Chipping away

NH’s timber industry tries to adjust after governor’s biomass veto

Photo courtesy of NHTOA

Jeff Eames, owner of Fort Mountain Companies, was driving between two logging jobs in Loudon when the phone rang. A wood buyer was calling to ask if Eames could deliver wood chips to Pinetree Power in Tamworth, one of the remaining wood-fired power plants operating, if sporadically.

“Are you buying wood?” Eames asked.

“They’re operating, but there’s no predicting where the market is going to go,” the buyer replied. “I don’t want to make it difficult for you, but they never know when they’re going to run.”

Eames said he could ship a truckload of chips the next day and the buyer told him “call me Friday and I’ll get out my crystal ball. I used to see months ahead. Now I can only see days ahead.”

The New Hampshire market for wood chips was rattled in August when Gov. Chris Sununu, for the second time in as many years, vetoed legislation extending subsidies to the biomass plants. Unlike a year ago, the Legislature upheld his veto. The shadow thrown over the future of the plants reaches to both the forestry industry and the forests themselves, because without a stable, buoyant market for low-grade wood, the incentive and capacity to harvest it diminishes, leaving foresters without their most effective means of generating healthy, productive, valuable and sustainable forests.

Some 84% of the state is forested, and 76% of it is privately owned — 68% by individuals and families and 8% by commercial enterprises. The federal government owns 14% and the state owns 5%. Northern hardwoods — maple, red oak, birch, beech and ash — represent little more than half the growth, while softwoods — pine, white and red, spruce and hemlock — account for another 20%. Between 70% and 80% of this growth is low-grade wood suited only for pulp, chips and firewood.

“The best way to get quality timber is to maintain a strong market for low-quality wood,” said Dennis McKinney, a consulting forester from Bennington. He said that the climate and soils of the Northeast enable forest regrowth to outpace timber harvesting, despite short growing seasons and slow-growing species.

“We can grow lots of very high-quality timber,” McKinney said, “but the tail comes with the hide, and we need markets for low-grade wood. Without it, it will quickly curtail my ability to practice sound silviculture.”

Value of wood chips

Eames’s crew was thinning 45 acres to grow high-quality timber and provide wildlife habitat. Eames watched as a feller buncher — a tracked vehicle with a claw and blade that gathers, cuts and fells trees at a stroke — crawled through a patch of forest culling the weakened, crowding trees to lend space and sunlight to their stronger competitors. “We’re keeping the good oak for the acorns and opening things up for migratory birds that don’t thrive in dense woods,” he said. He likened forestry to architecture. “We’re making a new forest,” he said, “and a market for low-grade wood is our most important tool.”

At the log landing, Eames pointed to stacked sawlogs that would find their way first to sawmills then to customers at home and abroad as finished lumber or prized veneer. “We fill containers shipped to China,” he said.

Jeff Eames, owner of Fort Mountain Companies, has experienced firsthand the variability in the wood chips market after the expiration of state subsidies.

Passing a larger stack of pulp logs, he said “the paper market is coming back,” explaining that rising demand reflected a preference for biodegradable material over plastic and Styrofoam while corrugated container output was growing along with online shopping.

Then as a slasher/delimber/loader machine plucked a spindly, leafy treetop from a pile, stripping it to a rattail, cutting it to length and dropping it on a fast-growing heap alongside a chipper, Eames asked, “What do I do with that?”

“That” was biomass — harvested at a rate of 30 to 60 tons per acre, depending on the age of the forest and suited mostly for wood chips, or “hog fuel,” chips mingled with leaves, bark and other chaff.

By lunchtime, the haul that Eames’s crew reaped that morning reached Pleasant View Gardens, one of New England’s largest wholesale greenhouse and garden center enterprises, not 10 miles away in Loudon.

There, the 30 tons of biomass will fuel a biomass plant producing heat and electricity. The wood chips have displaced 300,000 gallons of oil to lower heating costs by $900,000, or by 85%, a year.

Biomass represents nearly 40% of a typical timber harvest but only 3% of its monetary value, while sawlogs represent a quarter of the volume but more than 90% of the value. Generally, loggers pay landowners between 50 cents and a dollar a ton for the low-grade wood harvested on their property, then chip it and truck it to a power plant, where it fetches between $20 and $25 a ton.

“It costs more to make a wood chip than anything that comes out of the woods,” said McKinney, referring to the capital costs of mechanized harvesting and processing. “But it has the least dollar value. And chips don’t travel far,” he added, explaining that on top of the cost of harvesting the cost of distant deliveries further narrows thin margins.

Growing economic loss

In 2017, 1,363,805 tons of chips were delivered to the six legacy wood-burning plants — Indeck in Alexandria, Bridgewater Power Company, Springfield Power Company, DG Whitfield LLC and Pinetree Power in Tamworth and Bethlehem. Since then, Indeck has shut down and, more recently, owners of the plants in Springfield and Whitefield announced that they would go offline as well, resulting in a total of 40 layoffs.

Meanwhile, two larger plants — Burgess Biopower, a 75-megawatt facility in Berlin that began operating in 2013, and Schiller Station in Newington, where, in 2006, a 50MW boiler was converted from coal to wood — burn 750,000 and 400,000 tons, respectively, each year. The Berlin plant has a power purchase agreement with Eversource that runs for 20 years. Granite Shore Power purchased Schiller Station from Eversource last year and has guaranteed to operate it for at least 18 months.

Last year, the New Hampshire Office of Strategic Initiatives (OSI), applying a generic economic model and 2009 dollars, projected the economic impact of the closing of the six legacy plants. The low estimate projects 430 jobs would be lost in the first year and an average of 398 over the next 10. The high estimate projects an initial loss of 645 jobs followed by annual average losses of 575. In addition, OSI projects the loss of personal income to range from $31.5 million to $42.2 million in the first year and to average $42.2 million to $55.9 million during the next 10 years.

However, a parallel study by Daniel Lee of Plymouth State University for the New Hampshire Timberland Owners Association (NHTOA), using a model designed by the United States Forest Service specifically for the industry and 2016 dollars, claims that OSI grossly underestimated the volume and value of chips consumed by the plants and, consequently, the level of employment, income and economic activity they support. Lee calculated that the six plants employed 121 and carried a $11.6 million payroll and supported another 583 jobs, mostly in forestry, with a $28.1 million payroll. With the multiplier effect, he concluded the plants directly and indirectly generated 932 jobs, $50.9 million in payroll and $254.5 million in economic output. The impact will be widespread.

“This is not a North Country issue,” said Tom Thomson of Orford, who bought his first woodlot as an 11-year-old, 63 years ago. He stressed that while a third of the 1,349,320 tons of biomass delivered to the six legacy plants between April 2014 and March 2015 was harvested in the three northernmost counties — Grafton, Coos and Carroll — 43% came from Merrimack, Belknap and Hillsborough counties. Rockingham, Sullivan, Cheshire and Strafford counties, the furthest from the plants, produced less than a quarter of the total tonnage.

Thomson also said the economic impact will not only be limited to loggers and foresters.

Last year, when the governor first drew his veto pen, Thomson said that, within a week, one equipment dealer lost $10 million in canceled orders. Logging machinery requires regular maintenance and frequent repairs, he continued, which provides work for local mechanics and welders in rural communities. “There will be cascading effects felt throughout the economy,” he said.

Forests at risk

Mike McPhail of Farm Credit, a borrower-owned cooperative lending to the agricultural, forestry and fishing industries, said that because of the capital investment in equipment, the most highly leveraged operators in the forestry industry are at greatest risk from a downturn. He said they may not only find themselves challenged to service their debt but also faced with a weak market for their depreciated equipment if they seek to downsize and restructure their operations.

Eames said that two logging operators were said to be filing for bankruptcy.

However, McPhail said that, despite the uncertainty overhanging the biomass market, he was not aware of any general tightening of credit to the forestry industry, but instead stressed that lending remained based on conventional criteria of the safety and soundness of particular borrowers and expected operators to be seeking new markets for low-grade wood and more often leaving “tops and limbs in the woods.”

Apart from its economic effects, the shrinking market for low-grade wood puts the future health and productivity of the forest at risk.

Foresters fear the initial response could be “high-grading,” or harvesting only the most valuable timber and leaving the rest to grow, as McKinney said, “to pay the way out of the woods.” Eames recalled a fellow forester saying, “We can all do good forestry when our bellies are full.”

Charles Niebling, a forester and principal of Innovative Natural Resource Solutions in Antrim, explained that high-grading depletes the genetic stock of the forest by removing the hardiest trees and foregoing their future seedlings on the one hand while leaving the weakest trees, those most vulnerable to disease and pests, on the other. “Future growth is regenerated from inferior genetic stock and over time the forest is impoverished,” he said.

Jasen Stock, executive director of the New Hampshire Timberland Owners Association, stressed that forest management is an investment with a long time horizon, with as 50 to 70 years pass from sapling to sawlog. With a woodlot of his own, he said that thinning forests and removing low-grade wood on a regular rotation incrementally increases the proportion of high-quality timber. “I may not see the return,” he said, “but my children will.”

Apart from producing commercial timber, Eames emphasized that well-managed forests also provide wildlife habitat, offer recreational opportunities, contribute to water quality and shape the natural landscape of the state.

“We’re sitting in a wood basket,” he said, “and virtually all of it is open to the public at little or most often no cost.” He said New Hampshire, along with Maine and Vermont, are among the few states “where you can get out of your pickup and walk on to someone’s else’s land without a problem.”

These benefits are enriched by the quality, productivity and value of the forests.

Eames said he worries that if landowners fail to get reasonable returns from harvesting wood they may expand recreational uses — off-roading and snowmobiling, hunting and fishing — and, like their counterparts in other states, charge for the experiences.

Recently, he learned of a landowner who posted his property and leased it to a single hunter.

Opportunities and markets

“We’re not in this alone,” said Brad Simpkins, director of the state Division of Forests and Lands, noting markets for low-grade wood are weakening across the Northeast. But, while expecting “tough going in the near-term,” he said he was optimistic. “I don’t care where the wood goes once the truck leaves,” he said, “and there will be different uses and new technologies. That’s why we’ve been using wood for so long.”

Last year, Simpkins said, FORMaine, a partnership of industry, government and academia, developed a roadmap to expand that state’s forest product industry by 40%, from $8 billion to $12 billion a year, by 2025. The plan includes identifying emerging wood products and markets, particularly the prospects of heating with low-grade wood.

Simpkins anticipated more wood would be used for heating, and technologies would be developed to substitute wood for plastics and turn wood into insulating materials and liquid fuels like biodiesel.

“There are opportunities and different markets, especially for low-grade wood,” he said. “There will be some choices to be made and the question is does the logging industry have time to wait?”

Niebling said he believes wood-fired heating plants offer the most promising market for low-grade wood. Natural gas, he said, reaches less than a quarter of the state and less than half its population, while only Maine consumes more heating oil per capita than New Hampshire.

“New Hampshire imports $1 billion in fossil fuels each year,” he said, “and that $1 billion leaves the local economy.”

According to the Wood Energy Council, more than 100 municipal, institutional and commercial buildings — including schools, hospitals and businesses — are currently heating with wood-fired boilers, burning some $6 million worth of pellets or chips a year.

And Burgess Biopower announced in May that it was awarded a $500,000 grant by the Public Utilities Commission to add a thermal energy recovery system to its plant. The system will heat a $25 million hydroponic greenhouse in Berlin and perhaps the city’s streets and sidewalks.

Niebling acknowledged the initial capital costs of wood-fired heating plants are challenging, but he said there a number of programs to mitigate them and the payback period is very attractive.

In 2018, U.S. Sens. Jeanne Shaheen of New Hampshire and Susan Collins of Maine introduced the “Community Wood Energy Innovation Act,” reauthorizing a competitive grant program with an appropriation of $25 million to help state and local governments as well as private commercial entities install biomass heat and energy systems.

Biomass provides an economical and sustainable source of heating fuel produced and consumed locally, which, unlike biomass plants generating electricity, is neither dependent on government for operating subsidies nor hostage to the regulated power market, said Niebling. “We should stop fighting over the biomass plants,” he said, “and move to a different model. We have to move on.”

Meanwhile, biomass has become the renewable fuel of choice in Europe, where one plant in the north of England burns a quarter of the world’s pellet output — two-thirds of it imported from the United States, mostly from southern states. Wood generates 43% of the heat and energy in Austria. But a growing number of scientists have called for a halt to the practice, arguing that timber harvesting reduces the capacity of forests to store carbon while burning wood increases carbon emissions, contributing to climate change. Dartmouth College recently began reconsidering plans to invest $200 million in a wood-fired heating plant in response to challenges to its potential environmental impact.

Meanwhile, the wood buyer who had called Eames about sending wood chips to Pinetree Power recalled that when the Schiller plant was operating around the clock on the Seacoast, it was burning a ton of chips a minute — 1,200 tons a week and 500,000 tons a year, worth between $13 million and $17 million.

“Now, except maybe for mid-winter and mid-summer, it’s become an on demand business,” he said.

“I guess all we can do is cry in our beer,” Eames replied.

“If we can afford to buy one,” said the buyer.

Categories: Energy and Environment

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