[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

                              ----------                              
                                                                   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.

                                  
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