Introduction

Congress recently overrode President Bush's veto to enact the Food and Energy Security Act of 2007 (the "Farm Bill"), noting the value of farms in providing both key real estate for siting renewable energy projects and fuel sources for such projects. In recognition of that value, the Farm Bill offers incentives to develop renewable energy projects on rural or agricultural land, including: biomass projects, both ethanol-based and cellulosic, for the creation of biofuels and energy; and waste-to-energy projects using various types of animal waste, including manure.

Biomass and Biofuels

The Farm Bill creates grants and loan guarantees for (1) developing and constructing biorefineries for converting renewable biomass (including farm waste, animal waste, food waste, feed grains, plants and trees, construction waste and vegetative waste) or (2) repowering an existing facility to use renewable energy.

Such grants or loan guarantees will be awarded to projects demonstrating increased energy efficiency and reduced fossil fuel use. Grant amounts will be up to 50 percent of the cost of development and construction or 20 percent of the cost of repowering. Loan guarantees are limited to 80 percent project costs and can cover 100 percent of the principal and interest due on a loan. Loans to be guaranteed for construction projects may not exceed $250 million and repowering projects may not exceed $70 million.

Animal Waste

The Farm Bill provides the following incentives for selected animal solid waste facilities, including: loan guarantees up to a maximum of the lesser of $25 million per project or 80 percent of the cost of the activity being carried out; grants up to 25 percent of the cost of the project up to a maximum of $2 million; and production-based incentive payments as a substitute for a grant.

In selecting recipients of loan guarantees, grants or incentive payments, the following items, among others, shall be considered: the quality of the energy produced by the project; the energy efficiency of the project; impacts on air, water and soil quality; and the net impact on greenhouse gas emissions.

Conclusion

These provisions provide incentives to encourage farms, and other non-traditional renewable energy investors, to participate in the renewable energy economy in a more meaningful and proactive way than previously. The Farm Bill has the potential to stimulate the development of thousands of megawatts of renewable energy projects, especially for biomass and biofuels projects that otherwise would not have been developed. Additionally, farms, and other rural property, comprise millions of acres of valuable land ideal for the siting of renewable energy projects, and many have access to energy-rich raw materials that can be used as renewable fuels. Developers of renewable energy projects may now have valuable opportunities to partner with farms or other eligible organizations to take advantage of these provisions.

Ballard has extensive experience advising developers, investors and landowners on the development, financing and operation of such renewable energy facilities, as well as qualifying for and maximizing various tax incentives available to such parties.


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