Bio-Energy Industry Slow to Develop

Wed October 14, 2009 - Midwest Edition
Construction Equipment Guide

Kit Hasbargen (L), Hasbargen Logging, inspects the Cone-Head chipper and discusses the operation with Representative Jeremy LeLacheur (R), Dynamic Mfg.
Kit Hasbargen (L), Hasbargen Logging, inspects the Cone-Head chipper and discusses the operation with Representative Jeremy LeLacheur (R), Dynamic Mfg.

Many factors (supply, cost and infrastructure) are influencing the development of the biomass supply infrastructure, but not the feasibility or need for new markets. Many biomass feedstock projects are either operational or preparing to begin construction in the immediate future. This is evident in the Laurentian Energy Authority, Minnesota Power, Renewafuel, and Wood Pellet projects.

The equipment has been developed for the processing and transportation of biomass. Vendors such as Rotochopper, Morbark, Vermeer, and Dynamic Mfg. (Cone-Head) have been demonstrating their equipment at trade shows and in the woods to prospective logging operations.

So with the loss of 20 to 25 percent of the demand for stumpage eliminated through the closure of Weyerhaeuser and most of the Ainsworth operations why haven’t many loggers shifted to the biomass markets? One reason is that the loss of these traditional round wood markets has resulted in less biomass generation that would have been produced by the harvest of stumpage to support these mills. Theoretically, biomass would be a co-product created during round wood harvesting that would add value to the timber harvesting process.

Tops and Limbs Cannot be Harvested as Biomass and the Trunk Left Standing

The utilization of round wood (chipped) to support bio-energy demand would create new markets and support the feedstock supply demands of what may become a new primary forest products industry. The end product should not dictate forest management or resource utilization. Whether the product is dimensional lumber, paper, engineered wood, energy, ethanol, or toothpicks the market will determine the highest value added use of the forest resource.

So what is the “Value” of bio-energy created through the use of biomass as a fuel source? It cannot be benchmarked against other fossil fuels such as coal and natural gas. Those fuel sources do not meet the mandate of generating energy by renewable sources. Current bio-energy markets have established rates for biomass feedstock at levels that do not encourage the significant investment necessary to develop the infrastructure and questionably to remain profitable. Biomass delivered rates in Minnesota are $19 to $23/ton. Authoritative reports track national and international rates for biomass or hogfuel higher than rates in Minnesota. Clearly, the higher rates reflect the recognized cost of operation, transportation and equipment maintenance necessary to support a strong biomass industry. The Minnesota bio-energy sector will have to increase the rate paid for delivered biomass if it wants to ensure a stable and sustainable supply volume and system.

The biomass resource represented an expense to public land managers that were required to invest time and money in the disposition or burning of the slash. Charging for what once was an expense and liability to a fledgling emerging industry attempting to develop the necessary infrastructure to meet the potential of a new primary forest products industry contributes to tight profit margins and further impedes the development of the bio-energy markets. Allowing biomass utilization at no cost as part of public timber harvesting activities should be permitted with the public benefit/value being the elimination of the time and money required to dispose of the material.

Additionally, fair profit margins and long term contracts will encourage the significant investment required ($250,000 to $450,000) of logging operations to gear up to participate in the bio-energy markets. The existing and proposed projects will require an expansion of the current equipment infrastructure to meet the potential demand. Financial assistance with attractive terms will off-set some of the risk and expense and enable logging operations to acquire the equipment to expand their traditional operations into the biomass sector. See side bar “Forest Industry Eligible for Iron Range Resources Business Development Funding”.

In order to jump start the bio-energy market fiber resources need to be generated from traditional round wood harvesting operations at the volumes prior to the shutdown of OSB mills (even if it means using “unmarketable” round wood for biomass operations). Delivered rates need to be increased to levels that reflect the true cost of operation, transportation, maintenance and profit. Financial assistance needs to be available to encourage investment in bio-energy harvesting and transportation equipment. When these policies and mechanisms are established potential of the bio-energy markets will begin to be realized.

ACLT UpDate Editors Note: Recent unconfirmed reports indicate that prices for biomass fuel are increasing and range between the mid to upper $20’s per ton. If true this is a good trend that will have a positive impact on the effort to secure biomass fuel. Purchasers should continue to adjust the cost structure upward to reflect the true cost of production and transportation.

This story was reprinted from ACLT UpDate, September/October 2008.