Wood For Energy and Bio-refining

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Wood For Energy and Bio-refining
American Loggers Council March 10, 2005
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Discussion Items

• Forest Industry Business Condition
• Industry Actions
• Forest Industry Outlook
• Logging Sector
• Finding new market opportunity

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Forest Business Conditions

• 1997-2002 Import/ Export Imbalance Deteriorated
• Excess Capacity Worldwide for pulp and paper
  production
• Forest Industry under pressure
• Aging Facilities
• Excess Global Capacity
• High Financial Leverage
• Strong U. S.
• Substitutes
• Limited End Uses Demand

• 20022005 Structural Change significant with
  recovery underway
• Paper Markets improving
• Solid wood markets Strengthen
• Mergers Consolidation of Industry major players
• Energy Impacts cost of production of timber
• Reduction in overall capacity of logging drops by
  20-26

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Manufacturing Job Losses Total 47,000 Since 1997
in Pulp and Paper
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• Merger Acquisition Activity
  Affecting Alabama Companies
• Mead Westvaco
• Weyerhaeuser Willamette
• Bowater Alliance Forest Products
• Georgia-Pacific Fort James
• Plum Creek The Timber Company
• International Paper Champion International
• Weyerhaeuser Trus Joist International
• Weyerhaeuser MacMillan Bloedel
• International Paper Union Camp
• Stone Container Jefferson Smurfit
• Bowater Avenor
• James River Fort Howard
• Kimberly-Clark Scott Paper

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Timber Market Conditions

• Soft Timber Markets
• Capacity related downtime
• Reduced local market competition
• Increased Recycle
• Weak Product Pricing
• Will Product Market strength transfer to timber
  market?
• Abundant supply will cap price for pulpwood

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Forest Industry Actions

• Significant Movement in Forest Operations
• Increased merger and acquisition
• 14 million ton loss of production in 2000 2001 in
  pulpwood production FL, GA, MS, AR,TX
• Permanent closure of high cost mills
• Market related downtime at production facilities
• Divestiture of Timberland Assets
• TIMO s
• REIT s

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Outlook for Forest Industry

• New Pulp Mills Highly Unlikely
• Worldwide demand, Slow Domestic Demand, Cost
  Competitive issues, Environmental Constraints
• Incremental Expansion possible but not likely
  unless accompanied with Bio-refining or energy
  options
• Additional Shutdowns possible but slower pace
• Major capital investment milestones, New
  Environmental Regulations

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(No Transcript)
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Forest Products Bio-refining and Energy

• Forest resource Overview
• Forest Residues
• Managing Forest for Biomass fuels

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500 Million Acres of Timberland45 Billion Green
Tons of Wood
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2002 If wildfires were converted to energy???

• 7 million acres burned would equal
• 7000btu/kw or enough electricity to supply U S
  with 22 of annual demand
• 973 billion barrels of oil

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Forest Residues

• Forest operations yield significant volume of
  wood residue
• Up to 30 tons of woody biomass at age seven in
  salvage operations
• Up to 20 to 25 tons per acre on first thin of
  southern pine plantations

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Alabama Forest Resources

• 23 Million acres Timber
• 46 Hardwood
• 35 Pine
• Approximately 20 plantations
• 19 Mixed Pine Hardwood
• 900 Million Tons of Dry woody biomass
• Production off 22 since 1997 or about 7 million
  tons per year

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Logging Residue

• Alabama generates 2.6 million dry tons annually
  from logging
• Most logging residue is not recovered
• These residues represent a cost to subsequent
  forest operations

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Is it Sustainable ?

• Alabamas total timber inventory is 138 larger
  than it was fifty years ago, and is the largest
  ever recorded
• Alabamas annual harvest increased by 150
  between 1963 and 1998. Harvests peaked in 1998
  and have declined by about 25 since then
• Alabamas pine timber inventory is 125 larger
  than it was fifty years ago, and is the largest
  ever recorded.
• Alabamas hardwood timber inventory is 150
  larger than it was fifty years ago, and is the
  largest ever recorded

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Finding Markets?Approximately 15 of pine saw
timber volume is left as woody debris, for
hardwood almost 24 according to USFS research

• Alabama Could recover 5.4 million tons of forest
  residues annually
• Amount equal to 15 million barrels of crude oil
• These residues are currently not recovered and
  represent a cost to logging operations

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• Two Ways to manage for Woody Biomass
• 1) Energy Crops
• Some research done mostly outside of the south
• Economics have not been previously viable
• More research is needed
• 2) Co- manage for Energy and Conventional
  Products
• Economics have not been available
• Requires market development for biomass
• New research needed for development and management

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Woody Biomass Status and Outlook

• Existing Forest Biomass Operations
• Potential for expanded use of woody biomass
• Needs to Stimulate Development
• Potential Public Benefits

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Existing Woody Biomass Operations in AL

• Five to Six operations on Forest Harvesting Sites
  (Fincher, Castleberry, Baseline, Farley, Mobile
  Forest)
• Yield on Pine Plantations
• AGE 10-12 First Thin 1/1
• Age 14-17 Second Thin 2/1
• Age 20-22 Saw Timber 4/1
• Over 25 about 15 of total wood is residue
• For Hardwood about 24 is wood residue

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What are the benefits of developing wood biomass
markets?

• Logging only Vs.

Logging with Fuel Wood Markets
1) Economic Benefits - new markets for
timberland owners- new jobs to grow, harvest
transport woody biomass fuels- new
incentives to invest in productive forests- new
investment in energy conversion technologies
2) Environmental Benefits- reduction in
greenhouse gases noxious emissions from fossil
fuels - additional carbon sequestration from
managing forests for energy
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Outlook for Wood Residue Markets

• 1) Increased Use of Woody Biomass Within the
  Forest Industry - mills still using natural gas
  are converting steadily to wood2) Growing
  Interest in Woody Biomass in Other Industries -
  mills using natural gas are interested due to
  cost factors - mills using coal fuel oil are
  interested due to environmental factors -
  unfamiliarity complexity risk - initial
  capital investment - economic incentives are
  definitely growing, but are not compelling 3)
  Use of Woody Biomass by Electric Utilities Is the
  Key to Development of a Woody Biomass Fuel
  Industry - including a small percentage in the
  fuel mix could have big impact - incentives are
  needed to induce utilities to action

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Natural Gas ?
Tenaska Peeking Plant Billingsly AL
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Conclusions !!!

• Forest industry is emerging from a difficult
  business period which has resulted in a
  down-sizing of the industry and reduced demand
  for timber, particularly for pulpwood.
• Our public and private forests are growing in
  both timberland area and timber inventory volume,
  and have never been more productive.
• A decrease in timber demand and an increase in
  timber supply has resulted in weak prices,
  particularly for pulpwood and low-valued timber.
• There are abundant sources of woody biomass
  within the existing forestry system that could be
  used for energy purposes at the present time.
• The development of a viable market for woody
  biomass fuels would likely result in productive
  new systems for managing forests for energy
  production.
• Public policy initiatives are needed to provide
  the leadership and incentives needed to make
  woody biomass an attractive and sustainable
  source of energy.
• There are multiple and substantial benefits that
  could result from the large-scale use of woody
  biomass for energy, both to Alabama and to the
  Nation.

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Bio Energy ! What are we waiting for?

• Special Thanks to
• Ken Muehlenfeld Auburn University
• John Tourtelotte TALLC
• Scott Spear AIME
• Dan Daly AIME
• Gene Quick SAUBR

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Bio Energy Needs Assessment

• Clearinghouse for Technology Development and
  Investment
• SAUBR Southern Alliance for the Utilization of
  Biomass Resources needs full time coordinator.
  SAUBR needs allied group in each sub-region up to
  one million annually partnered with appropriate
  University systems for a period of five years at
  which time investment should take on
  responsibility for funding.
• Open loop Bio mass language in JOBS Bill must
  recognize longer investment period to attract
  capital and extend investment tax credits and
  capital to harvest operations
• Tax credits extended to co-firing and syn-gas
  operations
• Find incentives for states to go to a net
  metering system
• Amplify emission credits for conversion to
  blended fuels
• Demonstration Projects funded
• Market development for liquid fuels
• Loans over 25 million limited to Coops- Expand
  the range of BI USDA loan program.