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How To Cap BCAP Costs

How To Cap BCAP Costs

Story by Dan Shell,
Managing Editor

Back in early 2008, I remember first hearing about some type of new federal pilot program with matching payments for collecting and hauling biomass that would start with around $20 million bucks. Now, $20 million isn’t so much in the overall context of federal spending these days—call it the equivalent of a stock trader’s cup of coffee considering the trillions thrown at the investment banking sector, or a couple hours of war. I also remember thinking that $20 million for biomass shipments would disappear pretty quick.

Flash forward two years, and the Biomass Crop Assistance Program has exploded, with costs projected at $2.1 billion over the next 10 years. Until it was temporarily suspended in February because of its controversial impact on existing biomass and mill residual markets and lack of progress towards the goal of developing new sources of renewable fuels, more than $185 million in payments had been made in little more than 6 months—with another $100-plus million authorized and currently being processed.

So much for that cute little $20 million “pilot program.”

Previous issues of this magazine as well as this one have contained much coverage and background on the panel industry’s response to the Dept. of Agriculture’s Farm Service Agency soliciting public comments and modifying BCAP to better focus its efforts on developing and utilizing new sources of biomass, not disrupting existing markets and raising residual costs. A new and improved BCAP is due to resume later this year. Outside of that technical rule-making effort is the federal budget appropriations process to fund BCAP as part of the 2012 Farm Bill that’s currently gaining weight in Congress.

Even in a Congress that spends money like it’s burning a hole in the U.S. Treasury, it hasn’t gone unnoticed that BCAP is poised to become a giant agricultural subsidy. During recent Congressional hearings on BCAP, one appropriations committee member noted BCAP costs have risen 3,000% faster than original budget projections.

A new reason for the pending BCAP cost explosion is a provision added to the proposed “new and improved” BCAP: In addition to providing matching payments for collecting, storing and hauling biomass, the government will now pay biomass growers up to 75% of their “crop establishment” costs. That sound you hear is the subsidy door being blown wide open and off its hinges once BCAP gains traction as a row-crop subsidy.

Congressman Jack Kingston of Georgia said at a recent hearing, “If we don’t kill it now, it will have its own lobbying group. It has a constituency growing.”

While there are plenty of ways for government to get involved and help develop various incentives for alternative energy utilization, is having the federal government inject raw cash payments into developing markets the right way to go? Or will that just produce distortions in economic activity that’s occurring anyway?

USDA Farm Service Agency Administrator Jonathan Coppess says the the final BCAP rule will “unleash the full potential of the BCAP program.”

Yet seeing BCAP “unleashed” is exactly what many in the panel industry are worried about.

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