Inflated biomass demand leaves nursery industry holding the bill
By MATEUSZ PERKOWSKI
Nursery producers are attacking a federal renewable energy subsidy that benefits forestland owners and others in the timber industry.
The USDA's Biomass Crop Assistance Program, or BCAP, aims to increase the amount of energy generated from agricultural and forestry wastes.
By artificially inflating the demand for woody materials, the program has driven up the cost of bark dust -- a key component in soil mixes, according to a nursery industry group.
"It affects the whole supply chain, from growers to retailers to landscape supply companies," said Corey Connors, legislative relations director for the American Nursery and Landscape Association.
The added expense is taking a financial toll on nurseries, which are already ailing from the housing downturn, he said. "BCAP could well be a job killer."
Friction over renewable energy is nothing new in the agricultural industry.
For years, livestock producers have blamed federal ethanol policies for boosting corn prices. The corn industry, not surprisingly, supports more ethanol production.
Similarly, biomass energy is seen as a new revenue source for the timber industry. For nurseries, however, rising demand for wood waste equates to reduced supplies.
"We've seen prices tick up and availability become an issue in the past several years," Connors said.
A representative of the nursery group recently testified at a House subcommittee hearing, alerting members of Congress to the "unintended consequences" of the subsidy.
The organization has also urged the USDA to exclude "bark, bark-based materials, landscape mulching materials, softwood chips and forest thinnings" from eligibility for BCAP.
USDA pays biomass producers $1 for every $1 of material they sell to energy facilities, resulting in about $245 million worth of payments since BCAP was implemented in mid-2009.
The program was established by the 2008 Farm Bill and enacted by USDA last year on an interim basis. The agency is currently working on the final regulations for BCAP, which are expected to be completed by autumn.
Subsidies are needed to "jump-start" the biomass energy sector, since extracting woody material from the forest would otherwise be uneconomical, said Dan Whiting, communications director for the National Alliance of Forest Owners.
"It's critical because it helps to support the infrastructure and jobs needed to get more biomass into the supply chain," Whiting said.
Once a solid foundation has been established for the biomass energy sector, forestland owners will extract more material and alleviate any supply shortages, he said.
"What we hope that would do is increase the total amount of biomass available in the marketplace," Whiting said. "You're creating incentives to push more product onto the marketplace."
The side effect of the subsidy is that bark dust prices get pushed up as the overall market finds its legs, said Roger Lord, a forest economist at the Mason, Bruce & Girard consulting firm.
A lot of woody material -- such as branches and tree tops -- is currently left behind by loggers due to difficulties with processing and transport, Lord said.
Subsidies will provide loggers with an economic reason to collect that material, prompting them to invest in mobile grinders and chippers that improve hauling efficiency, he said.
Transporting unprocessed forest slash is impractical, Lord said. "You end up hauling a bunch of air and water, which you don't want to do."
As processing equipment becomes more prevalent, waste materials would no longer be prohibitively expensive to extract from the woods -- particularly as loggers hone their skills at such operations, he said.
"Given enough time, they'll make it economical," Lord said.