January - March, 2011
BCAP Funding Cut in FY2011
Budget Battle
Budget Battle
As part of the compromise budget agreement between Congress and the White House, the federal government has reduced funding for the Biomass Crop Assistance Program (BCAP). By how much is still unclear. A list of cuts released by House Republicans puts the decrease at $134 million. The text of the bill, as we reported last issue, says the following:
"None of the funds appropriated or made available by this division or any other Act may be used to pay the salaries and expenses of personnel to carry out the Biomass Crop Assistance Program in excess of $112,000,000."
Outside of Washington D.C., neither the grammar of this section nor the math makes sense. You don’t have to be an English teacher to find an easier way to say that funding for the program is limited to $112 million. And the math is even more obscure.
According to the final rule governing the program, published in October of last year, the total cost of the program for FY2011 was expected to be $199 million. $132 million of that was scheduled to go into the matching payments program, $61 million was earmarked for the biomass crop establishment cost share program, and $4 million was set aside for annual payments. The remaining $3 million was slated for technical assistance. Interestingly, the $65 million remaining after a supposed $134 million cut is the exact total reserved for Establishment and Annual Payments. But, and this is even more interesting, if you add the $134 million cut to the $112 million left in the budget for the program, you get $246 million, $47 million more than the program’s projected FY2011 cost.
This begs the question: was the reduction in BCAP funding a real spending cut, or was the USDA not likely to spend that money anyway? Many of the cuts in the new budget deal appear to be cuts in name only. For instance, the bill defunds four policy czar positions in the White House; none of these positions is currently filled, however, so the money would not have been spent in 2011 in the first place. Some provisions slice from the budget money earmarked for state-specific projects that have been discontinued, like the infamous bridge to nowhere. Others focus on money designated for specific projects that states have refused to accept, like grants for the construction of high-speed rail lines. The Congressional Budget Office estimates total savings in fiscal year 2011 will amount to just $352 million, not the $39.9 billion originally announced.
Details about how the USDA will adjust the budget for BCAP are not yet available. We don’t know at this point whether they will focus on one part of the program and spend the remaining money on establishing crops or whether they will divide cuts between the two parts of the program. Based on the focus of the final rule, which was heavily weighted toward encouraging crops and restricting matching payments, we suspect that once current contracts for matching payments are complete, this part of the program will take a back seat.
Who will be affected? The only facilities that have qualified as biomass conversion facilities since October are three POET plants, one in Iowa and two in South Dakota. As a result, the only biomass suppliers who will be immediately affected are those who supply corncobs to these POET facilities.
Beyond the immediate, however, the USDA was likely to qualify additional biomass conversion facilities before the end of the fiscal year. Some of these are wood consuming facilities scheduled to come online in the next few months. Aspen Power, a 50 MW facility nearing the end of construction in Texas, will start generating power in May, for instance. If the matching payments program is completely defunded, Austin Power’s s logging debris suppliers - one group the plan was designed to help - will not benefit from the incentive.
And this begs another question: does the fact that funding has been restricted at the same time that biomass power is coming online indicate the program was misconceived from the beginning? The intent of the matching payments program was to encourage the development of a biomass supply chain. Unfortunately, the supply preceded the demand. And now, in 2011, the first year in which wood-based biopower demand was scheduled to hit the market, no money will be available to help stabilize the supply chain.
Looking forward, 2012 is set to be a watershed year for biopower, as it is the year in which many of the projects announced in 2008 are scheduled to complete construction. The White House and Congress are scheduled to begin the 2012 budgeting process soon. With the size of the deficit, and with the precedent set in the 2011 budget, the $132 million that is scheduled to support matching payments in 2012 is likely to go away as well.
Source: April 2011 Forest2Fuel Newsletter