Industry trade organization urges changes to program that will facilitate private investment and support commercialization
WASHINGTON, D.C. (July 6, 2010) – The Algae Biomass Organization, the trade association for the algae industry, has encouraged the USDA to consider a variety of changes to its Biorefinery Assistance Program, which guarantees loans for the development of advanced biorefineries. Among the changes proposed by the ABO were: providing more flexible revenue requirements for qualifying under the program; increasing the amount of the loan that can be guaranteed; and removing the restrictive citizenship requirements for borrower eligibility. A full version of the ABO comments on the USDA Biorefinery Assistance Program is available at the ABO website: http://algaebiomass.org/policy-center/values-views/federal/.
“Along with strong support from the Department of Energy and Congress, the USDA’s Biorefinery Assistance Program will play a vitally important role in incentivizing private investment in renewable, domestically-produced advanced biofuels derived from algae,” said Mary Rosenthal, Executive Director of the ABO. “The benefits provided by algae-based biofuels align closely with the Program’s goals of enhancing our energy security, expanding markets for agricultural products and creating jobs. We look forward to continuing to work closely with the USDA to ensure the Biorefinery Assistance Program is as effective as possible.”
ABO’s offered a number of key recommendations, including:
- Provide more flexible revenue requirements. The current revenue requirements are too strict and could prevent early-stage algae-based fuel biorefinery projects from qualifying for a loan guarantee. The USDA’s notice of proposed rulemaking states that for a project to be eligible for a loan guarantee “more than 70 percent of the revenue generated by the biorefinery must be from the sale of advanced biofuels.” Because many algae companies project that a significant portion of their initial revenue will come from higher value co-products, including animal feed, chemicals and plastics, these inflexible requirements could serve to disqualify projects seeking to use algae as a feedstock. Furthermore, this requirement is not contained in Section 9003 of the Farm Bill. It is ABO’s position that it is counterproductive to impose an artificial product mix requirement.
- Increase the amount of loan guarantee available to industry. Congress authorized guarantees of up to 90% of the principal and interest on a loan; however, the percent of a loan that the USDA is proposing to guarantee is significantly less. For example, only 60% of the entire loan amount would be guaranteed for loans over $125 million. While USDA’s proposal may be appropriate for existing, commercially available technologies, these levels fall far short of providing the risk reduction needed to attract badly-needed private investment in capital intensive biorefinery projects.
- Remove the citizenship requirement for borrower eligibility. ABO believes that the physical location of a project and its potential to create domestic jobs, not the nationality of project’s equity investors, should be the measure of eligibility. Currently, the USDA is proposing that individual borrowers must be citizens of the U.S. and its territories or reside in the United States after legal admittance for permanent residence. For other entities, they must be 51% owned by U.S. citizens or legally admitted permanent residents residing in the U.S. Congress did not impose this requirement, and doing so could prevent international investors from investing in U.S. markets and creating much-needed domestic jobs. Requirements of this nature impose unnecessary barriers to achieving the goals of the Biorefinery Assistance Program, namely to increase the energy independence of the United States, diversify markets for agricultural products, promoting the development of new technologies, creating jobs, and enhancing America’s rural economies.
The Biorefinery Assistance Program was authorized by Congress in Section 9003 of the Food, Conservation, and Energy Act of 2008, commonly referred to as the “Farm Bill,” with the purpose of increasing U.S. energy independence, promoting resource conservation and health of the environment, diversifying markets for agricultural products, and enhancing America’s rural economies.
Participation in the USDA’s request for comments on the proposed rule is part of ABO’s commitment to accelerating the market for commodities derived from algal biomass, including education and outreach, policy briefings and other events focused on increasing policymakers’ and the public’s awareness of algae’s potential contributions to resolving critical issues such as energy security, climate change, and economic development.