Pellet Mill Magazine - May/June 2015

MAY/JUNE 2015

A Sound Source North America Best Place To Find Sustainable Fiber Page 12

Plus: Unique Challenges of

Pellet Production on West Coast Page 18

AND:

Streamlining Trade via Sustainable Biomass Partnership Page 22

www.biomassmagazine.com/pellets

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Contents »

Pellet Mill Magazine

Advertiser Index

MAY/JUNE 2015 | VOLUME 5 | ISSUE 3

14 Agra Industries 20 Andritz Feed & Biofuel A/S 28 Astec, Inc. 26 BBI Project Development 17 Bliss Industries, Inc. 24 BRUKS Rockwood 16 CPM Roskamp Champion 21 Evergreen Engineering 11 GreCon, Inc. 9 Industrial Bulk Lubricants 2 NSF International 4 International Biomass Conference & Expo 2016

FEATURES 12

27 Pellet Fuels Institute

The continued and rapid growth of the pellet industry hinges, in part, on the belief among private landowners that this new market will remain strong and unimpeded for years to come.

By Ron Kotrba

10 Pellets Forum 15 T & L Property Holding LLC 25 Vecoplan LLC

FORESTRY

This Land is My Land

18

8 West Salem Machinery Co.

WESTERN PELLET PRODUCTION

The West’s Quest

Circumstances vary across the country, but achieving profitability requires perfecting feedstock challenges and customer service.

By Katie Fletcher

22

CERTIFICATION

Answering the Question

The Sustainable Biomass Partnership is refining a certification scheme aimed at satisfying EU member nation regulators with very different notions of sustainability.

By Tim Portz

DEPARTMENTS 05 EDITOR’S NOTE

A Good But Difficult Story To Tell

By Tim Portz

06 FOREST ECONOMICS

Peer-Reviewed Science Reveals Markets Are Vital For Sustainability

By Robert Malmsheimer

07 ACTIVE ADVOCACY

National Bioenergy Day Great Opportunity To Showcase Mill

By Carrie Annand

ON THE COVER

NEXT GENERATION: These containerized seedlings at Plum Creek's Pearl River and River Bend Nursery are part of an impressive replanting infrastructure that produces nearly 125 million seedlings each year.

08 BUSINESS BRIEFS 10 NEWS 26 MARKETPLACE

PHOTO: TIM PORTZ, BBI INTERNATIONAL

MAY/JUNE 2015 | PELLET MILL MAGAZINE 3

Editor’s Note » Editorial

A Good But Difficult Story To Tell One of the last items our team works on for every issue of Pellet Mill Magazine is the cover. Recognizing that the cover is the first content our readers will consume in each issue, we work hard to arrive at a combination of imagery and copy that both invite our readers in and inform them about what they’ll find inside. This month’s cover is an image Tim Portz I really like―I took it early last summer VICE PRESIDENT OF CONTENT & while on a forestry tour in Mississippi.

EXECUTIVE EDITOR The image of containerized yellow pines tportz@bbiinternational.com at one of Plum Creek’s larger nurseries is emblematic of the cyclical nature of modern forestry; it carries a message of new beginnings, continuation and regrowth. For me, however, an image we didn’t choose carries the real message of the issue and our reason for not using it highlight perfectly the challenge of educating the general public about our industry.

While on the same forestry tour, I visited and photographed forest tracts of varying ages, including a 16-year old tract that was in the midst of its first commercial thinning. While visiting this particular track, I took a photograph of a stump shot against a background of trees left standing.

In so many ways, this image was perfect for our cover. Still, we just weren’t comfortable using it. Pictures certainly are worth a thousand words, but no one has really talked about the accuracy of those words. Over the past 18 months I’ve been paying close attention to how images are used to stoke a particular emotional reaction in the ongoing debate about woody biomass.

Those most stridently opposed to the growth of this industry have arrived at the image of a stump as their go-to icon. Recognizing that, we chose a different image.

The bottom line, however, is that diverse and stable demand for wood fiber is vital to maintaining this country’s forest acreage. This month’s issue of Pellet Mill Magazine examines this story from two different perspectives, and I recommend reading them together. Ron Kotrba’s page-12 feature, “This Land is My Land,” and my page-22 feature, “Answering the Question,” examine the ongoing effort to find a way to effectively tell the sustainable story of North American forestry to a public currently bombarded with misinformation, often fueled by imagery taken out of context.

PRESIDENT & EDITOR IN CHIEF Tom Bryan tbryan@bbiinternational.com VICE PRESIDENT OF CONTENT & EXECUTIVE EDITOR Tim Portz tportz@bbiinternational.com SENIOR EDITOR Ron Kotrba rkotrba@bbiinternational.com CONTRIBUTING EDITOR Anna Simet asimet@bbiinternational.com NEWS EDITOR Erin Vogele evoegele@bbiinternational.com COPY EDITOR Jan Tellmann jtellmann@bbiinternational.com STAFF WRITER Katie Fletcher kfletcher@bbiinternational.com

Art

ART DIRECTOR Jaci Satterlund jsatterlund@bbiinternational.com GRAPHIC DESIGNER Lindsey Noble lnoble@bbiinternational.com

Publishing & Sales

CHAIRMAN Mike Bryan mbryan@bbiinternational.com CEO Joe Bryan jbryan@bbiinternational.com VICE PRESIDENT OF OPERATIONS Matthew Spoor mspoor@bbiinternational.com SALES & MARKETING DIRECTOR John Nelson jnelson@bbiinternational.com BUSINESS DEVELOPMENT DIRECTOR Howard Brockhouse hbrockhouse@bbiinternational.com SENIOR ACCOUNT MANAGER Chip Shereck cshereck@bbiinternational.com ACCOUNT MANAGER Jeff Hogan jhogan@bbiinternational.com ACCOUNT MANAGER Tami Pearson tpearson@bbiinternational.com CIRCULATION MANAGER Jessica Beaudry jbeaudry@bbiinternational.com MARKETING & TRAFFIC COORDINATOR Marla DeFoe mdefoe@bbiinternational.com Subscriptions to Pellet Mill Magazine are free of charge—distributed quarterly— to Biomass Magazine subscribers.To subscribe, visit www.BiomassMagazine. com or you can send your mailing address to Pellet Mill Magazine Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. You can also fax a subscription form to 701-746-5367. Back Issues & Reprints Select back issues are available for $3.95 each, plus shipping. Article reprints are also available for a fee. For more information, contact us at 866-746-8385 or service@bbiinternational.com. Advertising Pellet Mill Magazine provides a specific topic delivered to a highly targeted audience. We are committed to editorial excellence and highquality print production. To find out more about Pellet Mill Magazine advertising opportunities, please contact us at 866-746-8385 or service@bbiinternational. com. Letters to the Editor We welcome letters to the editor. Send to Pellet Mill Magazine Letters to the Editor, 308 2nd Ave. N., Suite 304, Grand Forks, ND 58203 or email to asimet@bbiinternational.com. Please include your name, address and phone number. Letters may be edited for clarity and/or space.

Please recycle this magazine and remove inserts or samples before recycling TM

4 PELLET MILL MAGAZINE | MAY/JUNE 2015

COPYRIGHT © 2015 by BBI International

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« Forest Economics

Peer-Reviewed Science Reveals Markets are Vital for Sustainability

BY ROBERT MALMSHEIMER

The role of markets is sometimes ignored in forest sustainability analyses. Yet, the peer-reviewed scientific literature clearly demonstrates that in the United States increased demand for wood products, including wood used for bioenergy, results in increases in the amount of forestland, improvements in forest productivity, and investments in sustainable forest management, all of which can offset carbon impacts associated with increased harvesting. As my co-authors and I described in the November issue of the Journal of Forestry, evidence supporting this is based on observations, as well as empirical and modeling studies.

For example, since the early 1900s, demand for wood and paper products increased significantly. Yet during this time, the forested area of the U.S. remained stable. Additionally, U.S. forests have been carbon sinks since the 1950s, absorbing more carbon than they have emitted. Yet, this increase in carbon stocks occurred during a time when the demand for industrial roundwood greatly increased.

Empirical studies also document the importance of wood markets for retaining forested lands. Land constantly moves into and out of forest cover. Changes in net economic returns to landowners for different land uses result in more or less land in forest. For example, a study of factors affecting land use in the U.S. South found that the percentage of forest land was positively associated with increases in pine stumpage prices and negatively associated with increases in timber production costs.

The loss of forests in the U.S. is caused primarily by urbanization and development, not demand for wood. In fact increased demand for wood can thwart many of the pressures to convert land to other uses. As USDA Forest Service modeling of a range of scenarios for future forests revealed, the U.S. South is predicted to lose between 11 million and 23 million acres of forestland between 2010 and 2060, with the range of those losses based primarily on two factors: the rate of population growth and the future of U.S. forest products markets.

Importantly, these researchers found that the smallest decrease in forested lands was projected to occur when population growth was low and forest products markets were strong. Additionally, a December 2014 Forest Service technical report that examined the effect of policies on pellet production in the U.S. Coastal South found that under a demand scenario where wood pellet demand continues to increase, the amount

6 PELLET MILL MAGAZINE | MAY/JUNE 2015

of timberland (as well as harvesting and logging residue use for pellets) would continue to increase.

Strong markets increase the amount of forestlands, forest productivity, and investments in sustainable forestry because landowners respond to markets and price signals. For example, landowners with marginal croplands are more likely to convert those lands to forests when forest markets are strong. Strong markets can provide landowners whose lands are prime for development with income that allows them to resist development pressures. While forest product markets dictate that this income will be based primarily on sawtimber prices―because where robust forest products markets exist, sawtimber commands significantly higher prices than pulpwood or wood used for bioenergy―markets for bioenergy products can provide additional income that allows landowners to offset some of the costs of ownership, such as taxes and insurance.

Ultimately, the message from the peer-reviewed research is simple. It is impossible to understand the impacts of using wood for energy, or any other purpose, without understanding how landowners respond to changes in demand for wood.

This led the IPCC to conclude, “rather than leading to widescale loss of forestlands, growing markets for tree products can provide incentives for maintaining or increasing forest [carbon] stocks and land cover, and improving forest health through management.”

Markets for wood products, including bioenergy, are affected by polices that encourage or constrain market participation. Therefore, my co-authors and I conclude in our article that “policies that provide incentives for landowners to expand forest area, make forests more productive, and store more carbon could have important carbon benefits. On the other hand, policies that increase transaction costs to landowners or devalue forest biomass could have negative carbon consequences, by reducing incentives for investments in working forests, reducing biomass supplies, limiting afforestation activities, and leading to increased conversion of forests to other land uses.

The potential for landowner response to disincentives could be especially important in the case of materials collected for energy due to their low value.”

Author: Robert Malmsheimer Professor, Forest Policy and Law, SUNY College of Environmental Science and Forestry rwmalmsh@esf.edu

Industrial Insight »

National Bioenergy Day Great Opportunity To Showcase Mill

BY CARRIE ANNAND

Oct. 21 will be the third annual National Bioenergy Day. On this day, organizations all over the country―businesses, nonprofits, universities, and state and local governments―will showcase the many ways they benefit from bioenergy, an energy resource that needs increased understanding and public awareness.

National Bioenergy Day helps all involved in bioenergy educate their communities on the need to support energy―power, heating, cooling and fuels― from organic materials. Because our sector is diverse and serves many different roles, it is sometimes overlooked during discussions about renewable energy and forestry. Starting on the local level, we want to build broader understanding and support for bioenergy and its jobs, carbon reduction, and contributions to the forestry market.

Led by Biomass Power Association in partnership with U.S. Forest Service and with generous support from Pellet Fuels Institute and Biomass Thermal Energy Council, National Bioenergy Day facilitates interaction between bioenergy projects and their local communities, raising awareness of the economic and environmental benefits of bioenergy. We highly encourage participants to collaborate with other local bioenergy groups and supporters to showcase the full offerings of bioenergy in the community.

Participation may come in many forms―conducting facility tours to hosting local school groups for career days, to simply promoting the event through social media and signs. National Bioenergy Day events are scalable to meet the needs of your organization and stakeholders.

This year, National Bioenergy Day will highlight the many economic benefits of bioenergy, focusing on creating local jobs and supporting a highly skilled workforce. The tens of thousands of men and women who work in the forestry, agriculture, biomass, wood pellet, lumber, energy or similar sectors, and those interested in pursuing jobs in these fields, will be showcased whenever possible.

In its first two years, National Bioenergy Day participants earned dozens of media headlines and widespread recognition from across all levels of government. From the first year to the second year, National Bioenergy Day doubled in size, with 50 events held in 23 states in 2014. We expect even more growth in 2015.

We hope to grow participation from the pellet sector this year. Please visit www.bioenergyday.org to read news about last year’s events. You can also download our 2015 Participation Guide to help you brainstorm ways to mark the day. Our regular planning calls will provide you with extra support and help you connect with other local participants.

If you have interest in participating but have questions, please do not hesitate to reach out.

Author: Carrie Annand Vice President, External Affairs Biomass Power Association 703-506-3391 carrie@usabiomass.org

MAY/JUNE 2015 | PELLET MILL MAGAZINE 7

Business Briefs

PEOPLE, PRODUCTS & PARTNERSHIPS

Javo International introduces toploader to biomass market Javo International has introduced its patented toploader for biomass use in North America. The toploader provides a robotic solution for bulk storage and distribution of biomass materials. The toploader has been in use for biomass energy production in Europe for nearly a decade, can move up to 60 cubic meters per hour, and has virtually unlimited bunker capacity.

UGA professors recognized The Southeastern Society of American Foresters has recognized two University of Georgia professors for their service to forestry education and research. David Dickens Dickens was awarded the public education/ technology transfer award while Michael Kane received the research and development award. Both Dickens and Kane are professors in UGA’s Kane Warnell School of Forstry and Natural Resources.

Fecon announces expansion Fecon Inc. has purchased 9.25 acres of land a 40,000-square-foot building. The addition will complement the company’s 111,000-square-foot facility. In addition to providing more room for engineering and tractor production, the new building will also offer an expansive research and development department.

Viridis secures contract Viridis Energy Inc. has announced its wholly owned subsidiary Viridis Merchants Inc. has secured a contract with an existing supplier for exclusive distribution of up to 18,000 metric tons of 100 percent Douglas fir pellets. The contract value is more than CA$6 million during this year.

8 PELLET MILL MAGAZINE | MAY/JUNE 2015

WPAC appoints Rebiere to leadership posts The Wood Pellet Association of Canada has appointed Michele Rebiere as president and director following Rebiere the resignation of Brad Bennett. Rene Landry will serve as vice president and director, while Wayne Young will serve as director. Rebiere is chief financial officer of Viridis Enegy Inc., where she began in 2009.

Since joining Viridis, Rebiere has been an active industry advocate and a member of the board of directors and vice president of the WPAC for the past five years. Landry joined Shaw Resources in May 2014 and currently serves as operations manager. Young has served as president of Pacific BioEnergy since 2009. WPAC’s other board members include Vaughan Bassett of Pinnacle Renewable Energy Inc., Narda Brink of Control Union Canada, Jenna MacDonald of Belledune Port Authority, and Ken St. Gelais of Granules LG Inc. UK GIB adds CFO, nonexecutive director The U.K. Green Investment Bank has appointed Peter Knott as chief financial officer and Laurence Knott Mulliez as a new nonexecutive director. Knott previously served as chief risk officer at GIB. He will join Chief Executive Shaun Kingsbury as the only other executive director on GIB’s Mulliez independent board.

GIB is recruiting for a new chief risk officer. Mulliez has executive experience in renewable energy. She will also sit on GIB’s investment committee.

Canada Renewable Bioenergy appoints executive Canada Renewable Bioenergy Corp. has appointed Denis Pelletier as chief operating officer, replacing Robert Mukasa. Pelletier has been engaged by the company since March 2014 as a consultant through Fortec Consulting Inc., where he was involved in various aspects of forest operation management and permitting for companies as well as developing a pellet and biomass manufacturing facility for the company in northwest British Columbia.

Drax recognized with award Drax has received a Green Innovation award at the Humber Renewables and Green Energy Awards 2015, in recognition of its leading role in the decarburization of the energy industry. The transformation of Drax into a predominantly biomassfueled business will save some 12 million metric tons of carbon, once three units are converted. That is equivalent to taking 10 percent of the U.K.’s cars off the road. The project represents far more than a simple fuel switch and involves innovation at every step of the supply chain, from sourcing the raw material, the technology in the power station, to the renewable power being delivered to business customers.

Vecoplan adds team member Bob Gilmore has been appointed managing director and chief sales officer at Vecoplan LLC. He joins Len Beusse, managing Gilmore director and chief operating officer, on the strategic planning team charged with positioning Vecoplan for sustainable long-term growth, as well as day-to-day management of the company. Gilmore’s responsibilities also include the supervision of all internal and external sales staff, and overseeing the expansion of Vecoplan markets.

USFGIS announces agreement with Twin Ports Testing USFGIS LLC, a global inspection company, has announced a strategic agreement with Twin Ports Testing planning a joint market approach for the biomass industry.

USFGIS is committed to helping customers safeguard their businesses through its domestic and global operations. The company operates through the Global Superintendence Alliance a network of highly specialized inspection companies active in more than 595 countries. TPT has been involved in the wood pellet industry since the early 1980s and is an active member of the Pellet Fuel Institute. In addition, TPT has been involved in developing the North American standards for pelletized/densified commercial and residential fuel as well as QA/QC procedures.

Drax Biomass appoints CEO Drax Biomass has appointed Peter Madden as CEO of U.S. operations. He has nearly 30 years experience in the forestry Madden industry and will play a critical leadership role as Drax’s workforce and investment in the U.S. grows. He will guide the overall strategy and oversee day-to-day operations in the U.S. Madden most recently served as the vice president of renewable energy and supply chain for Plum Creek Timber Co. SGS named applicant certification body for SBP SCS Global Services has been accepted as an applicant certification body for the Sustainable Biomass Partnership. As a result, SCS is now ready to conduct audits of companies in the biomass sector, while continuing to contribute to the expansion and success of the SBP program.

SHARE YOUR INDUSTRY NEWS: To be included in the Business Briefs, send information (including photos and logos, if available) to Business Briefs, Pellet Mill Magazine, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203.

You may also email information to evoegele@bbiinternational.com. Please include your name and telephone number in all correspondence.

MAY/JUNE 2015 | PELLET MILL MAGAZINE 9

Pellet News NWP retrofits third pellet plant

BREAKING GROUND: Officials celebrate the groundbreaking of Portucel’s Colombo Energy pellet plant Greenwood County, South Carolina.

PHOTO: PORTUCEL SPORCEL GROUP

Portucel breaks ground on first U.S. pellet plant Portugal-based Portucel Sporcel Group has broken ground on its Colombo Energy pellet plant in Greenwood County, South Carolina, in the Emerald Road Industrial Corridor. This project is the first U.S. pellet plant developed by the company.

The 460,000-metric-ton facility is expected to be complete by the third quarter of 2016. According to Porucel, the plant will be equipped with advanced abatement equipment for en-

vironmental emission control, and its environmental performance will rival similar plants in the U.S. A Portucel spokesperson also noted the company has secured sales of 70 percent of its production through the signing of 10-year, fixed-price supply contracts, with most of the targeted sales for the European industrial market.

Northeast Wood Products has begun retrofitting its third pellet manufacturing plant, a Jasper, Tennessee, facility that will be capable of producing up to 125,000 tons of pellets annually. The plant is scheduled to be operational in November. Machinery purchased late last year is on site, and NWP plans to install a duplicate production line later in the construction phase.

NWP made the announcement less than a year after it made its first acquisition—Pennington Seed Co.’s 65,000-metric-ton pellet plant in Peebles, Ohio, and shortly thereafter, its 65,000-metric-tonper-year pellet plant in Ligonier, Indiana.

NWP also purchased some equipment and assets at Pennington’s Kenbridge, Virginia, facility.

NWP reports that its annual production volume is expected to be 450,000 tons when the Jasper plant comes online, a calculation that takes into account available output of the company’s three factories, as well as aggregation of premium product from U.S. manufacturers.

IFP2015_Pellet Mill Magazin_190,5x85,725mm_Layout 1 15.04.15 14:14 Seite 1

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10 PELLET MILL MAGAZINE | MAY/JUNE 2015

Pellet News »

NEWP acquires Allegheny Pellet

Lignetics, Bear Mountain merge

Vermont Rentech Inc. subsidiary New England Wood Pellet has acquired New the assets of Allegheny Pellet Hampshire New England Corp. The acquisition exWood Pellets pands NEWP’s market New England New York position in the U.S. Wood Pellets New England pellet heating sector.

Wood Pellets A l l e g h e n y ’s wood pellet plant in Youngsville, PennAllegheny sylvania, began opPellet Pennsylvania erations in 1993. The facility processes residuals from local sawmills into wood pellets for sale through big box stores, specialty workweek. The additional producretailers and bulk sales channels. tion will help meet strong demand According to Rentech, Allegheny for pellets in Pennsylvania and will be fully integrated into NEWP New York.

NEWP acquired all of the asand will operate as its fourth pellet sets of Allegheny for approximateplant.

NEWP intends to expand the ly $7 million in cash, and plans to plant’s annual production from ap- invest approximately $2 million in proximately 36,000 tons under a environmental and safety improvefour-day workweek to approximate- ments at the plant over the next ly 50,000 tons under a seven-day two years.

Ligenetics Inc. and Bear Mountain Forest Products Inc. have announced a merger. The combined company has the capacity to produce approximately 450,000 tons of wood pellets per year, including facilities in Brownsville, Oregon; Cascade Locks, Oregon; Sandpoint, Idaho; Glenville, West Virginia; and Kenbridge, Virginia.

“Completing this merger marks the beginning of an exciting new chapter in our two companies’ history, making us the market leader in the residential wood pellet industry in the U.S.,” said Ken Tucker, CEO of Lignetics The merger brings together several brands including Golden Fire, Lignetics, Bear Mountain, America's Best, Pres-to-Log, Dry Den, Cozy Den and EZ Equine.

“We are excited about the merger with Lignetics and the ability to offer all of our customers a more diverse product offering, now from five different plant locations,” added Bob Sourek, CEO of Bear Mountain.

Tucker and Sourek also noted that the transaction will give the company the capital base to pursue expansion plans at their current facilities, as well as explore potential future add-on acquisitions.

HIGHLY PRODUCTIVE: Despite a more than doubling of the population, and all of the land and wood demands that come with such a boom, tree growth in the U.S. has increased by 50 percent since the 1950s.

PHOTO: TIM PORTZ, BBI INTERNATIONAL

This Land is My Land Private forest owners welcome the opportunities presented by growing pellet markets, but feel their story of sustainability speaks for itself.

BY RON KOTRBA

W

hat environmental groups opposing the commercial wood industry must know is that invasive species such as the bark beetle are more destructive to U.S. forests than logging operations. In Colorado and Wyoming alone, an estimated 100,000 beetle-killed trees fall per day, according to the USDA’s Forest Service. The worst

part? Bark beetles kill indiscriminately, offer no profit opportunity, provide zero valueadded products to society, never replenish their lands and have no best-management practices to speak of whatsoever. They just destroy and move on. Their actions fly in the face of countless federal, state and local laws and regulations implemented to protect and conserve.

12 PELLET MILL MAGAZINE | MAY/JUNE 2015

“We don’t actively manage federal forestlands,” says Scott P. Jones, CEO of the Forest Landowners Association, an advocacy group promoting the rights of private landowners regardless of size, corporate structure, location, and certification status or tax classification. FLA membership is comprised of private forestland owners who are families and investment land owners, the

FORESTRY »

majority of whom are individual families that own and manage generational family ownerships.

The average holding is fairly large, Jones says, around 1,000 acres.

FLA Jones members represent about 48 million acres of private forestland, mostly in the Southeast U.S. “Because we don’t actively manage federal forestlands, they are in poor health,” Jones says. “There’s wild fires, massive outbreaks of pests, pathogens, bugs, fungus—a whole host of issues on federal lands that we don’t see on private forestlands. Private landowners manage their land. Part of that is harvesting timber. We need healthy markets.”

The Forest Service reports that the U.S. has about 751 million acres of forestland, with 623 million acres in the lower 48 states. Forests encompass around one-third of the total land mass of the U.S. Forestlands outnumber croplands in the U.S. by one-and-a-half times.

Nearly two-thirds of U.S. forests, or 514 million acres, are classified as timberlands.

Timberlands are forested areas that are actively managed for the production of commercial wood products. An additional 75 million acres of forest are reserved for nontimber uses under the management of public agencies.

The remaining 162 million acres do not qualify as timberland, but are important for watershed protection, wildlife habitat, grazing and recreation.

About 44 percent of U.S. forestlands are publicly owned, with 20 percent overseen by the National Forest System, 9 percent owned by states, 6 percent by the federal Bureau of Land Management, 2 percent by county and municipal governments, and the remaining 7 percent by other federal entities.

Fifty-six percent of U.S. forestland is privately held, most of which is noncorporate ownerships, according to the Forest Service.

Corporate-owned forestlands comprise about 18 percent of the total, while noncorporate, private ownerships represent around 38 percent of all U.S. forestlands—the largest, single chunk of ownership in the U.S. More

than 60 percent of private forest owners own between one and nine acres of forestland, but the Forest Service indicates that most of the private forestland acreage is in holdings of at least 200 acres. More than 20 percent of private forestland is in holdings of at least 10,000 acres, owned primarily by corporations.

Preliminary data from the Forest Service’s 2011 National Woodland Owner Survey shows that families own more than 282 million acres of U.S. forestland, a 12 percent increase from 2006. Those 282 million acres are held by more than 11 million ownerships, up 7 percent from 2006, with an average size of 25.2 acres.

A majority of U.S. timber comes from the South, where 147 million private forestland acres are held by 1.82 million family ownerships with nearly 5.3 million individual owners. The average holding size is 80.8 acres. The 2006 survey report shows that 87 percent of forests in the Southern U.S. are privately owned, and 68 percent of those are owned by families and individuals.

The Forest Service states that most of the nation’s forests are naturally regenerated, but planted forests are found primarily in the South. Nationally, 63 million acres, or 8 percent of forestland, is planted, but in the South, 20 percent is planted. Virtually all planted forestland is classified as timberland, and nearly all planted stands are established with native species, although not always the species that previously dominated in the area. Planted stands are supplying an increasing proportion of the U.S. timber supplies, and in the South, planted forests accounted for 43 percent of softwood removals in 2007. The annual rate of growth since 1996 has been about 3.5 times the increase in mortality during the same period, with growth rates in the South being among the highest. Historically, millions of intensively managed and highly productive forest industry timberland acres have been the primary reason for the higher average productivity on private timberland.

The U.S. population has more than doubled since the mid-20th century, from 152 million people in 1950 to 309 million in 2010, according to the U.S. Census Bureau.

One might think this kind of population boom, with all of its urban sprawl and massive

construction build-out demanding land and timber, would have devastating, depleting effects on our national forestlands. As counterintuitive as it may seem, however, tree growth in the U.S. has exceeded harvest since the 1950s, according to the Forest Service, and timber volume on timberlands has increased by about 50 percent since that time. Twothirds of that increase was on private lands.

“Historically, markets have been a friend to private forests in our country,” says Dave Tenny, president and CEO of the National Alliance of Forest Owners. NAFO is an organization of private forest owners committed to advancing national policies that promote the economic Tenny and environmental benefits of privately owned forests. NAFO membership encompasses more than 80 million acres of private forestland in 47 states.

“The post-World War II economic expansion in the U.S. that persists to this day represents the largest economic expansion in the history of mankind, and this expansion created unprecedented demand for forest products of all kinds. Using the logic of those who claim that new markets are bad for our forests would suggest that new markets would have depleted our forest resources long ago. But they didn’t. Instead, they helped increase by 50 percent the growing stock in our forests. That is a remarkable example of the strong, positive relationship between private forests and the marketplace.”

Priorities

Tenny says threats to the viability of working forests are reflected in NAFO’s policy priorities, which focus on preserving the wellestablished carbon benefits of private forests and biomass energy in federal policy, retaining the current tax treatment of timberland to preserve the economic viability and public benefits of private forest ownership, and preserving a reasonable interpretation of Waters of the U.S. (WOTUS) to maintain regulatory, economic and legal certainty.

MAY/JUNE 2015 | PELLET MILL MAGAZINE 13

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14 PELLET MILL MAGAZINE | MAY/JUNE 2015

ÂŤ FORESTRY

â&#x20AC;&#x153;In 2010, EPA suddenly and unexpectedly reversed the longstanding and internationally recognized principle in federal policy that emissions from biomass energy do not increase carbon in the atmosphere,â&#x20AC;? he says. â&#x20AC;&#x153;This longstanding position was based on the fact that trees and other plants are part of an ongoing natural carbon cycle that maintains a carbon balance over time. EPA has since reconsidered this position but has yet to adopt a final position. This has created significant uncertainty and confusion in the marketplace and in federal policy.â&#x20AC;? He says forest owners seek to restore in federal policy the principle that energy from forest biomass is carbon neutral. â&#x20AC;&#x153;Preserving this principle is fundamental to the whole carbon paradigm of forestry,â&#x20AC;? Tenny says. â&#x20AC;&#x153;Forests and the products we derive from them are a sustainable, long-term part of the carbon solutionâ&#x20AC;&#x201D; not part of the problem. New and unnecessary carbon regulations affecting land use that prevent the reduction or elimination of market opportunities for biomass energy and other forest products would be very harmful, not only to the practice of forestry and production of forest products, but also to our nationâ&#x20AC;&#x2122;s overall carbon reduction objectives.â&#x20AC;?

The current tax code treats private forest ownership as a longterm capital investment in real property and addresses in a practical way the economic realities of maintaining the health and productivity of these forests over time. Four private forestry provisions, commonly referred to as the â&#x20AC;&#x153;timberland taxâ&#x20AC;? provisions, help maintain the economic viability of 450 million acres of private forests owned and managed by more than 22 million forest owners, including individuals, families, institutional investors and businesses. â&#x20AC;&#x153;An analysis shows that repealing these provisions could cause a 15 percent decline in domestic sales totaling as much as $34 billion annually and the loss of up to 140,000 jobs, while reducing federal tax revenue from the forestry sector through systemic changes in the industry,â&#x20AC;? Tenny tells Pellet Mill Magazine.

He says the EPAâ&#x20AC;&#x2122;s proposal to expand the definition of â&#x20AC;&#x153;waters of the U.S.â&#x20AC;? under the Clean Water Act threatens to impose costly, new administrative burdens and litigation risk for states and forest owners. â&#x20AC;&#x153;These burdens include confusion over whether water quality standards would apply to streams and small channels that are wet only part of the year, man-made ditches and entire floodplains,â&#x20AC;? he says. â&#x20AC;&#x153;They also include expanded permit requirements for the use of herbicides and increased exposure to citizen lawsuits. Maintaining, and not expanding, EPAâ&#x20AC;&#x2122;s regulatory authority under the Clean Water Act would prevent significant financial and regulatory uncertainty for forest owners that could reduce economic returns, diminish land values, hasten the conversion of private forestland to other land uses and reduce the public benefits private forests provide.â&#x20AC;?

Jones says the concerns of FLA members are simple and fall into three principles. â&#x20AC;&#x153;We believe if we can secure private property rights, access to a free and open marketplace for wood, and fair taxation, then these people can manage their land for generations to come,â&#x20AC;? he says. â&#x20AC;&#x153;Right now, most attention is being paid to securing access to a free and open marketplace for wood.â&#x20AC;? Jones says by simply having a marketplace, this doesnâ&#x20AC;&#x2122;t ensure access. â&#x20AC;&#x153;If the market places constraints on who can participate by offering assurances of sustainability, then thatâ&#x20AC;&#x2122;s not a free and open market. All of a sudden, the market is only offered to those who follow the program. What

FORESTRY »

TIMBERLINE: Healthy, robust markets give way to healthy private forestlands, Tenny and Jones say. In the U.S., the annual rate of tree growth since 1996 has been about 3.5 times the increase in mortality during the same period, according to the Forest Service.

PHOTO: FOREST LANDOWNERS ASSOCIATION

complicates it for us is oftentimes the assurance to sustainability comes in the form of third-party certification systems. We’re not opposed to them. They have right to choose. But when a marketplace dictates use of that certification system in order to offer levels of assurance to sustainability, and constrains the marketplace in doing so, it takes away our rights to manage our forestlands the way we see fit.”

Misconceptions

Regulators in the U.S., EU and the U.K. “tend to be lazy,” Jones says. “They want to take a one-size-fits-all solution and apply that criteria for the whole world, and you can’t do that because the way we own and manage forestlands in the U.S. is different than anywhere else in world. Here they’re private lands. When you have private management—families—running a majority of the forestlands like in U.S., then the marketplace has to educate itself on the way we operate and work. The EU is unwilling to educate itself, so it’s the easy way out. Because of that, what they don’t see is that the pellet marketplace creates a sustainable solution in the U.S. marketplace. It creates a market into the future. If it’s not free and open, it puts in jeopardy the future of our forests. If there’s no money, there’s no incentives to continue managing our forestlands.”

And that’s where the danger lies. Jones and Tenny argue that when the markets for wood products and biomass energy decline or wither away, whether from recession or certification constraints applied by foreign markets, there is pressure on forestland owners to sell to developers or crop farmers—and that forestland, along with all the benefits it provided, is lost.

Jones says he and his members understand stewardship certification and what that represents, but when markets from abroad try to apply it in the U.S., it won’t take. He says only a minute percentage of forestland acres in the South is certified by the Forest Stewardship Council. “There’s no supply under that system to go to Denmark,” he says. “That’s not the way it works. The way they need to do it is educate themselves on what truly sustains our forests, and what does that is private, individual, healthy markets for wood products. Should we

MAY/JUNE 2015 | PELLET MILL MAGAZINE 15

« FORESTRY

be held to offer assurances of sustainability?

Yes, but to what level, and who’s driving the conversation? The track record we have is second to none. We are growing more trees now than 50 years ago. If you plot that against population growth, population has exploded.

Houses, Walmarts, electricity, all of that takes up land, yet we’ve increased the amount of forestland in this country. The reason? We’ve had incentive to do so, and that means more trees. Look at the pellet market, is that causing a sustainability problem or a solution? I know there’s a future for my wood, so I’ll keep growing it and reap the benefits.”

While certification programs can provide significant value by helping to demonstrate sustainable management practices, Tenny says the greatest impact on healthy forests in the U.S. is the long-term management ethic of those who own and manage the land. “In the U.S., sustainable forest management constitutes a commitment of individuals, families and businesses that is as much cultural as it is anything else,” Tenny tells Pellet Mill Magazine.

“It is a passion that is built into the fabric of

forestry and forestry communities, buttressed by a strong and well-constructed framework of federal, state and local laws, regulations, bestmanagement practices, technical assistance and certifications programs that support sustainable forestry.”

Certain opponents to logging, development and wood power suggest oversight of forestlands is slight, and lighthanded. In some less-developed nations where fragile rainforests and virgin habitat are being depleted for grazing, palm plantations or soybean crops, third-party certification schemes could play a defining role in curbing such activity. “Forests in Malaysia, China and Brazil—is third-party certification right for them?” Jones asks. “Absolutely. There they deal with issues like child labor and clearcutting, but in the U.S., we have a strong rule of law overseen by robust agencies, so adding more seems like hurdles that are not adding value.”

Some agenda-driven activists say U.S. forestry operations are akin to the Wild West, with little enforcement of the law. More than

26 federal statutes govern how U.S. forests are managed, Jones explains. “The Wild West?” he asks. “Not at all. We manage for threatened and endangered species, the Clean Water Act, the Army Corps of Engineers, the Fish and Wildlife Service—all of these agencies are in place to oversee laws and regulations to protect the health of our forests. Private land owners work under these and bestmanagement practices in forestry right now.

And clean water—one of the most important things coming off our forest—is reported on every single year in every state, and we have 90 percent compliance. Individual states have forest management laws. The management of private forestland falls under a whole host of environmental regulations with robust agencies overseeing, complying and managing timberlands and forestlands in a healthy way with those laws and regulations. What’s a third-party certification going to change? Just recognition of what’s happening now should be enough of an assurance of sustainability.”

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FORESTRY »

forestlands. “Pulpwood already has a home,” Jones says. “It goes into the paper industry. It’s a very healthy home and it’s not going away.

So when you have the lowest value product that already has a home, and you start putting the largest amount of restrictions on it, the question arises of whether they’ll get that wood or not. That’s the reality they have to come to grips with. Land owners don’t have to sell wood to the pellet market. Do they want to? Yes. Is it important? Yes. They want to but don’t need to. The sawmill industry has been producing wood for homes and paper for 75 to 100 years. They’ve never been asked for assurances because they know what’s going on, they’re located here. Industrial pellet consumers, they’re not sure, and that’s where the rub comes.”

Those positioned against biomass energy propose that increased “reliance” on wood power jeopardizes forestlands. “Because it is low value, biomass is like the tip of the tail of the dog,” Tenny says. “It certainly doesn’t wag the dog and is the most unlikely of the forest products to drive the general practice

of forestry in the U.S. In other words, entire forests will not be grown or cut down for fuel.

Biomass will most often come from the trees thinned from the forest during a rotation cycle and from mill and harvest residuals produced during the harvest and manufacturing process.

The message that biomass is driving forestry practices in the U.S. is a purposefully deceptive scare tactic used by some in an attempt to influence the perceptions of policy makers and the public. Strong existing and emerging markets are a friend to forests, not an enemy.”

To be clear, no one is clear-cutting forests to make wood pellets. In “10 Biomass Myths,” Bill Cook with Michigan State University Extension writes, “If an owner and their forest could be so easily separated, it would have been done long ago. Simply because a new market emerges does not mean forest owners will be lining up to harvest their woodlands.

In fact, recent research from Wisconsin and Pennsylvania suggest that providing wood for energy is not a significant motivator for future timber harvest.”

A misconception also exists that good

stewardship, environmental ethics and, ultimately, sustainability have to be forced upon commercial forest operations. “Sustainability is not separate from our business model—it is the business model,” Tenny says. “If a working forest is not practicing sustainability, it won’t survive over the long term. Every benefit a forest provides has value. Some benefits are clearly monetized such as valuable timber or less valuable wood for biomass that is sold, but others have intrinsic value like air and water, and we protect them because we recognize they have great value to society and our overall quality of life.”

Author: Ron Kotrba Senior Editor, Pellet Mill Magazine 218-745-8347 rkotrba@bbiinternational.com

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« WESTERN PELLET PRODUCTION

IN IT FOR THE LONG RUN: Pellets have been produced in the West for decades, often from sawmill residues, and in some rare cases, straight from the predominately publically owned forested lands that span the region. Currently with an oversupply, producers are selling where they can and keeping a watchful eye on oversea markets.

PHOTOS: WEST OREGON WOOD PRODUCTS, FOREST ENERGY CORPORATION, TIM PORTZ, BBI INTERNATIONAL

The West’s Quest

Type and location define pellet fuel's quality and prospective markets.

These realities differ for Western producers compared to their Eastern peers in the quest to run a successful plant.

BY KATIE FLETCHER

L

ocation, location, location, is real estate’s greatest determining factor in value, and if that real estate is a pellet plant, it also determines the product it produces. A series of forested mountain ranges-the Sierra Nevada, the Rockies and the temperate rainforests of the Pacific Northwest-span the Western United States. Many of these and other forested lands in the region are publically owned.

The opposite is true for the other half of the country. Privately owned land occupies the Eastern seaboard, the largely forested highlands in the Northeast, including the Piedmont and the Appalachian Mountains, ranging down to the Southeastern coniferous forests that occupy the Gulf coastal plain to

the south. Land ownership and forest type are two components that play into what sets pellet production and distribution in the West apart from that which occurs in the East.

Successful producers across the country have learned how to sustainably source the fiber their location provides and, in turn, tap the surrounding markets to distribute the pellets they produce. The markets currently gaining the most momentum are those accessed in the Southeast and Northeast. For example, in April, Portucel Sporcel Group broke ground on a pellet plant in South Carolina, and Northeast Wood Products is retrofitting its third pellet manufacturing plant in Tennessee.

Another big player coming onboard in the South is Drax Biomass. The company recently

18 PELLET MILL MAGAZINE | MAY/JUNE 2015

spent 15 months building port infrastructure to handle and ship pellets to Europe from the company’s two 450,000-metric-ton-per-year plants: Amite BioEnergy in Mississippi and Morehouse BioEnergy in Louisiana.

While many of these plants gear up for the expanding market in Europe, further up the East Coast, spikes in demand and supply disruptions have created periods of shortages.

On the other hand, an oversupply is occurring in the West, with mild weather and competing inexpensive natural gas. Some Western producers have even funneled excess pellets to the Northeast when requested and customers willing to pay a higher premium for shipping.

As for new Western plants, Centennial Renewable Energy announced plans to

WESTERN PELLET PRODUCTION »

build a 160,000-metric-ton wood pellet plant in northern Idaho. Other than this announcement, Western producers agree new production capacity is not likely with an oversupply on the domestic side, and a lack of lucrative export market opportunities.

However, as in most energy markets, the volatility makes the future unclear. As the East Coast has had success in Europe, the West may hold promise with their neighbors across the pond. Three producers, from locations in the West, share their decades of experience running successful pellet operations to provide a glimpse at what makes the region's industry tick.

A Southwest Example

Rob Davis, president of Forest Energy Corp. with the help of Gary Moore, director of operations, and 33 employees, runs a 60,000-ton-per-year plant in Show Low, Arizona, serving primarily residential customers in the surrounding Southwestern region. Whereas most Western producers buy sawmill byproduct for their feedstock, Davis’ mill obtains its feedstock differently. “We’re a little unique in the Southwest,” Davis says.

“We bring a lot of our wood directly from the forest to the plant—small diameter trees that need to be removed for forest restoration and fire hazard mitigation.”

FEC was the first mill to take material directly out of the forest and make pellets from it in the late ‘90s due to the lack of

sawmill operations in the area. Even today, not many producers in the country do, because historically it’s been more economical to purchase byproduct from a sawmill or similar operation when available. Over the past decade, the plant’s feedstock had been guaranteed through the White Mountain Stewardship Project, a 10-year stewardship contract that ended in August. Davis is a founding partner of Future Forest LLC, the prime contractor for the project, which had the aim to thin 150,000 acres of forest to protect communities from wildfire and stimulate the wood industry. Although this helped Davis guarantee feedstock for the plant, stewardship contracts are not common in the West, and the high volume of public land ownership makes a huge difference when obtaining feedstock.

“We’re relying on forest management plans by the BLM (Bureau of Land Management) or the U.S. Forest Service to be consistent and reliable so we can have some idea of what is going to happen in the future,” Davis says.

“Whereas in the East, you would probably buy a lot more from private land owners, it’s harder to obtain longer term assurances on public lands.”

Although FEC has been able to sustainably source feedstock to churn out pellets and restore forestland, growing the market for pellets has been a challenge in the Southwest. Davis says, in general, the market is spread out much more in the West than in the East. High consumption areas, paired with

the region’s population densities, are vastly distributed. FEC can only serve customers located within an economical transportation radius from the plant to make commerce work.

Another impact on market growth is competing heating fuels. “In the West, we have pockets of propane, but we also have, in the past several years, had very inexpensive natural gas, which has made it difficult for the Western markets to grow,” Davis says. “If you look at New England, they’ve had pretty high-priced fuel oil, which has caused more stove sales because it’s very competitive.”

FEC primarily uses ponderosa pine, with a small amount of the Douglas fir species to make its Heat’rs, TerrAmigo and Green Tree product lines. Within the past year, the pellets are now qualified under the Pellet Fuels Institute standards program. When it comes to hardwood species versus softwood, Davis says they don’t see it having a significant impact on the marketplace. He adds that for the most part pellets consumed in a region are produced there. “We shipped more to New England this year because they had a short-term demand and we had some extra product, but that’s not typical,” Davis says.

FEC went into business in 1992, and has experienced consistent, gradual market growth since. Ultimately though, “I don’t see a huge change in the market, or demand for pellets in the West unless outside influences create an impact,” Davis says.

MAY/JUNE 2015 | PELLET MILL MAGAZINE 19

ÂŤ WESTERN PELLET PRODUCTION

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Ken Tucker, CEO of Lignetics Inc., agrees with Davisâ&#x20AC;&#x2122; outlook. â&#x20AC;&#x153;I think the West is going to be pretty flat and the growth is going to be in the East,â&#x20AC;? he says.

Lignetics has plants on both sides of the country. The companyâ&#x20AC;&#x2122;s flagship plant, built in 1979, is located in Sandpoint, Idaho.

Its East Coast plants are located in Linn, West Virginia, and Kenbridge, Virginia. This February, Lignetics merged with Western pellet producer Bear Mountain Forest Products, adding two facilities in Oregon to the mix, one in Brownsville and the other in Cascade Locks. â&#x20AC;&#x153;We wanted to expand our footprint in the West,â&#x20AC;? Tucker says. â&#x20AC;&#x153;We wanted to expand our shipping corridors; freight has become a big part of our business lately. There is only so far you can truck our product and still be competitive.â&#x20AC;?

Lignetics is also in the midst of some expansion projects and upgrades. â&#x20AC;&#x153;At our Cascade Locks plant in Oregon weâ&#x20AC;&#x2122;re putting in a complete new dryer line, upgrading the pellet equipment and automating the bagging operation,â&#x20AC;? Tucker says. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;re upgrading our Virginia facility right now to include additional production capability, and we have just finished an upgrade in our West Virginia plant allowing us to process chips more efficiently than we were before.â&#x20AC;?

The recent merger and upgrades have increased Lignetics capacity. Its facility in Idaho is designed to produce about 80,000 tons per year with about 5,000 of the tonnage going into log production. The recent Cascade Locks acquisition has the capability now to produce between 30,000 and 40,000 tons of pellets per year, but will soon be raised to 60,000 or more. The companyâ&#x20AC;&#x2122;s Virginia plant will also be ramped up from its current operating capacity of 65,000 tons to 75,000 or more per year. Finally, both the Brownsville plant and the West Virginia facility are permitted at 125,000 tons per year.

Lignetics produces pellets qualified under the PFI standards program at its Idaho plant from premium quality Western conifer sawdust, and has changed the productâ&#x20AC;&#x2122;s distribution pattern over the years. â&#x20AC;&#x153;We started out supplying 100 percent of our production as bulk pellets as a replacement for industrial and commercial users to displace coal,â&#x20AC;? Tucker says. â&#x20AC;&#x153;The first pellet

stoves became available in 1984, and the Lignetics Idaho plant was the first plant in the U.S. to bag fuel for residential use. We have gradually gone from 100 percent bulk to right now weâ&#x20AC;&#x2122;re at about 2 percent bulk.â&#x20AC;?

Now, although almost exclusively residential, Tucker sees tentative potential to export from the Cascade Locks plant located on the Columbia River. â&#x20AC;&#x153;At some point weâ&#x20AC;&#x2122;d like to be able to think we can export to Asia, but weâ&#x20AC;&#x2122;re frankly not holding our breath on that happening anytime soon,â&#x20AC;? Tucker says. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;re certainly in a good position to do that on the river, which leads us right out to the Pacific Ocean.â&#x20AC;?

Overall domestically, Eastern and Western producers have access to a similar, diverse retail base. â&#x20AC;&#x153;Hearth product dealers are the people who really brought us to the dance 25 years ago,â&#x20AC;? Tucker says.

He adds that itâ&#x20AC;&#x2122;s a mix of the independent dealers who sell hearth products, hardware chains, big box retailers and farm supply stores amongst others. While the markets are similar across the country, pricing varies slightly. â&#x20AC;&#x153;One of the things that keeps the Western pricing down is, quite honestly, there is more supply of pellets in the West than there is demand, which is just the opposite in the East,â&#x20AC;? he says.

Due to the oversupply, Tucker doesnâ&#x20AC;&#x2122;t see a lot of expansion opportunity in the West, especially in the domestic market. He believes, â&#x20AC;&#x153;Before you are going to see too much growth it will have to come from offshore opportunities.â&#x20AC;?

Exploring Any, All Markets

Chris Sharron, CEO of West Oregon Wood Products, echoes Davisâ&#x20AC;&#x2122; and Tuckerâ&#x20AC;&#x2122;s thoughts on the status of the current market. â&#x20AC;&#x153;We see pellet plants not running to capacity out here and/or trying to find some other markets,â&#x20AC;? Sharron says. â&#x20AC;&#x153;The pie stays the same size, yet the slices are getting smaller and smaller.â&#x20AC;?

WOWP creates pellets predominantly from Douglas fir at its two plants in Oregon; a 30,000-ton-per-year facility in Banks and a 50,000-ton-per-year facility in Columbia City.

Like Davis, WOWP has shipped some pellets to the Northeast at a higher freight cost.

Sharron attributes their success in selling across the country to the customer base theyâ&#x20AC;&#x2122;ve built who prefer a Douglas fir pellet.

WESTERN PELLET PRODUCTION »

“We hope to hang on to at least some of that market looking for a super high-quality pellet,” he says.

Besides the Northeast, Sharron says they continue to look at any and every market. For now, the domestic, residential West Coast is the most suitable with the highest return.

WOWP has also sold its bagged fuel into the residential market in Italy. However, over the past few months with the return of the dollar, the increased tax on pellets in Italy, along with port issues, and mild heating seasons in Europe that export business is no longer there. Recently, Sharron has also taken his business to Asia. “We’ve been getting excited because at least we’re on the right beach to service that market,” he says. “We shipped some pretty good tonnage into Asia in 2014, they don’t have a very big thermal market as of yet, so a majority of the pellets are being used to make electricity.”

One of the advantages of shipping to this market was that it helped keep the two Oregon plants running during the spring and summer offseason. Now, with oil prices down and the strength of the dollar back, Sharron says they are debating whether to continue with that business as well. There has been some talk about aggregating pellets together from other plants to get volume up, but the market potential in Asia remains uncertain.

As most Western producers, WOWP uses sawmill residuals as its feedstock.

Sharron says in the Pacific Northwest there is a lot of biomass to be used for pellet production, but due to the terrain and often wet conditions it is expensive to harvest the material. “Unlike the Southeast U.S. where whole logs are being harvested in more of a plantation type scenario—flatter ground, large plots—that model just doesn’t work out here in the Pacific Northwest,” he says.

Sharron adds that with the market for the finished product and the pricing where it’s at in the West, it just doesn’t pencil out for his business to use anything but sawmill residuals. Currently, market pricing in the West for residential pellets freight on board (FOB) the mill is less than in the East. West Oregon is in the $150 to $160 per ton FOB mill range. Whereas in the Northeast, the plants there are in the upper 100s, some reaching over $200 per ton FOB the plant.

“That’s why you see some people chipping

whole logs in the East to use for pellet production,” Sharron says.

Running a successful Western pellet operation parallels in almost all aspects among these three producers. The tale is told of little market growth due in part to the West’s ample natural gas infrastructure, consecutive mild heating seasons and widely distributed markets and population density. These realities differ from the other half of the country, with the Northeast’s intermittently high fuel oil prices spiking pellet stove and boiler sales. The increasing demand for pellets in Europe gives way to increased pellet production along the Eastern seaboard. While, these three Western producers see potential opportunity on their opposing side of the beach, little can be said on how quickly the demand will come, and whether it might rival the growing volumes in Europe. Also, the current oversupply deters future plant construction, and with the exception of Centennial Renewable Energy, little talk of new capacity has occurred.

Sharron says you need all three legs of the stool when assessing whether to build: source of fiber, know-how to construct and operate a plant and a market for the product.

“All three legs are an issue right now,” he says. “Maybe not so much with the actual manufacturing, but the biggest issues are raw material supply and probably the biggest, lack of market, at least at the right price.”

A few tough years following the recession slowed down Western sawmills, which drove the price up for the fiber, and pellet prices haven’t followed. Even so, producers in the West have learned how to get creative to find market opportunity, and the variability in the marketplace could soon change the current landscape. In the meantime, with an occupation sometimes based on predicting the unpredictable, producers focus on the present. “I’m dealing with the day-to-day, keeping things running and keeping things going until hopefully some things do change in the future, which helps make things a little bit brighter,” Sharron says. “We celebrated our 30-year anniversary this May, and we're looking forward to the next 30.”

Author: Katie Fletcher Staff Writer, Pellet Mill Magazine 701-738-4920 kfletcher@bbiinternational.com

MAY/JUNE 2015 | PELLET MILL MAGAZINE 21

A REGION OF LOW RISK: The Sustainable Biomass Partnership hopes that its certification program offers pellet producers and their feedstock partners an efficient, common sense means of proving sustainability. This efficiency comes from the framework's ability to recognize the sustainability criteria that a region has a low risk of not meeting.

PHOTO: TIM PORTZ, BBI INTERNATIONAL

Answering the Question

Seven major European utilities, working to help producers satisfy a blend of varying sustainability requirements, establish the Sustainable Biomass Partnership.

BY TIM PORTZ

E

uropean Union member states are united in their commitment to growing their share of renewable energy as a means of driving down carbon emissions across the continent. The Renewable Energy Directive, established by the European parliament in 2009, set a binding target of 20 percent of final energy consumption in aggregate coming from renew-

able sources by 2020. The levels of in-place renewable production varies from country to country so each received their own goal, which achieved, will deliver the EU to its total goal. The goals vary widely and Sweden’s goal is the largest at 49 percent. This directive has been a boon for renewable energy producers and technologies in all categories, wood pellets included. The United Kingdom’s goal is

22 PELLET MILL MAGAZINE | MAY/JUNE 2015

15 percent by 2020, an ambitious undertaking considering the U.K. had among the lowest percentages of renewable energy deployments in Europe when the directive was established at 1.5 percent. It didn’t take long for utilities, regulators and policy makers to realize that if those targets were to be met, transitioning large base load power stations from nonrenewable inputs to renewable inputs like wood

CERTIFICATION »

pellets was going to have to be a part of the plan. The concept gained momentum, taking root in other countries, some with a well-established history of cofiring and global pellet production took off. As conversion plans began to take shape, regulators, NGOs and the general public began to ask for assurances that these conversions would, in fact, deliver the intended results and drive down overall carbon emissions. Sustainability requirements soon followed and it is here that the EU’s unified approach ends. What emerged was a patchwork of varying certification requirements and schemes that utilities and producers alike say inhibit efficient trade.

Development Time Line

In 2013, seven of the leading utilities in Europe took action forming the Sustainable Biomass Partnership with the stated goal of working to “enable an economically, environmentally and socially sustainable solid biomass supply chain that contributes to a low-carbon economy.” The end game for the SBP is to develop a certification scheme recognized within all pellet-buying countries in the EU, and potentially beyond, which reduces the drag the industry is already feeling, the multiple definitions of sustainability that have already emerged in the marketplace.

Working with a small group of stakeholders, the SBP developed a first draft of the scheme in March 2014 that it called the Biomass Assurance Framework Consultation Draft which was made public and open for public comment.

“We had a public consultation, a stakeholder consultation, which was open to all,” says Peter Wilson, SBP executive director.

“We had lots of responses, over 110 pages worth once we consolidated all of them. We did have a coordinated, combined response from the environmental NGOs and that was hugely valuable. So that has helped us get to where we are, which is this robust set of standards.”

After closing the comment period, the SBP refined the consultation draft and in September of 2014 published the Biomass Assurance Frameworks Standards version 0.0, meant to be a working beta version that could

be introduced to a wider group of stakeholders and solicit further comments. “In this first version of the SBP framework, we involved and engaged with a lot more stakeholders,” Wilson says. “Most notably we included other supply chain operators like resource managers, forest owners and biomass producers. All of them have been invited to our development meetings to ensure that we are developing a standard which is practicable, which can be implemented while being as robust as possible.”

This further refinement resulted in the first working framework, the SBP Framework version 1.0, which was released at an event in Brussels in late March. This version will serve as a working version which biomass producers will be encouraged to participate in and member state policy makers will be asked to accept as a means of satisfying their sustainability and carbon reduction requirements. At the event, SBP chairman and Drax Group CEO Dorothy Thompson said, “We are encouraged by the interest that representatives of the EU Institutions have shown in the SBP and its Framework, and we look forward to working with them and other interested parties to make this a truly multistakeholder approach."

How It Works

From its outset, the SBP has been clear that it is not seeking to replace existing forest certification schemes like the Forest Steward Council, the Sustainable Forestry Initiative and others. In fact, the SBP has been built to leverage these existing certification schemes whenever possible. Still, these existing certification schemes fell short of the emerging requirements regulators in Europe were asking utilities, and by extension their biomass suppliers, to comply with.

Simply put the SBP Framework is a certification scheme that contains 38 indicators of sustainability that an independent third-party auditor will verify are being successfully met.

Where the SBP differs from other schemes is in its ability to recognize that for producers within a given region, the risk of not meeting one or even many of the indicators is quite low. In these situations, the indicator is recognized as low-risk and the third-party verifier moves on. To illustrate, SBP technical direc-

tor Simon Armstrong points to the indicator that prohibits child labor. “There is no risk of that in the United States or Canada because of existing employment laws, so you could just assess that as low risk on a regional scale,” he says. “You can simply say there are extensive regulations around child labor. So for operators in Canada or the United States, there is no need to go and check their employment records.” The risks that will be deemed low-risk are likely to vary from region to region. In early pilots conducted in the Baltics, 35 of 38 indicators were deemed low-risk. The SBP hopes this ability to hone in specifically on only those areas where there is a specified risk will result in the more efficient uptake of the scheme and reduced costs for producers.

The SBP is clear that one of the goals of the certification process is to provide producers with a platform to raise the transparency of what they do and how they do it with an occasionally wary and suspicious public. “Someone said recently that biomass doesn’t have a sustainability problem, its got a transparency problem. That’s quite an interesting concept,” Armstrong says.

The SBP process concludes with producers making a summary of their third-party assessment publicly available. “One aspect of this is that when you’ve performed your risk assessment correctly, you’ve engaged enough stakeholders you should be confident you haven’t missed any big risks,” says Armstrong.

“You want to be in a position that when you are making the summary publicly available, you don’t have a stakeholder saying you never gave us an opportunity to comment on this process. Finally, you certainly don’t want to be in a position where a stakeholder says we made you aware of a particular risk and you never did anything about it. This is about stakeholders having the opportunity to comment.”

Recognizing that producers may see this as simply a means to give their biggest opponents a platform to interrupt their business, the SBP is quick to point out the framework has been built to deflect these criticisms and provide a pathway for producers to put unfounded allegations to rest. “You don’t have to reach a consensus with these critics, you don’t have to reach an agreement,” says Armstrong.

MAY/JUNE 2015 | PELLET MILL MAGAZINE 23

« CERTIFICATION

“But you have to demonstrate that you’ve taken aboard their comment and if it falls within the scope of the SBP requirements, the 38 indicators, that you’ve done something about it.”

Getting Certified

To participate in the SBP Framework and get certified, producers will need to engage a third party verifier to conduct an audit. Thus far, the SBP has accepted nine third-party certifiers as applicants that are actively progressing towards SBP approval. Ann Arbor, Michiganbased NSF International was the first North American certification body to be granted applicant status by the SPB. NSF International will leverage deep experience in certifying both primary and secondary manufacturers in the forest sector and strong institutional experience with greenhouse gas verification to win certification contracts in the pellet sector.

“NSF International has completed its first SBP audit of a major biomass producer located in the southeast,” reports Norman Boatwright, manager of NSF International’s forestry programs. “The witness audit report is in the process of being completed and will be sent to SBP for approval. Once this is complete and SBP finds the audit and the audit report compliant with its standards and expectations, SBP will be able to approve NSF International as an official certification body.”

It is the hope of the SBP that existing momentum and progress with certification schemes and certifiers can speed the rate of uptake and approvals throughout the industry.

“The standards have been deliberately structured to align with FSC and PEFC and other certification schemes,” says Wilson. “If an auditor is coming to do an audit for FSC, PEFC, SFI etc., they will come with their checklist and then there will be additional questions on top for SBP. So the intent is an auditing team can come and they can tick off multiple schemes at one time. It was deliberately designed like that not only for the biomass producer but also for the certification body.”

This certainly aligns with NSF International’s thinking and, Boatwright adds, “NSF International currently certifies several biomass producers, all of which will likely require SBP certification. We are in the planning stages with several other biomass producers to determine the best way for them to become certified. Ideally, SBP audits should be conducted in conjunction with the other Forestry

CERTIFICATION Âť

Program audits to reduce disruption to their operations as well as save time and costs.â&#x20AC;?

Finally, the SBP is quick to point out a major distinction between their program and other certification programs. The SBP certification does not bring with it a licensing fee or a production-based fee. Producers will have to pay third-party verifiers like NSF International, of course, and Armstrong allows that other nonsubscription costs should be expected but that the design of the SBP framework should keep those to a minimum. â&#x20AC;&#x153;The costs of certification schemes donâ&#x20AC;&#x2122;t come from the audits so much as they do in the changes to their management system,â&#x20AC;? he says. â&#x20AC;&#x153;I think that is the crux of why this scheme is quite smart.

Because we donâ&#x20AC;&#x2122;t go down the route of requiring the same level of effort for each indicator irrespective of risk.

ing to make a lasting contribution to the renewable energy targets of not only European countries, but other industrialized nations just beginning their journeys towards reducing greenhouse gas emissions, a system that reduces drag on the market must emerge. Sustainability requirements continue to be a moving target throughout Europe with prospective pellet-buying nations still working to build requirements that satisfy their citizens and policy makers but are also practicable for utilities and their feedstock partners. A harmonized, singu-

lar set of requirements seems unlikely and this market reality gave rise to the SBP Framework.

The hope now of the SBP, its utility founders and the pellet producers counting on the European market is that regulators will see the logic in one certification scheme with the flexibility to satisfy multiple notions of sustainability.

Author: Tim Portz Vice President of Content, Pellet Mill Magazine 701-738-4969 tportz@bbiinternational.com

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Path Forward

The plan now is to let producers, certifiers and regulators get familiar and comfortable with SBP Framework version 1.0 over the course of the next 18 to 24 months, enabling all parties as the SBP website puts it â&#x20AC;&#x153;to learn by doing.â&#x20AC;? The SBP is planning on robust engagement with a broad swath of stakeholders and anticipates releasing a more informed and refined version of the framework, version 2.0, in 2016.

The biggest question left to answer is whether SBP certification will satisfy European regulators. These efforts are ongoing and, by necessity, are happening at a countryby-country level. Knowing that without regulatory buy-in the Framework would fail, the SBP built it with an eye to the requirements already put forward by the regulatory bodies. â&#x20AC;&#x153;The standards have been built around the U.K. and the Dutch requirements,â&#x20AC;? says Armstrong. â&#x20AC;&#x153;The U.K. are currently benchmarking SBP to determine if it meets the sustainability requirement.â&#x20AC;? The SBP Framework may be experiencing the greatest regulatory approval momentum in Denmark. â&#x20AC;&#x153;The Danes have a voluntary agreement between industry and government which was negotiated with industry, government and NGOs and the conclusion that they came to was that if the generators in Denmark are using SBP certified material, then that means that they are meeting their sustainability requirements,â&#x20AC;? says Armstrong.

Ultimately, if biomass feedstocks are go-

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