Many changes in forestry industry, not all positive, in past decade in Louisiana

By James Ronald Skains
Journal Correspondent

Recently the Piney Woods Journal reported on the Louisiana Farm Bureau, which effectively represents Louisiana agriculture interests on both the state and national level.

Row-crop agriculture is a $2.7 billion industry in Louisiana. By comparison, last year the Louisiana forestry industry was $3.7 billion industry, down from a high of $5.4 billion a few years ago.

The forest industry has undergone numerous changes within the last few years. Few if any of these changes have been positive financially. Three paper mills vital to the Louisiana forest industry have closed in recent years as well as numerous sawmills that either shut down or downsized.

Perhaps of equal importance to the well-being of the forest industry, are the many structural changes taking place within the industry. Most of the major forestry corporations have sold their timber land in Louisiana. Typically, the corporations entered into long-term supply contracts with the purchasers of their land.\par }{\plain However, markets for both lumber and paper have shrunk dramatically in both industries due to the collapse of the US economy in 2008 and its slow crawl out of the depths of a devastated US housing market.

Options for the development of value-added products for the forest industry, especially the use of biomass for fuel, has been slow to develop. It seems that for the past ten years, the conversion of biomass is always "five years in the future."

To better understand the long range future of the Louisiana forest industry in general, and the landowners and logging force in particular, we took a look at moving parts in the forest industry.

First, the long-time north Louisiana logging contractor, Travis Taylor, said "I've been in the logging and timber business for over 40 years and have never seen the situation that we are in now. The number one problem is that our markets for lumber and paper have shrunk at the same time. Secondly, our logging force has decreased considerably and third, the value of timber has dropped to the point where it is not as good an investment for landowners as it has been in years past."

"A group of us have been working to get legislation through Congress that would give people building a new house an Investment Tax Credit if they use lumber grown and manufactured here in the United States," Taylor, VP of the American Logging Council pointed out. "Our lumber industry can't rebound until the US housing market rebounds. We think that our legislation, which we have named the TREE Legislation would cause a lot more loads of logs to be hauled to the mills each day," Taylor added. "The TREE legislation is projected to increase housing starts by 450,000 homes each year."

Buck Vandersteen, the longtime Executive Director of the Louisiana Forestry Association voiced his opinion of the TREE Legislation.

"Although the TREE Legislation that would provide a per square foot Investment Tax Credit to people building new homes using lumber grown and manufactured here in the United States sounds like a great idea, it has flaws and negative consequences," Vandersteen explained.

"In the short term, the TREE Legislation might increase housing starts and increase the harvesting of timber. Long term, it would be counterproductive," Vandersteen elaborated. "The first issue is that such legislation might be in violation of existing trade agreements, and offend some of our trading partners. Secondly, for the housing industry to get moving again, we have to start manufacturing products again, putting people to work." Vandersteen added. "Once that happens, and people begin to feel good about the economy, they will start building new homes.

"Since a house is one of the few things that is built on property exclusively here in the United States, wouldn't that qualify as something to manufacture here the US," the Journal asked.

"We need to cut taxes and get people back to work as the first priority to get our economy going again," Vandersteen answered. We can't offer an investment tax credit to some people that are not offered to everyone. Nor can we offer incentives to the people that might be in violation of our trade agreements."

"Although timber harvesting and housing starts are at all-time lows, we can't afford to do anything to offend our trading partners," Vandersteen pointed out. "We might one day need to import lumber to meet our demand."

"The Southern Pine Inspection Bureau is upgrading their grading system for southern pine lumber," Vandersteen informed the Journal. "This may have far-reaching implications on the amount of Southern pine lumber available for home building."

On the issue establishing a value for forest industry biomass, the Journal took a look at the "Request For Proposals" (RFP) issued by CLECO for biomass to co-fire their Madison 6 Unit at Boyce. At first glance, this appears to be an excellent chance for a break-through on using biomass to produce electricity for the Louisiana forest industry.

However, one of the first things you notice in the RFP is the definition of what constitutes biomass in Louisiana. The definition of biomass in the RFP reflects the deep divide within the forest industry itself that was fought before the Louisiana Public Service Commission (LPSC) several months ago. Eligible biomass in the CLECO RFP is defined as follows:
"Harvesting residue such as branches and tops, rough/cull material, small diameter saplings from pre-commercial thinning's, wood not now utilized by existing forest product companies to manufacturer primary wood- derived products such as paper, lumber or engineered wood product shall qualify as biomass. In addition, wood processing residue such as slabs and cutoffs that have been chipped, and clean storm biomass debris are eligible. Consideration will also be given by CLECO to the dedicated biomass fuel market."

Then comes further conditions in the RFP from CLECO: comply with appropriate sustainable forest products management practices, SFI or Forest Stewardship Council mandates, and the landowner from which the biomass is being harvested must have in place a written forest management plan by a professional forester certified by the Society of American Foresters. Also, the logging contractor must be a master logger and all BMP's must be met.

Other conditions laid out for biomass in the CLECO RFP concern moisture content, BTU content of the biomass, and ash content of the wood. CLECO is requesting a 10-20 year supply contract with virtually no chance of the vendor receiving additional money for their product even if the prices of biomass and diesel fuel increase during the length of the supply contract.

Travis Taylor has indicated to the Journal that he is seriously considering making a proposal to supply biomass meeting CLECO criteria.

"I know that this RFP on supplying biomass as defined by the proposal is a challenge, but I see a possibility of being able to put the pieces together and develop a niche market for this type of biomass," Taylor said.

Robbyn Cooper, a spokesperson with CLECO told the Journal, "Ten potential bidders attended our December 15, 2011 Contractors Technical meeting, but we are not certain how many will actually submit bid proposals."

"We are using a process created by the Louisiana Public Service Commission," Cooper added. "We anticipate evaluating the proposals and providing the LPSC with our required report in the third quarter of this year."

LPSC Chairman Foster Campbell had this to say to the Journal about the CLECO RFP: "If the Commission determines that it would be in the public interest for CLECO to proceed with co-firing biomass at Madison 3 (at Boyce) after the RFP's have been concluded, then the Commission would approve CLECO's request, but it would not be a mandate per se. If, however, the proposal plan to co-fire biomass would not be in the public interest, then there would be a mandate to honor their obligations under the renewable pilot program through an RFP (like the other electric investor owned utilities are doing)."

Of the four investor owned Utilities in Louisiana under the jurisdiction of Louisiana Public Service Commission, CLECO is the only utility that has shown (to the Journal's knowledge) any interest in biomass (even narrowly defined) as a feed stock for power production. SWEPCO, headquartered in Shreveport has recently entered into two 20 year contracts to purchase wind power from two wind farms, one in Kansas and one in Texas. 31 megawatts of electricity will come from the Flat River 2 Wind Kansas Energy Farm and 80 megawatts of electricity will come from Majestic Wind Farm near Amarillo, Texas.

SWEPCO told the LPSC in a recent meeting in Winnfield that the Flat Ridge 2 wind power agreement would lower SWEPCO customer's bills in 2013 by roughly 5 cents per month for residential customers and 11 cents per month in 2014.

It would seem that both the LPSC and the four investor owned electric utility companies in Louisiana missed a great opportunity to jump-start a new industry in Louisiana of biomass conversion to electricity. This move would have created thousands of jobs and millions in new tax revenue. In addition, all four of the investor owned electric utilities provide power to thousands of people in Louisiana who are directly or indirectly involved in the forest industry.

However, the production of electricity from biomass is hardly a new idea. Anyone with access to biomass and a little capital for a gasification system can produce their own electricity.

The Germans, before WWII developed a biomass gasification conversion to electricity process. This process is still in use in much of Western Europe (Scandinavian countries).