207-688-8195 Professional Logging Contractors of Maine

By JOE RANKIN

Maine’s forest products industry has seen its share of ups and downs over the decades. But the slide that started last summer rapidly became an avalanche that threatens to bury one of the state’s legacy industries, one that provides thousands of jobs and pumps hundreds of millions of dollars into the economy.

At stake are the jobs of loggers, sawmill workers and biomass electricity plant workers, the businesses that supply them, and the people who depend on the dollars those people spend in the larger economy, all down the line.

Like many complex catastrophes, you’d be hard pressed to tease out exactly what happened first, and when. You could probably follow some threads back for years. But the storm started to form in the middle of last year. Developments feeding into the mix include everything from reduced paper usage to cheap oil and natural gas; a very warm winter to the low Canadian dollar.

“It’s the perfect storm for the entire forest products sector,” said Lloyd Irland, a forest economist and president of the Wayne, Maine-based consulting and research firm The Irland Group.

“It’s the worst possible outcome of that kind of storm, the culmination of all those factors. Utter devastation,” said Dana Doran, the executive director of the Professional Logging Contractors of Maine.

Breaking it down a little more: 

  • The paper industry continues to shutter mills and bleed jobs. Expera Specialty Solutions closed its pulp mill in Old Town. Lincoln Paper and Tissue closed its mill and auctioned off the facility. Verso Paper announced it would lay off 300 workers at its Jay mill; the company then went into Chapter 11 bankruptcy. In March, Madison Paper announced it will close because of reduced demand for supercalendered paper.
  • Covanta Holding Corp. announced it will close biomass energy plants in West Enfield and Jonesboro, leaving only four standalone biomass plants, all operated by ReEnergy Holdings, still operating.
  • A mild winter, low heating oil and natural gas prices prices and competition from Canadian wood pellets forced Maine’s wood pellet mills to shut down completely or operate only intermittently.
  • Demand for lumber has held steady, but prices have been down because of oversupply caused by the global economic slowdown and competition from Canadian imports stemming from a cheaper looney, which, as Irland explains “hinders exports of logs and lumber and invites in imports.”

The upshot is drastically decreased demand for pulp wood, wood chips and mill byproducts such as sawdust and ground up mill yard scraps. An entire industry that for years has prided itself on being “green” and turning every scrap into a commodity that can be sold for cash money now confronts a bleaker future, at least in the short term. There is no quick fix, no easy solution to such a multi-faceted economic situation.

At Pleasant River Lumber Co. sawmill byproducts had accounted for about a quarter of the company’s revenues and in fact Pleasant River treats them as a separate product. But over the past few months the prices and demand for byproducts such as sawdust has collapsed, said co-owner Jason Brochu.

“Now we’re looking ahead, questioning whether they’re going to be any markets for biomass,” Brochu said.

Sawdust, for instance, that last year would have been sold, has been piling up at some mills and the burgeoning stockpiles of it have forced some to take downtime.

“The market is saturated with byproducts and chips,” said James Robbins, president of Robbins Lumber Co. in Searsmont. His company burns sawdust to supply heat for its drying kilns, but it can’t burn as much as it can produce.

It’s not only sawmills that are feeling the pinch. With the slow motion collapse of the state’s pulp and paper industry over the last two decades, loggers had turned to biomass plants and pellet mills as outlets for their chips. And they came to rely on them.

But the four wood pellet mills in the state — in Ashland, Corinth, Strong and Athens — are struggling. The winter of 2015-16 was the warmest on record in the entire lower 48 states, with New England the warmest region of all. Maine was a whopping 8.6 degrees above average.

The warm weather, combined with low heating oil prices, was great for consumers, who saved a bundle. But not so great for wood pellet manufacturers. Some plants closed in mid-winter, others closed, or started up, periodically. For them the situation is “bad, bordering on ugly,” said Bill Bell, the executive director of the Maine Pellet Fuels Association. Plants that closed early at least didn’t get stuck with unsold pellets, but those that kept operating ended up with a surplus they’ll have to store until the next heating season. And they won’t be buying chips and sawdust until they’re ready to start up again.

And the biomass energy sector is in deep trouble as well.  The mild winter, low oil prices and ample supplies of cheap shale gas have combined to help keep electricity costs down. Consider: in New England in December wholesale prices for electricity topped out at $48/MWh. That was the high. Much of the time it was a lot lower than that. Compare that to a high of $82 the previous December and $206 for December 2013, according to the U.S. Energy Information Administration.

Again, a boon for consumers. But wood-burning power plants have to buy wood chips and sawdust to fuel their boilers and they just can’t compete when wholesale electricity prices are in the basement, said Carrie Annaud, the executive vice president of the Biomass Power Association.

The Maine plants were helped somewhat by states that granted them renewable energy credits. However, in Massachusetts a new standard went into effect with the beginning of the year that requires a biomass plant to have a 50 percent energy efficiency rating to qualify for those credits. “Which is all but impossible for a biomass facility to meet” without being able to sell steam to an industrial facility next door, said Annaud. “Those plants just weren’t designed that way.”

After those standards went into effect Covanta announced the plans to close its two stand-alone biomass plants in Maine.

“Electricity is a commodity and it goes up and down. But biomass energy plants are not just electricity. They’re a place for mills to get rid of their residues,” said Tom Cushman, the owner of Maine Custom Woodlands, a large logging company in Durham. “Everyone in the forest industry relies on it now.”

Cushman has contracts to supply chips to the ReEnergy mill in Livermore Falls. That mill has renewable energy credits from Connecticut that are good through 2017, he said. But Connecticut is proposing restrictions on its renewable energy credits, commonly abbreviated RECs. And he’s worried that, if they go away, all the ReEnergy plants will go dark.

“I’m absolutely worried, but I’ve been in the logging business long enough to know that things change,” Cushman said. But, if the worst happens, “biomass is half of what we do. It would be devastating. I don’t even know what that business model would look like for me. I wouldn’t have the 25 employees that I have.”

The six plants in Maine, including the two Covanta plants, account for 148 direct jobs and an estimated 900 indirect jobs (like those on Cushman’s two mechanical logging crews).

According to the Biomass Power Association the six plants have 195 megawatts of generating capacity and can produce enough juice to power the computers and refrigerators and whatnot in more than 200,000 homes. Oh, and they use 2.5 million tons – yes, that’s million, and that’s tons – of purchased fuel. Purchased from loggers like Cushman. Together the six had an annual economic impact of more than $90 million, Annaud said.

Worst case scenario: the entire biomass market in the state collapses. Doran at the Professional Logging Contractors of Maine estimates that would be a $300 million blow to the Maine economy.

That raises the questions of what effects a collapsing biomass market would have on sawmills. If loggers, who depend on biomass, go out of business, the sawmills will have more trouble getting logs. And, they will be stuck with the sawdust and other byproducts that they used to be able to sell.

State environmental laws allow mills to stockpile sawmill waste with an “identifiable commercial use” on site for up to 12 months, according to Lou Pizzuti, an environmental specialist with the Maine Department of Environmental Protection.

But landfilling is not a realistic disposal option, he said. The costs of sending it to a commercial landfill are prohibitive. Building your own is expensive, time consuming, and a long-term liability, he added.

Pizzuti suggested the mills look at every available alternative market, from horse racing stables to organic-waste composting facilities to landfills that use it as cover. But it’s unlikely that even if they tap every niche market they’ll be able to move all their sawdust and other byproducts. And it won’t do anything to help move chips. That’s why the biomass energy generators are so important.

The current situation presents such a multi-faceted challenge that those in the industry can be forgiven for feeling like the little Dutch boy with his thumbs in the holes in the dike while more leaks spring elsewhere.

Those seeking to preserve the forest economy in Maine and its thousands of jobs realize they can’t influence global demand for paper, set the value of sovereign currencies, manipulate the prices of oil and natural gas, or, wield an Oz-like sway over global weather patterns.

“About the only thing we can control right now is biomass,” said Doran.

PLC is lobbying hard in the Maine Legislature to try to get a “short-term option for the stand-alone biomass facilities so they can have a fixed price,” he said. At a high enough level that it will keep them in business until the energy sector stabilizes. PLC also wants the state to fund a major study this year on biomass — its benefits and costs and where there is the potential to expand its use. The first is a “bridge solution,” to keep the biomass generators operating and some sort of stability in the market for sawdust and wood chips, Doran said. The second will provide some ideas for policy changes in the future to nurture the industry so the state won’t have to keep applying band-aid fixes.

While Doran is trying to shepherd those ideas through the Legislature, others have taken matters into their own hands. Like Jim Robbins, of Robbins Lumber Co. in Searsmont. He has decided to put the venerable family business back into the power generating business.

Robbins’ sawmill, a presence on the mid-coast since the 1800s, used to have a 1.7 megawatt electric generating plant fueled by wood waste. The mill shut down the 1940s-era turbine eight years ago, while continuing to burn wood waste and wood chips to generate steam for the drying kilns and buildings. But they’re only burning about two truckloads of waste a day for heating the kilns and can’t even use all they produce, much less loads of chips from logging contractors, said Robbins.

Last December, Robbins started things rolling on a project to build a new 8.5 megawatt biomass-fired Combined Heat and Power System that will generate electricity and provide steam. He doesn’t want to talk about the project’s price tag, only to say that “it’s a huge investment. More than we would put into any sawmill.” He’s wrangled a 20-year fixed-rate power supply contract with Central Maine Power, has put out bids for equipment, and is on his way to getting approval from the town. The plant could be running in 2017.

Robbins said the new CHP plant will guarantee Robbins a place to use its byproducts, help provide stability in its power cost, and provide loggers a market for low grade wood fiber. The company has relationships with some 75 loggers, he said. If they go out of business because they don’t have a market for the wood chips they produce, where would that leave Robbins? An 8.5 MW generating plant could burn 16 loads of chips a day, plus five loads of the company’s own sawdust. As for Robbins, he’s not hoping to make a killing on electricity. “I hope by the end of the 20 years that I’ll come out ahead,” he said wryly.

“We want to guarantee the health of the loggers and landowners in the future,” he said. “If we don’t help our loggers out, then the mills are going to be in trouble. They need us. We need them. We need each other.”

He gets calls almost every week from loggers desperate to know when the new plant is going online. “They don’t have the markets. They’ve been put on quotas and a lot of guys are dependent on this plant going in for the health of their operation,” Robbins said. “I wish I had it built last year.”

Joe Rankin writes on forestry, nature and sustainability. He lives in central Maine.