Mulch Producers Tune Into Biofuel Boom

A look at the potential, forthcoming uses of forest and timber resources as fuel, and how the mulch industry might size up in the changing market.

By Mollie Day

   The biofuels boom, spurred by government pursuit of energy independence, is a key factor in a congressional movement on alterative energy. Already the government is spending millions on biofuel research and development, and federal law is in place to increase usage of forest and timber resources for biofuel.
   In their 2005 “Billion Ton Report,” the US Department of Energy (DOE) and US Department of Agriculture (USDA) anticipate that US forest and timberlands have the potential to produce up to an estimated 370 dry tons of biomass annually, in a sustainable manner, as a feedstock for biofuel. An increase in the use of forest and timber resources for biofuel could spur stronger competition for certain woody resources, and the intensity of elbowing will depend on laws of supply and demand. Producers of forest resource products are looking for ways to secure their businesses as government agencies, policy makers and consumers move forward, casting votes that fuel the market.
   “It’s all speculative at this time how the markets will drive investment and landowner decisions,” says Bryce Stokes, National Program Leader of the US Forest Service R&D, Washington, D.C. Not every step toward the future will be grounded in speculation; some will be required by law.
   The Energy Policy Act of 2005 raised the required amount of biofuel to be mixed with gasoline sold in the US to 6.1 billion gallons in 2009 and 7.5 billion in 2012.
   Signed into law by George W. Bush, the act was a catalyst for the impending biofuels boom. The Energy Policy Act authorizes $50 million annually over the life of the bill for a biomass grant program.
   Two years later, upon signing the Energy Independence and Security Act (EIS) into law, the former president set a national goal of raising the total amount of biofuels added to gasoline sold in the US from 4.7 billion gallons in 2007 to 36 billion by 2022. Preparations for increasing national consumption of biofuels are being carried through from the Bush to the Obama administration. The DOE reports that of the nation’s biofuel target, 27% of the feedstock is to be derived from forest resources
   While the government agencies seem to understand that the market will drive the outcome for biofuels, the DOE and the USDA are clearly preparing for a future filled with biofuel. “We are now able to estimate both the potential and economic availability [of wood feedstocks] at different costs and show where these resources are spatially located,” says Stokes regarding the new forestry update to the “Billion Ton Report” which is due out by July 2009.
   Experts expect to see more federal and state policies that mandate use of alternative fuels cropping up along side the green feedstocks. They agree that competition among forest resource-based producers is inevitable, but still flexible.
   “At $140 barrel oil, we’re going to create a lot of bioenergy. At $40 we’re not going to affect the mulch industry,” says Tom Harris, editor of Timber Mart-South (the journal reports prices quarterly for standing and delivered timber products) and professor of forest business management at Warnell School of Forestry and Natural Resources, Athens, Gerogia. “Everyone that has a cell phone was going to get in the bioenergy market in July,” says Harris. “My phone’s not ringing nearly as much now that the barrel has dropped,” Harris adds.
   Wood can be used in a biorefinery as a feedstock or fuel. If the wood is a feedstock, it may be converted using thermochemical or biochemical processes into biofuels. Residues (waste) from these processes can also be used as a boiler fuel to produce process steam.
   While government agencies and lawmakers are preparing for the future, so far only one biorefinery that converts wood to ethanol is on line and running, it’s located in Upton, Wyoming.
   The advanced technology needed to convert wood to biofuel is still considered research and demonstration. “It still has too much technology or financial risk to be considered commercial,” reports Christina Kielich, spokeswoman for the DOE.
   Within the DOE portfolio of demonstration projects, there are five projects that use wood as a feedstock. Once up and running these projects will convert the wood feedstock to fuels and use the residue to produce process steam. The projects are located in Wisconsin, Georgia, Nebraska, Main and Michigan. They are expected to come on line in 2012.
   As forest and timber resources become more competitive in the biofueled-future materials that have been going to mulch producers, paper producers, animal bedding outlets and others, could become hard to get. “That is a change looming out there in the next 3 to 5 years,” says Dr. Dale Green a researcher and professor of resource management at Warnell School of Forestry and Natural Resources, Athens, Georgia. “If we start asking utilities to produce 15-20% renewable target in electricity production and half of that is wood – tens of millions of tons of wood – this will start to displace producers,” says Green.
   For decades, pulp producers have profited from an oversupply of wood. “So we left a lot of it in the woods, or it was cheap,” says Green. In the forthcoming years tree tops and limbs may no longer be considered waste; suppliers and purchasers will have to compete differently in a changed market. The US south, and other specific regions, could become a target region for wood-based biofuel producers in the future.
   The good news for mulch producers, according to Emily Olsen, VP of D.C. Legislative and Regulatory Services, is that, “The competition isn’t there yet.” Mulch producers, as well as their forthcoming competitors, have time to make changes.
   Olsen’s work with Congress puts her in a position to advise mulch producers about anticipated changes, which she did at a recent meeting of Soil and Mulch Council members. “If there’s a premium put there [on wood resources], those folks will have to decide who to sell it to,” says Olsen. She makes no bones about the fact that as the biofuel industry grows and develops so will the competition.
   “Mulch producers will certainly have to learn how to contract these people,” says Olsen.
   When American farmers built the ethanol industry, commodity costs shot up and harsh bidding wars ensued. Already the biofuel industry has had significant impact on the price of fertilizers presently due to the increase in demand, previously compounded by the spike in fuel charges.
   For mulch producers, Olsen assures, “We don’t think there will be a dramatic biding war, not for a long time. Mid-term and long term, they should expect to see some competition for their product if wood waste biofuels do establish themselves at 100-million gallon a year producers,” says Olsen.
   President Obama says he will carry through plans to lessen the nation’s dependence on foreign oil and greenhouse gas emissions, with a goal to produce at least 60 billion gallons of advanced biofuels by 2030. Obama is committed to investing federal resources, including tax incentives and government contracts into developing technologies and building the infrastructure to support them.
   Changes in energy policy, fuel resources and consumer preferences will undoubtedly lead to a variety of changes in the forest and timber industries, including: availability of forest and timber resource, criteria in the marketplace, distribution and cost. Additionally, logistics will exercise strong controls.
   A dedicated limitation of the biofuel industry is that it cannot take any waste material off of a public land. This sustainability principal is enforced through the EIS act, which requires that a renewable identification number be assigned to wood fiber loads.
   Because of the EIS, and the nature of the business, the biofuel industry will necessarily focus on a steady stream of dedicated crop. Experts anticipate that in the interest of profits, feedstocks won’t travel more than 75 miles to a biorefinery.
   “Large-scale facilities will look to plantations,” says Olsen.
   The USDA’s Stokes states that the take will occur in areas of the country where there are over-crowed stands that need thinnings for fuels reduction and health reasons, and in areas where there is more potential to produce more biomass in energy crops.
   “If power companies start switching feedstocks from coal to wood – as is being proposed – then the mulch producers in that wood basket will see more competition,” offers Harris, of Timber Mart-South offers. “We expect big power plants to be in the traditional forest products areas,” Harris says.
   But Harris also reminds that consumer preferences are weight bearing.
   “Mulch markets are very dependent on what the local people think is cool,” says Harris. “In one market pine straw is perfect, in another place it’s cypress, in another place it’s colored bark -- it varies. So that influences whether that product goes into the wood fuel or garden markets,” Harris adds.
   Wood bark, and specifically pine bark, is one mulch product whose fate is on the line. As both a potential fuel and mulch, bark’s value in the marketplace will depend on the energy market and, to some degree, the popularity of the garden product.
   Bark is in competition with all of the other biofuels, and mulch producers should note that wood fuels have issues others don’t. In some cases, e.g. for biochemical ethanol production, clean chips with little bark are required. The protocol might dictate raw material separation and utilization for the higher-value energy product and by-products for mulch.  Variable moisture content is something that doesn’t hinder coal; while bark can be very wet to very dry. Mulch producers who (wisely) contract with suppliers and distributors will have to sort through green versus dry purchase and transportation costs.
   In addition to species and moisture, mineral content could become an outstanding feature in the marketplace. The dirt component of a biomass needs to be strictly controlled for most of the fuel uses. Because mulch is a garden product mulch producers may be able to access sources that aren’t suitable to burning.
   “Mulch producers may have lower standards,” says Harris. “Construction waste, landclearing for construction, salvage,” places where meeting the schedule are more important than what gets muddy are places that mulch producers might get dibs. Because sand and grit are a problem in sawmill and pulp mill producing, the competition begins to fade away.
   Last, but not least, while most states do not have a mandate in place that requires utilities to use a percentage of renewable fuels, the inevitable is in sight. Most southern, wood basket states don’t have a renewable energy mandate in place, but if President Obama is good for his word (and Bush’s), forthcoming policy will rev up the use of forest residues for electricity production on an enormous scale. Because markets are localized, areas closer to centers where mulch markets are, will feel the competition more than others.
   In the biofuels industry, like any industry, risk management is a smart practice. Power plants buying coal, wood or any feedstock want long-term contracts rather than spot markets, commitment in advance, and steady flow of feed. “If a plant needs corn they lock in that price and that delivery,” says Olsen. “Sellers contract their green with the biofuel plant. You’ll probably be seeing that in the wood industry,” says Olsen.
   As US policy and consumer habits shift and as technology improves the arena will take shape. Experts agree that mulch producers will have to lock in their price to reduce competition. “We will appreciate the stability of the mulch producers as going forward,” says Harris.

Speaking to mulch producers, Olsen remains positive: “I think there’s room for everyone in this pool,” she says.