Wood pellet plant still sought in Northern British Columbia
Citizen Staff
The
Prince George Citizen REVIEW, March 10, 2007
TallOil Canada Inc. continues to push ahead on plans to build a wood pellet plant in northern B.C. but acknowledged it has been slow going.
The company has planned to start construction of the first of four $30-million plants last summer.
Like Ainsworth's proposed OSB plant, the pellet plants are tied to several major pine beetle-killed timber cutting licenses awarded to the company in late 2005.
The first plant the company is working on is in the Vanderhoof area. TallOil hopes to build the plant on reserve land belonging to the Saik'uz First Nation and is in discussions with the band.
Under the requirements of the timber rights from the province, TallOil must have a plant substantially completed before it can begin to log.
A plant must also be completed within two years of the award of the timber rights, which puts the deadline in the fall of 2007.
Griffith said they won't make that deadline and have already had preliminary discussions with the province about extending it.
TallOil's plan is to convert beetle-killed logs into high-density wood pellets, transport the pellets by rail to the Lower Mainland, and possibly Prince Rupert, where the pellets will be shipped to Europe to fuel energy plants. Each plant is expected to employ 60 to 70 people and support another 100 jobs in logging, trucking and silviculture.
B.C.'s pellet bonanza?
National Post; FP3; January 23, 2007
British Columbia plans to quadruple its output of wood pellets in the next half-decade as companies move to transform its beetle- ravaged forests into energy in a province one analyst describes as "the Saudi Arabia of biomass."
The province's leading pellet manufacturer has already doubled its production in the past two years, and late this March Swedish pellet producer Tall Oil plans to break ground on its first Canadian plant, a $30- million operation on an aboriginal reserve near Vanderhoof, B.C. It has plans for four more in the province in coming years.
Serious questions remain about the profitability of crushing dead timber into fuel for European power plants and hot-water boilers, although it received a shot in the arm with Ottawa's pledge on Friday of $1.48-billion for renewable energy, money that pellet-makers should be eligible to access.
Tall Oil is already finalizing engineering work and aboriginal agreements toward its first plant, and has drafted plans for four more in coming years. When completed, each will produce 500,000 tonnes of pellets annually, mostly for export to Europe, and be the province's first facility with the ability to transform whole dead trees into pellets.
Existing B.C. plants, which produce about 900,000 tonnes of pellets annually, depend on sawdust and other waste from mills for their manufacturing. But Tall Oil has developed its whole-tree technology in Scandinavia and was drawn to bring it to B.C. by "the opportunity that the pine beetle disaster offers."
"It's a very large source of wood pellets that you can't find anywhere else in the world," said Hans Nilsson, president of Tall Oil Canada, Inc., a privately owned firm with ¤130-million ($199-million ) a year in worldwide revenues.
Tall Oil's plans are driven by a surging pellet demand as industries look to alternative fuels to reduce greenhouse gas emissions under the Kyoto protocol. Burning wood pellets releases carbon dioxide into the atmosphere, but is considered carbon-neutral since the gases released had previously been sucked from the air by forests.
The result: an exploding market. Although pellet energy is cheaper than the current price for natural gas in B.C., Canadians have by and large avoided the technology. Europe, however, has embraced it. In 2000, the continent consumed about 800,000 tonnes of pellets. By 2006, that had grown to nearly five million, and is expected to more than double to 12.8 million by 2010. But the continent is only expected to produce just over eight million tonnes of its own by then, creating a lucrative potential market for Canadian manufacturers. "The potential is tens of millions of tonnes," Mr. Nilsson said.
B.C., though it is far from European markets, has the needed supply. Nearly a third of the province's interior forests consists of lodgepole pine, a species that has in the past six years succumbed to a sustained assault by the mountain pine beetle. By the time the beetle infestation dies off for lack of new host trees in 2013, fully 80% of the lodgepole is expected to be dead.
That has proven a temporary boon for foresters, as the province has boosted its annual allowable cut to enable some lodgepole to be recovered before it grows too dry and cracked to be useful as timber. But the beetle has spread so quickly that hundreds of millions of cubic metres of timber will remain unsalvageable.
Worried the dead forests will present a fire hazard and won't be cleared to make way for new growth, the B.C. government has attempted to stimulate fresh uses for the woods. In 2005, it issued licences for about 35 million cubic metres of forest to companies interested in using what is called "bugwood" to produce pellets and oriented strand board (OSB), a plywood-like product that is normally made from hardwood.
Despite that initial optimism, progress has teetered. A report produced last year for the B.C. Ministry of Forests warned that any such activities will be "temporary," and financially shaky unless government produces financial incentives for the industry. Already, last September Vancouver-based Ainsworth Lumber, which had planned to build two bugwood OSB plants, let half of its 21-million- cubic-metre allocation lapse because it was uneconomic.
The same report warned that a 250,000-tonne pellet plant that cost $25-million annually to operate would actually lose $10-million per year if it shipped its product to Europe, given the high cost of transportation. In fact, it calculated the only profitable way to produce pellets from bugwood would be to sell it to Alberta coal plants, which do not currently burn the material.
Building a pellet plant costs about $1-million per 10,000 tonnes
of production -- less for larger plants. Add to that production,
transportation
and
wood acquisition costs of about $115 per tonne -- pellets sell
for about $180
a tonne in Europe--and
what's left is a fairly slim margin.
Pellet manufacturers have operated in B.C. for 20 years, and
even existing manufacturers question Tall Oil's plan.
"We just can't figure out the economics," said Peter Brand, the vice-president of business development with Pinnacle Pellet Inc., which operates three pellet plants in the B.C. interior and has doubled its output to 400,000-tonnes a year since 2004.
So can the Swedes do this for a profit?
"Otherwise, we wouldn't be here," said Mr. Nilsson, who admits his company has not yet signed any contracts with mills, who would be needed both to supply sawdust and to process the useable timber on Tall Oil's 14 million cubic metre timber allowance.
"We've had some discussion and some letters of intent are signed, yes. We don't have any firm contracts, no," he said. "We would have liked to, but it's not crucial."
The industry will receive a boost at the end of the year, when mills in B.C. are forced to close some types of waste-incinerating bee-hive burners, which will provide more raw material for the pellet plants.
The potential, said Wood Pellet Association of Canada president John Swaan, is "huge. We're a $120-million industry as it stands today, and I think we're going to quadruple that just in B.C."
And as rising demand boosts margins, at least one bigger player has been drawn in. Last year, the country's biggest lumber producer, Canfor Inc., announced a joint venture with Pinnacle and a local aboriginal group [Moricetown Band] to build a pellet plant at its Houston, B.C., mill. The Houston Wood Pellet Plant is expected to ship about 80,000 tonnes of pellets this year, and construction recently began on a pellet silo to ship the product overseas from Prince Rupert, B.C.
"They're recognizing that there's a substantial opportunity to cash in on some of the revenue that can be captured by pelletizing it instead of incinerating it," Mr. Swaan said.
"B.C. is kind of the Saudi Arabia of biomass," said Kevin Mason, a forestry analyst with Equity Research Associations. "We have so much waste out there in the woods and in the overall processing sides of things that there's a huge opportunity to do something."
But, he said, pellets will likely continue to remain a small industry in the province unless larger companies bring their heft to bear.
"There really has to be a more aggressive focus by some of the larger players here. They're the ones that can really take this to the next level and develop it," he said.
