Here’s some of the regional evidence:
- In late August, Louisiana-Pacific curtailed production again at its oriented strand board (OSB) plant in Hayward, this time through October. The company said it also was indefinitely suspending OSB production at its Silsbee, TX mill. The Hayward mill was idled last November to reduce an inventory backlog.
- Ainsworth Engineered has resumed some OSB production in Cook, but its Grand Rapids mill has been idled “temporarily” for a year. In mid-2006, Ainsworth permanently shut down half of the capacity at its OSB mill in Bemidji.
- Symptomatic of a painful restructuring underway in the paper industry, a bankrupt mill in Park Falls reopened in mid-2006 under new ownership as Flambeau River Papers. Two other paper mills — Boise Cascade in International Falls and Stora Enso in Duluth — are operating amid ownership changes.
- Meanwhile, Finnish owner UPM-Kymmene is sitting on permits it secured nearly two years ago for an additional paper machine at its UPM-Blandin Paper mill in Grand Rapids. The company has made no public statements for many months about the status of the “Blandin Thunderhawk” project.
But rising oil prices, concerns about future supplies, and the role of fossil fuel emissions in climate change are adding up to the forest industry’s best untapped opportunity: producing fuels and industrial feedstocks from waste wood, or woody biomass. That conclusion is reinforced in a recent assessment by Shri Ramaswamy, PhD, chairman of the University of Minnesota’s Department of Bioproducts and Biosystems Engineering in St. Paul and nonprofit Dovetail Partners in Minneapolis.
Their report was commissioned by the Blandin Foundation and Iron Range Resources, which jointly released it during a Sept. 21-22 conference they co-sponsored in Grand Rapids, “Seizing Opportunity: Forestry and the BioEconomy.”
Following ag’s footsteps
The potential payoff for the forestry industry is best represented by a U.S. agriculture sector that’s already producing biofuels from corn (ethanol) and soybeans (biodiesel). Minnesota’s ag sector is the nation’s No. 4 producer of ethanol, No. 8 in biodiesel. Wisconsin didn’t open its first biofuels plant until 2004, but is quickly catching up with about half the production capacity of Minnesota.
Record oil prices has spurred demand for these renewable fuels, pulling up corn and soybean prices to near-record levels.
Meanwhile, a vast array of industrial chemicals and feedstocks is derived from oil and natural gas, ranging from plastics and butyl rubber to synthetic fibers, fertilizers and pharmaceuticals.
A common theme resonated through the conference: To pursue these potential markets, a search for proven technologies to produce both industrial feedstocks and liquid fuels from forest biomass needs to kick into high gear.
“Biofuels are the hottest thing in business development today,” said conference keynoter and biofuels expert Robert Elde, dean of the University of Minnesota’s College of Biological Sciences. He told the audience bioscience is at a time of convergence, where wood fiber has great value as a genetic building block for new product development.
Industry, government and academic researchers need to align in multi-state Midwest partnerships to compete in the developing bioeconomy, he said. “We have to be more aggressive than we have been to date to be the pacemaker.”
A global survey
Elde said electric utilities and the U.S. forest industry need look no further for bio-fuels development potential than northern Europe and South America.
- Brazil is the world leader, producing nearly all of its transportation fuels from renewable sources, principally sugar cane.
- Stockholm’s public bus system operates on ethanol, and Sweden is meeting 20 percent of its overall energy needs from renewable sources.
- Finland, also has met the 20 percent threshold and plans to be completely oil independent by 2025, a strategy relying heavily upon forest biomass product development. The chief executive at Finland-based UPM Kymmene, owner of the Grand Rapids mill, has stated the company intends to become a major producer of biodiesel from woody biomass.
Minnesota Gov. Tim Pawlenty acknowledged as much during the second day of the Grand Rapids conference. “This country has been asleep at the switch,” he said. “We’re one significant event away in Saudi Arabia from $100 per barrel oil . . . that’s $4 a gallon and it’s going to get worse. It’s not a choice to stay the same,” he said.
The Ramaswamy / Dovetail Partners study concludes the region’s paper mills are best-positioned in the wood industry for profitable biofuel and biochemical development in conjunction with their pulp and paper operations. Most already produce part of their process steam electricity and by burning their wood waste, and available technology can convert the “black liquor” byproduct of the paper pulping process into fuels. Some even have formal partnerships with their electric utilities to manage their “biomass” energy operations. One of those utilities, Minnesota Power, also is weighing a major biomass energy addition to its Laskin generating plant in Hoyt Lakes.
For financially-strapped loggers, a stable market for the waste wood they currently leave on the forest floor would add to their cash flow. It also would produce a better managed and more sustainable resource, said John “Jack” Rajala, of Deer-River based Rajala Cos., patriarch of one of the region’s best-known forestry families and an ardent advocate of sustainable management practices.
“Minnesota is backward with respect to full utilization of wood,” he said in an interview between sessions. “(Loggers and sawmill operators) are waiting for a better market for residue. For good forestry you have to get the residue out of the way.”
Flambeau River leads the way
Leading the way in this region on several of these fronts is Flambeau River Papers.
Its majority owner is William “Butch” Johnson, chief executive of Hayward-based Johnson Timber. The company operates three chipping mills and provided wood procurement services to the Park Falls mill before its bankruptcy, drawing from a logger network within a 150-mile radius. Johnson was a major creditor in the bankruptcy, and acquired the mill with silent minority investors.
They reopened the mill in July 2006 with a business plan to become energy independent and operate as a “biorefinery,” producing cellulosic ethanol, other biofuels and biochemicals from wood waste. The company’s $80 million grant request to the U.S. Department of Energy to help finance its $215 million plan was narrowly rejected this spring.
It’s since downsized that initiative with a planned $84 million, smaller scale demonstration plant. On Aug. 14 it submitted a new $30 million application to the federal agency for a new round of renewable energy grants to be awarded in early 2008, said William “Bill” Johnson, Flambeau River’s president.
The project essentially would add a “gasifier” to the mill’s No. 6 boiler — presently fired by wood waste, natural gas and coal — and build a gas-to-liquids plant on the backside of the gasifier, he said. Tail gases from the gasifier would be diverted to the paper mill, replacing the natural gas and coal presently used to fire the boiler, Johnson said.
The gasifier plan also would employ modified “Fischer Tropsch” technology to operate a gas-to-liquids plant that would produce up to 500 barrels per day of “biocrude,” a renewable input for oil refining. Murphy Oil executives, considering a major expansion of the company’s refinery in Superior, have submitted a letter supporting Flambeau River’s grant application, Johnson said.
The original technology was developed by two German scientists, Franz Fischer and Hans Tropsch, working at the Kaiser Wilhelm Institute in the 1920s in petroleum-poor but coal-rich Germany to produce synthetic liquid fuels. Germany and Japan used the process to supplement their crude oil needs during World War II.
Johnson said a second phase expansion would follow a successful demonstration project.
Public policy considerations
One big concern in biofuel and biochemical development from the forestry resource is that the pursuit of an energy solution does not create environmental damage to the region’s soil and water resources. Ethanol production from corn, for instance, produces carbon dioxide, recognized as the most serious greenhouse gas contributor to global warming. The water-intensive process adds to the growing pressure on underground aquifers, competes with other ag crops and is driving up food costs.
At the same time, farmer-owned cooperatives have snared a major part of the growing market for ethanol and biodiesel, and a significant share of the profits are returning to those producers.
Conference organizers devoted several sessions to explore and avoid potential unintended consequences from badly-planned, forest-based bioeconomy development. Beyond a new industry that’s environmentally sustainable, policymakers want it to produce a diverse basket of value-added forest products with a fair share of the profits staying in the region.
James Hoolihan, president of the Blandin Foundation said that goal is at the heart of its four-year-old ‘Vital Forests / Vital Communities’ initiative. “Many regions already recognize the opportunities to transform the forest products industry so that it becomes both the and of diverse and sustainable products. We believe that’s an entirely obtainable goal that is well within our region’s reach.”
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