Who Will Participate and What would be Assessed?
Three segments of the Wood-to-Energy sector would participate in a check-off program; export market pellet manufacturers, domestic market pellet manufacturers and biomass power producers whose primary product is energy. Specifically these segments use preconsumer, virgin fiber woody biomass to produce energy.
Definition of what would be assessed:
Proposed: Assessable Bone Dry Tons (BDT) of preconsumer woody biomass defined as: residuals from sawmills, paper mills, green wood, bark, arbor waste (urban, utility line clearing,), chips, logging debris, leaves, needles.
Definition of what would NOT be assessed: black liquor, construction and demolition material, scrap pallets, paper mill broke stock and paper mill sludge, agricultural waste (e.g. shells and pits).
What is a Referendum?
Before a check-off program as proposed for the wood-to-energy sector can be enacted, all affected (in the proposed population based upon production) members of the industry sector would have the opportunity to vote to approve the program. The vote is organized, administered and tallied by the USDA. This is known as the initial referendum.
If a check-off program is accepted, the industry participates in continuing referendums held periodically. This allows the industry to decide if the program is proving value and whether or not, as an industry, to continue the check-off program.
1. Initial referendum
a. The industry must vote to create a check-off program.
Proposed: For an initial 7 year program
b. The USDA sends ballots to all eligible companies and conducts the referendum.
Proposed: The vote must be approved by a majority of voting companies
AND a majority of production of voting companies.
2. Continuance of the referendum
Proposed: Continuance referendum every 7 years
How would it be governed?
Check-off programs are governed by a board of directors which is representative of the industry. They are normally nominated by their industry sector and presented to the Secretary of Agriculture for appointment.
Proposed: A Board of Directors of 11 – 15 members representing biomass power and pellet producers. (Ultimately, an exact number of board members has to be determined as part of the proposed order.)
Proposed: The Board will be representative of geographic distribution, size (e.g. small vs. large), industry sub-sector and diversity.
Proposed: Members will serve staggered three-year terms.
Proposed: Nominations for board members will come from their respective industry sectors.
What would be funded?
A check-off program can be used to fund research and promotion that helps industry maintain, develop and expand domestic and foreign markets. Check-off programs cannot be used for lobbying or directly influencing government policy, or disparaging other commodities.
Proposed: The check-off program would have the flexibility to fund research and promotions to deal with new challenges and concerns as they arise
Proposed: Examples of research and promotions that could be funded include:
1. Greenhouse gas and carbon accounting for wood as a source of energy
2. Forest health and sustainability
3. Value of wood for energy
4. Economic and employment impact of the industry
What are the funding safety nets?
The USDA provides several safety nets within check-off programs to ensure that funds are used as prescribed by law and in a manner that protects the funding from abuse. By law:
1. Funds cannot be used for lobbying and/or directly influencing government policy.
2. There will be a five year independent evaluation of the economic impact of the program(s).
3. Program administration expenses cannot exceed 15%, however the Board has the flexibility to adopt a lower percentage.
What are Program Assessments and Expenses?
Funding comes from an annual assessment placed on all eligible companies within the industry segments. Coupled with other overhead such as director salary, associated office costs, etc. to have a meaningful impact on the debate, the USDA Agricultural Marketing Service charges an annual fee in a range from $115,000 – $150,000 to cover the expenses of the services they provide to the check-off program.
Proposed: A base target of $4 – $5 million in annual assessment receipts.
Proposed: Bone Dry Tons (BDTs) will be the common assessment measure.
Proposed: For Pellet Mills: Assessment value = Bone Dry Tons of Pellet Sales (that is, total tons sold adjusted for moisture content)
(Companies will use their own moisture content calculations to adjust to BDTs)
Proposed: For Biomass Power Producers: Assessment Value = *Assessable Bone Dry Tons required to produce Net Energy*sold.
(*Net Energy is defined as electricity, heat or steam, net of parasitic load. Companies would use their own calculations to derive BDTs needed for Net Energy Sold.)
Smaller companies are exempted as there could be an unnecessary burden for record keeping, inventories and other activities related to assessments. A de minimus level allows for these companies to be exempt from the assessment yet not significantly impact annual assessment receipts.
Proposed: Pellet mills (at the total per company level) with less than 50,000bdt in annual sales.
Proposed: Biomass power producers (at the total per company level) with less than 50,000bdt of annual woody biomass consumption.
Proposed: First 50,000bdts for eligible companies is exempt from assessment.
What would it cost your company?
Once the assessment range is set and voted upon, it cannot be changed unless the industry goes through a new referendum. This gives the Board of Directors the flexibility of having a range of values allowing them to raise and lower assessments based on needs and challenges subject to an administrative rule making procedure.
Proposed: a range of values (e.g. $.10-.40/BDT) to provide the Board of Directors with flexibility to raise and/or lower annual assessments based upon need without having to go for a revote.