in world oil prices,
and a high level of caution by lenders in the wake of the credit
crisis. The level of interest among potential applicants remains high,
however, so the Agency anticipates that more applications will be
submitted in the year ahead as the economic recovery continues to
strengthen.
Since the publications of the Section 9003 Extension Notice of
Funding Availability for remaining funds from FY 2009, and the FY 2010
Notice of Funding Availability, Rural Development has responded to a
number of inquiries involving: the retrofitting of existing facilities
to accommodate pretreatment and processing of cellulosic feedstocks
(mostly corn residue and woody biomass) to make fuel ethanol; the
construction of new facilities for either the biochemical or
thermochemical conversion of: perennial grasses such as switchgrass,
reed canary grass, and miscanthus; energy cane; sorghum; and woody
biomass such as poplar, hybrid poplar, willow, and silver maple.
Rural Development also responded to a number of inquiries that
involve biorefineries to process oilcrops including oilseeds (camelina)
and algae into third generation biofuels; the so-called, ``drop-in'' or
``pipeline ready'' replacement fuels for existing fossil fuels such as
gasoline, diesel, and aviation fuel.
The Section 9003 program has about $150 million in budget
authority, available in FY 2010. The Section 9003 Biorefinery
Assistance Notice of Funding Availability for FY 2010 application
deadline was August 4, 2010. The Agency received six applications
totaling over $705 million that currently are under review that will
compete for the funding available.
On April 16, 2010, USDA published a proposed rule and accepted
comments through June 15, 2010. The Agency is currently reviewing the
comments to determine potential changes for the final rule.
The program considers advanced biofuel technologies. The Agency
requires a feasibility study, which includes a technical assessment
that provides information used to conduct our due diligence and
approval process. The Agency guidance concerning the preparation of the
documents, allows applicants to tailor the information to a particular
technology and project. The Agency implements the program from the
National Office, and uses our State and area offices to assist in the
process. Communication with private sector lenders prior to the
development of an application and during the Agency's review has proved
to be a crucial factor in implementing the program.
USDA is working with DOE to see how the respective department's
loan guarantee programs can complement each other in accomplishing the
common goal of advancing the production of advanced biofuels.
Question 9. As you know, non-fuel biobased products, such as
bioplastics, also made from renewable biomass, provide similar benefits
as biofuels--such as job creation, enhanced rural economies, greenhouse
gas reductions and reduced use of petroleum. The modern bio-refinery
will need to mimic the petroleum refinery platform in that it will
produce multiple products and materials from one feedstock. USDA has
provided some support for biobased materials through programs such as
the Biobased Markets Program but how can USDA further incentivize these
products and help create markets for them? Should these products
qualify for the grants and loan guarantees under the Biorefinery
Assistance Program? Why or Why not?
Answer. The Agency recognizes that other biobased products can
potentially be a sizeable portion of a biorefinery's revenues and thus
affect the financial viability of the biorefinery. However, the primary
goal of this program is to encourage the production of advanced
biofuels. Under the Section 9003 Notice of Proposed Rulemaking the
Agency requested comments on the percentage of a biorefinery's sales
that must come from the sale of eligible advanced biofuels in order to
be eligible under this program. The public comment period closed June
15, 2010, and the Agency is currently reviewing same. This issue will
be addressed in the interim rule that RD anticipates publishing later.
Question 10. We know that as folks are struggling to find capital,
there has been discussion of the use of the bond market to finance
projects. It's my understanding that several entities have approached
USDA about this approach, so I'm wondering if you're able to tell us
whether you think this is an option either under the Biorefinery
Assistance Program or your other rural development loan guarantees. And
if so, would you be able to make it work without any legislative
changes to the statutory language?
Answer. The Agency's guaranteed programs already can consider bond
financing in circumstances where the lender purchases all bonds and
sells and/or participates thereafter. Under the Agency's statutory
authority, the Agency guarantees run to lenders, not to investors.
Question 11. In your testimony on Section 9003, you mention that
applications for the program have been affected by a number of factors,
including the recession and a high level of caution among lenders. What
are the nature of the concerns lenders have expressed?
Question 11a. What steps has USDA taken (or what steps will the
Department take in the future) to address lender concerns?
Answer 11-11a. Rural Development recognizes the magnitude of the
financial exposure and risk born by lenders that participate in Section
9003 program.
On April 16, 2010, USDA published a proposed rule and accepted
comments through June 15, 2010. The Agency requested comments on the
following:
Preapplications. The Agency requested comments on whether or not a
preapplication process for the Biorefinery Assistance program will
provide sufficient benefit to lenders and borrowers.
Feedstocks. The Agency requested comments on eligibility of certain
types of feedstocks. For example, should by-products from the pulp and
paper production process which are commonly used for on-site energy
production or recycled be an eligible feedstock for a biorefinery
seeking a loan guarantee under this program?
Rural area requirement. As proposed, only biorefineries located in
rural areas will be eligible for loan guarantees. The Agency requested
comments on whether biorefineries located in non-rural areas should
also be eligible for a loan guarantee under this program.
Foreign ownership. The Agency requested comments on whether
biorefineries that do not meet the proposed citizenship requirements of
at least 51 percent domestic ownership should be eligible for a loan
guarantee under this program.
Program obstacles. The Agency requested comments on any and all
provisions for the proposed Biorefinery Assistance program and the
Business and Industry Guaranteed Loan program that present an obstacle
for stakeholders applying for assistance in either program.
Processing technology owned by the borrower. The Agency requested
comments on whether the processing technology owned by the borrower
should be included as an eligible project cost. Examples of potential
eligible project costs associated with the processing technology could
include, but not be limited to: highly skilled labor, laboratory costs
and testing, and equipment.
Percent revenue from sale of advanced biofuel. The Agency requested
comments on the percentage of a biorefinery's sales that must come from
the sale of eligible advanced biofuels in order to be eligible under
this program. The Agency does recognize that other biobased products
can potentially be a sizeable portion of a biorefinery's revenues and
thus affect the viability of the biorefinery.
Value of feedstock supplied by producer associations and
cooperatives. The Agency requested comments on the percentage of
feedstocks that must be purchased from producer association and
cooperatives in order to be awarded points in the scoring of
applications. The Agency proposed a 60 percent threshold for such
purchases. The Agency attempted to strike a balance between giving
priority to the purchase of feedstocks from producer associations and
cooperatives and encouraging new feedstocks and technologies.
Measuring potential for rural economic development. The Agency
requested comments on metrics that can be used for measuring rural
economic development.
Measuring positive impacts on resource conservation, public health,
and the environment. The Agency requested comments on metrics that can
be used for measuring each of these three areas--resource conservation,
public health, and the environment.
Definition of agricultural producer. The Agency requested comments
on the definition of agricultural producer in which ``50 percent or
greater of their gross income is derived from the [agricultural]
operations.''
Local ownership. The Agency requested comments on the definition of
``local owner'' in scoring applications. The Agency sought comments in
particular on the relationship of an owner to the area supplying the
feedstock to the biorefinery and whether the proposed distance of 20
miles beyond the feedstock area is reasonable.
The Agency is currently reviewing the comments to determine
potential changes for the final rule.
Section 9004 Repowering Assistance
Question 12. It is our understanding USDA wants companies to pay
all the up front costs before applying for assistance. Given the
current economic climate, many companies can't get financing to
implement all the changes and then get reimbursement. Is there a better
way to do this?
Answer. Rural Development anticipated that the process to replace
fossil fuel use among a limited number of biorefinery sites producing
liquid transportation fuels would be a highly capital intensive
prospect. Although USDA can pay up to $5 million of these costs, the
Agency looked for the right set of incentives to encourage projects
that were truly sustainable--economically, environmentally, and
socially viable, to apply.
The Agency discovered after the first round that most projects are
less capital intensive than anticipated. Other than making a direct
grant, there is no other feasible option.
Based on comments received during the proposed rule comment period,
USDA is evaluating various options. USDA will consider these comments
and the options in the development of the interim final rule.
Section 9005 Bioenergy Program for Advanced Biofuels
Question 13. Why was the rural area requirement included in the
Notice of Contract Proposal (NOCP) for FY09 and FY10 payments? Was any
analysis done on which to base this requirement? If the rural area
requirement is not included in the Proposed Rule, why would USDA keep
it in the subsequent NOCP that was issued for FY10 payments?
Answer. Rural Development administers the Section 9005 Bioenergy
Program for Advanced Biofuels in a manner that is consistent with the
mission for rural areas for Rural Development programs across the
mission area. The Section 9005 proposed rule solicited public comment
regarding the rural area requirement. Information obtained from the
public will used to justify permanent regulations for the 9005 program.
The Agency published the original NOCP for FY 2010 on April 16,
2010, in an effort to be consistent with 2009 NOCP. Based on comments
received during the public comment period for the proposed rule on this
program, the rural area requirement for Section 9005 was removed in a
subsequent NOCP for FY 2010 that extended the application period to
allow producers in non-rural areas to qualify and make application.
Question 14. Why weren't the rural area and domestic ownership
requirements raised by USDA for discussion at the public hearing that
USDA held on this program before the NOCP was issued?
Answer. The public hearing held prior to preparation of the initial
NOCP was designed as a listening forum to afford the public an
opportunity to provide comments on the implementation of Title IX
before any notice or proposed rule was developed. USDA only listened to
the comments received during this forum and did not discuss any
specific policy issues at the forum. Rural Development administered the
Section 9005 Bioenergy Program for Advanced Biofuels consistent with
the requirements of Rural Development programs across the mission with
respect to rural definition and rural area. The concerns related to
consistency were identified during the development of the notices,
which was after the public hearing. The proposed rule requested comment
on rural definition and rural area. USDA is considering these comments
as we develop the interim final rule.
Question 15. What is the timeline for issuing a Final Rule for the
Section 9005 Program? Do you anticipate making payments of remaining FY
2010 funds under a Final Rule within FY 2010? Was it not possible to
make payments of the full FY 2010 funding amount under a Final Rule
within FY 2010? If not, why?
Answer. The Agency anticipates the interim rule to be published
sometime in Fiscal Year 2011. The FY10 NOCP was cancelled and FY 10
funding will not be made available until the interim final rule is
published.
Question 16. Why was only $30 million provided in FY09, when the
statue prescribed $55 million? (USDA initially said OMB would not allow
the full amount absent the benefit of a rulemaking process and public
comment period. However, now USDA has made FY10 funds available while
the Proposed Rule is still pending).
Answer. USDA is currently in the end stages of finalizing a
regulation for Section 9005 that meets the needs of the public. To
create a program that targets the correct recipients and provides a
fair and equitable amount of funding per applicant, USDA needed to take
public comments on the rule. As this process has taken more time than
what was initially expected, the Administration decided to release as
subset of funds through two NOFAs in 2009 and 2010. The public voiced
legitimate concerns over the 2010 NOFA, causing us to pull the
available funding. A final regulation will be published shortly,
releasing the remaining 2009, 2010, and new 2011 funds.
Question 17. Why was the domestic ownership requirement included in
the Notice of Contract Proposal for FY09 and FY10 payments and the
Proposed Rule? Was any analysis done on which to base this requirement?
Answer. Rural Development administers the Section 9005 Bioenergy
Program for Advanced Biofuels in a manner that is consistent with the
provision of other Rural Development programs across the mission area.
The Section 9005 proposed rule solicited public comment regarding the
foreign ownership requirement. Based on the comments received during
the comment period, USDA issued a subsequent NOCP for FY 2010 that
extended the application period to allow producers with foreign
ownership to qualify and make application.
Question 18. Where in the process of ``undergoing an appeal'' to
EPA does a facility's fuel have to be for you to consider them
eligible? Formally submitted or given notice that they're working on
the modeling and will be submitting?
Answer. The process of ``undergoing an appeal'' requires the
producer to formally submit an appeal to EPA to be considered under the
program.
Question 19. It has come to the attention of the Committee that
applicants for the 9005, Bioenergy program, must be an approved biofuel
under the RFS2. Can you tell elaborate on why you included that?
Answer. In an effort to be consistent with the Administration's
priority on renewable fuels, the Department incorporated the RFS2
requirements to ensure that the advanced biofuels produced would have a
market awaiting their production. The parameters of that market are set
in the RFS2.
Question 20. For the supplemental FY09 payments that USDA is
making, why are you not allowing payments to producers that made
qualifying fuel in 2009 but did not get their facility registered under
the original FY09 deadline?
Answer. The Extension Notice for FY 2009 payments was not a request
for additional applications. The Agency offered the remaining FY 2009
funding to all applicants eligible under the original FY 2009 Notice.
Question 21. Why can't USDA accept new facilities that produced
eligible fuel in 2009 since USDA has supplemental and carry over funds
and is actually soliciting companies to make applications for
supplemental payments--but only if they were signed up the qualifying
fuel by the original deadline?
Answer. The Extension Notice for FY 2009 payments was not a request
for new applications. The Agency offered the remaining FY 2009 funding
to all applicants eligible under the original FY 2009 Notice.
Other Information:
On April 16, 2010, USDA published a proposed rule, with comments
due by June 15, 2010. The Agency retained the 51% U.S. citizen
ownership requirement in the proposed rule, as in the 2009 NOCP.
Comments were solicited regarding:
If entities do not sell the advanced biofuel, but use the
biofuel for internal purposes, should these entities be
entitled to Program payments? How should the on-site usage be
verified?
Whether the proposed rule is following the intent of the
Program.
The appropriateness of the proposed payment rates.
Should the program modify the 51 percent domestic ownership
requirement?
Should advanced biofuels produced at biorefineries that are
located in non-rural areas be eligible for payments?
The Agency is considering an approach to offer different payment
rates based on the advanced biofuels' lifecycle greenhouse gas (GHG)
emissions. This approach would offer a significantly higher payment
rate for biofuels that are demonstrated to significantly reduce GHGs
emissions relative to the conventional fuels that they replace.
A NOFA releasing $40 million in budget authority for FY 2010 was
published in the Federal Register on May 6, 2010. The window for
applications closed on July 6, 2010.
Section 9007 Rural Energy for American (REAP)
Question 22. With respect to Section 9007 of the 2008 Farm Bill,
the REAP Program, you mentioned that energy efficiency ``projects''
typically involve installing or upgrading equipment to significantly
reduce energy use. Can you give examples of what you mean by equipment
``installation'' or ``upgrades'' equipment?
Answer. The Rural Energy for America Program (REAP) can help
agriculture producers and rural small businesses purchase or construct
renewable energy systems and install energy efficiency improvements.
The program has financed grain dryers, refrigeration units, reverse
osmosis equipment, and anaerobic digesters. Energy efficiency
improvements must demonstrate an energy savings to qualify for the
program.
Question 23. I didn't see any mention of a proposed or final rule
for REAP. What's the status of the rule?
Answer. A proposed rule that incorporates the energy audits,
renewable energy development assistance, and feasibility provisions
into the current regulation will be published in Fiscal Year 2011.
Question 24. There have been some concerns about the fact that REAP
has been operating on solicitations of applications and other funding
notices instead of a rule. This has kept folks wondering from year to
year exactly how the program is going to be operated and led to some
complaints from the field. Any response to them?
Answer. The 2010 Appropriation Act provided $39 million in funding
for grants and loan guarantees in addition to the $60 million of Farm
Bill mandatory funding. USDA published a Notice of Solicitation of
Applications (NOSA) in FY 2010 to solicit applications for the purchase
of renewable energy systems and to make energy efficiency improvements
in the Federal Register on April 26, 2010.
A separate NOFA for $2.4 million in funding to conduct Energy
Audits and Renewable Energy Development Assistance was published in the
Federal Register on May 27, 2010. Additionally, USDA published a third
NOFA in the Federal Register for feasibility studies on August 06,
2010.
A proposed rule that incorporates the energy audits, renewable
energy development assistance, and feasibility provisions into the
current regulation will be published in fiscal year 2011. The current
rule was designed to require an annual notice of the amount of funding
availability to be published each year to advise potential applicants
of the amount of funding available.
Section 9008 Biomass Research Development Initiative (BRDI)
Question 25. What types of projects have you been funding under
Biomass R&D? Have you tried to balance research with development
requests
Answer. BRDI supports applied and developmental research and
demonstrations. Any research that is basic or early applied would have
to be conducted in the context of addressing a technology gap, and
could be considered ``directed'' basic research. In FY09, one project
funded by USDA was a demonstration, one project funded by DOE was a
demonstration and 10 projects funded by USDA and DOE were research and
development projects.
Question 26. Can you tell us the dollar amount requested by those
108 full applications under the last soliciation? And how much funding
did you have available in FY09?
Answer. The 108 full applications that were reviewed totaled
$282,165,356. In FY09, USDA was authorized for $20M and the DOE
contribution was $5M.
Question 27. Why was the decision made to require applicants to
meet all three technical areas, including the development of biomass
and modeling?
Answer. After extensive discussions about the FY 2010 solicitation,
the USDA-NIFA and DOE Office of Biomass Program team members determined
that integrating the three technical areas would result in projects
that would effectively coordinate biomass production and conversion
technology, and would generate useful data for determining
environmental quality, cost effectiveness, and social impacts
associated with the technologies being proposed. Addressing all three
technical areas requires a more systematic approach that is anticipated
to result in near term successful outcomes for sustainably producing
biofuels and biobased products.
Question 28. The Congressional intent on clarifying the third
technical aspect under the Biomass R&D Program was to get at the
availability of adequate modeling on issues related to feedstock and
bioenergy production. So, I'm wondering, why you would require
applicants to look at all three of these aspects together when both the
Federal agencies and Congress agree that we need better modeling
capabilities to make the kinds of decisions that are being made on
biofuels policy? Was there a lack of understanding about Congressional
intent?
Answer. USDA-NIFA understands and has an appreciation for the
Congressional intent of Technical Area C and the need for strategic
guidance. The solicitation states that all three technical areas must
be adequately addressed, but that does not preclude an applicant from
emphasizing any particular technical area, e.g., focusing on Technical
Area C. A model is only as useful as the quality of data input.
Systematic evaluations and analyses that are conducted in conjunction
with feedstock production and conversion result in data that can
support existing models or the development of new models. The
anticipated result is more robust modeling that will provide the
desired strategic guidance for truly sustainable biomass technologies.
Question 29. With respect to the Section 9008, you mention that the
Fiscal Year 2010 solicitation supports models that focus on public
lands regarding feedstock development; including analysis of new policy
approaches to stewardship contract, forest ecosystem restoration,
invasive species management, and grassland restoration projects. Can
you explain the extent of the Forest Service's involvement regarding
section 9008?
Answer. Statutory language was used verbatim in the FY 2010
solicitation to support biofuels development analysis and models:
``(i) Strategic guidance.--The development of analysis that
provides strategic guidance for the application of renewable
biomass technologies to improve sustainability and
environmental quality, cost effectiveness, security and rural
economic development; or
(ii) Energy and environmental impact.--Development of
systematic evaluations of the impact of expanded biofuel
production on the environment (including forest land) and on
the food supply for humans and animals, including the
improvement and development of tools for life cycle analysis of
current and potential biofuels; or
(iii) Assessment of federal land.--Assessments of the
potential of Federal land resources to increase the production
of feedstocks for biofuels and biobased products, consistent
with the integrity of soil and water resources and with other
environmental considerations.''
On December 2, 2009 the Biomass Research and Development Technical
Advisory Committee submitted, as required by legislation, their
recommendations for Section 9008. The twenty-nine recommendations
included the following:
``. . . strategies be developed to encourage the utilization
of woody biomass derived from federal, state and private lands
. . .'' The committee suggested that long-term (10 year
minimum) contracts for utilization of biomass from federal
lands be examined.
``. . . research be funded to help in the identification,
development, and selection of appropriate systems that might be
used to harvest, consolidate and convert invasive species into
biofuels or biopower.''
``. . . develop best management practices for sustainable
productivity of agriculture and forestry systems for biomass
feedstocks.'' An example of best management practices that
should be developed includes an analysis of forest and
grassland protection and restoration operations.
For the FY 2010 solicitation, it was determined that the broader
language in the statute encompassed the recommendations of the
Technical Advisory Committee.
As a Federal research agency, the USDA Forest Service is eligible
to submit applications to the Biomass Research and Development
Initiative--Section 9008. The USDA Forest Service has no extensive
involvement regarding the program beyond this capacity.
Section 2010 Biomass Crop Assistance Program (BCAP)
Question 30. USDA has stated in its proposed rules that it ``seeks
to avoid diverting any materials potentially eligible for BCAP matching
payments from existing value added production processes already
occurring in the marketplace.'' What is the reason for avoiding product
diversion is to avoid market distortions?
Answer. During the operation of the Notice of Funding Availability
(NOFA), concerns were raised by some users of biomass feedstocks, such
as mulch producers, nursery growers, and particle board manufacturers,
that BCAP payments were affecting the price and availability of their
respective feedstocks. These groups submitted written comments during
the public comment period of the proposed BCAP rule, and FSA has
closely reviewed these important comments as the final BCAP rule is
developed.
Question 31. Do you believe that the proposed rule implementing the
BCAP program achieves the Department's stated goal ``to avoid diverting
any materials potentially eligible for BCAP matching payments from
existing value added production processes''?
Answer. Yes. The language proposes that vegetative wastes, such as
wood waste and wood residues, collected or harvested from both public
and private lands, should be limited to only those that would not
otherwise be used for a higher-value product. More specifically, for
materials collected from both public and private lands, CCC is
proposing to exclude from matching payment eligibility wood wastes and
residues derived from mill residues (i.e., tailings) or other
production processes that create residual byproducts that are typically
used as inputs for higher value-added production (i.e., particle board,
fiberboard, plywood, or other wood product markets).
Question 32. Did the Department conduct any analysis of the impact
of the proposed rule on the forest products industry before publishing
the rule? What impact did you find?
Answer. No--no specific analysis was conducted on the forest
products industry.
Question 33. In the proposed rule, USDA states that it would exempt
wood waste and residues that would be used to create higher-value
products such as wood panels. Do you believe that allowing matching
payments for wood biomass that could be used to create pulp, paper and
packaging could divert these raw products from higher value use?
Answer. Apart from the Congressional authority in the statute, it
is generally economically unfeasible, with or without BCAP matching
payments, for these feedstocks to be used for energy purposes rather
than for pulp, paper and packaging.
Question 34. As you know, Congress created in BCAP both a matching
payments component for the delivery of biomass to biomass conversion
facilities, as well as a supply component to promote the production of
energy crops. However, the Conference Report stated that ``the primary
focus of the BCAP will be promoting the cultivation of perennial
bioenergy crops that show exceptional promise for producing highly
energy-efficient bioenergy or biofuels, that preserve natural
resources, and that are not primarily grown for food or animal feed.''
And yet, the funding for the BCAP program is skewed towards the
matching payments component, which would receive $2.1 billion for years
2010-2013 under the proposed rule, while the supply component would
receive only $536 million for years 2010-2012 for establishment cost
share and technical assistance and for annual payments over 2010-2026.
Do you believe that, of the 2 aspects of the BCAP program--the supply
component--is less likely to result in market distortions?
Answer. No. Both aspects of the BCAP rule--the establishment and
annual payments, and the matching payments--are by design to influence
markets, providing incentives to cultivate, harvest, transportation and
deliver biomass where it would otherwise not occur under present market
conditions. Further economic studies coinciding with BCAP outcomes
would be required to determine which two aspects of BCAP more
successfully incentivized the biomass marketplace.
Question 35. If the program were realigned so that more of the
available funds are allocated for the supply program, would this help
prevent market distortions? What allocation of funds do you contemplate
for the supply component versus the matching payments component?
Answer. BCAP will encourage producers to make choices on types of
biomass grown and consumers to make choices on types of biomass
consumed--affecting demand and supply of non-feed, non-food dedicated
energy crops. The necessary funding for the establishment and annual
payments portion of BCAP, therefore, will rest largely on the level and
type of interest from applicants seeking to participate in the program
during the time remaining until the next farm bill reauthorization in
2012.
Question 36. Creating sustainable feedstocks for a growing advanced
biofuels industry is vital to meeting the renewable fuels standard
enacted by Congress. The Biomass Crop Assistance Program (BCAP) in the
2008 Farm Bill is a promising program that could help a lot of farmers
get started growing dedicated energy crops, but I have heard from
farmers that USDA has been slow to implement the program, and that the
restrictions and requirements that USDA has proposed could really
hamper its impact. What can USDA do to get an effective and usable
Biomass Crop Assistance Program (BCAP) up and running quickly?
Answer. USDA is working to issue the final rule on BCAP this fall
so that interested applicants can participate in preparation for the
2011 crop year.
Question 37. While BCAP is important, its reach is limited. What
else will USDA do to incentivize agricultural land owners to begin
collecting agricultural residues and grow and manage dedicated energy
crops?
Answer. USDA will continue the federal investment in associated
energy projects of Title IX of the 2008 Farm Bill, and explore how
existing programs, such as risk management and disaster assistance,
credit mechanisms, research, and technical assistance can be used to
further develop a dedicated energy crop infrastructure.
Question Submitted by Hon. Steve Kagen, a Representative in Congress
from Wisconsin
Question. There is a company in my State of Wisconsin that allows
its customers (many of whom are my constituents) to pay for new energy
technology with the energy cost savings resulting from the technology
itself. At the end of a specified period of time, as defined in a
supply contract, the ownership of the equipment is transferred from the
company to its customer, the farmer. Unfortunately, a farmer in
Northeastern Wisconsin that takes advantage of creative financing
options like this are barred from applying for Rural Energy for America
Program (REAP) funding, the main source of funding at USDA that farmers
can use to make investments in energy efficiency and renewable energy
technology. This is a problem--if a farmer could enter into this kind
of financial arrangement and also take advantage of the REAP program,
the amount of time it takes for that farmer to pay for the technology
would decline significantly, and that farmer would be able to take
advantage of 100% of the cost savings much sooner.
While farmers don't control the cost of electricity--or the fact
that electricity costs are rising--they can control when they use
electricity and how much electricity they use, but only if they have
the resources they need to invest in the right technology. As long as
farmers that utilize creative financing options are excluded from REAP,
however, they cannot maximize their use of available resources. Is USDA
willing to work with Congress, as we draft the next Farm Bill, to solve
this problem?
Answer. The Rural Energy for America Program (REAP) assists
agricultural producers and rural small business purchase or construct
renewable energy systems and install energy efficiency improvements.
The Agency is open to discuss alternatives that will promote and expand
the REAP program and increase energy savings and renewable energy
production.
Questions Submitted by Hon. Adrian Smith, a Representative in Congress
from Nebraska
Question 1. Congress authorized $300 million over 4 years for
Section 9005, the Advanced Bioenergy Program, of the Energy Title of
the 2008 Farm Bill. While the statute provided $55 million in Section
9005 funds for Fiscal Year 2009, the Department of Agriculture paid out
only $30 million, carrying the other $25 million to FY 2010.
Answer. USDA is currently in the end stages of finalizing a
regulation for Section 9005 that meets the needs of the public. To
create a program that targets the correct recipients and provides a
fair and equitable amount of funding per applicant, USDA needed to take
public comments on the rule. As this process has taken more time than
what was initially expected, the Administration decided to release as
subset of funds through two NOFAs in 2009 and 2010. The public voiced
legitimate concerns over the 2010 NOFA, causing us to pull the
available funding. A final regulation will be published shortly,
releasing the remaining 2009, 2010, and new 2011 funds.
Question 1a. The USDA proceeded to request applications for
supplemental 2009 and 2010 advanced fuel production while at the same
time considering a proposed rule which would make significant changes
to the program.
Despite the fact USDA is making supplemental FY 2009 payments and
rolling unused supplemental funds to FY 2010, USDA is denying payments
to producers who made qualifying fuel in 2009 but did not apply under
the original FY 2009 deadline.
Why, if USDA has supplemental 2009 funds and is soliciting
facilities for application, are you denying payment to facilities which
would have qualified under the original FY 2009 deadline, but did not
initially apply?
Answer. USDA is currently in the end stages of finalizing a
regulation for Section 9005 that meets the needs of the public. To
create a program that targets the correct recipients and provides a
fair and equitable amount of funding per applicant, USDA needed to take
public comments on the rule. As this process has taken more time than
what was initially expected, the Administration decided to release as
subset of funds through two NOFAs in 2009 and 2010. The public voiced
legitimate concerns over the 2010 NOFA, causing us to pull the
available funding. A final regulation will be published shortly,
releasing the remaining 2009, 2010, and new 2011 funds.
Question 2. In FY 2009, Section 9005 payments were obligated using
a rule with several unjustified restrictions. USDA is now considering a
proposed rule which would make corrections and significant changes,
likely allowing currently ineligible producers to qualify. Why is the
USDA prepared to release 2010 dollars under the obviously conflicting
rule?
Answer. The Agency published a NOCP for FY 2010 that was consistent
with the 2009 NOCP. The Agency wanted to provide payments to an
industry having financial difficulties. However, the rural area
requirement for Section 9005 was removed under the Notice of Proposed
Rule Making published on April 16, 2010. The Agency received comments
on whether biorefineries located in non-rural areas should be eligible
for the program. In addition, comments were received concerning foreign
ownership. The Agency is currently reviewing all comments.