AUGUSTA – The Professional Logging Contractors (PLC) of Maine is applauding the Maine Legislature and Maine Governor Paul LePage for pulling together to pass two bills that will aid the state’s logging industry by providing short term contract opportunities to producers of biomass electricity and exempting commercial loggers and farmers from paying sales tax on fuel.
The biomass bill, LD 1676, “An Act To Establish a Process for Procurement of Biomass Resources”, was passed by both the Maine Senate and House with strong bipartisan support April 15 following debate in each chamber.
The sales tax exemption bill, LD 1481, An Act To Protect Maine’s Natural Resources Jobs by Exempting from Sales Tax Petroleum Products Used in Commercial Farming, Fishing and Forestry, also drew strong bipartisan support. It was included in an omnibus spending bill, LD 1606, which passed in the Legislature early on April 16.
Both bills were signed into law by Governor LePage on April 16.
“In a legislative session where disagreement drew most of the headlines, Maine’s lawmakers and the Governor pulled together in support of Maine’s loggers and the entire forest products value chain,” PLC Executive Director Dana Doran, said. “Logging is a legacy industry and is the root of Maine’s forest products industry and we applaud our elected officials for coming together at a critical time to support it. Both bills provide relief to an industry that is struggling due to factors beyond its control.”
The biomass bill’s passage comes as the biomass industry is teetering on the brink of collapse in the face of competition from cheaper natural gas and loss of renewable energy credit agreements in neighboring states: Covanta Energy has idled its two Maine biomass plants and ReEnergy Holdings has stated its four Maine plants are imperiled if conditions do not improve.
The loss of the biomass market would be a huge blow to the logging industry in Maine, which has sold woody biomass waste from logging operations to the plants for years. The shutdown of the two Covanta plants is already having a direct effect on a large percentage of Maine loggers who are struggling with paper mill closures in 2015 and early 2016 that have limited markets for wood fiber.
The PLC has estimated total economic losses to the state of Maine from the loss of the biomass industry could be as high as $300 million per year.
LD 1676 is designed to preserve the industry by providing stable, short-term revenue for Maine biomass plants to buy time for other steps that can lead to their long-term health, including a planned comprehensive study of biomass opportunities in Maine.
The bill directs the Maine Public Utilities Commission to secure 2-year contracts for 80 megawatts of new or existing biomass resources with the highest likelihood of providing in-state economic benefits such as permanent direct jobs, payments to municipalities, and payments to Maine loggers for fuel purchases; all criteria that favor biomass in Maine.
It will be paid for by money that would otherwise have gone into the Maine Budget Stabilization Fund, more commonly referred to as the Rainy Day Fund. The cost over two years would be a maximum of $13.4 million.
The bill as amended in recent negotiations includes strong accountability language for biomass producers as well as a provision for the Maine Public Utilities Commission to deny contracts if none are deemed to be competitive, which provided reassurance to some legislators worried about risking the expenditure.
The Maine Farm Bureau joined the PLC in advocating for passage of the sales tax exemption bill. The provisions of LD 1481 later included in the the omnibus spending bill will provide relief to industries including professional loggers and farmers by exempting them from sales tax on off-road diesel – used in commercial wood harvesting and farming. The exemption will be implemented Jan. 1 2017.
Farmers and loggers predominantly use off-road diesel. In 2002, the average price of off-road diesel was 93 cents per gallon, and the state sales tax was 5 percent. By 2014, the average price was up to $3.51 per gallon and the state sales tax was 5.5 percent. This represents a 280 percent increase in cost from 2002 for both industries, whereby arguably they were paid less to produce more.
In 2011, the 125th Maine Legislature provided commercial fisherman with a sales tax exemption for off-highway fuel used on commercial fishing vessels.
Massachusetts, New Hampshire, South Carolina, Wisconsin, Vermont and other states with major timber and agriculture industries do not tax diesel fuel used off road. In a very competitive global economy, this has put Maine farmers and loggers at a disadvantage.