Final Moments of 2012 Bring Major Biomass Policy Shifts

By Bob Cleaves | January 30, 2013

As we kick off 2013, we’re looking at how policy shaped in the last months and days of 2012 will affect the biomass industry. A momentous decision by the U.S. EPA, as well as delivery of the highly-anticipated fiscal cliff deal, will have major impacts on biomass in the new year.

What will likely have the biggest influence on biomass was one of the final decisions made by the EPA in 2012, a ruling on Non-Hazardous Secondary Materials, which was a huge win for our industry. The ruling clarifies what we have known all along: organic material such as agricultural debris, pallets and other clean wood-based fuels serve as important resources for making renewable electricity.

The EPA’s announcement that it does not likely view such materials as wastes is historic. In the rule released Dec. 21, EPA signaled its intent to treat these materials as fuels and not wastes through a subsequent rulemaking. The federal government is now joining California and other states that have long considered these materials as important fuels, and encourages their use in biomass plants to avoid landfilling, open burning or other non-sustainable practices.

Of course, the policy discussion that received the most attention at the end of 2012 was the fiscal cliff agreement (and the drama leading up to it). Despite the weeks-long will-they-or-won’t-they media coverage, Congress and the administration finally did make an agreement at the last possible minute, and their deal will be beneficial for biomass and other sources of renewable energy.

Thanks to the extenders language in the fiscal bill, facilities can qualify for production tax credits (PTC) and the investment tax credit based on the date that construction begins on a facility, thereby officially extending qualifications to anyone building a biomass facility this year. Before this legislation, new facilities would have had to be up and running by Dec. 31 of this year in order to qualify for the credits, a virtual impossibility even if construction began today. The legislation did not, however, address the industry’s need for an extension of the program expiration date, which is currently Dec. 31, nor the fact that biomass—along with hydro and energy from waste— receive half the credit of wind resources. Congressional supporters of biomass have signaled their intention to address both of these issues in the 113th Congress.

Another provision in the fiscal deal was not so favorable to biomass. While the Senate Agriculture Committee passed a version of the Farm Bill last summer that included $80 million of mandatory funding for the Biomass Crop Assistance Program, the passed legislation includes only $20 million of non-mandatory funding for the program. While BCAP has not been funded for some time, in the past the program has been a valuable source of funding for several facilities that collect forest waste. Particularly in dry, heavily forested areas, BCAP can provide fuel for biomass facilities while keeping forests healthy and preventing fire risk.

Entering 2013, we have a mixed bag of legislative and regulatory changes to adapt to.  I hope that everyone who qualifies takes advantage of the new PTC rules. I will continue to advocate for biomass with legislators, regulators and the administration, and Happy New Year to all in the biomass industry.

Author: Bob Cleaves
President and CEO, Biomass Power Association