Officials expect USDA blender pump financing to be successful

By Kris Bevill | June 10, 2011

The USDA’s June 15 application deadline for blender pump funding via the Rural Energy for America Program is fast approaching and state energy coordinators say they have been busy fielding calls and assisting with applications.

REAP is a well-known rural development program, but this is the first year that it has been used to provide an incentive for the installation of blender pumps. The USDA began accepting applications for grants and loan guarantees to be used to aid in the installation of blender pump systems on April 15, giving potential applicants just two months to complete the process. Given the short timeframe, the USDA launched an aggressive informational campaign in late April-early May to spread the word about the newly available funding to as many retailers as possible. Its efforts appear so far to have been more successful in some places than others.

David Kramer, Kansas USDA rural development energy coordinator, said area offices in his state have received a lot of interest from retailers, but added that the lateness of the funding announcement combined with the fact that this is the first time such funding has been open for  blender pumps has made it hard to raise awareness. “It definitely has the potential of being successful,” he said. “I think it will be, but until we get through at least one funding cycle, it’s hard to make that call.” Kansas was allocated just over $1 million to provide loan guarantees and grants. Kramer said it’s possible his state will disperse all of those funds and could even dip back into the national pool for more if necessary.

That might also be the case in North Dakota, where agency representatives said they fully expect to use the approximately $500,000 they have been allocated for blender pump assistance. “There has been strong interest from retailers to install blender pumps and offer more fuel options to their customers,” said Jasper Schneider, state director of the North Dakota USDA rural development office. His office has been active in engaging with retailers in the state to let them know about the funding opportunity, he said, adding that while they can’t yet predict what number of applications will be received by the deadline, they expect the offering to be a success.

In Minnesota, the response from retailers does not appear to be quite as warm. Lisa Noty, business and cooperative specialist with the state’s USDA rural development office, said her office is currently working with five potential applicants, but none had filed applications as of June 9. “Like anything new, it takes some time for potential applicants to become aware of this opportunity,” she said. “We have done a lot of outreach in making sure that retailers know the program exists. We would like to see more interest and we think that will come as retailers contemplate projects in the future.” Some retailers have expressed concern over the level of support being offered through the program, she said. While loan guarantees are available to cover up to 75 percent of the project costs, grants received through REAP may be used for only up to 25 percent of the project costs. “From our limited discussions it appears it may take more than 25 percent to motivate installations or conversions to blended fuels,” she said.

All three of the state agency representatives said they believe the USDA’s decision to provide funding for blender pumps is positive and will only become more successful in the future. It is unlikely that other funding opportunities like this will be provided by the USDA this fiscal year, but Kramer said every indication is that the agency will continue to allow blender pump projects to qualify for REAP next year. Interested parties who have not yet filed their applications can still do so and should be able to meet the deadline, provided they have begun the process of obtaining bids and other necessary items. “The application process in itself is not real difficult, but obtaining some of the information that you would need for that kind of a development needs some forethought,” he said.

Approved projects can expect to receive their financial awards by the end of the USDA’s fiscal year in mid-September.