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Finding Markets for Wood Biomass: Knowing the Incentive Programs, Markets and Regulations Makes All the Difference
Biomass Markets: Finding the right place to maximize the use of wood waste can be difficult, the Pallet Enterprise discusses opportunities with a wood utilization expert. Are you getting the most out of you biomass material?
By Rick LeBlanc
Date Posted: 7/2/2015
Finding the right place to maximize the use of wood waste can be difficult, the Pallet Enterprise discusses opportunities with a wood utilization expert. Are you getting the most out of you biomass material?
Every pallet and lumber company has some wood waste and biomass residue. Knowing what best to do with it can be difficult at times to determine. That’s where knowing your local market and the trends in the biomass sector can be a real benefit.
The Pallet Enterprise recently discussed the latest developments concerning biomass regulations, programs and markets with Larry Swan, a wood utilization and marketing biomass specialist for the U.S. Forest Service. A registered professional forester in California, Swan brings decades of experience to the discussion, and some refreshingly candid observations. Swan has worked in hundreds of projects involving wood products companies, including pallet companies.
Pallet Enterprise: The Biomass Crop Assistance Program (BCAP) was reauthorized by the 2014 Farm Bill through 2018. Can you give us a quick overview?
Swan: There are two separate parts of the Biomass Crop Assistance Program (BCAP) program. One is for people growing biomass crops so they can establish it in certain areas. The second part, which interests the forests products sector, is a subsidy or matching payment program if the material is taken straight from the ground, in other words not from a processing plant, and not from a middle man. It has to go from the property owner or the contractor right to a facility that has been approved by the Farm Services Agency (which oversees the BCAP). This matching program provides up to $20 match per dry ton. It had a higher value under the 2008 Farm Bill (from 2009 to 2012), but just about anything helps. Again, you have a low value material, moving it is difficult. That’s basically the idea.
Pallet Enterprise: BCAP was recently re-authorized through 2018 under the 2014 Farm Bill. Why is that decision important?
Swan: BCAP is important because it reinforces certain national goals toward building the renewable energy sector. Biomass can be used for energy as well as biofuels. It affects climate change as well. When you remove biomass instead of burning it, or when you burn it in a controlled environment or if you are using it so that it is not going to decompose rapidly, you are in essence reducing greenhouse gases.
Federal officials also like biomass because its removal helps reduce fire hazard, and it creates and sustains jobs in rural areas. We are not an economic development agency however we indirectly assume that role. What we do directly affects communities and jobs. We are very interested in supporting the forest products infrastructure and sustaining what is left of it. Over the last 40 or 50 years we have watched a steady reduction in facilities but have also seen the ones that remain become much more efficient and oftentimes produce as much volume as many of the smaller ones previously did. We are very interested in forest thinning and restoration, and so we recognize that we need to retain what infrastructure we have left.
Pallet Enterprise: Is BCAP of interest to pallet and lumber companies?
Swan: Not so much in the West; potential beneficiaries would be facilities that have a mill associated with their pallet plant. For most pallet companies BCAP isn’t going to help them. It isn’t intended for processing residues, such as sawdust. However, if you have a sawmill attached to your pallet plant, you buy federal timber from U.S. Forest Service or BLM hazardous fuels reduction or insect and disease projects, and you need to dispose of slash, you could use the benefit. Many more pallet companies in the East have their own mills than in the Western United States.
Pallet Enterprise: Can you describe the biomass market as you see it today.
Swan: In California, there are many types of biomass, including agricultural, urban, forestry, and really any carbon product. California has the most facilities in the country that burn biomass for power production. There are 24 or 26 industrial facilities still in production, so that is one key market, although 20 – 25 years ago there were double the number.
A second key market is mulch and soil amendments. There is competition in biomass especially forest biomass which tends to be cleaner. Then there is animal bedding. One company in California buys shavings from sawmills and bales them, and it also has the only whole log shavings mill I believe along the West Coast.
A fourth market, which we don’t have in California, is for composite panels such as MDF and particleboard. In other parts of the country a lot of fiber from wood processing plants could end up in these plants. In California we only have one composite panel plant left, so a lot of your highest value residues, such as clean chips, end up going to low value applications, such as mulch or soil or in boiler fuel. In the Pacific Northwest and British Columbia this material would be going into pulp and paper.
Pallet Enterprise: We may as well talk about pellets, seeing as everyone else is. What is the opportunity you see right now in pellet production?
Swan: The biggest trend in the last ten years for certain regions has been pellet production. None of us could have predicted that in the 90s because it was driven by policy change in Europe. The impact has been enormous. The number and the size of the pellet manufacturers in the Southeast is changing the market in ways I wouldn’t have ever imagined years ago. I just look at it today and marvel. It seems like another new plant is announced every week.
Pallet Enterprise: Is the pellet trend something that pallet companies can take advantage of? If so, how?
Swan: The domestic market is relatively well supplied, other than in certain situations such as last winter, when we saw the severe weather. We have seen this before, where people rush into the market, and this is not an unheard of question from pallet makers.
Pallet makers generate a lot of sawdust, and a lot of it is pretty dry, so they are thinking that pellets might make a pretty good venture. But most companies find that unless they are well financed and have a separate sales network, that it is not as easy as it looks. I haven’t worked with anyone where it hasn’t take at least a year to work out their issues, and on every business plan they write that they are going to make money in that first year. You have to have capital. This isn’t just something where you can buy some surplus equipment and squeeze out little sawdust sausages the first day. Because it never works that way. It is going to hurt.
There are at least four wood remanufacturers in Oregon making pellets. These tend to be regional operations selling to feed and seed stores, and mom and pops rather than trying to hit the big box stores. You have the well-established pellet makers who are selling to those. We would like to see more industrial uses of pellets, for example where it replaces fuel oil or propane with an industrial pellet.
Pallet Enterprise: What range of investment are we looking at for pellet production?
Swan: If they already have a plant and are producing their own waste, then the question comes in, how dry is the material. If they are running dimension lumber, that is supposed to come in at less than 18% moisture content. But you need 10%, so these facilities would probably have to do some drying of the material. And if you do, total investment for a plant consuming about 10,000 tons of dry sawdust would be $1.5 to $3.5 million dollars, which also include the pellet and log machines. A lot depends on your raw material. Pallet recyclers, often have material that is contaminated with metal even if they have good magnets, and you need really clean material for residential pellets. Another key limiting factor is operating capital. You have to finance not only your operation, but also your inventory since you do not start deliveries until just before the heating season.
Pallet Enterprise: What about fire logs?
Swan: Fire logs are easier to make than pellets. You can use some bark in them and specifications are not as tight. The caveat is that if you think it looks simple, it probably isn’t. You have to study it, and you might want to think about partnering up with another company that already has a marketing infrastructure in place and wants the extra capacity. If I was a pellet and fire log company and I was up in one area, and I had lots of customers down in your area, you might want to talk to me. It is not like you are going to make money hand over fist, but maybe you will reduce your cost incrementally because you don’t need to get rid of as much. I would certainly consider speaking to someone already involved in the business, if they know how to do it. You might save yourself months on the learning curve. Having said that, pallet companies tend to be very independent. If you are working with someone from outside your industry, maybe it is worth having a conversation.
Pallet Enterprise: What other markets come to mind for biomass?
Swan: Pallet companies produce mountains of sawdust, and they think about this day and night. Generations of owners have been thinking about this dilemma. They ask, “How can I lose less on my residue to improve the viability of my company?” I don’t want to pretend that I know more than the business people because they go to sleep and wake up thinking about these things. When you are a smaller operation, scale can be difficult.
Mulch only works with larger particles. If you only have finer particles, then you are talking about something like a soil amendment. Say you are near a brick factory. Bricks take bulking agents. I’ve seen in South America where people use sawdust as a bulking agent. If you can process the material into a very fine clean wood flour, it is used sometimes as a filler in plastic rather than talc, but this is a very sophisticated process. Another application of woodchips is for biofilters used to reduce odor in wastewater treatment plants. You wouldn’t know about it as a pallet person, and I only heard about it from a mulch and soil amendment maker.
Pallet Enterprise: Do you have any final thoughts?
Swan: If I was just doing pallets, generating tons of sawdust and some grindings, I would be looking at the things that could be done right now, like soil amendments, mulch and biomass energy. And for those folks who really have enough waste material, you might or might not want to carve that out as a new business. I’d stay local and simple as a pallet maker without a sawmill attached.
If I had a sawmill attached to my facility, you can do something different. The log sort is very important. Optimally, you will just get the logs that you want. But not uncommonly you will get other logs you can’t use. In some parts of the country, maybe I would consider adding a firewood business. That is not a high cost startup, but it has an intense distribution where you build inventory all year and then ship it all out over the course of three months. Many people who I know in the pallet business, they are not trigger happy. They would plot out any initiative very carefully. They just don’t have capital to waste.