By Jeremy Gilpin, Jordan Blanchard, and Cindy Thyfault, National Rural Lenders Association
Special to The Digest
There has been a keen focus the last few weeks for President Trump and the USDA with the release of the Task Force on Agriculture and Rural Prosperity Report, President Trump’s recent speech to the Farm Bureau, and the release from USDA of the 2018 Farm Bill and Legislative Principles.
There are threads of support for biotechnology, rural prosperity, well-paying jobs, transportation, renewables, and export competitiveness which are all essential building blocks in the larger arena of developing and commercializing new biofuels, biochemical, and value-added bio-products, as well as utilizing commercial renewable energy and energy efficiency technologies.
However, strong support and funding signals from the President or the USDA for the Farm Bill Title 9 Energy Programs has not been publicized. In a recent White Paper released by the Ag Energy Coalition entitled , Rural America’s Role in Expanding Energy Independence, Dominance, Innovation and Jobs: Recommendations for the New Farm Bill, there is a massive growth opportunity for rural America that include next-generation biofuels, renewable chemicals, and biobased products from feedstocks such as dedicated energy crops, cellulosic waste, and municipal solid waste that can provide new revenue streams and expand opportunities for value-added agriculture throughout the United States as well as accessing global markets. It also means new “cash crops” for rural communities via electricity generated from wind, solar, biomass, hydro, and geothermal resources. Smart energy efficiency measures save farmers, ranchers, and other citizens and rural small businesses money, improving bottom lines.
The National Rural Lenders Association is a national trade association representing private lending institutions nationwide that utilize USDA guaranteed lending program to support rural infrastructure and economic development. The mission of the National Rural Lenders Association (NRLA) is to advocate for the USDA Guaranteed Lending Programs to support rural economic development.
While there are many issues important to the financial lenders who serve our nation’s rural communities, NRLA has been actively reaching out to congressional leaders to express our views and provide recommendations for the 2018 Farm Bill. More specifically, our Energy Subcommittee has strongly advocated for enhancements and full budget appropriations to the Title 9 Energy section.
NRLA strongly supports the USDA Biorefinery, Renewable Chemical, and Biobased Product Manufacturing Assistance Program (9003), where our members are currently working with clients that have achieved financial close or are in the process of completing financial close this fiscal year.
It is important for NRLA and for our 9003 applicants to see a long-term, stable program be funded at $1 Billion of lending authority in the 2018 Farm Bill (at the current subsidy rate, this would be approximately $200 to $250 million in appropriations) for several reasons cited below.
Our members are working with exciting new technologies in renewable fuels, chemicals, and bio-products that are just reaching the threshold for true commercialization. The opportunity to capitalize on the billions of dollars of research and development spent by the US federal government and the private sector is allowing our clients to access profitable, stable markets and providing products that are in high demand both nationally and internationally.
These projects are located in rural areas, or draw from feedstock resources in rural areas. From the business plans that we have examined, these jobs pay over 200% of the average median wage in these areas, and not only provide new jobs but increase the wages of rural ag producers and small business owners in rural areas.
The research and development efforts of both the government and private sector, and the new technologies that are solving the problem of sustainable, affordable energy both here and abroad, have made the U.S. a global leader in this sector. However, innovation alone does not guarantee future success, especially in light of foreign trade barriers, subsidies, and aggressive export financing schemes.
We have been meeting with other companies and getting acquainted with new and exciting project and technologies that our members would like to fund, and that are ready to be commercialized. Unfortunately, there was a time lag in completing a new Final Rule for this program that slowed down the processing of loans through the USDA. However, we support the new 2-tiered system has been created, and it is working well to move these projects through the rigorous review process and into loan closing. This is the only government loan program that can accomplish the goals set out above. NRLA feels it is vitally important to continue with this program. It is important to not presume that the slowness of success in recent years is based on the slowness of opportunity. The members of NRLA also appreciate the USDA Energy staff and the teamwork and support we have received.
A request that NRLA would make of Congress is to assist in modifying and clarifying the language for renewable chemicals in two regards – Enhance and revise the definition of “renewable chemicals” and “biorefinery” within Section 9001 in the new Farm Bill language to allow standalone renewable chemical manufacturing facilities the ability to receive loan guarantees without producing advanced biofuels. In the 2014 Farm Bill the language was unclear or absent. Remove the 10% funding allocation for bio-based products and innovative food and feed ingredients (such as algae-based health products). Allow these technologies to compete for funding in the overall allocation. Expand the product eligibility definition to include bio-based health and wellness products.
The NRLA also strongly supports the USDA Rural Energy for America Program (REAP), and it is also important for the NRLA and for our REAP applicants to see a long-term, stable program be funded at $34 million annually for grants and $400 million of guaranteed loan lending authority annually ($16 million of appropriations annually at a subsidy rate of 4 percent in the current program) the 2018 Farm Bill for several reasons cited below.
This has been a robust program that has improved the businesses of agriculture producers and small businesses in the rural areas, and allowed for the installation of renewable energy and energy efficiency projects that have a four-to-one return on government investment. NRLA members have utilized this program for their customers and see the successful results. It is vitally important from a financing perspective that there would be given a longer timeline to allow for more investment in these technologies, and increase the savings and opportunities that these technologies can bring to rural producers and small businesses.
These projects are located in rural areas not only provide new construction and maintenance jobs that pay over the median wage rate, creating new industries in rural areas, but also increase the long-term profitability of agricultural producers and small business owners in rural areas.
NRLA is also requesting to eliminate the “small business” size standards for REAP loan guarantees (which will result in eliminating the current SBA size standards requirement). B&I and 9003 do not have size standards as an eligibility criteria, and it inhibits the use of the program for renewable energy development for companies in rural areas that will benefit from this type of assistance, as well as stimulate renewable energy jobs and services in rural areas.
NRLA also requests that the classification for solar farms of 100 acres or less as a Categorical Exclusion in the NEPA process. Currently it is 10 acres or less. Solar farms have minimal impact on land and can easily be converted back to farmland. Allow flexibility to enable support of components for projects or ancillary infrastructure (such as fuel cells and batteries for solar, connection costs to substations, value added products from digesters such as compost and other by-products).
NRLA members recently lobbied for the 2018 Farm Bill Energy Programs, meeting with congressional leaders and USDA representatives. However, NRLA cannot assure that these Farm Bill programs will survive with our advocacy efforts alone. It is vitally important that everyone involved in commercializing new technologies and building new biorefineries and manufacturing facilities contact their congressmen to provide a synopsis of your business plans and how these USDA Energy programs can assist in accelerating near term opportunities. The Farm Bill negotiations are underway, and the next 60 days a vitally critical window of opportunity to have an individual impact that can realize collective results and optimum funding for these programs.
“Due to the administration’s move to place tariffs on biofuel dumping in the U.S., it is of utmost importance that the domestic renewable fuels market be expanded rapidly by the commercialization of new technologies and building commercial biorefineries,” says Jeremy Gilpin, NRLA Chairman of the Board and Executive Vice President of Greater Nevada Credit Union. “We see the importance of this effort and we are partnering with our customers to do so, and recently or group closed the largest USDA 9003 loan in the history of the program for $118 million. We also have other 9003 loans are in the process of closing. The stability of domesticated renewable fuels is also an important platform to the security of the nation. As a military veteran of 9.5 years, as a combat engineer and an officer in the Army stationed throughout the world, I have experienced firsthand the importance of this effort. As Chairman of NRLA I am working with our members, the USDA, and our customers to fulfill the vision that was set out in EISA of 2007 and the 2008 Farm Bill, and enhance and improve this legislation to properly provide and maximize the opportunities in the 2018 Farm Bill for renewable fuels, biochemical, and bio-product industries.”
“As the largest USDA Rural Energy for America Program (‘REAP’) lender, we are eager to expand our lending efforts to the USDA 9003 program,” explained Jordan Blanchard, NRLA Energy Co-Chairman and General Manager, Renewable Energy Lending at Live Oak Bank. “We have seen annual REAP funding go from less than $50MM in 2014 to over $400MM in FYE 2017, and an expected $600MM in FYE 2018. During this time period we have gained a level of comfort working side-by-side with the USDA on renewable energy projects. With the credit enhancement provided by the USDA, we can fund much larger transactions, on more favorable terms, than we would otherwise be able to offer. We have utilized an active and growing secondary market to reinvest loan proceeds into additional projects. We believe that we can bring these same financing and secondary market efficiencies to the 9003 program and avoid the cumbersome bond structure that has been typical in the past.
Unfortunately, just when the 9003 program has reached a level of maturity suitable for banks and credit unions, its’ future is in doubt due to the expiration of the current Farm Bill. We strongly encourage the House and the Senate to support both REAP and the 9003 program as part of the current bill negotiations.”
“I have worked with most of the USDA 9003 applicants since the program inception in 2008, and I have testified during the 2012 Farm Bill negotiations for the 9003 and the 9007 programs, including detailed letters describing my client’s successes and opportunities to Congressional leaders,” said Cindy Thyfault, NRLA Energy Co-Chairman and Founder & CEO, Westar Trade Resources. “Unless we bring out case studies to Congress and highlight the unique national and global opportunities that are waiting to be untapped, the critical funding that is necessary is not going to be there when we need it. More importantly, the 9003 program has always struggled to find lenders of record for these larger projects. With the NRLA leadership and member participation, we have a team that has many years of experience in evaluating, underwriting, and servicing USDA Energy loans. As the Energy programs provide loan guarantees to the lenders, we hope to have an impact while lobbying next week and sharing how lenders see the value that this can bring to our country and our global marketplace.”
“It is more important than ever to have all hands on deck in this next 60 days,” Lloyd Ritter of Ag Energy Coalition expressed. “As I meet with Congressional leaders, they are only interested in success stories that support the need for these programs to continue, now and into the future.”
To find contact information for your congressional leaders, click on the links below.
Together, we can continue to move toward continued growth and success for all renewable energy and energy efficiency technologies, and create a more sustainable and profitable world for our generation and those that will follow us.
Jeremy Gilpin serves as the NRLA Chairman of the Board, and the Executive Vice President of Greater Nevada Credit Union, and recognized for being the USDA Business and Industry Loan Guarantee Program Lender of the Year for 2016 and 2017.
Jordan Blanchard serves as the NRLA Energy Co-Chairman and General Manager, Renewable Energy Lending at Live Oak Bank.
Cindy Thyfault serves as the NRLA Energy Co-Chairman and Founder & CEO, Westar Trade Resources. She also serves as the Chairman of the Renewable Energy and Energy Efficiency Advisory Board for Secretary of Commerce Wilbur Ross.