Existing Wood-Based Production and Logistics Infrastructure

1. Existing Wood-Based Production and Logistics Infrastructure MREP Bioenergy & Geothermal Committee Meeting Michigan Public Service Commission 6 October 2010 Traverse City Michigan Tom Barnes, Executive Director, Michigan Association of Timbermen

2. Logging Capacity • Michigan has roughly 1500 Logging Companies • Harvesting approximately 4,000,000 cords annually • Two primary harvesting systems are Cut-to-Length (CTL) Mechanized and Whole Tree Mechanized • Products range from high valued veneer logs to energy chips

3. Logging CapacityChallenges • Dwindling forest industry markets. Three pulp mills lost between 2005 and 2006. One million tons of consumption lost! • Operating cost continue to rise • Lack of stability in existing markets • Work force challenges • Finding or creating new markets to maintain our logging capacity • End result will and are going out of business • Concern of having enough logging capacity once things turn around

4. Opportunities • Michigan has the 5th largest timberland resource • Woody biomass includes entire living and dead trees, brush, stems, logs and forest product manufacturing residues • Some woody biomass components are un-utilized • Existing infrastructure utilizing and producing woody biomass • Potential for integrated forest manufacturing processes to utilize multiple forms of fiber

5. Michigan Forest Inventory Analysis2004 FIA Data – Million Oven Dry Tons, Percent Source – LaCourt, Donna .2007. Wood Fiber and the Bioeconomy. Powerpoint Presentation. September 11, 2007

6. Forestland Ownership Source – LaCourt, Donna .2007. Wood Fiber and the Bioeconomy. Powerpoint Presentation. September 11, 2007

7. Growth to Removal Ratios Source – LaCourt, Donna .2007. Wood Fiber and the Bioeconomy. Powerpoint Presentation. September 11, 2007

8. Availability of Unharvested Growth • Social • Public policy impacts fiber availability on public and private lands • Landowner behavior research indicates only 17% of Michigan non-industrial/non-institutional landowners unwilling to harvest • Economic • Competition with other markets • Delivered wood cost Source – LaCourt, Donna .2007. Wood Fiber and the Bioeconomy. Powerpoint Presentation. September 11, 2007

11. Michigan Primary Mill Closures From 2003 To The Present Source – Weatherspoon, Anthony. 2007. Michigan Woody Biomass Inventory. Powerpoint Presentation. May 8, 2007

12. Harvesting Types Cut-to-length

15. Harvesting CostCut-to-Length Source – Personal communication with MAT Board Members

16. Operational Cost To Harvest Forest Residue(Cut-to-Length Harvest1) ** Sold tops on landing to a commercial chipping operation

17. Whole Tree

20. Harvesting Cost Whole Tree including Chipping Chainsaw Logging Source – Personal communication with MAT Board Members

21. Operational Cost To Harvest Forest Residue(Whole Tree Harvest1)

22. Biomass Inventory Source – Weatherspoon, Anthony. 2007. Michigan Woody Biomass Inventory. Powerpoint Presentation. May 8, 2007

23. Growing stock (commercial) Cull Species Possible at county level Does not address availability Source – Weatherspoon, Anthony. 2007. Michigan Woody Biomass Inventory. Powerpoint Presentation. May 8, 2007

24. John Deere Wood Energy Harvester 1490D

28. Bundling Cost2 • Potential production rate of 20 bundles per machine hour (8 bone dry tons {bdt}). • Cost of colleting biomass and creating “Composite Residue Logs” (CRL) would be about $16 per bdt. • Forwarding is estimated to cost $5 per bdt based on 4 loads per productive hour. • With a hauling cost of $0.10 to $0.20/ton-mile, a 50-mile haul would add $5 to $10 per bdt. • Chipping at the energy facility may incur an additional $3 per bdt. • Total cost to deliver chipped hog fuel from CRL’s would be about $29 to $34 per bdt. • Approximately half the total delivered cost is due to bundling function.

29. Bundle Facts3 • Standard Bundle 30” x 10’ • Standard Bundle weighs an average of 1,000lb • Average Production 15 – 30 Bundles/hour • Standard Bundle contains enough heat energy to produce 1MW of electrical power • Approximately 16 bundles could power the average home for 1 year • 2 standard bundles equals the amount of energy in a refined barrel of oil and equal 6 mcf of natural gas • Biomass is carbon neutral

30. Retail Price for the 1490D is $450,000. • Hourly owning cost would be roughly $58/scheduled machine hour (smh). • Operating cost includes fuel, lube, repair and maintenance, chainsaw and twine operating cost would be $50/smh • Adding Labor total cost to operate $130/smh.

31. Summary

32. Markets Biomass • Co-Generation • Combined Heat and Power Facilities • Wood pellet production • Residential Grade • Industrial Grade • Wood to Ethanol Production Traditional • High and Low Grade Sawmills • Pallet Mills • Board Production – OSB, Particle, Paneling etc • Pulp

33. Timber Harvesting Issues • Transportation • Biomass facility delivery distance less then 50 miles • Rising fuel cost will increase production costs • Stumpage price • Ever increasing stumpage prices • Many cases stumpage prices for forest residue are excessive • Delivery Prices • Prices for biomass are typically lower then production cost • Raw material cost typically largest expense

34. Harvest Removal Concerns • Site Quality • Nutrient depletions • Increased site temperatures • Greatest impact on poor sites • Deer/Elk Densities • Increased browsing on natural regeneration • Forest residue protects regeneration • Seed Source • Removal of forest residue could impact natrual regneration for certain tree species, ie Jack Pine.

35. Benefits of Biomass Removal • Creates a “park-like” appearance for the landowner • Job creation in rural communities • Hazardous fuel reduction, lowers fire risk • Markets for non-merchantable fiber • Salvage Timber – insect or fire damage • Lowers dependency on petroleum based products • Increases utilization of our renewable resource

36. Wood Is Good! • Wood is available year round. • Logging & transportation infrastructure for wood is well developed and proven. • Forestry for energy production is environmentally sound • Less site disturbance • We’ll make more

37. Any Questions?

38. References • Peterson, Donald; The Cost of Extracting Logging Residues for Biomass Fuels, Great Lakes Region, September 2005. • Rummer, Bob; Len, Dan; and O’Brien, Obie; Forest Residues Bundling Project: New Technology for Residue Removal, May 2004. Southern Research Station, Auburn, Alabama. • Timber Jack 1490D Product Brochure. • The use of trade names or references to specific company or products in this publication does not imply endorsement; they are intended only as an aid to the reader.