Forest Advocates Sound The Alarm

Officials worry about economics of thinning contract process

Photo by Andy Towle. |

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Wood pellets.

Power plants.

Plywood.

Particle board.

Lots of companies have proven they can make money producing those items from wood scraps and tree branches, given a cheap, stable supply of the raw material.

But jet fuel?

Diesel gasoline?

Finger-jointed furniture?

Not so much. In fact, despite the enormous promise, a handful of companies trying to turn wood chips into diesel and jet fuel have so far lost money, abandoned the effort or produced mostly demonstration projects.

The effort to make money on wood scrap holds the key to the future of forested Rim Country communities, whose chief protection against wildfires may depend on whether the U.S. Forest Service can find a contractor that can turn a profit on harvesting the small trees and brush choking millions of acres as part of the Four Forest Restoration Initiative (4FRI).

The Forest Service is currently pondering a request from Pioneer Forest Products to transfer to another, still-secret company its 4FRI contract to thin 300,000 acres in northern Arizona in the next decade. Pioneer proposed turning millions of tons of small trees and brush into jet fuel and finger-jointed furniture. Reportedly, the still-unnamed company seeking to take over the contract will use the same business plan.

County supervisors, environmentalists and some experts on wood products have appealed to the Forest Service to include an independent review of the business plan of the new company, but the Forest Service has said it will follow federal contract rules — which means it will make the decision in secret and not release the new company’s business plan.

Navajo County Supervisor David Tenney cited the concerns he and Gila County Supervisor Tommie Martin have expressed for the past year. “I have repeatedly stated that the only thing worse than not issuing a contract would be issuing a contract to a bidder that could not finance and would not perform. As predicted, the worst has happened. I can only add now: and the only thing worse than that would be to do it twice in a row.”

A recent meeting involving the stakeholders group that helped develop 4FRI focused on the Pioneer business plan, including a plan by sub-contractor Concord Blue that it could produce 20 million gallons of jet fuel a year at a cost of $1 to $2 a gallon, a fraction of the cost reported by firms now making fuel from wood scrap experimentally. Some participants left with their doubts deepened.

Martin said she’s been told the new company will include as a prime partner Marlin Johnson, a former regional Forest Service official who fronted for Pioneer when it won the contract originally. The veteran of years of battles with environmental groups about timber harvests that included the large trees, Johnson brought years of experience to the table, but also spurred claims that his Forest Service connections played a key role in getting the contract for Pioneer.

The Roundup has obtained a memo to the Forest Service questioning the plan to make furniture and jet fuel written by Pasacal Berlioux on behalf of the Eastern Arizona Counties Association.

As it happens, Berlioux headed the timber company that bid on the contract against Pioneer. Berlioux worked in France in the oriented strand board (OSB) industry, which is essentially a high-tech plywood made from small trees. He set up a company to first work with the stakeholders to develop the 4FRI approach then bid for the contract. His company offered $10 million more for the contract and supported the original “large tree retention strategy.”

Berlioux folded his company when he didn’t get the contract and went to work for the Eastern Arizona Counties Association.

The memo called on the Forest Service to dump the Pioneer business plan in transferring the contract. It also questioned Johnson’s continued involvement.

The Forest Service will not comment on the rumors about Johnson’s involvement or the business plan of the new, proposed contractor.

The debate rests in large measure on the economics of turning small trees and brush into profit-making products. The previous generation of sawmills throughout the region relied on turning big trees into lumber. Almost all of them went out of business as the supply of large trees dwindled and lawsuits and appeals stalled timber sales.

The Federal Energy Management Program recently issued a fact sheet on turning wood waste into energy by burning it in wood-based power plants, converting it into gas or adding it to the fuel mix in coal-fired plants.

The FEMP study concluded many federal facilities could be readily supplied with power from biomass power plants, even operating on a small scale. For instance, the wood-fired energy system at a campus of Central Michigan University was converted from natural gas to wood waste at a cost of $3.6 million. The energy savings covered the cost of the conversion in about four years and consumed about 44,000 tons of wood waste annually.

The report cited four or five similar examples.

The U.S. Department of Energy estimates bio-energy plants could profitably use about 40 million tons of brush and wood from forest thinning projects nationally.

Most estimates suggest such biofuel plants would also produce fewer carbon emissions than coal-fired plants while dramatically reducing the risk of wildfire to forested communities.

The Eastern Arizona Counties Association memo contrasted the proven economics of biofuel and oriented strand board with the still-speculative market for jet fuel and finger-jointed furniture produced from small diameter trees and brush.

A report by the United States Department of Agriculture about the struggling Appalachian wood products industry pointed out that low-wage countries, like China, Vietnam and South America, have overwhelmed the once healthy U.S. furniture industry. Today, 60 percent of the wood furniture sold in the U.S. is imported, compared to only 5 percent 20 years ago.

That industry trend casts doubt on the economics of setting up a finger-jointed furniture industry in Arizona. However, the Pioneer plan appeared to count on profits from the furniture operations to help subsidize the even more speculative effort to turn wood scraps into jet fuel.

Several corporations have demonstrated that it’s possible to convert tree scraps into diesel and jet fuel. However, one of the major companies to tackle the task recently gave up the effort and decided to focus on more immediate and proven technologies. Rentech, in Colorado, mothballed its research and development activities on the fuel manufacturing process in March of this year, laying off 65 employees.

Meanwhile, Alaska Airlines also abandoned its effort to make jet fuel from waste products like chicken fat, algal oil, used fryer grease and plant waste. The airline hoped to develop alternatives to expensive, imported petroleum fuels and funded operations that produced jet fuel from those sources. However, the fuel ended up costing $17 a gallon instead of the $3 a gallon for fuel from conventional sources. The experimental project blended the biofuel with conventional fuel and produced a total of about 15,000 gallons before the airline abandoned the effort. A jet uses about 900 gallons of fuel for each hour it spends in the air.

Meanwhile, KiOR continues to experiment with making high-grade fuels from wood waste in Mississippi, where it uses waste from white pine commercial forests there. The company makes gasoline alternatives from pine wood chips. The company estimates that producing the fuel produces 80 percent fewer carbon emissions than coal or petroleum. However, the company has lost money steadily on the effort and the fuel produced costs far more than gasoline or conventional jet fuel, making it a still experimental, research effort.

The Eastern Counties memo noted that KiOR has produced just 5,000 gallons of cellulosic diesel at a reported cost of up to $45 a gallon, suffering losses of $31 million in the first quarter of this year.

“There is no doubt that technical progress is being made and that someday cellulosic or synthesis gas biofuels may be both technically and financially viable. But 4FRI is not designed to operate as a science laboratory, but as a reliable mechanism to fund now landscape scale restoration in Arizona.”

The memo concluded that the Eastern Arizona Counties Association had lost confidence in the claims and projections of Pioneer and Johnson, a skepticism reinforced by the company’s failure to obtain the estimated $230 million in financing it needed to build its proposed mill in Winslow.

The memo concluded under the terms of the original contract, Pioneer was supposed to have thinned 20,500 acres by now. Instead, it has actually thinned less than 1,000 — with delays accumulating.

“One time is bad enough. The delays in implementing 4FRI due to Pioneer’s failure already cost the communities of northern Arizona 20,500 acres in the race against the next Rodeo-Chediski or Wallow Fire. What we need to do is to get the job done with proven technologies and proven products going to proven markets. Now,” the memo concluded.

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