[Federal Register Volume 76, Number 29 (Friday, February 11, 2011)]
[Rules and Regulations]
[Pages 7916-7933]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-2480]
[[Page 7915]]
Vol. 76
Friday,
No. 29
February 11, 2011
Part II
Department of Agriculture
-----------------------------------------------------------------------
Rural Business-Cooperative Service
Rural Utilities Service
-----------------------------------------------------------------------
7 CFR Part 4288
Repowering Assistance Payments to Eligible Biorefineries; Interim Rule
Federal Register / Vol. 76 , No. 29 / Friday, February 11, 2011 /
Rules and Regulations
[[Page 7916]]
-----------------------------------------------------------------------
DEPARTMENT OF AGRICULTURE
Rural Business-Cooperative Service
Rural Utilities Service
7 CFR Part 4288
RIN 0570-AA74
Repowering Assistance Payments to Eligible Biorefineries
AGENCY: Rural Business-Cooperative Service and Rural Utilities Service,
USDA.
ACTION: Interim rule with request for comments.
-----------------------------------------------------------------------
SUMMARY: The Rural Business-Cooperative Service (Agency) is
establishing the Repowering Assistance Program authorized under the
Food, Conservation, and Energy Act of 2008. Under this Program, the
Agency will make payments to eligible biorefineries to encourage the
use of renewable biomass as a replacement fuel source for fossil fuels
used to provide process heat or power in the operation of eligible
biorefineries.
DATES: This interim rule is effective March 14, 2011. Written comments
on this interim rule must be received on or before April 12, 2011.
ADDRESSES: You may submit comments on this interim rule by any of the
following methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
Mail: Submit written comments via the U.S. Postal Service
to the Branch Chief, Regulations and Paperwork Management Branch, U.S.
Department of Agriculture, STOP 0742, 1400 Independence Avenue, SW.,
Washington, DC 20250-0742.
Hand Delivery/Courier: Submit written comments via Federal
Express Mail or other courier service requiring a street address to the
Branch Chief, Regulations and Paperwork Management Branch, U.S.
Department of Agriculture, 300 7th Street, SW., 7th Floor, Washington,
DC 20024.
All written comments will be available for public inspection during
regular work hours at the 300 7th Street, SW., 7th Floor address listed
above.
FOR FURTHER INFORMATION CONTACT: Contact Frederick Petok, USDA Rural
Development, Business Programs Energy Division, 1400 Independence
Avenue, SW., Room 6870, STOP 3225, Washington, DC 20250-3225.
Telephone: (202) 690-0784. E-mail: [email protected].
SUPPLEMENTARY INFORMATION:
Executive Order 12866
This interim rule has been reviewed under Executive Order (EO)
12866 and has been determined to be significant by the Office of
Management and Budget. The EO defines a ``significant regulatory
action'' as one that is likely to result in a rule that may: (1) Have
an annual effect on the economy of $100 million or more or adversely
affect, in a material way, the economy, a sector of the economy,
productivity, competition, jobs, the environment, public health or
safety, or State, local, or Tribal governments or communities; (2)
Create a serious inconsistency or otherwise interfere with an action
taken or planned by another agency; (3) Materially alter the budgetary
impact of entitlements, grants, user fees, or loan programs or the
rights and obligations of recipients thereof; or (4) Raise novel legal
or policy issues arising out of legal mandates, the President's
priorities, or the principles set forth in this EO.
The Agency conducted a benefit-cost analysis to fulfill the
requirements of EO 12866. In the benefit-cost analysis, the Agency
quantified the cost of the Repowering Assistance Program, but did not
quantify its benefits. Costs were quantified for the burden of the
Program to the public and to the Federal government, but its economic
impacts were not quantified. Qualitative discussions of potential
impacts of the Program on jobs, the environment, and energy are
presented in the analysis. While unable to quantify the benefits
associated with this rulemaking, the Agency believes that the overall
effect of the rule will be beneficial.
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act 1995 (UMRA) of Public
Law 104-4 establishes requirements for Federal agencies to assess the
effects of their regulatory actions on State, local, and Tribal
governments and the private sector. Under section 202 of the UMRA,
Rural Development generally must prepare a written statement, including
a cost-benefit analysis, for proposed and final rules with ``Federal
mandates'' that may result in expenditures to State, local, or Tribal
governments, in the aggregate, or to the private sector of $100 million
or more in any one year. When such a statement is needed for a rule,
section 205 of UMRA generally requires Rural Development to identify
and consider a reasonable number of regulatory alternatives and adopt
the least costly, more cost-effective, or least burdensome alternative
that achieves the objectives of the rule.
This interim rule contains no Federal mandates (under the
regulatory provisions of Title II of the UMRA) for State, local, and
Tribal governments or the private sector. Thus, the rule is not subject
to the requirements of sections 202 and 205 of the UMRA.
National Environmental Policy Act/Environmental Impact Statement
These renewable energy programs under Title IX of the 2008 Farm
Bill have been operated on an interim basis through the issuance of a
Notice of Contract Proposal (NOCP) or Notice of Funds Availability
(NOFA). During this initial round of applications, the Agency conducted
National Environmental Policy Act (NEPA) reviews on each individual
application for funding. No significant environmental impacts were
reported. Taken collectively, the applications show no potential for
significant adverse cumulative effects.
The Agency has prepared programmatic environmental assessments
(PEA), pursuant to 7 CFR part 1940, subpart G, analyzing the
environmental effects to air, water, and biotic resources; land use;
historic and cultural resources, and greenhouse gas emissions affected
by the Repowering Assistance Program. The purpose of the PEA is to
assess the overall environmental impacts of the programs related to the
Congressional goals of advancing biofuels production for the purposes
of energy independence and greenhouse gas emission reductions. The
impact analyses are national in scope but draw upon site-specific data
from advanced biofuel facilities funded under Sections 9003
(Biorefinery Assistance Guaranteed Loans) and 9004 as reasonable
assumptions for the types of facilities, feedstocks, and impacts likely
to be funded under this rulemaking for FY 2010-2012. Site-specific NEPA
documents prepared for those facilities funded under Sections 9003 and
9004 in FY 2008 and/or 2009 were utilized, as well, to forecast likely
impacts under the interim rule. Qualitative analyses of likely
programmatic impacts beyond the FY 2012 program expiration date are
provided, as appropriate. The draft PEA was made available to the
public for comment on the USDA Rural Business-Cooperative Service's Web
site in May, 2010. No comments were received on the draft PEA and the
Agency has issued a Finding of No Significant Impact (FONSI) for the
two programs that is available on the Agency Web site.
[[Page 7917]]
Executive Order 12988, Civil Justice Reform
This interim rule has been reviewed under Executive Order 12988. In
accordance with the rules: (1) All State and local laws and regulations
that are in conflict with these rules will be preempted; (2) no
retroactive effect will be given the rules; and (3) administrative
proceedings in accordance with the regulations of the Department of
Agriculture's National Appeals Division (7 CFR part 11) must be
exhausted before bringing suit in court challenging action taken under
this rule unless those regulations specifically allow bringing suit at
an earlier time.
Executive Order 13132, Federalism
It has been determined, under Executive Order 13132 that this
interim rule does not have sufficient federalism implications to
warrant the preparation of a Federalism Assessment. The provisions
contained in this rule will not have a substantial direct effect on
States or their political subdivisions or on the distribution of power
and responsibilities among the various government levels.
Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601-602) (RFA) generally
requires an agency to prepare a regulatory flexibility analysis of any
rule subject to notice and comment rulemaking requirements under the
Administrative Procedure Act or any other statute unless the agency
certifies that the rule will not have an economically significant
impact on a substantial number of small entities. Small entities
include small businesses, small organizations, and small governmental
jurisdictions.
In compliance with the RFA, Rural Development has determined that
this action will not have an economically significant impact on a
substantial number of small entities. Rural Development made this
determination based on the fact that this regulation only impacts those
who choose to participate in the Program. Small entity applicants will
not be affected to a greater extent than large entity applicants.
The entities affected by the Program are biorefineries. Regardless
of whether the participating biorefinery is a small or large business,
the average cost to a biorefinery to participate in the Repowering
Assistance Program is estimated to be approximately $16,400. Because
the major factor in determining whether a biorefinery, small or large,
will participate in this program is likely to be whether the
biorefinery has the capital, or access to the capital, for the
repowering project, the Agency does not believe that the cost of
applying and participating will dissuade a small business from seeking
to participate in this program. For example, this average cost
represents less than 0.5 percent of the proposed rule maximum of $5
million that a biorefinery could receive under this program. Further,
biorefineries are expected to realize a reduction in the costs to power
their operations once the repowering project is in place. Thus,
participating biorefineries will be able to recoup this expense,
although small biorefineries are likely to take longer to recoup the
expense because they are likely to have smaller power usage than large
biorefineries.
This regulation only affects biorefineries that choose to
participate in the programs. Lastly, the program is open to all
eligible producers, regardless of their size.
Executive Order 13211, Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use
The regulatory impact analysis conducted for this rule meets the
requirements of Executive Order No. 13211, which states that an agency
undertaking regulatory actions related to energy supply, distribution,
or use is to prepare a Statement of Energy Effects. The analysis did
not find that the rule will have any adverse impacts on energy supply,
distribution or use.
Executive Order 12372, Intergovernmental Review of Federal Programs
This Program is not subject to Executive Order 12372 because the
Program is not listed as a covered program on the Intergovernmental
Consultation list.
Executive Order 13175
USDA will undertake, within 6 months after this rule becomes
effective, a series of regulation Tribal consultation sessions to gain
input by elected Tribal officials or their designees concerning the
impact of this rule on Tribal governments, communities and individuals.
These sessions will establish a baseline of consultation for future
actions, should any be necessary, regarding this rule. Reports from
these sessions for consultation will be made part of the USDA annual
reporting on Tribal Consultation and Collaboration. USDA will respond
in a timely and meaningful manner to all Tribal government requests for
consultation concerning this rule and will provide additional venues,
such as Webinars and teleconferences, to periodically host
collaborative conversations with Tribal leaders and their
representatives concerning ways to improve this rule in Indian country.
The policies contained in this rule would not have Tribal
implications that preempt Tribal law.
Programs Affected
The Repowering Assistance Program is listed in the Catalog of
Federal Domestic Assistance under Number 10.866.
Paperwork Reduction Act
The information collection requirements contained in the Notice of
Funding Availability for the Section 9004 Repowering Assistance
Payments to Eligible Biorefineries program published on June 12, 2009,
were approved by the Office of Management and Budget (OMB) under
emergency clearance procedures and assigned OMB Control Number 0570-
0058. In accordance with the Paperwork Reduction Act of 1995, the
Agency is now seeking standard OMB approval of the reporting
requirements contained in this interim rule. In the publication of the
proposed rule on April 16, 2010, the Agency solicited comments on the
estimated burden. The Agency received no comments in response to this
solicitation. This information collection requirement will not become
effective until approved by OMB. Upon approval of this information
collection, the Agency will publish a rule in the Federal Register.
Title: Repowering Assistance.
OMB Number: 0570-NEW.
Type of Request: New collection.
Abstract: The collection of information is vital to the Agency to
make decisions regarding the eligibility of biorefineries to
participate in this program, to ensure compliance with the provisions
of this proposed rule and to ensure that the payments are made to
eligible biorefineries.
Biorefineries seeking funding under this program will have to
submit applications that include specified information, a feasibility
study, certifications, and agreements. Once a biorefinery has been
accepted into the repowering program and the repowering project has
been completed, the biorefinery must submit reports documenting their
renewable energy production. Participating biorefineries must keep
records, and make them available to USDA upon request, documenting the
ongoing displacement
[[Page 7918]]
of fossil fuel usage resulting from the repowering project. These
requirements are stated in the interim rule.
The estimated information collection burden hours has increased
from the proposed rule by 8,728 hours, from 4,390 to 13,118 for the
interim rule. This increase is attributable to the Agency's reassessing
the potential number of applicants who would be interested in applying
for this Program. At proposal, the burden estimate was based on
assuming that only facilities that primarily produced liquid
transportation biofuels would apply. The rule, however, allows
facilities producing biofuels and biobased products from renewable
biomass to apply. This increases the potential pool of applicants
significantly.
Estimate of Burden: Public reporting burden for this collection of
information is estimated to average 23 hours per response.
Respondents: Biofuel Producers.
Estimated Number of Respondents: 67.
Estimated Number of Responses per Respondent: 9.
Estimated Number of Responses: 581.
Estimated Total Annual Burden on Respondents: 13,118.
E-Government Act Compliance
Rural Development is committed to complying with the E-Government
Act, to promote the use of the Internet and other information
technologies to provide increased opportunities for citizen access to
Government information and services, and for other purposes.
I. Background
Rural Development administers a multitude of programs, ranging from
housing and community facilities to infrastructure and business
development. Its mission is to increase economic opportunity and
improve the quality of life in rural communities by providing
leadership, infrastructure, venture capital, and technical support that
can support rural communities, helping them to prosper.
To achieve its mission, Rural Development provides financial
support (including direct loans, grants, loan guarantees, and direct
payments) and technical assistance to help enhance the quality of life
and provide support for economic development in rural areas. The Food,
Conservation, and Energy Act of 2008 (2008 Farm Bill) contains several
sections under which Rural Development provides financial assistance
for the production and use of biofuels.
The Repowering Assistance Program interim rule addresses Section
9004 of the 2008 Farm Bill, which authorizes the Secretary of
Agriculture to ``* * * carry out a program to encourage biorefineries
in existence on the date of enactment of the Food, Conservation, and
Energy Act of 2008, to replace fossil fuels used to produce heat or
power to operate the biorefineries. * * *'' by making payments to
assist in the installation of new systems that use renewable biomass.
On April 16, 2010 (75 FR 20073), the Agency published a proposed
rule for Repowering Assistance Payments to Eligible Biorefineries.
Comments were requested on the proposed rule, which are summarized in
Section III of this preamble. Most of the proposed rule's provisions
have been carried forward into subpart A of this interim rule. Changes
to the proposed rule are summarized in Section II of this preamble.
Interim Rule. USDA Rural Development is issuing this regulation as
an interim rule, effective March 14, 2011. All provisions of this
regulation are adopted on an interim final basis, are subject to a 60-
day comment period, and will remain in effect until the Agency adopts
the final rule.
II. Summary of Changes to the Proposed Rules
This section presents changes from the April 16, 2010 proposed
rule. Most of the changes were the result of the Agency's consideration
of public comments on the proposed rules. Some changes, however, are
being made to clarify proposed provisions. Unless otherwise indicated,
rule citations refer to those in this interim rule. Significant changes
made to the proposed rule for the Repowering Assistance Program
include:
1. The citizenship requirement as an applicant eligibility
requirement was removed. In addition, the term ``immediate family'' was
deleted because the term was only used in the context of the
citizenship requirements.
2. The requirement that a biorefinery must be located in a rural
area was removed as an eligibility criterion, and has been replaced
with a scoring criterion that awards points if the biorefinery is
located in a rural area.
3. The payment provisions of the rule were revised to allow
participating biorefineries to request and receive reimbursement
payments for eligible project costs no more often than monthly during
the construction of the repowering project. Up to 90 percent of the
total award may be dispersed prior to completion of the repowering
project with the remaining 10 percent to be paid upon successful
completion of the project.
4. The name of the methodology for measuring the cost effectiveness
of a project was revised from ``return on investment (ROI)'' to
``Simple Payback.''
5. The scoring for the percentage of reduction of fossil fuel was
modified by adding a provision that deducts 5 points when any of the
fossil fuel being replaced is natural gas.
6. The renewable biomass scoring criterion was revised by
decreasing the points awarded from 10 to 5 (in order to provide points
for the new scoring criterion of rural area location) and by changing
the proposed requirement that an applicant demonstrate 100 percent
control over its feedstock for a period of 3 years to the requirement
that the applicant demonstrate at the time of application that it has
on site available access to biomass or enforceable third party
commitments to supply biomass for the repowering project for at least 3
years.
7. The applicant eligibility criteria were revised to require that
successful applicants must be awarded at least minimum points for cost-
effectiveness and for percentage of reduction of fossil fuel use under
Sec. 4288.21(b).
8. The scoring for ``cost effectiveness'' was revised to add a
fourth level to the estimated simple payback period. For applicants
projecting a simple payback period of between 6 and 10 years, the
maximum points to be awarded was changed from 0 points to 5 points.
This change allows applicants with a projected payback period of up to
10 years to meet the minimum criteria for applicant eligibility, as
discussed in item 6.
9. The definitions of ``eligible renewable biomass'' and
``feedstock unit'' were deleted as these terms are no longer used in
the rule.
10. In addition to providing information on the biofuel production
as part of the application contents, information is now required for
any biobased product produced at the facility.
11. The Agency removed the requirement to provide receipts for drop
shipments of and use of renewable biomass from the application content
requirements under Sec. 4288.23(a)(5)(iii).
12. The Agency has added a requirement to submit annual reports for
the first 3 years after completion of the repowering project. These
reports must include documentation regarding the usage and production
of energy at the biorefinery during the previous year, including both
the previous and current
[[Page 7919]]
fossil fuel load and the renewable biomass energy production.
13. The Agency has added a provision giving it the right to
disqualify payments made to a biorefinery if, upon completion of the
repowering project, the biorefinery fails to reduce its fossil fuel
consumption, produce energy from renewal biomass, or otherwise operate
as described in its Agency approved application.
14. A new section (Sec. 4288.26) was added such that an entity
that submitted an application for payment to the Agency under this
program prior to the effective date of this rule will have their
payments made and serviced in accordance with the provisions specified
in this subpart.
III. Summary of Comments and Responses
The proposed rule was published in the Federal Register on April
16, 2010 (75 FR 20073), with a 60-day comment period that ended June
15, 2010. Comments were received from 8 commenters yielding 30
individual comments, which have been grouped into similar categories.
Commenters included biorefinery owner/operators, Rural Development
personnel, trade associations, and individuals. As a result of some of
the comments, the Agency made changes in the rule. The Agency sincerely
appreciates the time and effort of all commenters. Responses to the
comments on the proposed rule are discussed below.
Eligibility Requirements
Comment: One commenter suggests the proposed eligibility
requirements remain open to ethanol biorefineries to be able to use any
process stream that would be capable of generating a renewable biogas
to replace fossil fuel related energy usage. The commenter states that
process streams typically considered for biogas generation are the
whole stillage, thin stillage, or syrup streams and that these streams
contain renewable biomass at various solids concentrations that could
be used in biogas generation technologies.
Response: Ethanol biorefineries are eligible under the Repowering
Assistance program. The byproducts from the production of ethanol,
whole stillage, thin stillage, or syrup streams are eligible biomass
which can be used to replace fossil fuels.
Scoring Criteria
Comment: One commenter states that the scoring criteria are good.
The commenter further states that the criteria promote projects that
have a major repowering impact on the facility, give preference to
technologies that can have an immediate/near-term impact, and credit
companies that have a firm handle on the biomass supply aspect.
Response: The scoring criteria have remained substantially the same
since the inception of this program. The Agency agrees with the
commenter that they have worked well. However, based on experience with
the first round of applications, the Agency believes that improvements
can be made.
The revised scoring criteria are not substantially different from
those in the Notice of Funding Availability (2010 NOFA) published in
the Federal Register on May 6, 2010. The scoring criteria have been
revised to better effect the program's purpose, and to encourage the
use of biomass to replace fossil fuels.
For cost effectiveness, a fourth level was added to the scoring for
the estimated simple payback period. For applicants projecting a simple
payback period of between 6 and 10 years, the maximum points to be
awarded was changed from 0 points to 5 points and for applicants
projecting a simple payback period of 10 years or more, no points would
be awarded. This change allows applicants with a projected payback
period of up to 10 years to be awarded points and, thus, meet the
minimum criteria for applicant eligibility.
In addition, a provision was added to the percentage of reduction
of fossil fuel use scoring criterion to deduct 5 points when any of the
fossil fuel being replaced is natural gas. As discussed below, this
provision was added to in recognition of the greater emission
reductions to be achieved under this program when renewable biomass is
used to replace coal compared to natural gas.
Lastly, a new scoring criterion was added that awards 5 points to
biorefineries located in a rural area. This scoring criterion replaces
the proposed rule's eligibility criterion that the biorefinery be
located in a rural area in order to be eligible for the program.
Payment Rate and Terms
Comment: One commenter states that most qualifying projects will
likely exceed the $10 million threshold. Based on the anticipated
amount of fossil fuel replaced by such projects, it appears the maximum
award level will never be reached under the current payout system
proposed. The commenter recommends increasing the initial payment
amount received and/or increasing the amount per fossil fuel MMBTU
replaced so that the maximum award level may be reached. The commenter
provided an example where 50 percent or $2.5 million of the maximum
award of the proposed rule's $5 million cap could be included in the
first payment with payments of $1.00 per MMBTU replaced. The commenter
states that under this payment structure the intended maximum award
level should be achieved within 3 years after operation. To further
ensure the award level is reached, an allowance can be made to extend
the payment term for longer than 3 years or until the award level is
reached. The commenter also proposes payments be extended 3 years or
otherwise determined from the beginning date of biogas production not
the award date as there could be a significant amount of time before
production begins due to project permitting and construction.
The commenter further states that, at current payment levels and
economic parameters, there seems to be no incentive for larger
repowering projects at ethanol biorefineries. Repowering projects will
be downsized from their potential size to make the economics favorable
when considering the present payment structure of only 3 years of
payments and the proposed rule's $5 million maximum award that appears
will never be realized for some projects. The commenter recommends
higher award amounts be considered to allow the economic analysis for
larger projects be favorable enough to encourage even more reduction in
fossil fuel usage. The commenter also requests that any potential
changes in payment structure that further encourages completion
projects be retroactive. This will help fulfill the intent of the
program and payment structure to reach the current maximum award levels
of 50 percent of the project up to the proposed rule's $5 million
maximum award.
Response: The purpose of the Repowering Program is to incentivize
the switch to renewable biomass fuels, not to be the major source of
project funding. There is a relatively small amount of money available
in this program given the capital cost of the projects. The Agency
wanted to maximize the number of award recipients while still providing
a meaningful financial incentive. While the proposed rule's $5 million
cap would have achieved this objective, the Agency has determined that
it is better for the Repowering Program to determine the cap each year
because the funding available for the program could change in the
future. Therefore, the Agency will announce in a Federal Register
notice the maximum award for the Repowering Program each year.
[[Page 7920]]
The Agency has revised the payment structure to provide
reimbursement payments for eligible project costs during the
construction phase of the repowering project. Payments will be made no
more often than monthly and participating biorefineries must submit a
request for payment with proper documentation of the incurred costs to
be considered for payment. The Agency has determined that this payment
structure will better enable biorefineries to obtain financing for
repowering projects.
The commenter's reference to a $10 million threshold is incorrect.
There is no cap on the cost of projects eligible for the Repowering
Program. The cap will apply to the amount awarded to individual
applicants.
Comment: Another commenter states that the $0.50/MMBTU production
payment with 20 percent project cost share after completion of the
project does not share enough financial burden/risk in today's economy
and bank financing scarcity. The commenter states that project
financing, not technology, is the show stopper on building capital
intensive repowering projects and that a more appropriate approach
might be a simple, low interest Federal loan to finance the project
with 50 percent loan forgiveness after a demonstration of system
performance. The commenter states that, under such an approach, the
owner will be motivated to operate the repowering equipment to achieve
a return on the investment and make payments on the loan balance.
Response: The Agency acknowledges the burden on the applicant
seeking credit to fund projects, and has revised the payment method.
However, the Repowering Assistance rule implements the terms of Title
IX of the Food, Conservation and Energy Act of 2008 (Pub. L. 110-246)
which provides for payments to biorefineries based upon the extent of
the replacement of fossil fuels with renewable biomass and the cost
effectiveness of the renewable biomass system. The statute does not
provide for a loan program. As noted above, the purpose of the
Repowering Program is to incentivize the switch to renewable biomass
fuels, not to be the major source of project funding.
Payment Amount Alignment
Comment: One commenter states that, based on the current estimated
fossil fuel reduction and the capital costs likely needed for such
reduction, the payment amount should be increased in order to reach the
incentive levels defined as the maximum award level in the proposed
program. The commenter states that the potential for up to 100 percent
fossil fuel reduction exists at many ethanol biorefineries, but to
achieve that level or very high levels of reduction the amount of
capital needed in relation to the amount of the current incentives
would unlikely provide the necessary payback or return on investment
needed to move the larger projects forward at this time. The commenter
states that a thorough economic analysis would need to be completed to
determine the necessary incentive level to achieve the necessary return
on investment to complete the larger project scenarios.
Response: The purpose of the Repowering Program is to incentivize
the switch to renewable biomass fuels, not to be the major source of
project funding. There is a relatively small amount of money available
in this program given the capital cost of the projects. The Agency
wanted to maximize the number of award recipients while still providing
a meaningful financial incentive. As noted in a previous response,
because funding for the Repowering Program could change in the future,
the Agency has determined that it is better to determine the cap each
year and will announce the cap in an annual Federal Register notice.
Therefore, the Agency has revised the rule accordingly. In addition,
the Agency revised the payment method to address commenters' concerns
about biofineries having to fully fund a project. Payments will now be
made during the construction phase of a project.
Citizenship Requirements
Comment: One commenter states that funding should be carefully
restricted to promote domestic owners efforts to reduce fossil fuel
use. The commenter states that domestic derived energy needs to have
domestic owners to deepen the roots of domestic energy security and
promote the movement (and pride) by domestic companies to take
ownership of the movement to reduce greenhouse gas (GHG) emissions.
One commenter states that USDA's citizenship requirements are
hurting rural America. The commenter believes the policy is delaying
the Administration's ability to reach its economic goals for rural
America and energy independence goals for the country. The citizenship
status of the applicant should not be an eligibility requirement of a
facility as it has no effect on the program goal of encouraging the
development of commercial scale biorefineries that produce advanced
biofuels. The commenter states that the rural economic development
potential resulting from the local construction and operation of a
biorefinery is substantial and these facilities use local feedstocks
and employ U.S. workers. Therefore, the ability for a biorefinery to
provide substantial local economic development opportunities is
directly related to the location of the facility, not the citizenship
of the owner.
The commenter further states that biorefineries need government
grants, loans and loan guarantees to attract investors who understand
green investment and that investors who understand a green investment
framework are often foreign, where the clean technology investment
framework is readily understood. The commenter states that, in the age
of a global economy, this citizenship requirement is impractical and
ineffective and it inhibits the purpose of the program to incentivize
private equity investment in the sector.
The commenter also states that, as a regulatory matter, a 51
percent determination of domestic investors is untenable. An investor's
domicile often cannot be discerned as foreign or domestic. A
successful, ready to scale biochemical company is usually funded by a
number of sources, both foreign and domestic, often made up of venture
funds with investment from around the world, funds of funds, and
independent investors alike. To discern whether or not the fund that
owns a fund, that is invested in a particular portfolio company has 51
percent U.S. ownership, is not only impractical, it is impossible. The
commenter states that, as green technology companies struggle to find
funding from U.S. and foreign investors alike, the U.S. government
clings to an outmoded policy that limits the substantial investment
incentives of grants, loans and loan guarantees that will bring the
U.S. green economy to scale.
Another commenter supports the position of the previous commenter
and adds that the U.S. clean tech sector will need $10 trillion of
capital in the next ten years if we expect to reach climate change
goals. The commenter states that this sector struggles to shift from
research and development to large-scale deployment in an uncertain
economic and regulatory environment. Private equity investors readily
recognize the investment risk of bringing these technologies across the
commercialization gap. Many U.S. private equity investors are simply
unwilling to take on the burden of helping green tech companies to
cross into full-scale commercialization without the same regulatory
certainty
[[Page 7921]]
that exists today in China and Europe. The commenter also added that
U.S. equity investment incentives, already limited in scope by
government programs, are cut down further by a 10 percent reduction in
the capital costs of new technology deployed on foreign soil (i.e., the
Middle East, China, Malaysia). In addition, as technology deployment
costs are lower overseas, foreign governments have gone far and beyond
U.S. government commitments to clean technology. The China Development
Bank has allocated $11.7 billion for solar production alone over the
next ten years with regulatory certainty in place for the next ten
years. These are the competitive realities of the clean tech sector on
a global scale.
One commenter states that the proposed ``citizenship requirement''
discriminates in favor of some U.S. companies and workers while
disadvantaging other U.S. companies and workers. Under the proposed
test of at least 50 percent domestic ownership, numerous U.S.-
incorporated companies would be excluded from participation. As
currently drafted, significant USDA partners would be excluded. Such
companies employ tens of thousands of American workers in research,
production and manufacturing facilities throughout the United States.
The commenter states that restricting certain U.S.-incorporated
companies and their American workers from access to the program
undermines U.S. goals of job creation and undermines the effectiveness
of the program in its goal of encouraging the use of renewable biomass
as a replacement fuel source for fossil fuels. The important goals laid
out by President Obama in his May 5th Presidential Directive--to
increase America's energy independence and spur rural economic
development while encouraging production of the next generation of
biofuels--are unlikely to be achieved without allowing U.S.
subsidiaries, some of the most innovative and successful companies in
the world, to fully participate.
The commenter states that U.S. subsidiaries can make important
contributions to the USDA and their participation would be of
significant benefit to the Rural Business-Cooperative Service and to
the United States. The Department of Energy's Advanced Research Project
Agency-Energy (ARPA-E) recognized the benefits of such participation
when it lifted similar eligibility requirements in December 2009. ARPA-
E now fully permits entities incorporated in the United States to apply
for funding, regardless of whether they are ultimately foreign-owned or
U.S.-owned. The commenter urges similar equal treatment by the
Department and equal access for U.S. subsidiaries to the Repowering
Assistance Payments to Eligible Biorefineries program.
The commenter also states that the proposed ``citizenship
requirement'' calls into question the U.S. commitment to a
nondiscriminatory environment for foreign investment, and invites
similar protectionist retribution from other countries. Setting aside
any questions the restrictions raise under U.S. international
agreements, they are also inconsistent with the longstanding and
explicit U.S. policy to encourage foreign investment in the United
States and accord nondiscriminatory treatment. The commenter further
states that the proposed rule invites discrimination against U.S.
companies abroad, which is exactly what President Obama and the other
G20 Leaders have pledged to avoid through their commitment to ``promote
global trade and investment and reject protectionism.''
Response: The Agency has reconsidered the citizenship requirement
and has decided to eliminate this requirement from the rule. The Agency
agrees that the beneficial impacts of the program will be at the local
level regardless of ownership.
Rural Area Limitation
Comment: One commenter requests that USDA expand the boundaries
that define the location population to define a city as a populous of
over 500,000 to 1,000,000 persons versus 50,000 persons. The commenter
explains that they are not qualified to apply for any USDA funding
programs (grants or loans) because their facility is located in an area
that encompasses the City of Erie (population about 102,036) and its
outlining areas, even though they have low population. The commenter's
facility has the versatility to run on various feedstocks from non-
vegetable oils to animal fats to agricultural feedstocks such as soy.
It is also located on Lake Erie where it has access to shipping, two
interconnected railroads (CSX and Norfolk Southern), I-90 and I-79.
Thus, it can easily bring in feedstock and ship out finished biodiesel.
If they could be deemed located in an applicable area then they could
apply for USDA funding and build on relationships with local/domestic
farm institutions.
Two commenters caution against defining ``Rural Area'' with too
much restriction, potentially disqualifying ideal sites for
biorefineries that would, in fact, meet the program goals and increase
economic opportunity in rural communities, but may be located in areas
that do not fit the program definition. The commenters explain that,
for a biorefinery, the cost of feedstock can typically represent 80
percent of the total cost of finished product. As a general rule, a
majority of the feedstock will inherently come from the rural
community, and be produced/collected/harvested by a local labor force.
Similarly construction and operation workforces will be predominantly
local. The rural economic development potential resulting from a
biorefinery is substantial. One advantage of advanced biofuels is that
they can be produced all over the country utilizing multiple
feedstocks. Projects should not be evaluated negatively on one of the
advanced biofuels industry's greatest assets, flexibility. Offering
eligibility to facilities in non-rural communities is critical to the
success of the program goals and the advanced biofuels industry.
Restricting the location of these facilities is not necessary to
maintain the spirit of enhancing rural development and the geographic
diversity of advanced biofuels production. More flexibility of site
selection, not less, should be installed in these programs.
The commenters further state that having a consistent, cost
competitive regional supply of feedstock is key to the success of any
project. Non-rural plants that use agricultural feedstocks will most
certainly rely on the surrounding rural communities to produce,
harvest, store, and handle feedstock needs. With feedstock cost
representing the largest operational cost of a biorefinery, this in
turn means that most of what the plant spends goes to the rural
community in paying for that feedstock. This should demonstrate that
the biorefinery does not need to be in a rural area to fulfill program
goals. Excluding plants that are not in rural areas denies the
supporting rural community significant opportunity.
Another commenter disagrees with the rural area proposal because
the Repowering Assistance section in the Farm Bill does not restrict
applicants to only those in rural areas. ``Repowering Assistance'', by
its terms, applies to any biorefinery, regardless of location. Further,
this proposed restriction would narrow the pool of eligible applicants
beyond Congressional intent. In so doing, the rural restriction will
reduce the overall effectiveness of the program. The commenter states
that when Congress authorized the Repowering Assistance program and
established the eligibility requirements, it did not limit the
Repowering Assistance program to
[[Page 7922]]
only biorefineries located in rural areas. This rural restriction is
not supported in either the Manager's Report or the legislation. The
authorizing legislation very clearly states eligibility includes ``any
biorefinery that meets the requirements of this section.'' The
statute's sole discussion of ``eligibility'' is the following:
Eligibility--To be eligible to receive a payment under this
section, a biorefinery shall demonstrate to the Secretary that the
renewable biomass system of the biorefinery is feasible based on an
independent feasibility study that takes into account the economic,
technical and environmental aspects of the system.
The commenter states that an example of a similarly clear
Congressional rural restriction may be found under Section 9007, the
Rural Energy for America Program (REAP). The eligible recipients for
REAP are ``agricultural producers and rural small businesses.'' The
second part, ``rural small businesses,'' clearly limits eligible
businesses to only those in rural areas. As REAP shows, Congress knows
how to include a rural restriction when it wants to do so.
Notably, the mission for the USDA Rural Business-Cooperative
Service can be served without a rural restriction, and without
conflicting with public policy goals. When facilities in non-rural
areas use biomass--whether as a feedstock to produce final products or
as fuel--they increase demand for materials produced mostly in rural
areas. When public investments build a larger bioeconomy, rural
residents benefit from increased rural income from biomass sales and
wages. Prohibiting participation by non-rural biorefineries would have
the effect of reducing benefits to rural citizens.
The commenter states that by restricting the pool of eligible
applicants, the proposal violates the plain language of the statutory
authorization, and elevates agency interest over clear Federal policy
goals.
Response: The Agency has reconsidered the proposed rural area
requirement. The beneficial impacts of the program will generally be in
rural areas even if the biorefinery is located in an area that does not
meet the proposed rural area definition, because biomass production is
expected to occur largely in rural areas and, thus, rural economies
will benefit from the increased use of biomass. The Agency is,
therefore, removing the proposed rural area requirement from the rule
as an eligibility criterion. However, as has been stated previously,
the biorefinery must be located in a rural area in order to receive 5
points under the revised scoring criteria.
Timeframe for Control of Feedstock
Comment: Two commenters oppose the scoring criteria that reward
maximum points to applicants who demonstrate control of the repowering
project feedstock for at least 3 years. One of the commenters states
that at an ethanol biorefinery this demonstration is impractical and
unnecessary. Typical feedstock contracts at many ethanol biorefineries
do not extend out to this duration of time. The repowering feedstock is
readily available after the production of ethanol and so many ethanol
biorefineries are already controlling feedstocks as necessary according
to existing market and plant operating conditions. The commenter
recommends removal of this scoring criteria as it discriminates
unfairly against those who do not need to control feedstock 3 years out
and already have a repowering feedstock available in their current
process.
The other commenter states that many firms operate biomass
facilities without long-term contracts for their biomass supply. This
is a strategic business decision and does not necessarily determine
success or failure. Biomass plants often procure materials on a mixed
basis, sometimes by long-term contract and other times by simply
procuring on the spot market or on short-term contract. For example, a
firm may purchase wood from the spot market while also having contracts
for biomass from private forests and/or for residues from wood products
manufacturers. The term for the contracts can vary and the supply of
biomass for a plant will change over time in response to market
conditions.
The commenter states that it is possible that USDA included these
points as a way of assuring a longer-term supply of biomass. Private
investors often require a demonstration of the availability of 3-10
times the annual biomass requirement within a reasonable shipping
distance as a part of their due diligence. The commenter recommends
that, since sufficiency of supply, rather than control of the supply,
is the crucial question, USDA should require as a threshold criterion
that applicants demonstrate an adequate supply of biomass for the
plant. Doing so will address the real issue (feedstock supply) without
limiting the refinery's flexibility in managing their fuel supply.
Response: While many of the repowering applications proposed to use
feedstock produced from their own process, such as stillage or syrup,
many others proposed to purchase biomass. Control and availability of
biomass are crucial to a project's viability. The rule does not make
the control of biomass mandatory, rather a scoring element. The Agency
revised the scoring criteria to include on site availability of
renewable biomass or enforceable third party commitments to supply
renewable biomass, similar to the Fiscal Year 2010 NOFA.
Closed System Use of Own Waste Streams
Comment: One commenter recommends developing a scoring criterion
that would give preference to biorefineries that have closed systems or
that can use their own waste or process streams in the repowering
project. Preference should be given to these types of projects that
utilize an already available biomass feedstock on-site. By using the
available biomass feedstock in existing process streams, the carbon
intensity associated with operations is further minimized by not having
to include the carbon emissions associated with the processing and
transportation of biomass feedstock from off-site sources as well as
the amount attributed to the current transportation of the waste or
process streams constituents off-site.
Another commenter noted that the meaning of the term ``closed
system'' in this request for comment is not clear. Thus, the commenter
recommends not including a scoring criterion for ``closed systems''
without clearly defining the term.
Response: Title IX of the Food, Conservation and Energy Act of 2008
(Pub. L. 110-246) provides for payments to biorefineries based upon the
extent of the replacement of fossil fuels with renewable biomass and
the cost effectiveness of the renewable biomass system. The statute
contains no other criterion for awarding payments. The Agency believes
it has effectively implemented the intent of the statute in the current
rule.
Type of Fossil Fuel Displaced Payment
Comment: One commenter agrees with the concept of scoring an
application higher for replacing certain types of fossil fuels that are
the higher GHG emitting fuels. The commenter also states, however, that
unless there are additional incentives for those fuels or the cost of
those fuels significantly changes, it is likely the economic analysis
will tend to favor replacement of natural gas based fossil fuel usage.
Response: The statute does not make the distinction among fossil
fuels that the commenter proposes and does not specifically address
emissions. While
[[Page 7923]]
the majority of facilities that have applied to date use natural gas,
emissions from coal are more significant than from natural gas. The
Agency recognizes that reductions of greenhouse gas emissions and
hazardous air pollutant emissions will be greater under this program
when coal is replaced than when natural gas is replaced. Therefore, in
recognition of this, the Agency has revised the cost-effectiveness
scoring criterion to include a provision that deducts 5 points when any
portion of the fossil fuel being replaced is natural gas.
Purpose and Scope--Sec. 4288.1
Comment: Two commenters state that the rules as proposed exclude
future advanced biofuels and biobased products facilities which hold
great promise in achieving the program goal of incentivizing the
replacement of fossil fuels by including the requirement that the
incentives can only be awarded to biorefineries in existence on June
18, 2008. The commenters recommend that USDA use a broad definition of
``in existence'' when evaluating the eligibility of a biorefinery based
on the requirement that the facility must be in existence on June 18,
2008 to be eligible for the program so that the maximum number of
facilities qualify.
The commenters state that, while there are significant benefits to
incentivizing biopower at biorefineries in existence on June 18, 2008,
there are equal if not greater benefits to opening eligibility to new,
more efficient technologies as well. Allowing this incentive to only be
available to facilities in existence before June 2008 gives an
advantage to existing technologies and biorefineries over new
technologies and facilities, thereby threatening to stifle innovation
in commercialization of biotechnologies such as advanced biofuels,
biobased products, and renewable specialty chemicals that will be
produced collectively at modern biorefineries. Incentivizing
conventional technologies over advanced technologies in this manner
will have significant effects on other programs such as renewable and
low carbon fuel standards by giving these technologies an incentive to
improve their lifecycle GHG emission reductions while not providing the
same incentives to advanced technologies to do the same.
The second commenter adds that biorefineries that use energy
efficient and cost effective business models, like producing multiple
bioproducts at one facility, should not be disadvantaged.
Response: The statute only authorizes biorefineries in existence as
of the date the Food, Conservation, and Energy Act of 2008 was passed
(June 18, 2008) as eligible for participation in the program. This is
not a matter within the discretion of the Agency.
Definitions--Sec. 4288.2
Comment: One commenter requests that USDA clarify that projects
that retrofit biorefineries in existence prior to June 18, 2008 with
additional equipment are eligible for this program provided the heat
and power are centrally produced.
Response: The Agency's understands this comment to inquire whether
retrofits made prior to the inception of the program are eligible for
payments. Section 4288.12 specifically provides that project costs
incurred prior to submitting an application to the Repowering
Assistance Program are ineligible.
Applicant Eligibility--Sec. 4288.10
Comment: One commenter states that, while the Department is right
to take steps to avoid the program disproportionately benefitting one
company, many companies or entities own more than one plant. USDA's
proposed ``one company, one plant'' rule might prevent conversion of
more energy systems, thereby limiting program success, if funds would
otherwise go unused as a result. The commenter suggests that, to avoid
this potential unintended consequence, companies with more than one
plant should be allowed up to two applications. Once a firm's highest
scoring submission wins an award, the lower scoring of the two
proposals would be set aside for a second round pool. The second round
pool would only be considered if sufficient funds remain available from
the first round. If sufficient funding is available, these second round
submissions would be ranked according to point scores and selected
until available funding is awarded. This approach will allow the
Department to accomplish more in the event a smaller number of firms
demonstrate interest in repowering and the program. By limiting the
awards to two, USDA will largely preserve its goal of avoiding unfair
benefits to one firm, while allowing potentially more use of program
funds in some circumstances.
Response: The Agency's intent is to maximize the number of projects
funded by limited resources, $35 million. The Agency wants to ensure
that small- to medium-sized companies have an opportunity to compete
for payments. Limiting applicants to one application achieves this
objective.
Comment: One commenter would like USDA to clarify that energy
integration synergies from co-locating a cellulosic ethanol plant with
an existing starch-based plant will qualify for this program in the
final rulemaking. The commenter states that certain technologies for
production of cellulosic biofuels, will have substantial excess steam
energy available for co-located users. When a cellulosic ethanol
facility is co-located with an existing corn ethanol plant, it has the
opportunity to reduce the natural gas requirement for the corn plant
and allow it to qualify for this program.
Another commenter also asked for a similar clarification, pointing
out that co-location is another way companies intend to participate in
improving the economic viability and environmental sustainability of
biofuel production facilities.
Response: An existing ethanol facility would be eligible for
Repowering Assistance payments, and co-locating a project would not be
a problem as long as the scope of the project would be limited to the
existing ethanol facility. That portion of the project which served the
cellulosic plant would be ineligible unless that cellulosic plant was
in existence as of the date of passage of the Farm Bill (June 18,
2008).
Payment Info--Sec. 4288.13
Paragraph (a)
Comment: One commenter expressed concern with the realistic
opportunity for a biorefinery to qualify due to all of the stipulations
outlined in the program while making the changes in an economically
feasible manner. The commenter states that the majority (80 percent) of
the payment in this program is made after the project is in place and
producing energy so the money to install these systems must be fronted
by the biorefinery in hopes of recouping the costs in the future. There
are very few funding sources in today's economic environment that will
take the risk of installing a fairly new and unproven system at an
existing biorefinery with the plan of collecting the funds once the
system is producing energy. The commenter states that the other issue
is that the return on investment must happen very quickly (<4 years),
yet the costs of implementing many of the systems and acquiring the
feedstocks heavily outweighs the current costs of the rural fossil fuel
derived utilities to the facility. The commenter states that they have
a strong desire to offset fossil fuel derived utility usage but it must
make good economic sense in order to allow the biorefinery
[[Page 7924]]
to thrive during already extremely difficult market and economic
conditions.
Response: The Agency acknowledges the burden on the applicant and
has changed the payment method to provide an expedited incentive
intended to lower barriers for applicants seeking to use the program to
repower facilities. The program seeks to encourage and incentivize
sustainable, long term biomass projects.
Application Review and Scoring--Sec. 4288.21
Cost-Effectiveness--Paragraph (b)(1)
Comment: One commenter states that USDA proposes the cost-
effectiveness metric to implement the legislative requirement for cost
effectiveness. The commenter states that while USDA refers to it as
ROI, it actually appears to be a formula commonly understood as
``simple payback'' to represent the time necessary to pay off the
investment through savings or other measurable benefits. The commenter
states that ``return on investment'' is widely understood to represent
a different calculation (see below) that measures in terms of percent
or rate, not years, and believes that USDA's proposed measure should be
referred to as the ``payback period'' or ``simple payback.''
ROI = (gain from investment-cost of investment)-cost of investment
The commenter further states that, regardless of its name, USDA's
proposed approach to implementing this requirement has drawbacks,
primarily by boosting the eligibility of projects that need the least
funding. The commenter questions whether, if the payback is under 3
years, the incentive is really necessary, or perhaps if only a smaller
incentive is needed to lower the payback to levels warranting
investment. Increasing the incentive based on lower payback period may
also increase the numbers of ``free riders'' who do not need an
incentive to invest in the plant but can get a grant anyway.
The commenter further explains that payback and return on
investment performance measures are appropriate for a private investor,
but can easily lead a public agency astray from implementing the clear
goals of the legislation. The measure employed for cost-effectiveness
should focus on the effectiveness in accomplishing the legislative
intent and goals, rather than short-term profitability. When a public
agency cost-shares projects, such as under Repowering Assistance, the
decision should be based on measures related to the public policy, not
to profit maximization (which is the concern of the private partner).
Payback analysis outcomes will often skew from policy outcomes due
to the very factors which make the policy necessary in the first place,
such as the failure of energy project evaluation to include the costs
of carbon pollution. Payback can also differ between candidate
submissions based on factors such as differences in local economics,
fuel costs or plant layouts. For example, some facilities may require
more costly modifications to adapt to biomass power given their
existing plant layout or access to fuel yards. Or, different biomass
energy technologies may result in longer payback periods yet higher
carbon pollution reductions. A payback focus might diminish the chances
at funding for projects that are cost-effective at reaching the public
policy goals.
The commenter proposes that the criteria for cost-effectiveness be
based not on the private sector's measure of payback but, instead, on a
measure related to the public policy goals. In this case the primary
policy goal is carbon reduction; therefore, the appropriate criterion
is the cost per ton of fossil CO2 emissions displaced. By
using this measure the USDA would more effectively address cost-
effectiveness as required in the legislation through using the policy
goal itself.
Response: The ROI methodology used was intentionally selected
because of its simplicity; it is a simple return on investment
calculation, also known as simple payback. The Agency agrees with the
commenter that the methodology is more commonly known as Simple Payback
and has changed its name in the rule from ROI to Simple Payback.
Title IX of the Food, Conservation, and Energy Act of 2008 sets
forth specific criteria to determine the amount of payments. The
criteria include: (1) The quantity of fossil fuels replaced by biomass,
(2) the percentage reduction in fossil fuel, and (3) the cost and cost
effectiveness of the biomass system.
The rule has been written to implement the statute. The cost
effectiveness of the biomass system is not only a statutorily mandated
criterion, but one which is essential for a project to provide a
realistic cost competitive alternative to fossil fuels, such as natural
gas and coal. The operation of a biorefinery is, ultimately, a
business, and must achieve cost effectiveness to be viable over the
long term.
Application Review and Scoring--Sec. 4288.21
Percentage of Reduction of Fossil Fuel Use--Paragraph (b)(2)
Comment: One commenter believes this is a very appropriate
criterion that the Agency should use with the strong weighting factor
proposed, because the goal of reducing carbon pollution is central to
the purpose for Section 9004. The legislation states, in Section
(b)(2), that the Agency should consider ``the percentage reduction in
fossil fuel used by the biorefinery that will result from the
installation of the renewable biomass system.'' The commenter
recommends that the scoring on this point should be calculated as
proportional to the percent of fossil fuel displacement. So, for
example, displacement of 100 percent of the fossil fuels results in 35
points. All lower point scores should be proportional to the percentage
fossil fuel reduction--for example, 80 percent of the total 35 points
is 28 points. This linear scale rewards more fossil fuel displacement.
There should be a minimum floor of at least 50 percent displacement.
This scoring plan, however, does not account for the most efficient
resource use, which will be the most environmentally beneficial
utilization strategy. Combined heat and power has approximately twice
the efficiency of standalone uses of either heat or power. The
commenter proposes that the Agency recognize the value of this approach
by awarding under this category 10 points for projects employing
combined heat and power technologies, or otherwise demonstrating at
least 50 percent efficiency. The 10 points would be in addition to the
criteria of ``percent displaced fossil fuels,'' which maximum can
simply be reduced by 10 (from 35 to 25), maintaining the category's
point totals. The following table shows how points vary by the percent
of fossil fuels displaced for the proposed rule, a proportional level
based on a 35 point maximum and a proportional level based on a 25
point maximum.
Proposed Point Scoring Proportionate Points According to Fossil
Fuel Displacement:
(a) 100% (b) 35 (c) 35 (d) 25
(a) 80% (b) 25 (c) 28 (d) 20
(a) 60% (b) 15 (c) 21 (d) 15
(a) 40% (b) 5 (c) 14 (d) 10
(a) = Percent Displaced Fossil Fuels.
(b) = Points Proposed by USDA.
(c) = Proportional displacement points with 35 point maximum.
(d) = Proportional displacement points with 25 point maximum.
The commenter further recommends that there should be bonus points
scored
[[Page 7925]]
for plants that exceed 100 percent displacement, but only from combined
heat and power systems. This can happen if biorefineries become net
power, and/or heat, exporters. In most cases, they would displace
fossil fuels used for other purposes by customers beyond the host
plant. This approach would more fully utilize the plant investment,
reducing unit costs and potentially increasing project feasibility. The
commenter recommends, for simplicity, using a single threshold for
exported power and recommends an extra 10 points for power and/or heat
exports above 10 percent of plant demand.
The commenter states that USDA should implement a single
methodology to estimate the level of CO2 reductions under
the various submissions. Otherwise, a wide range of approaches may be
used by applicants, making fair comparison and submission processing
very difficult. The commenter recommends that this would be the point
to implement the approach using emissions factors for different fossil
fuels, as described in Section IV, ``Request for Comments,'' item 10,
of the proposed rule. By using emission factors established by the
Energy Information Administration or the U.S. EPA for fossil and
biomass fuels, the applicants and USDA can use standard and uniform
emissions factors and formulae for estimating carbon pollution
reductions.
Response: The intent of this program is to assist eligible
biorefineries to use renewable biomass and move away from fossil fuels
including, but not limited to: Propane, coal, oil, and natural gas.
Most sources of electric generation are derived from fossil fuel, and
the program takes that into account in evaluating the content of
electric power consumed by an applicant.
Because the intent of the program is to encourage and reward the
greatest displacement of fossil fuels with biomass, scoring is not
proportional. The Act restricts the eligible project costs to
repowering the facility. The program does not prevent an applicant from
becoming a net power producer, it merely prevents the public from
providing payments for that purpose. Based on applicant experience to
date, more definition in scoring criteria has not been needed as a
selection factor in the program.
Application Review and Scoring--Sec. 4288.21
Renewable Biomass Factors--Paragraph (b)(3)
Comment: One commenter has concerns regarding the scoring criteria
for ``renewable biomass factors.'' The ``renewable biomass factors''
seem to be better described as ``biomass supply arrangements.'' The
proposed ``factors'' do not address whether or not the material is
``renewable.'' The commenter proposes, as an alternative scoring
approach for ``renewable biomass factors,'' added points based on
certain factors which reflect the greatest carbon pollution reduction
benefits, and best environmental outcomes. The commenter states that
the best proposals will maximize the realistic potential for a carbon-
neutral, or carbon-negative, project. The goal for these criteria
should be to maximize program success by rewarding the submissions with
well-grounded and feasible plans for maximum sustainability. Points
awarded based on viable practices and plans will allow the USDA to
reward submissions that are most likely to accomplish program goals.
The commenter suggests the following:
10 points: Project uses crops planted for energy use (such as
perennial grasses or fast-growing trees) that are replanted after
harvest with procurement plans that demonstrate harvest is accomplished
in a sustainable manner. The project uses segregated and uncontaminated
residues from the biorefinery process, such as stillage.
Response: The commenter points out that the criteria scored in the
Renewable Biomass Factors section of the rule are the ``biomass supply
arrangements.'' The commenter advocates changing the criteria to award
points based on the greatest carbon pollution reduction benefits and
best environmental outcomes. The Agency believes that the criteria as
written are essential to select sustainable projects which demonstrate
access to an adequate supply of renewable biomass. The Repowering
Assistance Program is designed to reduce carbon emission by the
replacement of fossil fuel with renewable biomass. Title IX of the
Food, Conservation and Energy Act of 2008 does not make the
distinctions among fossil fuels that the commenter proposes.
Environmental criteria are not part of the scoring elements. Mitigation
of adverse environmental impacts is mandatory. Environmental
requirements for the Repowering Assistance Program can be found in the
rule and the National Environmental Policy Act.
Application Review and Scoring--Sec. 4288.21
Liquid Transportation Fuels--Paragraph (b)(5)
Comment: Two commenters disagree with the Agency's proposal to
score projects on the basis of whether the biorefinery primarily
produces liquid transportation fuels.
These two commenters caution the Agency against implementing a
sole-use requirement for biorefinery eligibility. The future
biorefinery will likely develop much like the typical oil refinery of
today. In other words, one feedstock will be utilized to produce
several products at one facility. In a biorefinery's case, renewable
biomass would be the feedstock and multiple biofuels, biobased
products, and specialty renewable chemicals could be produced at the
same plant or industrial facility. The commenters believe that the
Agency should encourage the concept of industrial ecology and
collocation of diverse product manufacturing units.
Response: The Repowering Program is statutorily required to provide
payments for biorefineries in existence as of the passage of the Farm
Bill (June 18, 2008). The program was designed to work with facilities
that primarily produce transportation fuels based on the direction
given in the manager's report. Still, there is nothing in the rule that
prohibits applicants from applying for payments if they do not produce
transportation fuels. Future biorefineries are not the focus of the
Repowering Assistance Program, they are addressed by research programs
and fall into the province of the Biorefinery Assistance Program or
possibly the Rural Energy for America Program.
General--Benefits of the Program
Comment: One commenter states that the program has the potential to
provide a significant number of operational, environmental, and
economic benefits that would improve existing biorefinery operations,
reduce the amount of emissions and carbon intensity associated with
fossil fuel energy use, and promote the sustainability of rural
communities by providing economic benefits, while decreasing the
country's dependence on fossil fuel based energy. The commenter also
states, however, that the amount of capital needed to realize these
benefits fully is prohibitive in an economic analysis. The Section 9004
program can provide the assistance needed to help projects come to
fruition by making the economic analysis become more favorable with the
proper financial incentives.
[[Page 7926]]
The commenter explains that repowering with the renewable biomass
associated with existing process streams at ethanol facilities will
improve operations by increasing plant efficiencies and production
capabilities. Many ethanol biorefineries already have available the
necessary process streams to integrate into the technologies that would
generate biogas. After ethanol is produced and separated there remains
whole and thin stillage streams with various solids concentrations that
could be utilized in anaerobic digestion processes to generate biogas.
The biogas could then be used to generate electricity or burned in a
boiler for process heat. The commenter states that there is enough
biomass in the stillage process streams after ethanol production to
generate enough renewable biogas to offset up to 100 percent of all the
fossil fuel usage needed for process heat and electricity generation at
ethanol biorefineries. Incorporating biogas generation will help plants
improve energy efficiencies by not having to use energy to concentrate
up the stillage stream solids content through evaporation or other
processes that are done currently. Biogas generation will improve
operations by removing any of the undesirable constituents in the
portion of recycled process water or thin stillage typically sent back
through the ethanol production process. Decreasing the amount of
undesirable constituents will create the potential for higher ethanol
production capabilities or improvement in ethanol yields.
The commenter also explains that the program has the potential to
significantly decrease emissions and the carbon intensity associated
with ethanol production to make it substantially lower than the carbon
intensity of conventional gasoline. A significant portion of the carbon
intensity at ethanol plants are those associated with the greenhouse
gases generated from fossil fuel energy usage to create process heat
and electricity. If facilities are repowered with existing renewable
biomass feedstock sources that are already available in the process
streams, the carbon intensity will be greatly reduced by lowering
fossil fuels consumed making it an even more valuable low carbon fuel.
By using the available biomass feedstock in existing process streams
the carbon intensity is further minimized by not having to include the
carbon emissions associated with the processing and transportation of
biomass feedstock from offsite sources as well as the amount attributed
to the current transportation of the waste or process streams
constituents off-site. Potentially it could create a distinct advantage
on the world markets by lowering the carbon intensity of home grown
ethanol below that of the current Brazilian sugar based ethanol carbon
intensity values. In the U.S. there are approximately 190 ethanol
biorefineries and a majority of these facilities could incorporate
renewable fuel generation technologies if the economics were favorable
to do so. This program, if structured properly to make it economical,
could help the U.S. ethanol industry become even more environmentally
friendly than it already is by reducing significant amounts of fossil
fuel usage and carbon intensity.
The commenter also states that the program has the potential to
provide a significant number of economic benefits and opportunities to
the existing biorefineries and the rural communities typically around
them. This program could support potentially large capital projects
that provide and support numerous jobs associated with the equipment,
construction, and continuing operation of the improved facilities. The
economic benefit could have a far reaching impact beyond the rural area
to providing additional economic stimulus to the country. Another
economic benefit is the protection it provides to future costs
associated with fossil fuel derived energy due to fluctuations in the
market or to national or State legislation on low carbon fuel
standards, carbon taxes, or cap and trade programs. Incorporation of
these types of repowering projects into existing biorefineries helps
promote economic sustainability of the facility operation as it will
allow for more operational flexibility by having more options for
different fuel sources and by-product pathways to respond to market
conditions.
Response: The Agency thanks the commenter for their comments. A
significant share of the applications submitted under the Repowering
Assistance Program have utilized just such strategy and many of the
applicants that may have chosen other resource streams will undoubtedly
make use of low carbon fuel standards as an increased value stream.
General--Sustainable Fuels
Comment: One commenter states that the Congressional intent for the
program was to displace fossil fuels in a manner that reduces carbon
emissions at biorefineries. The USDA should take steps to ensure that
taxpayer funding is not used in ways that could increase carbon
pollution, or otherwise harm the environment. This approach is good
policy and is also important to maintain public support for this type
of program, and biofuels in general. If the public perceives their tax
dollars being used to support projects that harm the environment, a
public opinion backlash is likely. The Repowering Assistance program
can and should result in beneficial use of biomass energy crops and
residues from farms and forests for fuel. However, USDA should ensure
that the development, removal and use of this biomass is done
sustainably, by which we mean preserving soil integrity and avoiding
erosion, surface water pollution, sedimentation, soil carbon depletion
or other negative environmental and natural resource impacts. Some
purchasers of crops residues for bioenergy production, like Show Me
Energy in Missouri, already require their suppliers to demonstrate
removal of residues is done in a sustainable manner. The fact that
these purchasers already require a sustainability demonstration
indicates both a desire to minimize environmental harm and the ability
to do so. The commenter recommends that, to avoid potential harm, the
Repowering Assistance rule require safeguards be put into place to
ensure that fuels and practices are environmentally beneficial. The
commenter states that, on the energy conversion side, a focus on
combined heat and power with appropriate fuels has been found to be the
best biomass energy pathway toward net reductions in carbon pollution.
Response: The intent of Congress was to replace fossil fuels with
biomass. The Agency agrees that this approach is good policy and good
for rural America. We also agree that the program should consider the
overall impacts on the environment. In fact, we believe that the
information that is requested in the application addresses
environmental concerns. The program is subject to the National
Environmental Policy Act (NEPA) and both the definition of ``biomass''
and the scoring criteria are already designed to safeguard the
environment. Thus, we believe that the commenter's concerns have
already been addressed in the rule as proposed.
List of Subjects in 7 CFR Part 4288
Administrative practice and procedure, Energy--advanced biofuel,
Renewable biomass, Reporting and recordkeeping.
For the reasons set forth in the preamble, title 7, chapter XLII of
the Code of Federal Regulations, is amended by adding a new part 4288
to read as follows:
[[Page 7927]]
PART 4288--PAYMENT PROGRAMS
Subpart A--Repowering Assistance Payments to Eligible Biorefineries
Sec.
4288.1 Purpose and scope.
4288.2 Definitions.
4288.3 Review or appeal rights.
4288.4 Compliance with other laws and regulations.
4288.5 Oversight, monitoring, and reporting requirements.
4288.6 Forms, regulations, and instructions.
4288.7 Exception authority.
4288.8-4288.9 [Reserved]
4288.10 Applicant eligibility.
4288.11 Eligible project costs.
4288.12 Ineligible project costs.
4288.13 Payment information.
4288.14-4288.19 [Reserved]
4288.20 Submittal of applications.
4288.21 Application review and scoring.
4288.22 Ranking of applications.
4288.23 Notifications.
4288.24 Program payment provisions.
4288.25 Succession and control of facilities and production.
4288.26 Fiscal Year 2009 and Fiscal Year 2010 applications.
4288.27-4288.100 [Reserved]
Subpart B--[Reserved]
Authority: 5 U.S.C. 301; 7 U.S.C. 1989.
Subpart A--Repowering Assistance Payments to Eligible Biorefineries
Sec. 4288.1 Purpose and scope.
(a) Purpose. The purpose of this program is to provide financial
incentives to biorefineries in existence on June 18, 2008, the date of
the enactment of the Food, Conservation, and Energy Act of 2008 (the
2008 Farm Bill) (Pub. L. 110-246), to replace the use of fossil fuels
used to produce heat or power at their facilities by installing new
systems that use renewable biomass, or to produce new energy from
renewable biomass.
(b) Scope. The Agency may make payments under this program to any
biorefinery that meets the requirements of the program up to the limits
established for the program. Based on our research and survey of
medium-sized project costs, the Agency has determined that the dollar
amount identified will provide adequate incentive for biorefineries to
apply.
(1) The Agency will determine the amount of payments to be made to
a biorefinery taking into consideration the percentage reduction in
fossil fuel used by the biorefinery (including the quantity of fossil
fuels a renewable biomass system is replacing), and the cost and cost-
effectiveness of the renewable biomass system.
(2) The Agency will determine who receives payment under this
program based on the percentage reduction in fossil fuel used by the
biorefinery that will result from the installation of the renewable
biomass system; the cost and cost-effectiveness of the renewable
biomass system; and other scoring criteria identified in Sec. 4288.21.
The above criteria will be used to determine priority for awards of 50
percent of total eligible project costs, up to the maximum award
applicable for the fiscal year.
Sec. 4288.2 Definitions.
The definitions set forth in this section are applicable for all
purposes of program administration under this subpart.
Agency. The USDA Rural Development, Rural Business-Cooperative
Service or its successor organization.
Application period. The time period announced by the Agency during
which the Agency will accept applications.
Base energy use. The amount of documented fossil fuel energy use
over an extended operating period.
(1) The extended operating period must be at least 24 months of
recorded usage, and requires metered utility records for electric
energy, natural gas consumption, fuel oil, coal shipments and propane
use, as applicable for providing heat or power for the operation of the
biorefinery.
(2) Utility billing, oil and coal shipments must be actual bills,
with meter readings, applicable rates and tariffs, costs and usage.
Billing must be complete, without gaps and arranged in chronological
order. Drop shipments of coal or oil can be substituted for metered
readings, provided the biorefinery documents the usage and its
relationship to providing heat or power to the biorefinery.
(3) A biorefinery in existence on or before June 18, 2008 with less
than 24 months of actual operating data must provide at least 12 months
of data supported by engineering and design calculations, and site
plans, prepared by the construction engineering firm.
Biobased products. Products determined by the Secretary to be
commercial or industrial products (other than food or feed) that are:
(1) Composed, in whole or in significant part, of biological
products, including renewable domestic agricultural materials and
forestry materials; or
(2) Intermediate ingredients or feedstocks.
Biofuel. Fuel derived from renewable biomass.
Biorefinery. A facility (including equipment and processes) that
converts renewable biomass into biofuels and biobased products, and may
produce electricity.
Eligible biorefinery. A biorefinery that has been in existence on
or before June 18, 2008.
Energy Information Agency (EIA). The statistical agency of the
Department of Energy and source of official energy statistics from the
U.S. Government.
Feasibility study. An Agency-acceptable analysis of the economic,
environmental, technical, financial, and management capabilities of a
proposed project or business in terms of its expected success. A list
of items that must be included in a feasibility study is presented in
Sec. 4288.20(c)(9) of this subpart.
Financial interest. Any ownership, creditor, or management interest
in the biorefinery.
Fiscal year. A 12-month period beginning each October 1 and ending
September 30 of the following calendar year.
Fossil fuel. Coal, oil, propane, and natural gas.
Renewable biomass.
(1) Materials, pre-commercial thinnings, or invasive species from
National Forest System land or public lands (as defined in section 103
of the Federal Land Policy and Management Act of 1976 (43 U.S.C. 1702))
that:
(i) Are byproducts of preventive treatments that are removed to
reduce hazardous fuels; to reduce or contain disease or insect
infestation; or to restore ecosystem health; and
(ii) Would not otherwise be used for higher value products; and
(iii) Are harvested in accordance with applicable law and land
management plans and the requirements for old growth maintenance,
restoration, and management direction as per paragraphs (e)(2), (e)(3),
and (e)(4), and large tree retention as per paragraph (f), of section
102 of the Healthy Forests Restoration Act of 2003 (16 U.S.C. 6512); or
(2) Any organic matter that is available on a renewable or
recurring basis from non-Federal land or land belonging to an Indian or
Indian Tribe that is held in trust by the United States or subject to a
restriction against alienation imposed by the United States, including:
(i) Renewable plant material, including feed grains; other
agricultural commodities; other plants and trees; and algae; and
(ii) Waste material, including crop residue; other vegetative waste
material (including wood waste and wood residues); animal waste and
byproducts (including fats, oils, greases, and manure); and food waste
and yard waste.
[[Page 7928]]
Rural or rural area. Any area of a State not in a city or town that
has a population of more than 50,000 inhabitants, according to the
latest decennial census of the United States, or in the urbanized area
contiguous and adjacent to a city or town that has a population of more
than 50,000 inhabitants, and any area that has been determined to be
``rural in character'' by the Under Secretary for Rural Development, or
as otherwise identified in this definition.
(1) An area that is attached to the urbanized area of a city or
town with more than 50,000 inhabitants by a contiguous area of
urbanized census blocks that is not more than 2 census blocks wide.
Applicants from such an area should work with their Rural Development
State Office to request a determination of whether their project is
located in a rural area under this provision.
(2) For the purposes of this definition, cities and towns are
incorporated population centers with definite boundaries, local self
government, and legal powers set forth in a charter granted by the
State.
(3) For the Commonwealth of Puerto Rico, the island is considered
rural and eligible for Business Programs assistance, except for the San
Juan Census Designated Place (CDP) and any other CDP with greater than
50,000 inhabitants. CDPs with greater than 50,000 inhabitants, other
than the San Juan CDP, may be determined to be eligible if they are
``not urban in character.''
(4) For the State of Hawaii, all areas within the State are
considered rural and eligible for Business Programs assistance, except
for the Honolulu CDP within the County of Honolulu.
(5) For the purpose of defining a rural area in the Republic of
Palau, the Federated States of Micronesia, and the Republic of the
Marshall Islands, the Agency shall determine what constitutes rural and
rural area based on available population data.
(6) The determination that an area is ``rural in character'' will
be made by the Under Secretary of Rural Development. The process to
request a determination under this provision is outlined in paragraph
(6)(ii) of this definition.
(i) The determination that an area is ``rural in character'' under
this definition will apply to areas that are within:
(A) An urbanized area that has two points on its boundary that are
at least 40 miles apart, which is not contiguous or adjacent to a city
or town that has a population of greater than 150,000 inhabitants or
the urbanized area of such a city or town; or
(B) An urbanized area contiguous and adjacent to a city or town of
greater than 50,000 inhabitants that is within one-quarter mile of a
rural area.
(ii) Units of local government may petition the Under Secretary of
Rural Development for a ``rural in character'' designation by
submitting a petition to both the appropriate Rural Development State
Director and the Administrator on behalf of the Under Secretary. The
petition shall document how the area meets the requirements of
paragraph (6)(i)(A) or (6)(i)(B) of this definition and discuss why the
petitioner believes the area is ``rural in character,'' including, but
not limited to, the area's population density, demographics, and
topography and how the local economy is tied to a rural economic base.
Upon receiving a petition, the Under Secretary will consult with the
applicable Governor or leader in a similar position and request
comments to be submitted within 5 business days, unless such comments
were submitted with the petition. The Under Secretary will release to
the public a notice of a petition filed by a unit of local government
not later than 30 days after receipt of the petition by way of
publication in a local newspaper and posting on the Agency's Web site,
and the Under Secretary will make a determination not less than 15
days, but no more than 60 days, after the release of the notice. Upon a
negative determination, the Under Secretary will provide to the
petitioner an opportunity to appeal a determination to the Under
Secretary, and the petitioner will have 10 business days to appeal the
determination and provide further information for consideration.
Sec. 4288.3 Review or appeal rights.
A person may seek a review of an Agency decision or appeal to the
National Appeals Division in accordance with 7 CFR part 11 of this
title.
Sec. 4288.4 Compliance with other laws and regulations.
Participating biorefineries must comply with other applicable
Federal, State, and local laws, including, but not limited to, the
Equal Employment Opportunities Act, the Equal Credit Opportunity Act,
Title VI of the Civil Rights Act of 1964, 7 CFR Part 1901, subpart E,
Section 504 of the Rehabilitation Act of 1973, and the Age
Discrimination Act of 1975. Applicants must submit and will be subject
to pre-award and post award compliance reviews with the terms and
conditions set forth in Form RD 400-1, ``Equal Opportunity Agreement''
and Form RD 400-4, ``Assurance Agreement.''
Sec. 4288.5 Oversight, monitoring, and reporting requirements.
(a) Verification. The Agency reserves the right to verify all
payment requests and subsequent payments made under this program,
including field visits, as frequently as necessary to ensure the
integrity of the program. Documentation provided will be used to
verify, reconcile, and enforce the payment terms of Form RD 4288-5,
``Repowering Assistance Program--Agreement,'' along with any potential
refunds that the recipient will be required to make should they fail to
adequately document their request.
(b) Records. (1) For purposes of verifying the eligible project
costs supporting payments under this subpart, each biorefinery must
maintain in one place such books, documents, papers, receipts, payroll
records and bills of sale adequate to identify the purposes for which,
and the manner in which funds were expended for eligible project costs.
The biorefinery must maintain copies of all documents submitted to the
Agency in connection with payments made hereunder. These records must
be available at all reasonable times for examination by the Agency and
must be held and be available for Agency examination for a period of
not less than 3 years from the final payment date.
(2) For the purpose of verifying compliance with the fossil fuel
reduction and energy production requirements of this subpart, each
biorefinery must make available and provide for the metering of all
power and heat producing boilers, containment vessels, generators and
any other equipment related to the production of heat or power required
to displace fossil fuel loads with renewable biomass. These records
must be held in one place and be available at all reasonable times for
examination by the Agency. Such records include all books, papers,
contracts, scale tickets, settlement sheets, invoices, and any other
documents related to the program that are within the control of the
biorefinery. These records must be held and made available for Agency
examination for a period of not less than 3 years from the date the
repowering project becomes operational.
(c) Reporting. Upon completion of the repowering project, the
biorefinery must submit a report using Form RD 4288-6, ``Repowering
Assistance Programs--Reporting Form,'' to the Agency annually for the
first 3 years after completion of the project. The reports
[[Page 7929]]
are to be submitted as of October 1 of each year. The report must
include the items specified in paragraphs (c)(1) and (c)(2) of this
section.
(1) Documentation regarding the usage and production of energy at
the biorefinery during the previous year, including both the previous
and current fossil fuel load and the renewable biomass energy
production.
(i) Metered data documenting the production of heat, steam, gas and
power must be obtained utilizing an Agency approved measurement device.
(ii) Metered data must be verifiable and subject to independent
calibration testing.
(2) Current utility billing data, indentifying metered loads, from
the base energy use period.
Sec. 4288.6 Forms, regulations, and instructions.
Copies of all forms, regulations, instructions, and other materials
related to this program may be obtained from the USDA Rural Development
State Office, Renewable Energy Coordinator and the USDA Rural
Development Web site at http://www.rurdev.usda.gov/regs[sol].
Sec. 4288.7 Exception authority.
The Administrator of the Agency (``Administrator'') may, with the
concurrence of the Secretary of Agriculture, make an exception, on a
case-by-case basis, to any requirement or provision of this subpart
that is not inconsistent with any authorizing statute or applicable
law, if the Administrator determines that application of the
requirement or provision would adversely affect the Federal
government's interest.
Sec. Sec. 4288.8-4288.9 [Reserved]
Sec. 4288.10 Applicant eligibility.
(a) Eligible projects. To be eligible for this program, the
applicant must be an eligible biorefinery utilizing only renewable
biomass for replacement fuel, and must meet the requirements specified
in paragraphs (a)(1) through (a)(5) of this section.
(1) Timely complete application submission. To be eligible for this
program, the applicant must submit a complete application within the
application period. Projects will be selected based on ranking which is
derived from the application of the selection criteria stated in Sec.
4288.21.
(2) Multiple biorefineries. Corporations and entities with more
than one biorefinery can submit an application for only one of their
biorefineries. However, if a corporation or entity has multiple
biorefineries located at the same location, the entity may submit an
application that covers such biorefineries provided the heat and power
used in the multiple biorefineries are centrally produced.
(3) Cost-effectiveness. The application must be awarded at least
minimum points for cost-effectiveness under Sec. 4288.21(b)(1).
(4) Percentage of reduction of fossil fuel use. The application
must be awarded at least minimum points for percentage of reduction of
fossil fuel use under Sec. 4288.21(b)(2).
(5) Full project financing. The applicant must demonstrate that it
has sufficient funds or has obtained commitments for sufficient funds
to complete the repowering project taking into account the amount of
the payment request in the application.
(b) Ineligible projects. A project is not eligible under this
subpart if it is using feedstocks for repowering that are feed grain
commodities that received benefits under Title I of the Food,
Conservation, and Energy Act of 2008.
Sec. 4288.11 Eligible project costs.
Eligible project costs will be only for project related
construction costs for repowering improvements associated with the
equipment, installation, engineering, design, site plans, associated
professional fees, permits and financing fees.
Sec. 4288.12 Ineligible project costs.
Any project costs incurred by the applicant prior to application
for payment assistance under this program will be ineligible for
payment assistance.
Sec. 4288.13 Payment information.
(a) Maximum payment. For purposes of this program, the maximum
payment an applicant may receive will be 50 percent of total eligible
project costs up to the applicable fiscal year's maximum award as
announced in an annual Federal Register notice. There is no minimum
payment to an applicant.
(b) Reimbursement payments. The Agency shall only make payments
based on the biorefinery's expenditures on eligible project costs.
Payments shall be determined by multiplying the amount of eligible
expenditures stated on the payment request by a percentage obtained by
dividing the aggregate payment award by total eligible project costs.
(c) Timing of payments. The Applicant may request payments not more
frequently than once a month by submitting an original, completed,
validly signed Standard Form (SF) 271, ``Outlay Report and Request for
Reimbursement for Construction Programs'' including the supporting
documentation identified in Sec. 4288.23, to reimburse the applicant
for the Agency's pro rata share of funds expended on eligible project
costs. The Agency shall make such payments until 90 percent of the
total payment award has been expended. The final 10 percent of the
payment award will be paid upon completion of the repowering project
and satisfactory evidence has been received by the Agency demonstrating
that the biorefinery is operating as described in the Agency approved
application.
Sec. Sec. 4288.14-4288.19 [Reserved]
Sec. 4288.20 Submittal of applications.
(a) Address to make application. Application must be submitted to
USDA, Rural Development-Energy Division, Program Branch, Attention:
Repowering Assistance Program, 1400 Independence Avenue, SW., Stop
3225, Washington, DC 20250-3225.
(b) Content and form of submission. Applicants must submit a signed
original and one copy of an application containing the information
specified in this section. The applicant must also furnish the Agency
the required documentation identified in Form RD 4288-4, ``Repowering
Assistance Program Application,'' to verify compliance with program
provisions before acceptance into the program. Note that applicants are
required to have a Dun and Bradstreet Universal Numbering System (DUNS)
number (unless the applicant is an individual). The DUNS number is a
nine-digit identification number, which uniquely identifies business
entities. A DUNS number can be obtained at no cost via a toll-free
request line at 1-866-705-5711, or online at http://fedgov.dnb.com/webform. Applicants must submit to the Agency the documents specified
in paragraphs (b)(1) through (b)(6) of this section.
(1) Form RD 4288-4. Applicants must submit this form and all
necessary attachments providing project information on the biorefinery;
the facility at which the biorefinery operates, including location and
products produced; and the types and quantities of renewable biomass
feedstock being proposed to produce heat or power. This form requires
the applicant to provide relevant data to allow for technical analysis
of their existing facility to demonstrate replacement of fossil fuel by
renewable biomass with reasonable costs and maximum efficiencies. The
applicant must also submit evidence that the
[[Page 7930]]
biorefinery was in existence on or before June 18, 2008. The applicant
is required to certify the information provided.
(2) RD Instruction 1940-Q, Exhibit A-1, ``Certification for
Contracts, Grants and Loans.''
(3) Form RD 400-1.
(4) Form RD 400-4.
(5) Form RD 1940-20, ``Request for Environmental Information''
(first page only). Note, however, that applicants must substitute the
narrative outlined in RD Instruction 1940-G, Exhibit H, in place of the
narrative attachment specified in the instructions to Form RD 1940-20.
(6) Certifications. The applicant must furnish the Agency all
required certifications before acceptance into the program, and furnish
access to records required by the Agency to verify compliance with
program provisions. The applicant must submit forms or other written
documentation certifying to the following:
(i) AD-1047, ``Certification Regarding Debarment, Suspension, and
Other Responsibility Matters--Primary Covered Transactions'' or other
written documentation.
(ii) AD-1048, ``Certification Regarding Debarment, Suspension,
Ineligibility and Voluntary Exclusion--Lower Tier Covered
Transactions'' or other written documentation.
(iii) SF-LLL, ``Disclosure of Lobbying Activities.''
(c) Application package contents. Applicants are required to
provide relevant data to allow for technical analysis of their existing
facilities to demonstrate replacement of fossil fuel by renewable
biomass with reasonable costs and maximum efficiencies. Applicants in
existence on or before June 18, 2008 with more than 24 months of actual
operating data must provide data for the most recent 24-month period.
Applicants in existence on or before June 18, 2008 with less than 24
months of actual operating data must provide 12 months of data
supported by engineering and design calculations, and site plans,
prepared by the construction engineering firm. All applicants must
submit the information specified in paragraphs (c)(1) through (c)(9) of
this section as part of their application package.
(1) Contact data. Contact information for the primary technical
contact for the biorefinery.
(2) Biorefinery data. Basic information on facility operations over
time (hours/day, days/year).
(3) Electric use data. Information on existing electric service to
the facility, data on consumption, peak and average demand, and
monthly/seasonal use patterns.
(4) Fuel use data. Information on natural gas and current fuel use
for boilers and heaters, including fuel type, costs, and use patterns.
(5) Thermal loads. Information on existing thermal loads, including
type (steam, hot water, direct heat), conditions (temperature,
pressure) and use patterns.
(6) Existing equipment. Information on existing heating and cooling
equipment, including type, capacities, efficiencies and emissions.
(7) Site-specific data. Information on other site-specific issues,
such as expansion plans or neighborhood considerations that might
impact the proposed new system design or operation; or environmental
impacts.
(8) Biofuel and biobased product production. Information on biofuel
and biobased product production, including quantity and units of
production.
(9) Feasibility study. The applicant must submit a feasibility
study by an independent qualified consultant, which has no financial
interest in the biorefinery, and demonstrates that the renewable
biomass system of the biorefinery is feasible, taking into account the
economic, technical and environmental aspects of the system. The
feasibility study must include the components specified in paragraphs
(c)(9)(i) through (c)(9)(x) of this section.
(i) An executive summary, including resume of the consultant, and
an introduction/project overview (brief general overview of project
location, size, etc.).
(ii) An economic feasibility determination, including:
(A) Information regarding the project site;
(B) Information on the availability of trained or trainable labor;
and
(C) Information on the availability of infrastructure and rail and
road service to the site.
(iii) A technical feasibility determination, including a report
that:
(A) Describes the repowering project, including:
(1) Information on heating and cooling equipment, including type,
capacities, efficiencies and emissions;
(2) Anticipated impacts of the repowering project on the
information requested above relating to electric use data, fuel use
data, thermal loads and biofuel and biobased product production; and
(3) A project development schedule as more fully described in Sec.
4288.21(b)(4)(iv);
(B) Is based upon verifiable data and contains sufficient
information and analysis so that a determination may be made on the
technical feasibility of achieving the levels of energy production that
are projected in the statements. The report must provide the
information in a format that is responsive to the scoring criteria
specified in Sec. 4288.21(b)(1) through (5) and applicants should
identify in their report the information that corresponds to each of
the scoring criteria; and
(C) Identifies and estimates project operation and development
costs and specifies the level of accuracy of these estimates and the
assumptions on which these estimates have been based.
(iv) A financial feasibility determination that discusses the
following:
(A) Repowering project construction funding, including repayment
terms and security arrangements. Attach any documents relating to the
project financing;
(B) The reliability of the financial projections and assumptions on
which the project is based including all sources of project capital,
both private and public, such as Federal funds;
(C) Projected balance sheets and costs associated with project
operations;
(D) Cash flow projections for 3 years;
(E) The adequacy of raw materials and supplies;
(F) A sensitivity analysis, including feedstock and energy costs,
product/co-product prices;
(G) Risks related to the project; and
(H) The continuity, maintenance and availability of records.
(v) A management feasibility determination.
(vi) Recommendations for implementation.
(vii) The environmental concerns and issues of the system.
(viii) The availability of feedstock, including discussions of:
(A) Feedstock source management;
(B) Estimates of feedstock volumes and costs;
(C) Collection, pre-treatment, transportation, and storage; and
(D) Impacts on existing manufacturing plants or other facilities
that use similar feedstock.
(ix) The feasibility/plans of project to work with producer
associations or cooperatives including estimated amount of annual
feedstock from those entities.
(x) If woody biomass from National forest system lands or public
lands is proposed as the feedstock, documentation must be provided that
it cannot be used as a higher value wood-based product.
[[Page 7931]]
Sec. 4288.21 Application review and scoring.
The Agency will evaluate projects based on the cost, cost-
effectiveness, and capacity of projects to reduce fossil fuels. The
cost of the project will be taken into consideration in the context of
each project's ability to economically produce energy from renewable
biomass to replace its dependence on fossil fuels. Projects with higher
costs that are less efficient will not score well. The scoring criteria
are designed to evaluate projects on simple payback as well as the
percentage of fossil fuel reduction.
(a) Review. The Agency will evaluate each application and make a
determination as to whether the applicant is eligible, whether the
proposed project is eligible, and whether the proposed payment request
complies with all applicable statutes and regulations. This evaluation
will be conducted by experts in the Agency and other Federal agencies,
including the U.S. Department of Energy based on the information
provided by the applicant.
(b) Scoring. The Agency will score each application in order to
prioritize each proposed project. The maximum number of points
awardable to any applicant will be 100. The evaluation criteria that
the Agency will use to score these projects are specified in paragraphs
(b)(1) through (b)(6) of this section.
(1) Cost-effectiveness. Cost-effectiveness will be scored based on
the anticipated simple payback period, or ``simple payback.''
Anticipated simple payback will be demonstrated by calculating
documented base energy use costs for the 24-month period prior to
submission of the application or at least 12 months of data supported
by engineering and design calculations, and site plans, prepared by the
construction engineering firm.
(i) The simple payback period is calculated as follows:
Simple payback = C/S
Where:
C = eligible capital expenses of the repowering project
S = savings in annual operating costs.
Example: Eligible capital expenses of the repowering project,
including handling equipment, biomass boiler, piping improvements
and plant modifications, are equal to $5,300,500. The annual
difference in fossil fuel cost versus the cost for renewable biomass
is $990,500. Assume these costs and uses are based on a yearly
operating cycle, which may include handling, storage and treatment
costs. In this example, C = $5,300,500; S = $990,500; simple payback
= 5.35 years (C/S = simple payback).
(ii) A maximum of 20 points will be awarded as follows:
(A) If the anticipated simple payback is less than or equal to 4
years, award 20 points.
(B) If the anticipated simple payback is greater than 4 years but
less than or equal to 6 years, award 10 points.
(C) If the anticipated simple payback will be greater than 6 years
but less than or equal to 10 years, award 5 points.
(D) If the anticipated simple payback will be greater than 10
years, award 0 points.
(2) Percentage of reduction of fossil fuel use. The anticipated
percent reduction in the use of fossil fuels will be measured using the
same evidence provided by the applicant for measuring cost-
effectiveness. However, this set of criteria will measure actual fossil
fuel use for the 24-month period prior to submission of the application
or for at least 12 months of data supported by engineering and design
calculations, and site plans, prepared by the construction engineering
firm. All fossil fuel use, for thermal loads as well as for electric
use, will be evaluated by using information provided by the Energy
Information Agency (EIA). The Agency will determine the percentage
reduction of fossil fuel use based on and in cooperation with the
applicant's submission of electric power provider contracts, power
agreements, and utility billings in relation to available information
from the EIA. A maximum of 35 points will be awarded as follows:
(i) Applicant demonstrates an anticipated annual reduction in
fossil fuel use of 100 percent, award 35 points.
(ii) Applicant demonstrates an anticipated annual reduction in
fossil fuel use of at least 80 percent but less than 100 percent, award
25 points.
(iii) Applicant demonstrates an anticipated annual reduction in
fossil fuel use of at least 60 percent but less than 80 percent, award
15 points.
(iv) Applicant demonstrates an anticipated annual reduction in
fossil fuel use of at least 40 percent but less than 60 percent, award
5 points.
(v) Applicant demonstrates an anticipated annual reduction in
fossil fuel use of less than 40 percent, award 0 points.
(vi) If any of the fossil fuel being replaced is natural gas,
deduct 5 points.
(3) Renewable biomass factors. If an applicant demonstrates at the
time of application that it has on site available access to renewable
biomass or enforceable third party commitments to supply renewable
biomass for the repowering project for at least 3 years, 5 points will
be awarded. If an applicant cannot demonstrate this, no points will be
awarded.
(4) Technical review factors. Technical reviews will be conducted
by a team of experts, including rural energy coordinators and State
engineers. The Agency may engage the services of other government
agencies or other recognized industry experts in the applicable
technology field, at its discretion, to evaluate and rate the
application. Each section of the technical review will be scored within
a range of possible points available within that section. A maximum of
25 points will be awarded as follows:
(i) Qualifications of the applicant's project team. The applicant
must describe the qualifications of those individuals who will be
essential to successful performance of the proposed project. This will
include information regarding professional credentials, relevant
experience, and education, and must be supported with documentation of
service capabilities, professional credentials, licenses,
certifications, and resumes, as applicable. Award 0-5 points.
(ii) Agreements and permits. The applicant must describe the
agreements and permits necessary for project implementation. An Agency-
acceptable schedule for securing the required documents and permits
must be provided. Award 0-4 points.
(iii) Design and engineering. The applicant must describe the
design, engineering, and testing needed for the proposed project. The
Design and Engineering documents shall demonstrate that they meet the
intended purpose, ensure public safety, and comply with all applicable
laws, regulations, agreements, permits, codes, and standards. Award 0-4
points.
(iv) Project development schedule. The applicant must provide a
detailed plan for project development including a proposed schedule of
activities, a description of each significant task, its beginning and
end, and its relationship to the time needed to initiate and carry the
project through to successful completion. This description must address
the applicant's project development cash flow requirements. Award 0-3
points.
(v) Equipment procurement. The applicant must describe the
equipment needed, and the availability of the equipment needed, to
complete installation and activation of the new system. The description
supports that the required equipment is available, and can be procured
and delivered within the proposed project development schedule. Award
0-3 points.
(vi) Equipment installation. The applicant must provide a
satisfactory description of the plan for site
[[Page 7932]]
development and system installation that reflects the soundness of the
project plan. Award 0-3 points.
(vii) Operations and maintenance. The applicant must describe the
operations and maintenance requirements of the system necessary for the
system to operate as designed and provide the savings and efficiencies
as described. The description and requirements noted must be
supportable by the technical review. Award 0-3 points.
(5) Liquid transportation fuels. If the biorefinery primarily
produces liquid transportation fuels, award 10 points.
(6) Rural area. If the biorefinery is located in a Rural Area,
award 5 points.
Sec. 4288.22 Ranking of applications.
All scored applications will be ranked by the Agency as soon after
the application deadline as possible. The Agency will consider the
score an application has received compared to the scores of other
applications in the priority list, with higher scoring applications
receiving first consideration for payments.
(a) Selection of applications for payments. Using the application
scoring criteria point values specified in Sec. 4288.21 of this
subpart, the Agency will select applications for payments.
(b) Availability of funds. As applications are funded, if
insufficient funds remain to pay the next highest scoring application,
the Agency may elect to pay a lower scoring application. Before this
occurs, the Agency will provide the applicant of the higher scoring
application the opportunity to reduce the amount of its payment request
to the amount of funds available. If the applicant agrees to lower its
payment request, it must certify that the purposes of the project can
be met, and the Agency must determine the project is feasible at the
lower amount.
Sec. 4288.23 Notifications.
(a) Successful applicants. Successful applicants will receive an
award letter notifying them of the award, including the terms and
conditions, and Form RD 4288-5. Each funded project is unique, and,
therefore, conditions of Form RD 4288-5 may vary among projects.
Successful applicants must execute and return the Form RD 4288-5,
accompanied by any additional items identified in the award letter.
(b) Unsuccessful applicants. Unsuccessful applicants will receive a
letter notifying them of their application score and ranking and the
score necessary to qualify for payments.
Sec. 4288.24 Program payment provisions.
The procedure the Agency will use to make payments to eligible
biorefineries is specified in paragraphs (a) through (e) of this
section.
(a) Payment applications. The Agency shall make payments based on
the biorefinery's expenditures on eligible project costs. To request
payments under this program during a fiscal year, an eligible
biorefinery must:
(1) Submit an original, validly signed and completed SF 271 to the
Agency not more frequently than once a month with the following
supporting documentation:
(i) Evidence of expenditure of funds on eligible project costs
which shall include paid third party invoices, receipts, bills of sale,
and/or payroll records. Such records must be adequate to identify that
funds to be reimbursed were spent on eligible project costs; and
(ii) Evidence that construction of the repowering project is in
compliance with the project development schedule.
(2) Certify that the request is accurate.
(3) Furnish the Agency such certifications as required in Form RD
4288-4, Part C, and access to records that verify compliance with
program provisions.
(b) Clarifying information. After payment applications are
submitted, eligible biorefineries may be required to submit additional
supporting clarification if their original submittal is not sufficient
to verify eligibility for payment.
(c) Notification. The Agency will notify the biorefinery, in
writing, whenever the Agency determines that a payment request is
ineligible and why the request was determined ineligible.
(d) Refunds and interest payments. An eligible biorefinery that has
received a payment under this program may be required to refund such
payment as specified in paragraphs (d)(1) through (d)(5) of this
section.
(1) An eligible biorefinery receiving payment under this program
will become ineligible for payments if the Agency determines the
biorefinery has:
(i) Made any material fraudulent representation;
(ii) Misrepresented any material fact affecting a program
determination; or
(iii) Upon completion of the repowering project, failed to reduce
its fossil fuel consumption, produce energy from renewal biomass or
otherwise operate as described in its Agency approved application.
(2) All payments made to a biorefinery determined by the Agency to
be ineligible must be refunded to the Agency with interest and other
such sums as may become due, including, but not limited to, any
interest, penalties, and administrative costs, as determined
appropriate under 31 CFR 901.9.
(3) When a refund is due, it must be paid promptly. If a refund is
not made promptly, the Agency may use all remedies available to it,
including Treasury offset under the Debt Collection Improvement Act of
1996, financial judgment against the biorefinery, and sharing
information with the Department of Justice.
(4) Late payment interest will be assessed on each refund in
accordance with provisions and rates as determined by the Agency.
(i) Interest charged by the Agency under this program will be at
the rate established annually by the Secretary of the U.S. Treasury
pursuant to 31 U.S.C. 3717. Interest will accrue from the date payments
were received by the biorefinery to the date of repayment, and the rate
will adjust in accordance with applicable regulations.
(ii) The Agency may waive the accrual of interest and/or damages if
the Agency determines that the cause of the erroneous determination was
not due to any fraudulent or negligent action of the biorefinery.
(5) A biorefinery or person receiving payment under this program
will be liable for any refund or related charges associated with their
project due under this program.
(e) Remedies. The remedies provided in this subpart will be in
addition to other civil, criminal, or administrative remedies that may
apply.
Sec. 4288.25 Succession and control of facilities and production.
Any party obtaining a biorefinery that is participating in this
program must request permission to participate in this program as a
successor. The Agency may grant such request if it is determined that,
the party is eligible, and permitting such succession would serve the
purposes of the program. If appropriate, the Agency will require the
consent of the previous party to such succession. Also, the Agency may
terminate payments and demand full refund of payments made if a party
loses control of a biorefinery whose production of heat or power from
renewable biomass is the basis of a program payment, or otherwise fails
to retain the ability to assure that all program obligations and
requirements will be met.
Sec. 4288.26 Fiscal Year 2009 and Fiscal Year 2010 applications.
Any entity that submitted an application for payment to the Agency
under this program prior to March 14,
[[Page 7933]]
2011 will have their payments made and serviced in accordance with the
provisions specified in this subpart.
Sec. Sec. 4288.27-4288.100 [Reserved]
Dated: January 31, 2011.
Dallas Tonsager,
Under Secretary, Rural Development.
[FR Doc. 2011-2480 Filed 2-10-11; 8:45 am]
BILLING CODE 3410-XY-P