USDA's BCAP threatens Elimination
of the Mulch and Soil Industry.
What Is BCAP?
As part of the energy program of the 2008 Farm Bill, the Biomass Crop Assistance Program (BCAP) was created to incentivize the production of “new” biomass crops to support the emerging biofuels industry and encourage greater use of carbon-neutral biomass to replace fossil fuels. The original target beneficiaries were agricultural landholders who needed assistance to grow new, renewable biomass crops other than corn, such as switchgrass and miscanthus, for which there is no established market. The inclusion of forest fiber (byproducts not sold for higher value use) was made after the 2008 Farm Bill was authorized and without any stakeholder input.
Although originally authorized for $70 million, USDA rushed BCAP into existence in July 2009 with an initial Notice of Funds Availability (NOFA) for $500 million for the first 6 months of a 2-year program without first issuing any proposed rules. The BCAP NOFA provided for $1 for $1 matching grants up to $45/bone dry ton (BDT) for the collection, harvest, storage and transport of approved biomass crops to authorized biomass conversion facilities to generate energy, extract advanced biofuels or create biobased products.
As a result, an immediate calamity of unintended consequences caused the USDA to suspend operations in February 2010 after less than three months operation. On February 9, 2010, USDA issued a Notice of Proposed Rulemaking (NPR) seeking public comment on program rules until April 9, 2010, that should have been issued prior to the NOFA. At the close of the April comment period, the BCAP NPR had received over 24,000 comments compared to the 47 comments received in July 2009 for the NOFA.
BCAP Impact on the Mulch & Soil Industry
Less than 30 days after the December release of BCAP funding under the NOFA, members of the Mulch & Soil Council reported immediate negative impacts such as:
- Wood fiber suppliers refused to sell wood chips, sawdust or other forest byproducts to mulch producers at market rates in anticipation they might qualify to sell the same materials to a biomass conversion facility at the higher, government subsidized rate, and
- Wood suppliers willing to sell materials would do so only at the subsidized rate whether they were BCAP qualified or not.
The immediate impact is that BCAP has drastically disturbed the existing forest byproducts marketplace. Members report an inability to acquire wood fiber inventories across the country. Forest landowners and loggers have shown an unwillingness to enter into supply agreements without assurance they can maximize their pricing under the new government subsidy program.
If BCAP rules are not changed to protect the existing market applications, mulch & soil producers will have to compete for inventory supplies that have doubled in cost due to matching grants up to $45/BDT. Garden mulch costs could more than double, if product is even available at all.
Since bark-based growing media is used to produce 95% of the container plants grown by the nursery industry, the unavailability of growing media caused by the lack of wood fiber will also send a very negative economic ripple through the entire green industry.
BCAP Unintended Consequences
- The unintended consequence of BCAP inclusion of forest products takes wood from established industries making a variety of biobased products that provide tens of thousands of domestic jobs in mostly rural locations, and gives it to the biomass fuel industry (only hundreds of jobs) to burn or convert for mainly export markets.
- The originally proposed $70 million has already seen $500 million allocated for USDA sponsored subsidies under the Biomass Crop Assistance Program (BCAP) with no cap on spending. As now structured, BCAP will immediately harm the U.S. economy and cripple many U.S.-based wood products manufacturers while adding over $2 billion in taxpayer debt.
- If BCAP’s purpose was to incentivize the production of NEW biomass resources or promote the collection of unused and under-utilized wood and agriculture biomass, then it should be clear that Congress never intended to divert materials currently used for the production of existing wood fiber products at the expense of existing jobs and the loss of existing industries.
- Rather than foster the growth of a new industry, as Congress intended, BCAP puts existing manufacturing jobs at risk. The U.S. Census shows that industries dependent on forest byproduct resources account for more than 350,000 American manufacturing jobs and over $75 billion in sales in 2006. An additional 10,000 jobs are in the mulch and soil industry and another 20,000 jobs are in the composite panel industry alone.
- U.S. mulch and soil producers spent an estimated $426 million on raw material in 2009 providing the foundation for growing plants in greenhouse and nursery production for horticulture, landscaping and consumer gardening that represents another $70 billion in U.S. economic activity. Under BCAP, literally all the wood used by our industry (6% of the byproduct market) would be consumed by biomass fuel interests, and in cases where mulch manufacturers compete with biomass fuel, raw material prices could double.
- USDA’s exclusion of “higher-value use” materials from the BCAP program indicates the agency did not intend to displace the present marketplace and those industries making productive use of forest products.
- By subsidizing forest byproducts (wastes) at rates approaching or exceeding the cyclical market rate for higher-value materials, BCAP actually creates the counter-market force it was trying to prevent.
- In the current depressed market for building materials, BCAP jeopardizes higher value products, including saw timber, due to unnatural, temporary, and completely artificial market conditions the subsidy creates within the forest products industry.
- Burning higher value products as biomass is irrational. There is no point to promoting biomass to heat homes we can no longer afford to build because our raw materials were wasted as a result of unintended consequences of the BCAP program.
- Mill operators have reduced their buying price to half the market in some areas, i.e., a $60/ton market results in a $30/ton payment by biomass conversion facilities and a $30/ton match from BCAP. Biomass sellers receive no incentive to sell to the biomass conversion facilities. Tax dollars are creating windfall profits for private industry that has already converted to biomass use by reducing the cost of fuel for biomass users at the expense of the American taxpayer and not one new biomass resource has been created and no biomass supplier has benefitted as intended by the program.
- Every BCAP matching dollar spent on products with existing markets and not new biomass development is contrary to the original purpose of the BCAP program and a waste of taxpayer dollars.
- Disruption in the forest byproduct market has already created artificial shortages threatening industry’s ability to meet inventory needs and contract fulfillment for product orders. Contract defaults add another layer of economic burden brought upon industry by a hasty BCAP subsidy program.
- If BCAP continues on its current path, unintended government sponsored materials redistribution contrary to free market forces in the wood fiber industry will eliminate biobased product producers long before the program expires in 2 years.
BCAP Solution Options
- To avoid unintended redistribution of existing forest products markets, BCAP would have to allow all biobased product companies to qualify as biomass conversion facilities to maintain equitable competition in the marketplace.
- Alternatively, BCAP can change the list of raw materials eligible for subsidy and exclude bark, hardwood chips, softwood chips, forest thinnings and disaster debris. All of these forest byproducts have existing markets (including biofuels at 48%) and the BCAP subsidy only represents an unintended, but very real, extinction level event for the remaining 52% of the market comprised of biobased product manufacturers, like mulch and soil producers, who cannot compete at artificially high, subsidized market prices.
For More Information
The Mulch & Soil Council has led the industry in responding to the serious threat BCAP represents to the mulch and soil industry. Letters and information for Congressmen are available to members who are willing to contact their Representatives and Senators to oppose the BCAP program. MSC has held numerous meetings with agencies, Hill committees and elected officials to educate everyone on the unintended and dangerous consequences of BCAP.
If you want to help, please contact the Mulch & Soil Council office at 703.257.0111 for assistance in having your voice heard on this issue.
