Possible biomass shutdowns loom; $27 million loss for Minnesota loggers

By Adelle Whitefoot

The logging industry in Minnesota has seen a lot of changes over the past year that could negatively affect it in a big way.

Blandin Paper Co. shut down its No. 5 machine and the Minnesota Legislature passed legislation last year allowing Xcel Energy to negotiate a shutdown of three renewable energy plants.

But even with all of the changes and uncertainty in the industry, Josh Hull, owner of Hull Forest Products, said he’s still in it for the long haul.

“I still wake up every morning excited to go to work,” Hull said. “I love this industry and these people and the type of work we do in being able to make the forests better for our kids and the next generation. That’s really what drives us every day. I’m proud to be a part of it all.”

Hull started working for the logging company he now owns in 2010 when he came back from his third tour in Afghanistan with the U.S. Army.

 

“Tom McCabe owned the company at the time and I knew him from church and our wives were friends from church, and he offered me a job when I got home just running some equipment,” Hull said. “It was peaceful and relaxing just being able to work in the woods without all of the stress of everything else going on.”Hull comes from a long line of loggers. His grandfather was and his father is a logger who owns a sawmill in Two Harbors.

“Really, I started logging when I was 12 years old with a farm tractor and my dad,” Hull said. “My grandfather owned a logging company for a long time, so it has just been in my family, and I think once it’s in your blood it’s not something you can get out.”

So when McCabe asked Hull to buy his business in 2013, it was a no-brainer for Hull. And even though there’s uncertainty in the industry, Hull said this winter has really been a big help.

“Weather-wise it’s been fantastic. There’s not a lot of snow, and some cold temperatures have made for frozen ground conditions,” Hull said. “We haven’t had that fight like last winter where the ground never froze and we were constantly dealing with muddy, half-frozen ground. This year we have been able to run on frozen ground and it’s been great.”

According to a Minnesota Logger Education Program survey conducted by the University of Minnesota Department of Forest Resources, 53 percent of volume harvest in the state is done in the winter.

“That’s for a couple of reasons. One being the prevalence of swamps,” said Wayne Brandt, the Minnesota Timber Producers Association’s executive vice president. “Even if it’s not in a swamp, the access may be difficult because you might have to cross a wet area that you can’t in the summer.”

However, Hull said a great winter with early frozen ground that stays frozen can be a double-edged sword.

“One of the drawbacks to a very nice, cold, logger-friendly winter is that a lot of wood gets moved, and when a lot of wood gets moved the mills start filling up,” he said. “So the market side has been weaker than I would like to see, and has been in the past. All of the mills have been buying, but the mills are starting to fill up with all the wood that they’ve bought.”

Some mills have even started putting restrictions on how much timber they will accept. But that won’t stop loggers from harvesting as much timber as possible.

“My markets have been solid this winter and with the ground the way it is, we’ve been moving every stick of wood that we can cut,” Hull said.

Biomass shutdown would leave large hole in industry

During the 2017 session, the Legislature passed a bill allowing Xcel Energy to negotiate a shutdown of three renewable energy plants — one in Hibbing, Virginia and Benson. Xcel says the cost of biomass power is too expensive and that customers should not have to pay higher rates when cheaper alternatives are available.

The provision was in the omnibus jobs and energy bill signed last June by Gov. Mark Dayton. Though Dayton signed the bill, he did take issue with the provision allowing Xcel to terminate its contracts with the three biomass plants.

 

“We do not yet know the full impact these provisions will have on the loggers, mills and truckers that had planned business decisions on contracts intended to last for up to another 11 years,” Dayton wrote to Sen. Michelle Fischbach last year. “A meager effort to study the economic impact on this industry, after the fact of passing these policy provisions, is inadequate.”But an economic impact is exactly what a Minnesota group is suing Xcel for. The Associated Contract Loggers and Truckers (ACLT) of Minnesota have filed a lawsuit against Xcel, Benson Power and Laurentian Energy under the Minnesota Environmental Rights Act, which requires an environmental impact statement or analysis be conducted to determine the environmental impacts that will result from the loss of these markets, said ACLT Executive Director Scott Dane. Laurentian was recently dismissed as a defendant in the case.

“We have contested the Public Utilities Commission findings and have requested consideration of their ruling,” Dane said.

Organizations that oppose the shutdown of these biomass plants believe the impacts will extend past the logging industry.

“It would affect all of the industries because these loggers that currently work on biomass production are going to have to, in order to survive, shift into traditional wood production — impacting all of the traditional logging industry,” Dane said. “But, more importantly, it will affect the public and private landowners who manage their forest because what the biomass industry utilizes is low-grade, unmerchantable timber, and without a market for that timber, public and private landowners will have a very difficult time properly managing their forest.”

An example of low-grade, unmerchantable timber is damaged wood from blowdowns, which have become more frequent in recent years.

“The reason they go there is the wood fiber is frequently damaged in some way, which makes it less suited or unsuitable for making lumber or making paper,” Brandt said. “So a lot of that material has gone to those markets, and those markets are going away.”

Brandt said in large blowdown situations like the one in Brainerd in 2015, loggers may approach landowners willing to pay them if they allow the loggers to come in and clean up the land.

“Landowners were shocked that loggers were willing to pay them to come in and clean it up,” Brandt said. “When those (biomass) markets go away, it may be that they’ll have to pay somebody to clean it up next time.”

According to Dane, no one in the industry saw the announcement of shutting down these biomass plants coming. It was a complete surprise.

“It was a behind-closed-doors deal that the industry was totally blindsided with,” he said. “There was no testimony or inclusion of the industry in any of the proceedings.”

Dane said they hope with the lawsuit to, if anything, establish an orderly timeline to transition away from the biomass markets.

“That’s the initial objective, but it’s multifaceted in that we are looking in the meantime to identify and establish new bioenergy markets that can replace the loss of these markets and therefore maintain the biomass industry in the state of Minnesota,” he said.

Xcel signed contracts to purchase electricity from Laurentian until 2026 and Benson until 2028. These contracts stemmed from a 1994 agreement made with the state by Xcel’s predecessor Northern States Power Co. in exchange for permission to expand nuclear waste storage at the utility’s Prairie Island nuclear plant in Red Wing.

“When we lose a market, guys switch that product for a different market,” Hull said. “Losing the chipping industry is a big hit because there is a lot of uncertainty going along with that market. With uncertainty, people aren’t going to be upgrading or buying new equipment or expanding to try to buy more of the forest resources that match that product.”

Hull said his crews are still chipping and they can still move a volume of chips, but it’s an industry he’s not confident in continuing. According to Dane, the biomass industry accounts for $27 million in direct biomass purchases annually.

“Those contracts were expected to be in effect for another 10 years, so the loss of these markets will cost the forest logging industry $207 million over the next 10 years directly, and that’s not including the economic multiplier factor,” he said.