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Originally published by The New Lede

The US Department of Agriculture (USDA) extended its moratorium on loans for anaerobic digesters — many of which are issued for large-scale farms that turn animal waste into gas — through the end of 2026 due to “persistent and escalating concerns.”  

The directive this week extended an earlier pause announced in January that halted federal loan guarantees for new anaerobic digester projects due to high loan delinquency and project failures. 

That hold was due to expire on April 14, which would have allowed loan programs to resume.

The extension threatens to stall momentum for the industry. There are an estimated 394 manure-based digesters operating in the US, with more than 70 under construction, representing a 55% increase over the past decade. 

Anaerobic digesters use bacteria to break down large amounts of animal manure and turn it into “biogas,” which is a mix of mostly methane and carbon dioxide and can be refined into renewable natural gas (RNG) and used in some vehicles and as a natural gas substitute. The digesters can also break down other farm waste like food scraps and crop residues. 

Biogas advocates say such digesters are a climate-win, reducing methane emissions from manure generated at concentrated animal feeding operations (CAFOs) and spread on land as fertilizer.

But critics say such facilities are prone to leaks, incentivize adding more animals to already packed farming operations, and are too reliant on federal and state loans and subsidies. 

In this week’s directive, J.R. Claeys, administrator of the Rural Business Cooperative Service (RBCS), which manages the loan guarantees for such projects, said the decision to pause new loan guarantees was based on “continuing and significant risks identified during the initial review.” 

“Continuing to guarantee high risk projects … threatens the long-term stability of the program and its capacity to fulfill its mission,” he wrote. 

“Continuing to guarantee high risk projects … threatens the long-term stability of the program and its capacity to fulfill its mission.” – J.R. Claeys, USDA

In addition to anaerobic digesters, the pause includes loan programs for “controlled environment agriculture” such as vertical farming, hydroponics, aeroponics and aquaponics. 

Claeys wrote that the agency has found that lenders don’t have the underwriting expertise for this “volatile sector” and that high loan delinquency, “deteriorating cash flow and financial instability” are rampant among projects.

“Biodigesters have a 28% delinquency rate inside the portfolio,” he wrote. “This is on top of realized losses.”

The original USDA directive pausing loan guarantees cited $102.6 million in delinquent loans for anaerobic digesters but did not name the companies in delinquency.

The New Lede in February, however, analyzed the USDA’s Lender Lens portal and found four anaerobic digester loans in delinquency that total $102.6 million — with $100.1 million of the delinquent loans belonging to the Wisconsin biogas project called BC Organics, via two loans awarded in 2021 during the Biden administration. 

BC Organics is between 181 and 360 days delinquent on the loans, which were originally for more than $104 million combined. The only other USDA loans for anaerobic digester projects in delinquency are $891,179 for Dovetail Energy LLC in Ohio, and $696,492 for Ringler Energy LLC in Ohio, according to the portal. 

Patrick Serfass, executive director of the American Biogas Council, said “the more we learn about this issue, the more surprised we are that there’s a pause on projects in the first place.”

“Most biogas projects are operating successfully, and four projects with difficulties in no way reflect the broader performance of the industry,” he said. “The fact remains that anaerobic digestion is one of the most effective tools we have to deal with manure. It captures methane, reduces odors, and helps protect water quality—turning an environmental challenge into a solution.”

The pause extension was lauded by environmental groups who, prior to the original pause, petitioned the USDA to disqualify anaerobic digesters that turn animal waste into gas from the agency’s Rural Energy for America Program (REAP), alleging that such funding causes pollution and benefits large factory farms.

“Most biogas projects are operating successfully, and four projects with difficulties in no way reflect the broader performance of the industry.” – Patrick Serfass, American Biogas Council

The renewable energy grant program is designed to help farmers and rural communities pursue clean energy, energy independence and efficiency. 

“USDA’s latest extension of its pause on loan guarantees for manure digesters recognizes what the petitioners and others have made clear: manure digesters are a losing investment,” Kara Goad, senior associate attorney at Earthjustice, said in a statement. Earthjustice was one of more than 30 groups that sent the petition. 

“USDA should end its support for manure digesters and, in doing so, free up funds for projects that benefit small farms, rural communities, the environment, and taxpayers,” Goad added. 

The USDA will draft updated guidance and ways to mitigate risk before loan guarantees restart for anaerobic digester projects, according to Claeys’ directive.

“Our goal is to ensure stronger underwriting standards and reduce risk for both lenders and borrowers,” he wrote. 

Featured image: USDA Rural Development Rural Business & Cooperative Services administrator J.R. Claeys at a March event. (Credit: USDA)