OMAHA (DTN) -- A biomass program that pays matching payments to farmers could survive in the next farm bill, but will move ahead in 2012 with just a fraction of its recent funding.

Congress last week approved $17 million funding for FY 2012 for the Biomass Crop Assistance Program, a stunning blow for a program that just two years earlier was authorized for funding up to $552 million.

"You'll see a lot of plant failures. I can see it coming," said Steve Flick, chairman of the board for Show Me Energy Cooperative, the first biorefinery approved under BCAP.

BCAP was created in the 2008 farm bill as a small pilot project largely to pay farmers and landowners matching payments of up to $45 per dry ton to deliver biomass to alternative-energy facilities. Some projects were set up for cellulosic ethanol, while others were set up to burn biomass for electricity. The matching payments for biomass delivery were capped at two years per producer.

USDA initially had been given full discretion on BCAP spending, but lawmakers began dramatically whittling down the program in last April's budget agreement, capping BCAP for FY 2011 at $119 million. That was about $84 million less than USDA had earlier planned to spend. The cut last spring was so dramatic that the Farm Service Agency sent out notices in September to state offices effectively freezing funding applications for 2011.

"It's such as small piece of the budget," Flick said. "If this country is serious about utilizing fuel sources and making it homegrown, we're at a crossroads. If we don't take the advantage and lead on biomass as a fuel in the forefront we'll have nobody to blame but ourselves."

Before settling on $17 million for FY2012, the House had zeroed out funding for BCAP, but the Senate had approved $119 million.

In a farm-bill proposal released last week, BCAP would receive up to $75 million in annual funding starting next year, assuming the farm bill is adopted. But farm-bill negotiators also lowered the matching payments to $20 a ton.

Based in Centerview, Mo., Show Me Energy is a relatively small biorefinery that has already weathered the storm and now sells pelletized biomass to coal-fired power plants nationally. The facility's biomass mostly comes from prairie and native grasses on 27,000 acres of largely marginal ground.

Flick saw the concept of biomass facilities popping up much like microbreweries across the country, each individually producing relatively small amounts of energy, but building up as a more diverse industry over time.

"It's emerging and it's fledgling," Flick said. "There's no national spokesman or organization that represents strictly biomass as its interest."

Secondly, discussion of farmers delivering round bales of switchgrass or corn stover to a small plant out in the country just doesn't excite many people over the energy potential.

"It's a huge economic driver for rural America. It's economic development and jobs creation. It is a big technological shift. That is a big deal to rural America," Flick said.

Several projects of different scope were developed through the BCAP program. For instance, the University of Missouri Extension is working with producers to grow switchgrass and miscanthus on marginal ground. Further, Kansas State University just announced last week a study to look at the feasibility of using land now enrolled in Conservation Reserve Program to grow biomass.

Scaling back BCAP is one of the difficulties for the biomass and cellulosic industries. Loan guarantees for emerging industries are less likely with the collapse last year of Range Fuels in Georgia, a cellulosic ethanol project that received more than $150 million in federal loan guarantees from 2007-2009 before shutting down. Range Fuels used some of the same programs that the bankrupt Solyndra solar company also tapped.

"We cannot afford to have another Range Fuels," Flick said. "In our industry, that is the black sheep. Solyndra just added to the herd."

Now that BCAP is funded, biomass facilities are waiting to see how USDA divvies up the smaller pie. Earlier this month, ethanol producer POET stated 61,000 tons of biomass had been harvested for the plant's Emmetsburg, Iowa, cellulosic facility called Project LIBERTY. But producers were waiting on BCAP funding to deliver for their matching payment. Project LIBERTY has been taking delivery of biomass for more than a year, but actually is slated to begin cellulosic ethanol production in the latter part of next year.

Jim Sturdevant, director of Project LIBERTY, said the facility isn't hitched to BCAP for its success, but the program was designed to offer landowners and farmers an initial chance to get involved in biomass production.

"Everyone needs to keep in mind BCAP was designed as a two-year incentive to get producers over the hump and into the game," Sturdevant said. "It was never designed to be the end-all to long-term biomass production. It's just a boost."

Chris Clayton can be reached at chris.clayton@telventdtn.com

(AG/SK)

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