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USDA limits subsidies

Published on October 29, 2010 3:01AM

Last changed on November 26, 2010 8:20AM

Bark dust proved more popular than anticipated in project


Capital Press

The USDA has changed course on controversial subsidy program aimed at promoting biomass-to-energy projects.

Opponents criticized the Biomass Crop Assistance Program for driving up the cost of wood byproducts, helping the timber industry at the expense of nursery companies that heavily rely on bark dust for soil mixtures.

Under the initial version of the program, implemented on an interim basis in mid-2009, biomass producers were paid $1 for every $1 of raw material they sold to energy facilities.

By making it more appealing to burn byproducts for power generation, the program reduced the overall supply of woody biomass, according to critics.

The USDA's Farm Service Agency has now revised the program to effectively bar certain byproducts from qualifying for matching payments.

"We're trying to create a new energy market," said Kent Politsch, agency spokesman. "We're not trying to hurt anybody."

Strictly speaking, bark dust and similar materials are still technically eligible for the program -- but FSA officials can exclude them if they determine the byproduct is already in demand from a higher-value market, like the nursery industry.

"They're acknowledging some of these materials are already used for good stuff and they don't want to disrupt that," said Craig Regelbrugge, vice president for government relations at the American Nursery and Landscape Association.

Woody materials obtained by removing dead trees or thinning forest stands will still qualify for matching payments, as long as they're not directly used for higher-value products, Politsch said.

Officials from FSA will determine the eligibility of each proposal on a case-by-case basis, most likely with advice from the U.S. Forest Service, he said.

"It's going to be a work in progress," Politsch said. "There's going to be some trial and error, but we're hoping this will be something very productive."

Unless wood byproducts are generated far from any traditional market, they're unlikely to qualify for matching payments, said Wade Mosby, senior vice president at the Collins Companies, a timber company that has tracked the issue.

"In reality, it's going to be pretty difficult," he said.

Mosby said he understands the USDA wants to fund new sources of biomass, rather than subsidizing "business as usual," but some of the new constraints are overly restrictive.

For example, shells from nut-processing plants are an excellent source of biomass for combined heat-and-power plants, he said. Unless the shells are collected directly from the farm, however, they don't qualify for the program.

Under the new terms, only materials from conservation and thinning projects will likely be eligible for matching payments, Mosby said. "It's probably better than nothing, but I thought the interim rule was more realistic."

Budgetary concerns also probably played a role in the USDA's decision to limit the program's scope, he said.

According to a report from the Congressional Research Service, the program was initially expected to cost only $36 million through 2012, when it's set to expire. Its popularity was unexpected: More than $240 million has already been spent since 2009.

Though the program's breadth has been curtailed, the nursery industry is nonetheless studying alternative materials for soil mixes, Regelbrugge said. Even without direct subsidies, bark and wood byproducts are being used for power production.

"We're operating under the assumption it's going to be more of a precious resource," he said.


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