On October 21, 2010, the U.S. Department of Agriculture (USDA) announced the release of the final rule for the Biomass Crop Assistance Program (“BCAP”).

Created by the 2008 Farm Bill, BCAP provides two incentive programs to increase biomass fuel supply nationwide. One component of BCAP provides matching payments of $1 per ton of eligible fuel (up to $45/ton) to qualified biomass fuel harvesting, collecting, handling, and or storage entities. The new BCAP amends previous requirements relating to relationships between the buyer and seller and simply requires that all eligible material be purchased at fair market prices, regardless of the parties’ relationship.

Another component of BCAP provides annual payments to landowners who produce certain eligible biomass feedstocks. These subsidies will cover 75% of initial costs for establishing new energy crops (such as miscanthus, energy cane and algae), and will also provide ongoing support for up to five years for non-woody perennial crops and fifteen years for woody perennial crops.

The new BCAP also implements enhanced stewardship and conservation measures, such as requiring that biomass is certified that it was collected and harvested only with an approved conservation, forest stewardship or similar plan.

Although generally very popular, there has been some criticism of BCAP. In the final rule, USDA includes criteria to protect existing woody biomass markets, stating that eligible materials will not quality for matching payments if those materials are used for pre-existing markets. Many complain that the definition of “eligible biomass” is too narrow and unfairly excludes forest and mill residuals from eligibility for matching payments.

USDA also announced additional biofuels programs in an attempt to spurn development in the industry. The first is a program under which the Department will provide matching payments for investments in retail pumps and storage equipment for blended gasoline incorporating biofuels to support the anticipated installation of 10,000 pumps over the next five years.

Another program is a five-year partnership agreement with the Federal Aviation Administration to identify biomass feedstocks for aviation fuel and evaluate their availability.