1. Rural Development – Business Programs U.S. Department of Agriculture
USDA Funding Assistance for Rural Renewable Energy and Energy Efficiency: Section 9006
Rural Development – Business Programs
U.S. Department of Agriculture
The Farm Security and Rural Investment Act of 2002 (the Farm Bill) created a number of programs for rural America including a direct and guaranteed loan and grant program to help fund renewable energy systems and energy efficiency improvement projects in rural America.
This program, created in Section 9006 of the Farm Bill, is a 5-year program to help farmers, ranchers and rural small businesses purchase renewable energy systems and make energy efficiency improvements.

2. What is the Section 9006 Program?
A program designed to assist farmers and rural small businesses with energy projects.
This program provides grants and guaranteed loans for renewable energy systems and energy efficiency improvement projects.
The Farm Bill established the Renewable Energy Systems and Energy Efficiency Improvements Program under Title IX, Section This section directs the Secretary of Agriculture to make loans, loan guarantees, and grants to farmers, ranchers and rural small businesses to purchase renewable energy systems and make energy efficiency improvements. Congress provided $23 million to fund the program in each of fiscal years 2003 and 2004.
The Secretary of Agriculture delegated the responsibility for this program to the Rural Business-Cooperative Service within the Rural Development Mission area of U.S. Department of Agriculture.
The USDA anticipates that this program will help farmers, ranchers and rural small businesses reduce energy costs and consumption and help the nation meet its energy needs. The program will also help support and stimulate rural economic development by helping agricultural producers and rural small businesses create new sources of income, to create new jobs, and to create new uses for agricultural products and wastes.
The USDA is in the process of developing policies and procedures to outline how this program will operate. The first year of the program was 2003, and since policies and procedures had not yet been developed, the program was implemented through a Notice of Funds Availability. A total of $21.7 million in grants was awarded to 114 agricultural producers and rural small businesses in 24 states.

3. Farm Bill Definitions Renewable Energy – energy derived from:
wind, solar, biomass, or geothermal source, or
hydrogen derived from biomass or water using one of the above energy sources
Energy Efficiency Improvement. Improvements to a facility, building, or process that reduces energy consumption, or reduces energy consumed per square foot.
The Energy Title of the Farm Bill includes a few important definitions – what is renewable energy and what is meant by the term “biomass.” According to the law,
Renewable Energy – energy derived from:
wind, solar, biomass, or geothermal source, or
hydrogen derived from biomass or water using one of the above energy sources
Biomass -- any organic material that is available on a renewable or recurring basis. Includes:
agricultural crops
trees grown for energy production
wood waste and wood residues
plants (including aquatic plants and grasses)
residues
fibers
animal wastes and other waste materials, and
fats, oils and greases (including those that are recycled).
The term “biomass” does not include paper that is commonly recycled or unsegregated solid waste.

4. Who is Eligible?
Rural small businesses and agricultural producers can apply
The regulation includes the following definitions:*
Rural – Any area other than a city or town with population over 50,000. Cannot be in urbanized area adjacent to such a city or town.
Agricultural Producer - An individual or entity directly engaged in the production of agricultural products (including farming or ranching) that gets 50% + of their gross income from the operations
Small Business - A private entity including a sole proprietorship, partnership, corporation, cooperative (including most Rural Electric Cooperatives), and certain other electric utilities.
Must meet SBA size standards for small business
Non-profits excluded
Pursuant to the Farm Bill, eligible applicants include farmers, ranchers and rural small businesses. To be eligible for grants, applicant must demonstrate financial need as determined by USDA. The definitions of these terms for the year 2004 and beyond will be determined later this year. As an example, the USDA used the following definitions and conditions for grants in 2003:
Rural area- any area other than a city or town that has a population greater than 50,000 and the urbanized area contiguous and adjacent to such a city or town.
Agricultural producer - An individual or entity directly engaged in the production of agricultural products, including crops (including farming); livestock (including ranching); forestry products; hydroponics; nursery stock; or aquaculture, whereby 50 percent or greater of their gross income is derived from the operations.
   Small business – A private entity including a sole proprietorship, partnership, corporation, and a cooperative (including a cooperative qualified under section 501(c)(12) of the Internal Revenue Code) provided the entity has 500 or fewer employees and $20 million or less in total annual receipts including all parent, affiliate, or subsidiary entities at other locations. Entities cannot have been formed solely for a charitable purpose and they must meet the Small Business Administration’s Small Business Size Standards.
  Demonstrated financial need -- the applicant must demonstrate that it is unable to finance the project from its own resources or other funding sources without grant assistance.
In addition, grant recipients in 2003 had to be the owner of the system and control the operation of the proposed project. If grant recipients sell the project to a buyer that is not eligible under the above definitions, the Government may recapture a prorated portion of the grant funds for up to 20 years.
* Actual definitions available in the Regulation

5. Who is Eligible? Other requirements for eligible applicants:
Must demonstrate financial need (grants only)
If individuals, must be U.S. citizens or legal permanent residents of the U.S.
If an entity, must be at least 51 percent owned by individuals who are either U.S. citizens or legal permanent residents of the U.S.

6. What Projects are Eligible?
Requirements for eligible projects:
- Must be located in a rural area
- Must be for a pre-commercial or commercially
available and replicable technology
- Must be technically feasible (technical report
and/or energy audit)
- For Energy Efficiency Projects must
demonstrate projected energy savings
Eligible renewable energy projects include systems that generate energy from wind, solar, biomass, or geothermal source or that produce hydrogen derived from biomass or water using a renewable energy source. Renewable energy projects can include the generation of electricity, heat, fuels, or hydrogen. Energy efficiency improvement projects are also eligible. Energy efficiency projects typically involve installing or upgrading equipment that results in a significant reduction in energy use from current operations.
Grant requests must not exceed 25% of the eligible project costs, and the combined total of grant and loan (made or guaranteed) cannot exceed 50% of a project’s costs.
Eligibility requirements for the future will be determined in a regulation to be published later this year. As an example, the USDA used the following definitions and conditions for grants in 2003:
·      - Projects had to be located in a rural area.
- Residential uses were not eligible.
- There was no upper limit on project size, but the maximum grant size for energy efficiency projects was $250,000 and the maximum grant for renewable energy projects was $500,000. Grant requests had to be for at least $10,000 per application.
·     - Grant funds could only be used for commercial or pre-commercial technology. They could not be used for research, development, land acquisition, or crop production.
·     - Funds could be used for the following as a part of an eligible project: purchase and installation of equipment; construction or improvements; energy audits; permit fees; professional service fees; feasibility studies; business plans, and retrofitting.

7. Eligible Project Costs for Grants
Post application purchase and installation of equipment (new, refurbished or remanufactured) except agricultural tillage equipment, used equipment and vehicles.
Post application construction or project improvements, except residential
Energy audits or assessments
Permit and license fees
Professional service fees except for application preparation
Feasibility studies and technical reports
Business Plans
Retrofitting

8. What Costs are NOT Eligible
Residential improvements
Energy efficiency improvements related to new construction
Agricultural tillage equipment
Vehicles

9. Grant Limitations Grants request must not exceed 25% of project costs
Minimum grant request: $2,500 for RE, $1,500 for EE
Renewable Energy:
Maximum grant request: $500,000
Energy Efficiency
Maximum grant request: $250,000
If total eligible project costs are over $50,000, an energy audit must be conducted by or reviewed and certified by an energy auditor.
If total project costs are $50,000 or less an energy assessment or energy audit may be conducted by either an energy assessor or energy auditor.
The applicant must be the owner of the project and control the operation and maintenance of the proposed project.

10. Guaranteed Loans
On a guaranteed loan the lender is the applicant seeking a guarantee on a loan to an agricultural producer or rural small business
Guaranteed loan request must not exceed 50% of total eligible project costs
Minimum guaranteed loan request: $5,000 for RE and EE
Maximum guaranteed loan request: $10,000,000 for RE and EE
Maximum percentage of guarantee:
85% if = or < $600,000
80% if > $600,000 & = or < $5 million
70% if > $5 million & = or < $10 million
Eligible project costs are the same as those listed for a grant with the addition of working capital and land acquisition

11. Example of Potential Projects
Energy improvements to poultry houses. (heating systems, new insulated curtains, drop ceilings, lighting etc. . .)
Heat mats for sow operations to replace heat lamps.
Solar powered water heaters and solar powered watering system.
Wood Fired Boilers to heat greenhouses or cure tobacco
Small Businesses – heating systems, awnings, more efficient lighting.

20. Items Needed to Start A Simplified Application
Contact Rural Development office to discuss project.
Front page & schedule F of preceding year tax return (for farmers) to determine 50% of income is from farming. Also include schedule C if applicable.
Tax return or FYE statements for rural small businesses to determine total annual receipts for the business. May also need documentation of number of employees if this determines small business designation
Organizational documents: Articles of Incorporation, Operating Agreement, Partnership Agreement, etc.
Evidence of 75% matching funds: Letter from lender, copy of account statement showing matching funds, etc.

21. Items Needed to Start a Simplified Application
Evidence that proposed renewable energy system or energy efficiency improvements are commercially available. Warranty information on RE Systems or EE Improvements (brochures or spec. sheets can normally provide this information)
Evidence of ownership of project: deed, tax card, bill of sale, etc.
Bids on project
Technical report will be needed. Recommend starting application with above to see if eligible before completing technical report but technical report is needed for complete application.
This is a general list. Other documents may be required depending on the application.

22. Application Process Cont . . .
Once the information is assembled our office will help applicant complete forms and application.
We will help coordinate getting an Energy Assessment or Energy Audit, but this is ultimately the applicant’s responsibility.
Completed application submitted to National Office for funding consideration.

23. For More Information Contact your local Rural Development Office:
Asheville: Henderson:
Jefferson: Williamston:
Lumberton: Smithfield:
Albemarle: Kinston:
Shelby: Sanford:
Additional Contacts:
Rossie Bullock, Program Specialist, phone: ext. 4
Steve Byrd, Program Director, phone
Information on eligibility and program details
Assistance with filling out applications
Advance action on environmental reviews for projects of concern
Helpful websites: