These standards have less meaning with the production of a new crop type, and thus create uncertainty and potential for conflict between tenants, landlords, and end-users seeking control over the production process. Landowners may want to ensure the crops or the producers’ cultural practices will not cause long term harm to the land, creating another moral hazard problem and requiring landowners to increase control or monitor producer behavior. One possible solution could be the establishment of bonding requirements for remediation, similar to those imposed on biomass plantings in Florida larger than two acres. Bonding provisions could be incorporated into both the rental lease and the biomass production contract.If producers, in spite of these concerns, are able to secure leases for an extended length of time, they remain highly exposed to termination or default by the landlord; if the landlord defaults, the producer remains bound to a biomass production contract without sufficient land upon which to grow the crops. On the other hand, if a producer desires to exit the biomass industry, or becomes unable to continue production for any reason, he faces the risk of being locked into an undesirable long term lease. Likewise, landowners, due to high asset specificity and the nascent character of the bio-energy industry, face a relatively higher risk of default by both tenants and end-users. The issues discussed above illustrate the importance of specifically considering land tenure within the biomass supply contract and linking the provisions to specially tailored farmland leases for biomass production. Moreover, biomass supply contract duration should align with crop life cycles, which should align with land lease terms.Access to land, 4×8 flood tray while the most important consideration in negotiating biomass supply contracts, is not the only issue warranting attention.
Control of germplasm, whether conventionally bred or through advanced genetic engineering technologies, is an essential element of intellectual property rights protection. Contractual agreements embedded within intellectual property licenses can impose restrictions on the grower. Many of these restrictions currently used in the agrobiotech industry go far beyond mere protection of intellectual property rights and dictate specific agronomic practices of the farmer. The use of germplasm contracts could be structured to specify inputs , farming and harvesting practices , post-harvest disposition , and post-contract actions . From the producer’s perspective, growers may wish to expand their own production by harvesting rhizomes from their fields. This practice especially is likely in the early stages of industry maturity when rhizomes or specialized seeds may be hard to procure. Biomass supply contracts, therefore, should specifically address intellectual property rights in germplasm and ensure compatibility with germplasm agreements. A second ancillary issue relates to the positive externalities derived from certain agronomic practices associated with perennial biomass cultivation. Planting Miscanthus or other bio-energy crops may control erosion, improve water quality, sequester carbon, and increase wildlife habitat. In the future, ecosystem service markets may reward these practices. Accordingly, the biomass supply contract and, if applicable, the farmland lease should specify which party may participate, and thus receive the benefits, in ecosystem service markets.The duration of the biomass production contract has serious consequences for producers, but will likely be driven from the end-user’s perspective. This is because end-users must secure a stable biomass supply for the duration of the investment cycle of the conversion facility, likely at least 20 years.
Offering contracts for less than the optimal investment cycle creates supply risk for the end-user and potential holdup issues. Longterm contracts are somewhat less critical for producers, as dedicated energy crops can be destroyed and the land returned to traditional cropping methods with comparatively lower cost. Nonetheless, in electing to produce perennial crops, producers also make long-term commitments by establishing a crop with a production cycle that could reach 15 years. Moreover, producers may wish to renew contracts, particularly if the life cycle of the established crop outlasts the initial contract term. To address these concerns, contract length should correspond with crop life-cycle to ensure producers can recover establishment costs and obtain adequate return on investment. Shorter durations, due to asset specificity, give rise to holdup risks. In situations in which the life-cycle of the crop outlasts the duration of the contract, the producer can reduce the risk of holdup by negotiating renewal options. As the end-user’s primary concern is securing a stable supply of biomass, incorporating assignment clauses in the initial agreement can provide a seamless escape hatch for farmers no longer interested in producing biomass as part of a long-term contract. Assignment clauses may minimize potential supply disruptions and serve as a “next best” strategy compared to attaching production contracts to land title. However, due to the vertically coordinated nature of the bio-energy industry, the extent to which individual producers may negotiate the contract provisions discussed in this section remains to be seen. Nonetheless, the authors recommend that end-users seeking a stable, long-term biomass supply chain at a low overall cost should consider the issues identified above, as biomass production agreements that incorporate the sociocompatibility perspective, along with risk- and cost minimization, are more likely to result in more secure supply chain relationships.
Incorporating a combination of the solutions detailed above into biomass production contracts will substantially address the costs, risks, and sociological concerns of producers and endusers. This should improve contract negotiation processes and improve supply chain stability. Moreover, as the biomass industry matures and follow-on issues arise, the proposed Biomass Contracting Framework can serve as an important point of departure in obtaining negotiated solutions. In addition to the framework described above, the development of sustainability standards tailored to the biomass industry, such as the Council on Sustainable Biomass Production 277 or Round table on Sustainable bio-fuels , can provide further support to improved biomass contract design. By focusing on long-term sustainability, these standards can use market forces to provide additional incentives for end-users to approach contractual relationships beyond the archetypal cost- and risk-minimization perspectives. For example, the RSB’s socioeconomic principle requires skill training that is culturally sensitive and respective of existing social structures. Although the intent of this provision is to apply within the context of impoverished regions, most likely in the developing world, the underlying sustainability benefits of cultural sensitivity in skills training certainly would hold true in domestic biomass contracts between end-users and producers. In the current climate of adhesion-type contracts presented by biomass end-users, producers could reference the internationally accepted RSB standards within their limited contract negotiations as support for professional development, formation of peer groups, and even feedback mechanisms, such as fieldmen services. Sustainability standards for environmental criteria, such as biomass residue removal, compaction, erosion, soil carbon maintenance, and restrictions on introduction of potentially invasive energy crops, also may have positive cross-over effects on biomass contract design. Incorporating environmentally-based sustainability standards into biomass contracts sends a signal to the producer of the perceived environmental credibility of the practice, and lessens producer concerns regarding land stewardship and conversion from familiar cropping systems. Moreover, many of the producer autonomy concerns and cultural risk management practices identified in the social compatibility discussion in Part I.A, find resonance within these environmental standards. On the other hand, unduly restrictive practices embedded in a sustainability standard could discourage producer acceptance, if these criteria sacrifice traditional agricultural risk management practices, such as pesticide application. Nonetheless, 4×4 flood tray the incorporation of sustainability standards within the biomass contract may provide a novel means to bring together divergent views of risk management, cost-minimization, and social compatibility to create a more stable, and ultimately profitable, biomass supply chain. In the future, end-users may be able to use contractual mechanisms to coordinate efforts within its “fuel shed” to achieve greater economic and environmental sustainability.Biomass crops in the United States are projected to yield 136 billion liters of biomass-derived liquid fuels by 2022 . The expectation is that this will require cultivation of between 54 and 150 million acres of bio-energy crops. Furthermore, state and federal greenhouse-gas reduction initiatives have incentivized widespread cultivation of bio-fuel crops. Of the crops under consideration, perennial nonfood grasses are the leading candidates. To be successful in this role, these bio-energy grasses will need to possess many agronomically desirable traits, including broad climatic tolerance, rapid growth rates, high yields, few natural enemies and resistance to periodic or seasonal soil moisture stress .
One of the leading candidates among bio-energy grasses is switch grass . Switch grass is a perennial warm-season bunch grass native to most of North America east of the Rocky Mountains, where it was historically a major component of the tall grass prairie. It was included in the initial screening for bio-fuel crops in the United States in the 1970s and was determined to be the model bio-energy species by the Department of Energy . This was primarily due to its broad adaptability and genetic variability . Over the past three decades, breeding efforts have developed several cultivars, many of which produce dense stands, tolerate infertile soils and readily regenerate from vegetative fragments . These cultivars are often separated into upland ecotypes and lowland ecotypes . Switch grass is not native to California and was, in fact, included for a brief time on the California Department of Food and Agriculture Noxious Weed List due to concerns about its potential invasiveness. Although there was one documented report of an escape of switch grass from cultivation in Orange County, California , there are no known records of its escaping elsewhere or causing any ecological or economic damage, despite its long-time use as a forage and conservation species . Since its removal from the CDFA Noxious Weed List, it has been the focus of yield trials throughout California . Because of the state’s Mediterranean climate, the yield potential is high; however, the crop will require significant water and nitrogen inputs.In an ideal system, bio-fuel crops should be cultivated in a highly managed agricultural setting similar to that of most major food crops, such that the crop could not survive outside of cultivation. Under such conditions, the likelihood of escape and invasion into other managed or natural systems would be very small. Unlike bio-fuel species, most food crops have been selected for high harvestable fruit or grain yield. This nearly always results in a loss of competitive ability, typically accompanied by an increase in the addition of nutrients and often pesticides. When a bio-fuel crop is grown for cellulose-based energy, the harvestable product is the entire above ground biomass. To be economically competitive, such perennial crops should be highly competitive with other plant species, harbor few pests and diseases, grow and establish rapidly, produce large annual yields and have a broad range of environmental tolerance, while also requiring few inputs per unit area of water, nutrients, pesticides and fossil fuels . Few species fit these requirements better than rhizomatous perennial grasses, primarily nonnative species . However, these qualities and traits are nearly identical to those found in harmful invasive species . For example, species such as johnsongrass Pers and kudzu were introduced as livestock forage or for horticultural use but have escaped cultivation to become serious weeds in many areas of the United States. In selecting bio-fuel crops, a balance must be struck between high productivity with minimal inputs, on the one hand, and risk of establishment and survival outside the cultivated environment on the other. Johnsongrass, like switch grass, was first cultivated as forage, but it subsequently escaped and has become one of the world’s most expensive weeds in terms of control costs . It is currently listed as a noxious weed in 19 U.S. states. When comparing switch grass to johnsongrass and to corn, a typical agronomic grass crop, it is clear that switch grass possesses many growth traits similar to those of weedy johnsongrass and only a few similar to those of corn . While this is not direct evidence that switch grass will be a significant invasive or weedy species, it does suggest that the risk may be greater than for more typical agronomic crops. Although cultivation of switch grass and other bio-fuel crop species may ultimately prove a net benefit to society, the environmental risks associated with their potential escape into natural and managed systems should be assessed before the crops are commercialized and introduced into new regions.