Mulch & Soil Council

USDA's Biomass Crop Assistance Program's (BCAP)

What Is BCAP?
BCAP Current Status & Recommendation
BCAP Impact on the Mulch & Soil Industry
MSC Response to BCAP
BCAP Proposed Rules
Agricultural Committee Hearing (June 9th 2010)

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 Current Status (top)

BCAP was a program disaster from the very start. Provisions to protect existing "Higher Value" markets were initially ignored and that created a stampede for unreasonable govenment funding give-aways that severely disrupted the wood fiber market. Efforts by the MSC and the Wood Fiber Coalition restored proper recognition of higher purpose markets and significantly curtailed the runaway spending BCAP had created. The 2012 Farm Bill reduced BCAP funding to just $25 Million to be spent mostly on "Project Area" funds and not CHST matching grants.

Current Recommendation

At its present funding level, BCAP represents a minimal threat to disrupting the open market for wood fiber products. However, its continued existance means that increased funding could recreate the market disasters experienced in 2010 at a moments notice. MSC recommends that Council members carefully watch USDA annual funding and Farm Bill activities that might re-energize the BCAP CHST matching grant program that would redirect market materials unfairly away from mulch and soil producers as a result of ill advised government subsidies..

BCAP Impact on the Mulch & Soil Industry (top)

Less than 30 days after the December release of 2010 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 was that BCAP drastically disturbed the existing forest byproducts marketplace. Members reported an inability to acquire wood fiber inventories across the country. Forest landowners and loggers demonstrated an unwillingness to enter into supply agreements without assurance they can maximize their pricing under the new government subsidy program.

In various regions of the country, mulch & soil producers found inventory supplies doubling in cost with matching grants up to $45/BDT.

BCAP Unintended Consequences

• • Forest byproducts are a well-established, highly competitive market that has existed for decades and includes hardwood chips, softwood chips, bark, sawdust, etc. representing 11% of forest harvests, approximately 3.2 billion cubic feet. Of that 11%, 48% already goes to the biofuels market, 34% to wood fiber products, 10% to particle board, 6% goes to mulch and 2% to miscellaneous markets. There is little in the realm of "new" biomass that can be realized from its inclusion because production rises and falls with market demand for timber.

• • 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.

BCAP Is a Jobs Killer

• • 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.
  

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MSC Response to BCAP (top)

To overcome the market disaster BCAP created in 2010, MSC met with the Farm Service Agency (FSA), the division of USDA that operates the BCAP program, to express our concerns and outline the unintended consequences of the program. FSA officials acknowledged that government subsidy programs discriminate in the market place and wood fiber users, like mulch and soil producers, should adjust to the greater good the administration is trying to accomplish in moving away from fossil fuel use. In short, we know this is going to hurt you, but you should get over it.

Given the unlikely prospect of agency assistance, MSC organized and conducted a series of 5 legislative briefings of members via Internet conferencing to advise the industry to oppose inclusion of forest byproducts in the BCAP list of eligible materials noting inclusion was inconsistent with the NOFA guidelines and asserting that no economic evaluation had been done to quantify the damage BCAP’s unintended consequences would cause to employment and the economy in multiple industries.

MSC also recruited the help of the American Landscape and Nurserymen’s Association (ANLA) and began a series of one-on-one meetings with 6 Congressmen and 4 Senators urging their offices look into the issues BCAP had raised in its very short venture into the market and the damage it was causing to their constituents. Additional meetings were held separately with both the minority and majority staffs of the House Agriculture Committee where the 2008 Farm Bill originally created the BCAP program.

While it is clear Congress had little knowledge of the unintended consequences caused by the BCAP program, little can be done until USDA releases the final rule later this summer. Until then, the MSC continues to take every opportunity to educate congressional offices on the program issues in the event the final rule is unsatisfactory.

The Council is thankful for all members who took an active role in responding to the BCAP issue. While the Council was ultimately successful in curtailing the market-destructive government subsidies BCAP created, it was not without damage to the indusrty created by supply shortages and excessive raw materials costs that could not be recovered in market sales. Therefore, we do not want to repeat the market destructive forces created by unnecessary government subsidies and must continue to monitor the USDA/FSA BCAP program until such time as wiser elected officials eliminate the threat entirely.