WPAC Report Making Pellets a Priority Improving fibre security and affordability for B.C.’s wood pellet industry. By Gordon Murray he Southeast U.S. recently passed British Columbia to become the world’s largest wood pellet exporting region. Russian production is also growing rapidly. Unless the fibre supply situation improves for B.C.’s pellet producers, the province will soon slip into third place behind Russia and pos-sibly even fourth place behind the Baltic countries. The problem is that despite endless talk, the B.C. govern-ment, in its role as landlord over the province’s public forests, has not provided any meaningful way for pellet producers to obtain fibre supply security. Moreover, B.C.’s primary forest tenure holders – the large lumber manufacturers who control the majority of provincial forests – simply dictate the terms T In the past two years, fibre costs have doubled for B.C. pellet producers, and despite millions of tonnes of harvest residues still being burned in B.C. by the lumber industry, pellet producers often struggle to obtain access to those residues. and conditions by which pellet producers may purchase saw-dust and harvest residues. No negotiating is involved. In the past two years, fibre costs have doubled for B.C. pel-let producers, and despite millions of tonnes of harvest resi-dues still being burned in B.C. by the lumber industry, pellet producers often struggle to obtain access to those residues. British Columbia’s leading lumber manufacturers boast about being responsible stewards of public forests, yet if B.C. pel-let producers are not able to pay the price they demand for leftover logging waste, the lumber producers will simply burn such residues, putting pellet industry jobs up in smoke as the B.C. government stands by and watches. In 1995 the B.C. government introduced regulations requir-ing sawmill waste-wood beehive burners to close as an initiative to reduce air pollution. At that time there was no commercial use for wood waste and most sawmill operators were unable to comply with the regulations. They repeatedly asked the B.C. government to delay enforcement of the new regulations until they could find an economic solution – threatening sawmill closures and job loss if the government would not agree. In the late 1990s a few entrepreneurs – notably the Swaan brothers, the Johnston brothers, and the owners of L&M/ Nechako Lumber – began using sawmill wood waste to make pellets for a small domestic market. This market quickly be-came oversupplied and pellet operators turned to the larger and rapidly expanding European power utility electricity gen-eration market, with the first shipment of wood pellets being exported to Sweden in 1998. From 1998 to 2011, B.C.’s wood pellet industry grew to 13 plants and B.C. temporarily became the largest pellet-exporting region in the world. British Co-lumbia’s lumber manufacturers were able to close their beehive burners and found a new source of much-needed revenue for wood waste during the recent lumber industry economic crisis. The B.C. government recognized the importance of the wood pellet industry in its 2008 BC Bioenergy Strategy, which stated that “the Province will promote wood pellet production and fa-cilitate market development opportunities within the Province and around the world.” fiBre supply issues faced By B.c. pellet producers For the past hundred years, the B.C. government has used for-est tenure as a policy instrument to encourage development of both the pulp and sawmill sectors. The province issued timber tenures to industry as an incentive for capital investment and employment, a strategy that has resulted in a substantial pri-mary forest industry. Also, the government recognized that the forest-harvesting sector required security and created a regula-tion requiring major tenure holders to enter long-term con-tracts with logging contractors. Such contracts enabled loggers to justify large expenditures for equipment and thus the forest-harvesting sector was developed. As landlord over B.C.’s public forests, the government now urgently needs to take a similarly active role to enable pellet producers to obtain the same degree of fibre security that has enabled the pulp, sawmill, and har-vesting sectors to develop. The pellet sector has invested some $500 million in B.C. without any fibre security. This situation can’t continue. The wood pellet sector’s primary customers are large power utilities. Presently, several of these utilities – particularly in the U.K. – are holding back on investment decisions that would JULY/AUGUST 2013 8 Canadian BIOMASS
Canadian Biomass August/September 2013: Page 8
