The Rural Development Office of the United States Department of Agriculture ("USDA") has announced the availability of loan guarantees to fund the development, construction, and retrofitting of commercial-scale biorefineries using eligible technology. The "Biorefinery Assistance Program" was authorized by Congress under the "Food, Conservation, and Energy Act of 2008" (Public Law No. 110-234) (commonly known as the "Farm Bill").

The USDA is accepting applications for this program through April 30, 2009.

A link to the program website is attached, where a Notice of Funds Availability ("NOFA") and Application Guide can be found. In addition, an explanation of the major provisions of the program follows. Reed Smith's Public Policy & Infrastructure Practice is available to assist in the competitive loan guarantee application process, including in efforts to obtain support from Members of the House of Representatives and the Senate.

Overview of Program

Under the Farm Bill, Congress authorized $75 million in funding for Fiscal Year 2009 ("FY 09") for the development, construction and retrofitting of commercial-scale biorefineries that produce an advanced biofuel. The goals are to increase energy independence, promote conservation, and enhance the economic development of this nation's rural economy. Up to 50 percent of the funding was to be distributed in the first half of FY 09, with applications due to the Rural Development Office by Dec. 31, 2008. The remainder is to be distributed in the second half of FY 09, and applications are due by April 30, 2009.

Eligible use of biofuels must utilize "first-of-a-kind technology"

NOFA indicates that preference will be given to first-of-a-kind refineries, i.e., those that use advanced biofuel not utilized before on a commercial scale. One type of biofuel NOFA immediately excludes is ethanol, which has been commercialized. NOFA indicates the following advanced biofuels as eligible for funding, including biofuels derived from:

  • Cellulose, hemicellulose or lignin
  • Sugar and starch
  • Waste material, including crop residue, other vegetative waste, animal waste and food waste
  • Renewable biomass, including vegetable oil and animal fat
  • Landfill gas and sewage waste treatment gas
  • Butanal and other alcohols

Borrower Eligibility

To be eligible, the borrower must be either a/an:

  • Individual
  • Indian tribe
  • State or local government
  • Corporation
  • Farm cooperative
  • Association of Agricultural Producers
  • National laboratory
  • Institution of higher education
  • Rural electric cooperative
  • Public power entity
  • Consortium of any of the above

Project Eligibility

Projects must:

  • Fall in a rural area (defined below); and
  • Develop and construct commercial-scale biorefineries using eligible technologies (i.e., first-of-a-kind technologies discussed above); or
  • Retrofit a facility (such as wood products facilities and sugar mills) to use an eligible technology

Definition of a Rural Area

A rural area is defined under NOFA as "an area of a State not in a city or town that has a population of more than 50,000 inhabitants, according to the latest decennial census of the United States."

Maximum Loan Guarantee

The maximum loan guarantee is up to 80 percent of the principal, for loans of $80 million or less. For loans in excess of $80 million but less than $125 million, the maximum guarantee is 70 percent. For loans in the $125 million to $250 million range, the maximum guarantee is 60 percent. The USDA will not guarantee loans of more than $250 million.