Woodchip prices now and in the future

With the passage of the Energy Bill, speculators are looking closely at the possible impact of increasing demand on biomass feedstock prices. We have seen the early impact on corn - what about wood?

In the current market the availability of woodchips, a residual from the manufacture of wood construction materials, is down because the housing construction is down. The price for woodchips has gone up because the supply is low.

What can we expect when wood begins to replace coal and natural gas in boilers or is used as the feedstock for conversion to biofuels? Supplies will increase to meet demand and the price will go down, right?

Not so, according to a press released just distributed by Business Wire that can be found at Forbes.com. Here is the story in its entirety...

Alternative Fuel Demand Boosts Prices of Forest Products

Power companies in the South and Pacific Northwest will drive prices for wood fuels higher as new facilities are built to produce an energy alternative to fossil fuels, experts in the forest products industry said Friday.

But the supply of wood chips - a byproduct of lumber production used at pulp mills and power facilities - is dropping as residential construction drastically slows in the weak housing market. The reduced supply has raised prices by almost 10 percent since the third quarter of 2006.

"The supply of wood chips is already low because of the problems with the housing market," said Pete Stewart, president of price information provider Forest2Market. "Increased demand from power facilities will continue to increase prices."

The current increase in demand for wood fuels is coming from forest products companies in the U.S. that have either updated or installed new boilers that run entirely on biomass - plant material such as wood chips, bark and tree limbs. Forest products companies burn wood fuel to power their operations.

Southern forests are facing additional pressure from Europe as utilities overseas, bound by the Kyoto protocol to reduce greenhouse gas emissions, import wood chips to produce power. The weak dollar has made it cheaper for Europe to import wood fuels to satisfy their energy needs.

The U.S. has not signed Kyoto, but individual states are mandating a reduction in carbon dioxide emissions from power companies.

In the Pacific Northwest, the dynamics are slightly different. The majority of wood chips are sawmill byproducts used by the region's pulp mills. Generally, wood-fueled boilers are fed hog fuel, which is made of bark and other wood waste unsuitable for pulp production.

"With the startup of new power facilities, the forest industry will have the opportunity to earn additional revenue by collecting forest biomass to supplement residual hog fuel," said Gordon Culbertson, Forest2Market's Pacific Northwest region manager. "Many companies are seeking creative strategies to develop biomass as an economical source of fuel."

Nevertheless, prices for wood chips in the Pacific Northwest are increasing because sawmill production is idled by poor lumber demand. To fill the void, small saw logs that would have otherwise been used in lumber production are being chipped.

The demand for wood fuels throughout the country will continue to grow. U.S. utility companies are planning to build biomass-fueled power facilities to reduce greenhouse gas emissions and avoid the rising costs of oil. These facilities should come online in the next two to four years, which will further increase competition for wood chips.

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Senator Wyden: Thinning Forests to Save Them

Well, at least someone in the Senate has it right. Thinning forests is not only "not all bad" but absolutely necessary if we hope to return forest to their historic condition - their condition prior to the relocation of native americans, the rampant logging, the counter-productive suppression of forest fires, obstructive environmentalist litigation, and real estate overdevelopment of wildlands. Without thinning, there will be insufficient funding of this important work which will help reduce forest fires, their greenhouse gas emissions, and their rapacious impact on wildlife habitats.

Below is a press release reporting on Senator Ron Wyden's (D-Oregon) explanation of the need for thinning legislation. On January 9, 2008, a story by Jeff Barnard appeared in on the AP news wire about Wyden's plans to introduce legislation in support of measures to expedite the deployment of national forest logging projects.

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Wyden Says Pacific Northwest Forests in Trouble, Thinning Will Help Increase Forest Health, Reduce Fires, Increase Jobs
Tuesday, January 8, 2008

Medford, Or -- Thinning the Pacific Northwest’s troubled federal forests will increase forest health, decrease the chances of catastrophic forest fires and create more timber industry jobs for Oregonians, Senator Ron Wyden said today.

“Thinning creates a healthier forest, a healthier economy and a healthier environment,” Wyden said during opening remarks at a roundtable discussion on how to improve federal forests in the Pacific Northwest. “Trees going up in smoke do nothing for the quality of our communities, our air or our families. As chair of the Public Lands and Forest Subcommittee, I am committed to finding a solution that protects our treasures while meeting our needs for healthy forests and providing timber for our mills.”

The roundtable discussion included representatives of federal forestry agencies, timber, recreation organizations, conservation groups and others. The roundtable in Medford and another earlier this week in Bend were are a follow up to a Public Lands and Forest Subcommittee hearing in Washington, D.C. last month.

“It’s outrageous, even by federal government standards, that over half of the Forest Service budget is spent on fighting fires while tens of millions of acres of choked, second growth forests go un-managed, waiting to burn,” said Wyden. “Government inaction, endless appeals, and poorly allocated resources have put communities, jobs and forests at risk like never before. If we are willing to work together toward bipartisan, sensible solutions, we can restore our forests, reduce the risk of catastrophic fire, protect old growth and ensure good, family-wage jobs for decades to come.”

Wyden noted that The Healthy Forests Restoration Act (HFRA) authorized up to $760 million in new money to complete hazardous fuel reduction work on 20 million acres of federal forest land, but that only 77,000 acres had been treated.

“At that rate, it would take the Bush Administration more than 250 years to complete the Act’s mandate,” Wyden said. “I, for one, am not willing to wait that long.

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No incentives for national forest waste-to-biofuels

As a result of some backroom redrafting of the Energy Bill in the House, USDA Forest Service authority to fund proper forest stewardship through the sale of forest thinning slash and waste has been dealt a serious setback - needed bioenergy infrastructure will be ineligible for woody biomass-to-ethanol incentives.

This is a blatant usurpation by a few autocrats of the conscientious efforts and intent by many bipartisan congressional leaders. The sad part is that it will be communities around the forests that are hurt most because proper forest stewardship is long overdue on public lands. This was a prime opportunity to enable the Forest Service to take corrective action to avert bug infestations, forest fires, and real estate development in and near public forests.

Here is a reprint of an article that appeared in the Rapid City Journal.

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Energy bill cuts national forest wood waste
By Steve Miller, Rapid City Journal

A last-minute change in the federal energy bill discourages the use of wood chips, tree limbs and other wood waste from national forests in the production of ethanol, according to a forest industry spokesman.
The surprise provision makes no sense, says Aaron Everett, a spokesman for the Black Hills Forest Resource Association.

The energy bill passed by Congress and signed by the president earlier this month requires an increase in the amount of ethanol produced from renewable biomass materials such as grasses and wood waste. The bill requires 21 billion gallons of ethanol to be produced from biomass, including cellulosic materials, by the year 2022. Corn-ethanol production is slated to double, to 15 billion gallons.

All of South Dakota's congressional delegation worked hard to make sure slash piles and other wood waste from national forests would qualify for the definition of renewable biomass in the energy bill, Everett said.

Rep. Stephanie Herseth Sandlin, D-S.D., a member of the House Natural Resources Committee, made sure the definition included national forests when the bill came out of that committee, Everett said.

However, the bill had been changed in the House to exclude national forests before it got to the Senate. Everett said he suspects environmental interests got the provision inserted at the last minute.

"I think it fell victim to groups whose aim is to limit, in any way possible, forest management on public lands," he said.

Everett said the exclusion discourages the use of hundreds of thousands of tons of wood waste just from the Black Hills National Forest.

The provision was discovered too late in the process to change by the time it arrived in the Senate, according to Brendon Plack, a legislative aide to Sen. John Thune, R-S.D. Plack said much of the language of the 1,100-page bill apparently was written behind closed doors in final negotiations.

The provision doesn't outright ban using wood waste from national forests to make ethanol, Plack said.

However, it ensures that ethanol made from such national forest biomass will not count toward the increased renewable fuels standard target in the energy bill, he said.

That means ethanol made from national forest biomass will not qualify for government incentives, Everett said.

"It represents a policy disincentive," he said.

Companies making ethanol from wood products will have more incentive to use wood waste from private land, Everett said.

There is one exception in the definition: biomass from federal forests in the immediate vicinity of private homes qualifies for the renewable fuels standard.

"Essentially, for the purposes of energy incentives for the federal government, forest biomass on national forest lands might as well not exist," Everett said.

(The definition in the bill, however, does appear to list wood waste from tribal lands as qualifying for the renewable biomass definition.)

In contrast to the energy bill, Plack said, the farm bill does count wood waste from federal forests as renewable biomass.

"That fits in well with Sen. Thune's biomass crop transition program, which would pay individuals who transport that biomass to bio refineries on a per-ton basis," Plack said.

The farm bill has passed both the House and Senate, and a conference committee will meet next month to iron out differences between the two bills.

Everett said an important existing incentive for renewable energy was stripped from the bill when the Senate dumped a tax package. Some Republicans objected to taxes on oil companies in the package. But it also included reauthorization of a production tax credit of a 1-1/2 cents per kilowatt hour for renewable electricity production, Everett said. The incentive promoted practices such as burning wood chips to make electricity, he said.

Contact Steve Miller at 394-8417 or steve.miller@rapidcityjournal.com

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Logging trees to save forests from development

One of my favorite forest industry resource sites is the Smallwood Utilization Network operated by Craig Rawlings and Nora McDougall of Missoula, Montana. I find a timely piece of information whenever I read one of their monthly newsletters (you can subscribe for free here).

This month's nugget is an editorial published in the Seattle Times about the retrenchment of various conservancy groups who are suddenly realizing that the forest products industry is good for forests and is a bulwark against the plagues of bugs, fires, and real estate developers that are ruining these precious resources.

The author of the article is Brian J. Boyle was Washington's commissioner of public lands from 1981 to 1993 and is the leader of the Northwest Environmental Forum. The University of Washington's College of Forest Resources has brought together a broad spectrum of stakeholders to apply scientific and policy information to address critical environmental and natural resource management issues. Potential users will include resource and environmental agencies; energy, forest, agriculture, and real estate interests; and land conservancies, environmental groups, tribes, and NGOs.

Here is the text of his article in its entirety...

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Save Northwest forests for conifers, not condos
By Brian J. Boyle

The Nature Conservancy announced this past summer that it plans to log trees on 161,000 acres in the Adirondack forest in New York to preserve the forest. The conservancy says that the logging will help pay off the debt incurred buying the land from a private owner, pay taxes, supply logs to a local sawmill and protect "a unique jewel of nature from fragmentation and development."

In Washington, the Cascade Land Conservancy has acquired 140,000 acres of "working forests" with a similar goal — to prevent development. The land conservancy also has plans to log sustainably, in keeping with the idea that the forest "works" when it provides logs and jobs — and income for the conservancy to manage the forest.

One might ask, how did the conservationists become tree-cutters?

Twenty years ago, environmental activists chained themselves to trees to save them from cutting, and the forest industry was often branded a threat to the environment. Yet, today, sustainable logging may be the salvation, because in the words of one conservationist, it's a choice between conifers and condos.

When you fly over Western Washington and some areas east of the Cascades in the daylight, you see unbroken swaths of trees. A forest? you ask. But try flying over at night — in Eastern King, Snohomish, Okanagan or Lewis counties — and what you will see are lights, thousands of them, from houses on rural subdivisions split into one- to five-acre parcels. This isn't a forest, it's "rural residential." This forest doesn't have spotted owls or murrelets, and the dominant bird species may be the crow. Once-timbered slopes now have serpentine driveways leading up to rural mansions.

Working forests, on the other hand, include areas actively managed for timber and for environmental services, such as fresh water, wildlife habitat and climate protection. Washington's working forests include 8 million acres of private and tribal forests and more than 2 million acres of state forestland.

Protecting the forests from development has turned conservation leaders into working-forest proponents. They've teamed up with old enemies and other strange bedfellows to keep sustainable timber operations in business, and they're stopping forests from being converted to subdivisions the old-fashioned way, by buying the land.

The forest industry isn't the same one your grandparents knew. The so-called industrial forest is disappearing. Weyerhaeuser is the last big corporate owner in the Northwest and its future is uncertain. Other former industrial forests are now owned by pension funds and investors and valued as financial investments, not for their tree values, and are swapped from landowner to landowner to rebalance portfolios.

Family forest owners eke out a living while fending off pressures from neighbors who live in subdivisions that used to be forests. Any forest landowner may find it expedient to sell as Washington's urban areas grow and subdivisions are permitted. The money from a developer fattens a retirement portfolio faster than the money from trees that can't be harvested for 30 years. But, a forest thick with houses ceases being a working forest, a shelter for wildlife and a protector of streams.

Conservation groups, local land trusts, and timber industry, government and tribal representatives, at a series of dialogues convened as the Northwest Environmental Forum, agreed that to sustain the forest environment, they need to help keep the timber industry in business through incentives for landowners. Here is what this diverse group thinks the Legislature should do:

• Create conservation markets, by putting a price on fish-and-wildlife habitat and carbon capture, so landowners can realize profits from more than just timber;

• Help nonprofits and others acquire and trade easements and development rights to protect critical forest watersheds;

• Remove wood from overstocked and overstressed forests to reduce wildfire risks, protect wildlife habitat and save state forest-fire-suppression funds;

• Help investors produce bioenergy from wood cellulose;

• Provide tax incentives so developers permanently protect forestland in exchange for higher-density development elsewhere.

Many say the Puget Sound-area population will double by 2050. That's a lot of potential condos, unless we can find ways for the forests to be saved and to support this new image of the industry.

Copyright © 2008 The Seattle Times Company
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