THE FOREST INDUSTRY OF THE FUTURE: What Will It Look Like?

The following post was originally published by Timber-Mart South 4th Quarter 2009 -- Vol. 14, No. 4, January 2010

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I was recently asked to speak at the North Carolina Forestry Association’s annual meeting in Myrtle Beach on the above captioned topic. Before agreeing to the talk, I had to think about it for a while. The quote “Its tough to make predictions, especially about the future” attributed to Yogi Berra, as most quotes are, hung in my mind for a few days. But I took a shot at it and later agreed to share some of those thoughts with TMS readers.

First, there has to be a basis for the prediction. The basis that I chose was to look at the changes occurring in the forest industry and to look at what I thought the future economic environment might look like.

The three key changes in progress are:

1.    Changing Timberland Ownership
2.    Biomass for Energy
3.    Global Industrial Revolution

Timberland Ownership: The shift in ownership (from forest industry to institutional) is well documented and well underway so there is no need to spend time on it (maybe a couple of comments!). Due to the housing/lumber market collapse, timberland owned by the sawmill industry is following in the footsteps of that formerly owned by the pulp and paper industry. This is illustrated by the timberland ownership shifts of Allegheny Wood Products and Anthony Forest Products to TIMOs. Survival can be tough. The second point is that the institutional owners have no allegiance to a mill so the wood will flow to the highest bidder.

Biomass for Energy:  This is not a new thing but its impact is changing and the magnitude of the issue is not universally well understood so it merits significant discussion. There are three drivers pushing the biomass market shift.

1. Renewable Energy: The desire to shift to energy sources that we cannot “run out” of. Many states already have legislated renewable energy targets and biomass, particularly in the Southern states, is playing a key role toward the advancement of those goals.
2. Climate Change: The desire to shift away from energy sources that add to the perceived problem of man caused global warming. Burning wood is carbon neutral when viewed from a carbon cycle perspective. This appears to be more of a political issue than a scientific one but that is irrelevant to the outcome. Pellet exports from the U.S. to Europe increased over ten fold last year fueled by carbon taxes in EU countries. If Cap and Trade is passed here, expect to see an even greater shift from coal to biomass by utilities.
3. Energy self-sufficiency: This is the most important concern from my perspective. It is significant from both national defense and economic security points-of-view.

So where will this biomass come from? The primary sources of woody biomass are manufacturing residues, harvest residues, urban waste (construction, etc.), pulpwood and short rotation crops grown specifically for biomass. I have looked at available manufacturing residues for multiple clients and there is just not a significant amount available. It is virtually ALL being used and most of it is used by the forest industry to produce products or energy. Harvest residues are there BUT, as the pulp and paper industry knows, harvesting residues is expensive, they have a negative impact on mill processing and they produce a product of inferior quality and value. These traits are equally true for pellets and pulp. I don’t know much about urban waste but there is less of it with the housing market decline. So that leaves pulpwood and that is where the bulk of the woody biomass resource will come from.

To better understand the magnitude of potential biomass demand, let’s look at some of the new facilities.

A Pellet Mill: The pellet mill in Cottondale, Florida started up in April 2008 as the largest pellet production facility in the world. One hundred percent of the plant’s production is for export to Europe where the pellets are mixed with coal to reduce carbon emissions in the production of electricity. The driver behind it is the European carbon tax applicable to coal but not the carbon neutral wood pellet. The plant produces 560,000 tons of pellets annually and consumes about 1,000,000 green tons of wood. The resource used is not “residue” - it is pulpwood. This facility is the equivalent of a new pulp mill.

Cogeneration: This is certainly not new in the forest industry as our pulp mills have been doing this for a long time. What is new is the magnitude of the projects. Industry is expanding the use of cogeneration, schools are installing the systems and one village in Pennsylvania is building a system to use the steam to heat all of the houses in the village as well as supplying the electricity to them. An industrial example is the Sonoco / Peregrine Energy Corporation plan to develop a new $135 million woody biomass-fueled cogeneration plant in South Carolina. Plans are for Peregrine to construct a new 50-megawatt capacity facility that will be capable of generating enough electricity to power approximately 14,000 homes. The new biomass-fueled cogeneration facility will replace Sonoco's existing coal-fired boilers. Peregrine intends to sell the entire electrical output and all renewable energy certificates associated with the plant to Progress Energy Carolinas, Inc., and low pressure steam from the plant to Sonoco for use in the manufacture of recycled paperboard and other converted products. “The project would benefit the regions' forestry industry by utilizing pre-commercial thinnings and waste logging residues as the woody biomass fuel for the project.”

As a rule of thumb, a 100-megawatt plant will consume about a million green tons so this facility will consume about one-half of that but that is still a lot of precommercial thinnings!

A Coal Fired Power Plant: This one really caught my attention. The power companies are struggling with the renewable energy standards. In the East, there is limited opportunity for wind, solar or geothermal so biomass is about the only alternative left (hydro is out for a multitude of reasons). FirstEnergy at Shadyside, Ohio has announced its conversion from coal to biomass. The largest proposed development to date had been Yellow Pine Energy's 110 MW project in GA, a million-plus ton/year wood consumer. FirstEnergy’s is 312 MW and will consume 3 million green tons! This is on a par with the South’s largest pulp and paper mills.

The sheer quantity and magnitude of the announced facilities similar to the examples above is staggering from a resource consumption viewpoint. Not all of them will come to pass but it is very clear that enough of them will reach production levels that will greatly impact the future supply/demand picture for forest products.

Global Industrial Revolution:  The third key change, the global industrial revolution, is well under way but it may never be realized. All of the developing nations have ambitions to reach the standard of living with which we are blessed but the commodities, the natural resources, are just not there to reach that level on a global basis. Commodity shortages, particularly oil and other transportation energy sources, will prevent the world from reaching the level that we have obtained and, more than likely, those same shortages will prevent us from maintaining that level. Escalating transportation costs will cause us to revert back to a society much more dependent on manufacturing. It is significantly less expensive to ship dried lumber than logs.

The three key changes mentioned above combine with a couple of additional economic factors to create the drivers that define my view of our economic future. The drivers are:

• Social drive for renewable energy, energy self-sufficiency and climate change
• High energy costs- The key cost escalator
• High Inflation Rate (perhaps hyperinflation) driven by:
      * Very high government spending
      * Very high oil prices
      * Commodity shortages, including timber
• Declining Value of Dollar (see Figure 1)

Source: fxstreet.com

 The Future of the Pulp Mill: Domestic paper demand will continue its downward trend but I am not as pessimistic about the industry’s future as most people are. The continuing decline in the dollar, although very bad for the consumer, will have a positive impact on the pulp and paper industry. The export market will be much brighter. A great deal of capacity has already been taken out of the market. Although bio-refinery economics are very unclear at this time, more capacity may come out as some mills are converted from pulp to production of “of ultra-clean, renewable motor fuels”. As the energy transportation costs rise, it may be cheaper to burn pulpwood for energy and to convert black liquor to transportation fuels. The key driver is the future price of oil and that may be considerably higher than the current consensus. The major downside for the pulp and paper industry will be the competitive demand for wood. Wood is both its raw material and its energy source and the power companies are going to be very tough competitors.

The Future of Sawmills: Despite the doom and gloom about future housing, domestic lumber demand driven by housing demographics still looks good after the excesses have been worked off. The Global Industrial Revolution combined with a weaker dollar will create a very positive manufacturing and exporting environment for sawmills. Global housing and lumber demand will be high and the U.S. will be one of the key suppliers. Very high energy costs make it more cost effective to ship lumber than logs to export markets, reversing the current norm.  There will be a much more competitive market (higher prices) for mill residues. Consistent and steady demand from biomass consumers will provide a steady supply of logs from producers. Things couldn’t look much better assuming there is a mill somewhere that survives the current crisis! It’s always darkest before the dawn.

The Future of Biomass Consumption:  Biomass utilization is a game changer in the forest industry because of the sheer quantity of biomass that will be utilized. Many schools in cold climates are heating with wood chip boilers today and they are saving money without any subsidies (and this is spreading to the warmer South as well). European villages have moved in that direction and some Canadian and U. S. villages are capitalizing on their experiences. The developing demand by the power companies seems so huge as to be unsustainable. Transportation cost increases will work against the large biomass programs such as the 3 million G ton Ohio facility. Power facilities with less output and shorter haul distances will be more cost effective (diseconomies of scale). If the “man-caused” global warming issue does not result in tax legislation, if consumers scream too loudly about electrical cost increases, government may back off and the power companies will be able to revert to coal to produce electricity more economically. That would take the pressure off biomass and still provide energy self-sufficiency to a degree. But even that scenario will not change the shift to biomass for energy. Oil is a finite resource and more energy must be expended to get each additional barrel. Like it or not, oil prices are on the wrong end of the power curve and that means that transportation costs are too. There WILL come a point, I don’t know when, where cellulosic ethanol (or one of the other wood-based transportation fuels) is less expensive than oil. When that happens, the forest industry is changed forever.

The Future in the Forest: Recent economic drivers supporting longer rotations are creating a “wall of wood” in the sawlog size class. Institutional investors have lengthened rotations from the pulpwood size-class to the sawtimber size-class to capitalize on the price differential. Sawtimber sales have been deferred as a result of poor markets, so harvest followed by planting has slowed (Figure 2).

The graph shows a significant decline in planting, which is troubling to some folks, but more likely reflects increased thinnings and significant reductions in clearcutting. Short rotation energy plantations close to market will happen IF wood costs go up significantly OR planners fail to anticipate increases in transportation costs. There will be more “in-woods” operations (chippers, biomass harvesting, biochar, and perhaps mobile methanol) – all driven by higher oil costs. Biomass harvests will be incorporated into conventional tree planting prescriptions. Much more competitive markets will mean higher stumpage prices for biomass and pulpwood. The current growth/drain ratios are very favorable (Figure 3) but sustainability will probably become a political issue if not a real one.

Changes in Wood Supply Chain: It is the same basic Wood Supply Chain, but…

• Harvest residues will be added, probably more mechanized
• Biomass demand brings more stable wood demand
• No monthly (weekly, daily) shifts in mill consumption
• No shifts in species needed
• Annual contracts for wood producers become practical for biomass production – good news for loggers!
• May force the same for pulpwood and sawlog buyers
•  Logging will become a more robust, stable and competitive market segment

My Synopsis of the Future Forest Industry

• Biomass/Power companies will be a key part of the industry.
• There will be more “in-woods” operations (chippers, biomass harvesting, biochar, and perhaps mobile methanol).
• A smaller pulp and paper industry will survive and exporting will play a larger role.
• Sawmills: Demographics still favor housing and lumber export market will become significant. Imports less competitive.
• Logging contractors will have a more stable operating environment. Annual production contracts.
• Stumpage market will be more competitive and more stable.
• Plantation establishment will consider energy market.
• Timberland ownership will be a good place to be!

So that’s the way I see it. A global economy responding to a failed energy policy built on unsustainable oil production. This view of the future may not be right but it is worth considering as you go forward.

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Differing views welcome, especially if rational is explained. --Brian

Visit Timberland Strategies web site.

How Much Did Timberland Values Fall in 2008?

My stock portfolio has certainly taken a hit to the downside. The housing market has tanked and the values of many houses and rental units have gone down with it. Stocks of the publicly traded timberland owners have gone down 20 to 60% in the last year or so. The logic is that the decline in housing has caused a drop in lumber price which has created a drop in timber (stumpage) price which has resulted in a corresponding drop in timberland prices. So logically my portfolio has taken a hit on the tree farm side too. But has it?

I do some consulting with market analysts and hedge fund managers interested in valuing timberland and the drivers behind it. The most common question that I have heard recently surrounds the declining value of timberland and just how great that decline is. How can a company like Weyerhaeuser or Plum Creek be properly valued given the logical decline in timberland values? I could give my opinion (and I always do!) but that is not enough.

I have been maintaining a database of the major timberland transactions for over a decade so I wanted to quantify the change for 2008. Below is a chart showing the $/acre sale price trend for the last decade.


















This is pretty interesting. Nationwide, it appears that prices have dropped about 21% following a year where they gained 60%! BUT… it is important to understand the data and what is happening. This database is composed of transactions that total between one and seven million acres in any given year. Also in the database is a “REGIONS” field. Price distortion occurs between years due to the variation in the percentage of sales occurring between regions ($/acre varies significantly between regions). So how does the price per acre change if we just look at a single region? Let’s look at the South.



















Within any particular region, individual transactions will impact any given years weighted average price. In spite of that, the trend is clear and it is difficult to find any argument in the data that supports a decline in timberland pricing – at least in the South. The first reported sale for 2009, Potlatch to RMK, was at $1,745/acre, right in the ballpark.

The Northeast is the only region that did show a drop last year. The acreage sold in the NE was not particularly large (meaning most of the variability was probably due to the variability between tracts) so I would be reluctant to attribute much significance to the decline. There was one significant datapoint though. The Essex Timber to Plum Creek transaction (at $267/acre) pulled the average down. It is important to note that there was a conservation easement on this tract. We should expect to see significantly lower transaction values as more sales occur on tracts with existing conservation easements. The sale of a conservation easement provides revenue in the form of an early payment for HBU land but it can also have a negative impact on future forestry based revenues as well.

So…, what does all of this mean? I can see little or no decline in timberland values. I’ll be curious to see what the NCREIF index on timberland values has to say. The index is based more on appraisals than actual sales but the appraisals SHOULD be based on comparable sales and comparable sales just do not support a decline in appraisal values. If sale prices are not declining, what is wrong with the logic expressed in the first paragraph – declining housing starts means declining timberland values?

Here is my take. First, buyers are “looking through” current timber prices. Sophisticated timberland investors use appraisal techniques that look at cash flow from timber over the planned life of the investment. Those timber values are based on their view of the future, not just today’s market.

Second, more money is chasing fewer acres. A significant amount of timberland is being pulled from the market. Example: almost all of the 161,000 acres of Finch and Pruyn timberland in the Adirondacks will ultimately be withdrawn from production and become a part of the Forest Preserve. An example from the other side of the equation: this week the United Nations announced that its pension fund would diversify its portfolio and seek to acquire timberland. More money chasing fewer acres. Institutions want to diversify their portfolios, particularly by acquiring hard assets.

Third, future wood demand will be impacted by both renewable energy and global warming concerns. We are already seeing pellet mills being built to export pellets to Europe where they are mixed with coal to reduce the amount of carbon tax the utilities must pay. Most forecasters expect to see a similar tax in the U.S. soon.

Fourth, there is evidence that declining interest rates are impacting the discount rates used by institutional timberland purchasers. A declining discount rate drives value up!

These are my thoughts, these are my numbers, and these are my opinions. Comments are welcomed. --Brian

Two Ongoing Changes in Timberland

Probably the most significant change happening today in the nation's timberland is the rapidly evolving biomass for fuel market. While most of the manufacturing residue has been used - primarily by the pulp and paper industry - for several years, the accelerating change in demand is beginning to show up in the stumpage market.

One of the other changes, perhaps more temporary in nature, is the increase in foreign ownership of U. S. timberland. Reasons include both the weaker dollar, although the fall appears to have reversed, and the European desire for a carbon neutral source of energy.

There is a very good news article in the Atlanta Business Chronicle which looks at the status of these changes in Georgia. You can read it here. The article references a USDA report on foreign ownership of timberland and farms. If you would like to read it, you can download the report here.

On a totally unrelated note, American Timberland Co. has acquired 20,000 acres from International Paper in Horry County, South Carolina. --Brian

Biofuels Update

A year ago last February I made my first post on this Blog. Among other things, I expressed my dissatisfaction with President Bush for his corn-based ethanol thrust and for ignoring the potential of wood. At that time I wrote “maybe we will come to understand that people would rather eat than have gasoline made from corn ethanol. Or see timberland and wildlife habitat cleared for corn fields. Perhaps soon a President will wake up to the fact that he/she has a nation with forests capable of providing ethanol (and other forms of fuel) and a very capable research team already in place that is capable of making it happen. Then forest productivity will once again be a major issue and timberland investors will be smiling. And capital will flow to forest research!”

To President Bush's credit, he woke up quite quickly and began a very real push for cellulosic ethanol research as well. Perhaps less well known is his core strategy of “next-generation-biofuels production from nonfood feedstocks”. At any rate, now would be a good time to assess what has happened since that original post.

First, the nation (world) now clearly understands that corn ethanol is not the solution or even a part of the solution. Corn ethanol's high energy inputs, very limited carbon reduction (if any), clearing of forest land, and hard pressure on food prices are all serious consequences that have now become well recognized. A recent, widely read Time Magazine article, “The Clean Energy Scam” by Michael Grunwald, had this to say:

“But several new studies show the biofuel boom is doing exactly the opposite of what its proponents intended: it's dramatically accelerating global warming, imperiling the planet in the name of saving it. Corn ethanol, always environmentally suspect, turns out to be environmentally disastrous. Even cellulosic ethanol made from switchgrass, which has been promoted by eco-activists and eco-investors as well as by President Bush as the fuel of the future, looks less green than oil-derived gasoline.”

“Meanwhile, by diverting grain and oilseed crops from dinner plates to fuel tanks, biofuels are jacking up world food prices and endangering the hungry. The grain it takes to fill an SUV tank with ethanol could feed a person for a year. Harvests are being plucked to fuel our cars instead of ourselves. The U.N.'s World Food Program says it needs $500 million in additional funding and supplies, calling the rising costs for food nothing less than a global emergency. Soaring corn prices have sparked tortilla riots in Mexico City, and skyrocketing flour prices have destabilized Pakistan, which wasn't exactly tranquil when flour was affordable.”

“Biofuels do slightly reduce dependence on imported oil, and the ethanol boom has created rural jobs while enriching some farmers and agribusinesses. But the basic problem with most biofuels is amazingly simple, given that researchers have ignored it until now: using land to grow fuel leads to the destruction of forests, wetlands and grasslands that store enormous amounts of carbon.”

Grunwald concludes with “But the world is still going to be fighting an uphill battle until it realizes that right now, biofuels aren't part of the solution at all. They're part of the problem.” And so is Grunwald.

The article, widely criticized by the ethanol community, paints a pretty accurate picture of corn ethanol and the agri-fuels but it paints all biofuels with the same brush. (Grunwald is an advocate: he ignored science and balance to make his point). Not once did he look at wood as a source of biofuel. Click to read the article. The danger stemming from Grumwald's article is that people will believe that all biofuels are “bad” and that “They are part of the problem” as he says.

The second point of this assessment is to look at what is actually happening on the wood front. Biomass co-generation plants have been successful for years and their use is expanding rapidly. Most of the fuel for these plants has typically been waste. There are over a dozen wood pellet mills operating in North America already. The largest one, in Cottondale, Florida, has an annual capacity of 550,000 tons. Another, perhaps even larger, is going in at Selma, Alabama with the intent of exporting to Europe. In Europe, wood pellets (carbon neutral) are mixed with coal to produce a cleaning burning product to reduce carbon emissions.

“Europe already consumes nearly 8 million tons of wood pellets a year, to run factories and power plants , and to heat entire neighborhoods (combined heat-and-power biomass systems with district heating). In 2005, the EU witnessed a 16% growth of electricity produced from biomass.” For more on this, here is a link to a Biopact article. This site also has a link to “A Biofuels Manifesto: Why biofuels industry creation should be ‘Priority Number One’ for the World Bank and for developing countries” by John Mathews. I would encourage Mr. Grunwald to read it!

Initially, the wood pellet plants have been sourced with wood waste but that will likely change. As consumption increases, it should be expected that fiber for pellets will begin competing with lower grade wood products like pulpwood. That makes timberland investors happy and research capital flows in that direction.

A DOE letter commenting on the Grunwald article stated that government “agencies invested more than $1 billion in research, development and demonstration of next-generation-biofuels production from nonfood feedstocks, which remains the core U.S. Strategy” (my italics). That's pretty significant. Both money-wise and strategy wise. Some of that grant and research money, along with private investment capital is also flowing into cellulosic ethanol. There are at least nine, perhaps more, cellulosic ethanol projects in some level of funding now.

“Despite all of this, Range Fuels Inc., which broke ground on its 20 MMgy wood-to-ethanol thermochemical plant in Soperton, Ga., is finding success quite unlike the rest of the biorefinery projects. On April 1, the company announced that it had raised more than $100 million in series B equity financing. This is in addition to the $76 million DOE grant Range Fuels received along with a $6 million grant from the state of Georgia. The company says the $100-plus million will go toward the completion of construction on the 20 MMgy biorefinery. Russo confirms that Range Fuels is the only commercial-scale cellulosic ethanol plant under construction by the end of the first quarter of 2008. Three more projects that were part of the original $385-million award have completed what’s called a Phase One award. (source: Biomass Magazine). For a more detailed look go to Commercial Biorefinery Update.

The third point that needs discussion is the use of wood as a feedstock for biomass to liquid, BTL, for a clean burning diesel fuel. We convert natural gas to a liquid form, LP, and use it as a fuel. Coal (which is wood under pressure for a few years) is being liquefied and being burned in the new diesel engines. This new biodiesel burns much cleaner and with increased mileage as well. A reader sent me a link to a very informative German newspaper article, BIOFUELS -- THE SECOND GENERATION, New Technology Foresees Trees, not Grain, in the Tank, by Christian Wüst from which I will extract a few quotes.

“The facility is fairly small. And even if all goes smoothly, its production will also be fairly modest -- just 13,500 metric tons of diesel fuel a year as compared with Germany's annual consumption of 30 million tons. Still, this tiny refinery in the eastern German town of Freiberg has managed to attract a number of highly prominent visitors, including ... Mercedes and Volkswagen..., Shell will be there, as will German Chancellor Angela Merkel. After all, the small cluster of concrete silos, combustion chambers and catalyzers owned by Choren Industries is worth paying tribute to. The only facility of its kind in the world, it is designed to turn wood into fuel for cars -- and thus represents a decisive step toward so-called "second generation" biofuels.”

“Now Choren wants to mark the dawn of a new age. The plant in Freiberg uses non-food biomass instead of traditional crops and is the first of its kind to cross the threshold from theoretical research into industrial production. This advanced refinery was designed to furnish proof that the new fuels are feasible -- and can be produced on a much larger scale.”

“Instead of sugar beets and rapeseed, the new plant processes wood as its raw material. In a pinch, it can also use straw. Using these materials significantly increases the yields from cultivated areas. According to estimates provided by the German Agency for Renewable Resources (FNR), the annual energy yields using the Choren process, based on a Central European climate, are 4,000 liters of fuel per hectare (1,057 US gallons), which is up to three times as much as previous biofuel production methods. What’s more, in contrast to production methods using rapeseed oil and ethanol, this technique does not produce fuel of inferior quality. Choren manufactures extremely pure diesel with virtually no sulfur. Moreover, these second generation biofuels do not harm particle filters or engines and meet top emissions standards.”

“ 'BTL is a dream fuel,' says Wolfgang Warnecke, CEO of Shell Global Solutions in Hamburg, 'the best of all the biofuels.'”

“The German technology is ready for production. And this has prompted traditionally gasoline-fixated Americans to take an interest in BTL diesel. In a competition held last year between 146 entrants, Choren emerged as the only foreign company in a group of winners to offer new energy technologies. Washington wants to promote these new technologies quickly and effectively -- and without red tape. Choren CEO Blades says a US government agency reviewed his company for just nine months. Soon thereafter came the offer for a loan guarantee amounting to 90 percent of the investment costs of a BTL facility on American soil.”

Here is my takeaway. Government policy has changed and is now pointed in the right direction (will Bush be known as the “Energy President”?). Capital is flowing in the right direction. Research is generally where it should be. The politics of all three Presidential candidates are inconsistent with the reality and the news media changes it's stance as food and gasoline prices waiver. And as the little company in Germany is showing us, at the heart of the solution is capitalism! Wood is good. --Brian

Cellulostic Ethanol Action Alert

The Forest Landowners Association has issued the following Action Alert. If you support wood, (instead of corn) as a base for ethanol production, now would be a good time to let your Senators know. --Brian
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Special Issue June 7, 2007
Forest Landowners Association Action Alert
Contact Your U.S. Senator Today
The Forest Landowners Association is excited about the federal movement to promote cellulostic ethanol as a renewable energy source for our country, which will benefit the almost 11 million non-industrial forest landowners across the United States. Cellulostic ethanol is produced from natural feedstocks such as woody biomass, trees, and a variety of other plant materials.
We need your help!
Congress is developing energy legislation that will be voted on soon. We are pleased to report that due in part to recent FLA efforts, the Senate Energy Bill now has language that includes cellulostic ethanol as a means to help solve our nation's energy crisis and spur the development of bioenergy markets for forest landowners.
A few manufacturers fear this new market for forest products will create increased competition which could translate into them paying higher prices to landowners for their wood. They are working very hard to change this bill, and others, in order to limit the forestland eligible for these new markets. We need your help to make sure they don't succeed in excluding your forestland.
Why is this so important?
In an effort to reduce America's dependence on foreign oil, power our nation, reduce greenhouse gas emissions, and diversify the nation's fuel supply, forest landowners can provide an alternative to fossil fuels by promoting, enabling, and utilizing all cellulostic biomasses.
New markets for woody biomass and other cellulostic feedstocks will improve forest health by reducing hazardous fuels, encouraging responsible forest management, and enhancing wildlife habitat. The use of wood for energy can sustain forestlands as desirable investments and stop forestland conversions to other uses. We value current markets, but forest landowners must have some assurance that there will be future markets for their investments in forestland. An unrestricted market in cellulostic biofuels is the best policy for forest landowners and renewable energy producers.

What to say to your Senator

• 
  Family forests can be part of the solution to America's energy needs and independence.
• 
  Trees are an abundant, renewable, and reliable energy source.
• 
  New markets for forest products will help landowners sustain the family forest.
• 
  A few manufacturers are proposing restrictive definitions of woody biomass in the energy bill and they want to limit competition for their raw products: trees.
• 
  Unrestricted markets are the best policy for forest landowners and renewable energy producers.

Call Today!
To contact a Senator's office, please call (202) 224-3121, ask for his/her office and then ask for the energy legislation assistant. Leave a voicemail message if you cannot speak directly to that person. Please be sure to contact your Senator by phone or fax as sending a letter takes too long and timing is important on this issue.

Kudos to Weyco!

While politicians promote corn, sugar beets and other annual crops, Weyerhaeuser and Chevron have announced an alliance to "assess the feasibility of commercializing the production of biofuels from cellulose-based sources". Kudos to Weyerhaeuser, Chevron and capitalism!

"The two companies said the partnership reflects their shared view that cellulosic biofuels will fill an important role in diversifying the nation's energy sources by providing a source of low-carbon transportation fuel. The venture leverages the strengths of both companies, combining Chevron's technology capabilities in molecular conversion, product engineering, advanced fuel manufacturing and fuels distribution with Weyerhaeuser's expertise in collection and transformation of cellulosics into engineered materials, innovative land stewardship, crop management, biomass conversion and capacity to deliver sustainable cellulose-based fiber at scale." The entire news release is well worth reading.

On April 4th, Roger Sedjo with Resources for the Future, moderated a session on Biomass Energy: Biorefineries. All of the presentations are available at the previous link but I found the presentation by Theodore H. Wegner, Assistant Director, Forest Products Laboratory to be particularly informative. It is an outstanding look at the current situation while clearly laying out the hurdles that must be overcome to begin using wood to replace oil. --Brian

Ethanol from Trees, Not Corn!

Before I start on the corn rant again, there are a couple of recent articles that I found interesting. The first is kind of a summary, from an investor/financial perspective, of the shifting ownership from industry to investors that was done by Laura Mandaro with MarketWatch. See "For-sale signs pop up on U.S. timberlands". Some interesting facts.

For an update on what is happening in the State of Washington, click here. The focus is on the loss of timberland to development. There are references to Hancock, Weyerhaeuser, Port Blakely, UW and the Forest Service.

On Feb.3, disappointed with President Bush's push for corn ethanol, I wrote "Perhaps soon a President will wake up to the fact that he/she has a nation with forests capable of providing ethanol (and other forms of fuel) and a very capable research team already in place that is capable of making it happen". I doubt that Dubya spends much time reading blogs but I am certainly glad that he woke up and is now making research commitments to "cellulosic" ethanol!

The obvious outcomes of the corn ethanol push are already well under way. Corn prices have jumped. Today's newspaper reported farmer's intent to increase the acreage in corn by 15% (farmers are no dummies, they have already sold a portion of that harvest at these increased prices). Most of the new acreage in corn will be at the expense of other crops, like soybeans and milo, meaning we will see price increases in many other foods plus the many non food products manufactured from soybeans. If the corn thing isn't halted quickly, there will be a new rash of conversion from timberland to farm land. When the shift to cellulosic ethanol occurs, some folks will be holding the bag as corn prices drop substantially. The only thing that will hold corn prices up will be farm subsidies funded by us good old taxpayers. And in a double whammy, we will have higher food prices as well. There is a certain odor about this. To put it bluntly, it stinks of farm belt politics!

But things are at least moving in the right direction (slowly). The following appeared in a recent issue of the Forest Landowners Fast Facts newsletter.
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New Wood Biomass Coalition Formed

Recently, FLA lobbyist Frank Stewart participated with other representatives from like-minded groups to help effectively organize to "provide advocacy, education, information, and outreach to public and private entities that promote research, development, and funding for sustainable woody biomass utilization and markets."
As a result of that organizational meeting, the coalition adopted the name, "Woody Biomass Committee," and set goals, including: · Reduce America's dependence on foreign oil and improve the nation's national security position · Improve forest health · Create new markets for renewable fuels, including woody cellulosic ethanol in rural America, which will promote economic opportunities and growth while supplying a sustainable supply of woody biomass for all biomass/bioenergy products
These are certainly aspirations in keeping with FLA ideals for the 110th Congress, which are: · Statutory and regulatory definitions of "wood biomass" should be defined as "wood" and not simply as wood residues, wastes, and/or byproducts. · Wood biomass must be a full partner with other cellulosic feedstocks in all bills, laws, regulations, and other federal initiatives. · Markets for wood biomass must be developed to maintain forestland investments as vital, so forestland investors continue to hold their land as forestland. Without suitable markets, forestland divestitures may increase.
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There was also an article in the last NC State alumni magazine with a focus on research aimed at reducing lignin in cottonwood specifically for ethanol production (although originally the research was done for pulp production). So, overall, research is beginning to shift from pulping to energy production in support of the new role that timberland will soon play. --Brian