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Weekly UpdatesThe high cost of petroleum and the wide availability of renewable wood resources may be combining to bring a new dimension to Alaska's forest products industry. Two years ago, Congress passed a comprehensive energy bill that included a research and development component to encourage the use of biomass to generate energy. As a result, federal funding became available, and both the Department of Energy and the Department of Agriculture have developed programs to provide grant money for wood-based energy projects.
That the idea has caught on in Alaska can be attributed to at least two causes. First is the economic downturn in many Southeast communities caused by the loss of a major component of the region's timber industry. The pulp mills are no longer consuming the low-grade logs that make up the majority of most timber stands offered for sale in the Tongass National Forest. That loss of utilization has rendered most of the Forest Service timber offerings uneconomic for the remaining sawmills to purchase. The mills must, therefore, request export permits for the logs they cannot make boards out of, simply leave them in the woods, or try to find some other use for them locally. Heating plants that consume wood may be part of the answer.
TAPPING NATURAL RESOURCES
The second reason has little to do with regional economies per se and nothing to do with the changed industry in Southeast. Instead, it stems from the high cost of transporting already expensive diesel fuel into small towns and villages all across the state. Many of those small towns have an abundance of wood in their immediate vicinity and reaching out to tap that resource is a natural step. National concern over the country's growing dependence on oil imports added impetus to the notion of finding alternative sources of energy, and the sentiment is no less strong in Alaska.
In the intermountain west, a similar trend has emerged over the past few years. Fueled by concerns over an inordinately heavy load of dead material in the region's forests, the states of Idaho, Montana, Wyoming, North Dakota, Utah and Nevada have jointly developed the Fuels for Schools program. Using a combination of federal, state and local funding, schools in the six-state area have harnessed emerging technology and dramatically reduced their dependence on oil to heat schools and other public buildings. Coupled with the Bush Administration's Healthy Forests initiative, this has not only reduced heating cost burdens on local governments, but also it has improved ecological conditions in many fireprone forests.
ENTER CRAIG
The City of Craig has moved forward to pioneer the same basic idea in Alaska. With assistance from the Alaska Energy Authority (AEA), Craig has put together a project to heat two schools and the community swimming pool. Presently, the three facilities consume 14,000 gallons of No. 2 diesel and 39,000 gallons of propane every year. When the project is complete, that fuel source will be replaced with 750 green tons of wood chips, supplied by local sawmills and cut from local timber.
The capital costs are being borne by a combination of grants from the USDA, the Department of Energy, the Denali Commission and local government contributions. Once implemented, the annual cost savings to the city are expected to be in the $80,000 to $100,000 range. This is no small amount for a town the size of Craig. (See related story on page 28.)
LEADING THE WAY
AEA's Peter Crimp believes the Craig demonstration project will stand as an example of what can be accomplished in other locations across the state. "This is an opportunity to use a local, renewable resource to displace diesel, which is imported into the community, while cash now being exported from the community can stay home," Crimp says. He refers to the project as a nice combination of "local economic development with local sustainability."
AEA also has collaborated with the Alaska Village Initiative and the USDA Forest Service to form the Alaska Wood Energy Development Group to explore the use of biomass energy projects in other regions of the state. The group recently released two requests for statements of interest for facility heating projects in rural Alaska. An added economic incentive for the State of Alaska is the potential for wood-fired facilities to reduce the Power Cost Equalization payments over the long term. Currently, PCE is a multi-million dollar drain on state financial resources.
REAL PROMISE
According to State Forester Chris Maisch, the idea of greater utilization of wood for energy in Alaska holds real promise, not only for reducing costs for local and state governments, but also for changing the economic dynamics in forest products manufacturing. "It presents a real opportunity to fully manage Alaska's forests by allowing us to better utilize low-grade and small-diameter logs in order for each log to go to its highest and best use," he says.
A closely related simultaneous trend is the growing interest in the manufacture of pellets for both domestic and industrial heating plants. A private firm in Delta Junction has been quietly building a pellet plant that would produce commercial grade pellets for use in home-heating stoves. Such stoves have been increasing in popularity, especially for people who may not have the ability or the inclination to go cut firewood every summer weekend, but who wish to have an alternative to heating their home due to increasingly expensive petroleum products. At least two other companies are in the early stages of investigating pellet plant construction in the state, according to industry sources.
EXPORT ACTIVITIES
The most active component of Alaska's forest products sector is the export market. In addition to continued sales of round logs from private lands, mainly to Asian markets, Alaska forest products manufacturers are selling window, door and trim stock to remanufacturing firms in the Lower 48, Asia and Europe. Also, high-grade softwood and hardwood chip markets in Japan and Korea still favor Alaska wood chips. NANA Services/ NPI's operation at Port MacKenzie is the only large producer of wood chips in the state.
According to company management, however, NPI is presently stalled in serving the chip market, primarily due to infrastructure issues. NPI forester Pat Johensu reports that while the company has significant timber resources available to it, the majority requires extensive road construction before the feed stock can reach the port. The company has contracted with PND Consulting Engineers to help design a new access road from the Susitna Valley to the Tyonek area, but that project is likely to take months to get permitted and constructed, according to state and federal officials. Meanwhile, the company is seeking timber sales from state, municipal and private landowners in the lower Susitna area. The State Division of Forestry has recently announced plans to make timber available in the Willow Creek area, and NPI is expected to bid on those sales.
ENTER TAIWAN
One promising market for Alaska wood is Taiwan. For the past three years, the Murkowski Administration has been working closely with Alaska industry, the government of Taiwan and Taiwanese business officials to promote increased trade in several sectors, including forest products. The Taiwan-Alaska Trade and Investment Cooperation Council (TATICC) recently created a Special Forestry Task Force to focus on the sector.
A delegation from Alaska, consisting of State government and private-sector individuals, spent a week in Taiwan in June visiting manufacturing facilities and discussing trade issues with their Taiwanese counterparts. The Alaska delegation was led by Frank Roppel, who has decades of experience in Alaska's timber industry and is considered by many to be a leading expert on forest products trade with Asia. A proposed Memorandum of Agreement for future expansion of trade was developed in the meetings and is still under discussion. Companies participating in the trade mission included NANA Services/NPI and Sealaska Timber Co.
According to Dane Crowley, NPI resource manager, "Representatives from the company were very happy with the reception and interest from the Taiwanese Government and the private companies during the Task Force meetings. It is likely that some significant and substantive discussions will occur between NANA Services/ NPI and end users in Taiwan. Several projects involving investment in Alaska could prove feasible in the near term." Follow-up meetings of the task force are planned for the fall, including a Taiwan trade delegation visit to Alaska and additional formal meetings in Taipei.
With increased foreign trade activity and the exploration of innovative product lines, such as biofuels and wood pellets, the Alaska forest products industry is showing new signs of expansion and growth. As Alaska's most abundant renewable natural resource, timber will continue to be a factor in the state's economy for the foreseeable future.
Jack E. Phelps is the forest products specialist for the Alaska Office of Economic Development. His experience in the timber industry began nearly four decades ago. He has been a natural resources advisor to the Alaska House of Representatives, the United States Senate and to Gov. Frank Murkowski. Formerly the Alaska Forest Association's executive director in Ketchikan, he now lives in Palmer with his wife of 36 years.
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