Bioenergy Program Amendments Frequently Asked Questions

The release of Alberta’s Nine-Point Bioenergy Plan in October 2006, which included $239 million in program funding, established huge interest and initial bioenergy investment. The programs have already funded over 65 projects, including: processing plants of various scales, technology scale-up demonstrations, market development projects, feasibility/business plan development and infrastructure projects.

The departments of Energy, Agriculture and Rural Development, Sustainable Resource Development, Advanced Education and Technology, Finance and Environment and Water continue to work with the private sector in order to facilitate a bioenergy industry.

The current investment climate has changed markedly in the past two years. Amendments to the bioenergy programs were required to ensure that Alberta capitalizes on the value-added and environmental bioenergy opportunities.

Program amendments include:

• extension of the application deadlines for the Biorefining Commercialization and Market Development Program (BCMDP) and the Bioenergy Infrastructure Development Program (BIDP) from March 31, 2009 to March 31, 2011;
• amending the eligibility amounts; and
• increasing requirements for environmental reporting.

These programs will continue to operate within the budgeted $239 million approved in 2006. 
The amended deadline of March 31, 2011 refers to the deadline for application; project deliverables can extend past 2011. The applications will be reviewed on an ongoing basis.

 

Phase 1
The original programs—the Biorefining Commercialization and Market Development Program (BCMDP) and the Bioenergy Infrastructure Development Program (BIDP)—will be business as usual for projects that are in the initial stages of development. The proportions covered for hard and soft costs will remain as they currently are, with the only change being the extension of the application deadline to March 31, 2011. The programs will continue with the combined cap of $5 million per project and will be referred to as “Phase 1.”

Phase 2
The bioenergy programs have been amended to allow companies to potentially access additional funding above the Phase 1 cap of $5 million. As the amounts awarded will potentially be very high, the eligibility requirements to qualify will also be stricter. Phase 2 is intended and designed for companies and projects that are well-established, have strong financial backing and are at the construction stage.

For ease of administration, all applications for Phase 2 will be under one program, the BCMDP. Both hard costs and soft costs will be eligible: 20 per cent covered for hard costs, 50 per cent covered for soft costs up to the maximum eligibility amount that the company/project has been awarded. 
 
The chart above illustrates the maximum funding levels under the revised Phase 1 and Phase 2 BCMDP schedule, based on industry project investment amounts.

 

The revised eligibility chart was derived to:

• provide a high enough incentive to be effective in assisting projects that are currently stalled and incent new companies to invest in Alberta;
• fully utilize the $239 million that was allocated in 2006; and
• maximize the bioenergy programs’ value-added opportunities and benefits to Alberta. A linear pay-out schedule at 20 per cent is likely to benefit only a small number of projects, before consuming the monies remaining in the $239 million fund.

Approximate maximum eligibility can be determined from the chart included in the answer to the question above and the following table:

Project Total	Maximum Eligibility (including Phase 1 and Phase 2 combined)
$1,000,000	$500,000
$10,000,000	$2,700,000
$50,000,000	$10,500,000
$100,000,000	$15,000,000
$300,000,000	$24,000,000

Any funds already received under Phase 1 must to be subtracted from the maximum eligibility to determine the additional funds for which a project may qualify.

 

The "maximum eligibility" formula is the summation of the following:
50% for $0-$1 million; 25% for $1-$20 million; 20% for $20-$40 million; 15% for $40-$60 million; 10% for $60-$80 million; 5% for $80-$200 million; 2.5% for > $200 million

Example:  maximum eligibility if project’s costs total $116 million (M):
= (0.50*$1M)+(0.25*$19M)+(0.20*$20M)+(0.15*$20M)+(0.10*$20M)+(0.05*$36M)=$16,050,000

 

Yes. The application for Phase 2 revisits the Phase 1 project application and also requires an update on the project. As well, Phase 2 requires additional information to prove that the project/company is developed enough to qualify for additional government dollars.

 

Typically, companies will be encouraged to apply for funding under the Phase 1 programs to make sure that the feasibility work is in place, the business plan is completed and all of the necessary background work has been finished.

However, if a company has fulfilled all of the requirements for Phase 2 (see below), they can submit both Phase 1 and Phase 2 applications. (The Phase 1 application requires information that is not part of the Phase 2 application.)

 

The applicant must have completed the following, and must attach proof/documentation for each:

• a comprehensive feasibility study and business plan;
• project team in place (for example: technology engineer, financial expertise, project management);
• technology license purchased;
• the land on which the site is to be located must be purchased, and site permitting for development obtained. If industrial and electrical generating permits have not yet been obtained, documentation must be shown to indicate the timing of receiving each of these approvals;
• all relevant environmental approvals obtained;
• engineer sign-off that the project is at Class 2 Estimate (or higher) as defined by the Association for Advancement of Cost Engineering (AACE). (See Appendix 2)
• life cycle analysis (LCA) completed (see more details below); and
• project financing in place. (Example in Appendix 1) The projects approved will require strong fundamentals and will need to include:
  • description of amounts/proportions of funding from each source;
  • termsheets, commitment letters from banks and potential investors; and
  • proof of applications and approvals from other funding agencies.

The review committee has discretion on what constitutes adequate funding, as each project is unique. Please note that we retain the right to seek guidance from Agriculture Financial Services Corporation or other financial institutions (keeping project details confidential to accordance with the Freedom of Information and Protection of Privacy Act).

 

We understand it is important for financial institutions to have the security of a contract from the government, with a commitment of funds. If a project is otherwise eligible, with the exception of the funding in place, we will work with companies to provide a letter of intent, indicating that the project/company would be eligible for funds within a certain timeframe. This can be given to the bank as an indication of commitment from the program. However, the timeline will be limited on the letter of intent. If a company cannot secure their funds through the bank with the letter of intent, the funds need to be available to fund other companies’ projects. (Example in Appendix 1) 

With the exception of assisting companies in securing their financing by providing a letter of intent (detailed above), companies must have all of the eligibility requirements met in order to qualify for Phase 2. A project that is in the preliminary project stages can reapply for additional funds (up to the $5 million cap) until they are eligible for Phase 2 funding. It is acceptable for a company to reapply under either program.

 

Costs are eligible from the time of application of Phase 1, as long as the costs incurred are directly related to the project scope as detailed in that application. Any costs that deviate from the initial scope in Phase 1 must be incurred after the application to Phase 2 in order to be eligible under the programs.

 

A review committee (representatives from the departments of Agriculture and Rural Development, Energy, Advanced Education and Technology, and Sustainable Resource Development) reviews each application. The committee’s recommendations are sent to the Minister of Energy for review and final approval.

 

The $5 million cap in Phase 1 and the maximum eligibility under Phase 2 is administered to each project, not each company. Therefore, one entity is eligible to make multiple applications, and can potentially receive the maximum funding amount for each project.

 

The bioenergy programs do not pay any additional monies for demonstrating adherence to other government objectives. You may want to investigate further, to see if your project aligns with other programs that may have funding opportunities.

 

The Government of Alberta is committed to developing its resources in an environmentally sustainable manner. As such, the bioenergy program applicants have been asked to provide additional information on the environmental benefit of their program to the public. The increased environmental reporting will be required for all projects, and will involve quantifying indicators such as the carbon benefits from each project. The quantification of the carbon benefit is similar to that of the biofuels protocols used to calculate a project’s carbon offsets or performance credits.

 

If your company has applied to Phase 1 already, please contact your Industry Development Officer.