* Some materials eligible for both types of biomass aid
* USDA sees 5,000 farmers, 12,000 acres in energy crops
* "Black liquor," a paper byproduct, ineligible for aid
* Impact of program blunted by expiry on Sept 30, 2012
By Charles Abbott
WASHINGTON, Oct 27 Pioneers in cellulosic
ethanol, tapped to leapfrog corn-based ethanol, say they are
studying or plan to use a new U.S. program that pays farmers
and forest owners to experiment with energy crops.
The Biomass Crop Assistance Program, estimated to cost $461
million, took effect on Wednesday. A wide variety of materials
are eligible for support, from wood chips and crop residues to
switchgrass, woody plants, algae and animal and food waste.
U.S. officials say the program will assure a supply of
non-food feedstocks as the infant cellulosic industry grows.
The government is providing loan guarantees for construction
of a first round of commercial-size bio-refineries.
Found in grasses and woody plants, cellulose could make moot
the "food vs fuel" argument over using corn, a livestock feed,
to make fuel. Critics complain corn-based fuel drives up prices
for food globally.
The 2007 energy law calls for the use of 21 billion gallons
a year by 2022 of advanced biofuels such as cellulosic fuels,
compared to 15 billion gallons of corn ethanol.
This year, the ethanol industry will produce 12 billion
gallons of ethanol, consuming more than one-third of the crop.
A small amount of U.S. farmland -- 12,000 acres -- would be
devoted to energy crops, estimates the Agriculture Department,
partly because the biocrop program expires in 2012.
Two types of support are offered -- matching payments for
gathering and transporting feedstocks and payments for
establishing and producing biomass crops.
Some crops, such as switchgrass, could qualify for both
strands of support. Matching payments run two years. Biocrop
payments can run up to 15 years.
Privately owned POET, the largest U.S. ethanol maker, says
it will ask the Agriculture Department to list three of its
plants listed as biomass conversion facilities. Approval would
allow matching payments, of up to $45 per dry ton, to farmers
for gathering and hauling cellulosic feedstocks to the plants.
Corn stalks and cobs are the feedstock for two POET plants.
One in Iowa would produce 25 million gallons a year of ethanol
and the other is a pilot plant in South Dakota.
Executives of Range Fuels Inc and Abengoa Bioenergy Corp, a
subsidiary of Abengoa SA (ABG.MC), say they are interested in
the biocrop program. Range Fuels began production in August at
a plant in Soporton, Georgia, using woody biomass. It plans to
expand plant capacity to 60 million gallons a year.
Range Fuels chief executive David Aldous said "on the
surface, the program has real potential for us."
"If we participate, it has the opportunity to improve our
operating cost position as well as provide conditions to local
growers to profitably grow new energy crops," said Aldous.
Abengoa plans to begin construction in 2011 on a 15
million-gallon-a-year biomass plant at Hugoton, Kansas, that
could use corn and milo stover, wheat straw or prairie grass.
"I think we are interested in both programs," said Chris
Standlee, executive vice president of Abengoa Bioenergy,
referring to the types of support offered.
Abengoa's U.S. corn ethanol plants have a capacity of 378
million gallons a year. POET, Archer Daniels Midland Co (ADM.N)
and Valero Energy Corp (VLO.N) are the leading producers.
USDA said the short lifespan of the program will limits its
impact. Lawmakers would decide in 2012 whether to renew it.
Some 5,000 producers of energy crops near 32 biomass plants
would receive establishment and production payments and 975
"eligible material owners" who are not affiliated with a plant
would qualify for matching payments, estimated USDA.
An earlier version of the program, limited to forestland
materials, cost nearly $250 million during a brief life. USDA
now bars "black liquor," a fuel that is a byproduct of
paper-making, from the program.
(Reporting by Charles Abbott,editing by Sofina Mirza-Reid)