Uncertainty clouds plan to extract biofuel from Michigan’s forests

Upper Peninsula plant has attracted hundreds of millions in private, public funds

By Patrick K. Egan 3/3/09 8:00 AM

(Source: Mascoma.com)

Gov. Jennifer Granholm’s single largest alternative energy project is a long way from proving itself. There is much uncertainty surrounding the plan to burn 375,000 cords of Michigan hardwood every year to create 40 million gallons of cellulosic ethanol for biofuel annually, raising concerns that it could do more financial and environmental harm than good.

More than $100 million of private investment and another $125 million in public funds have been committed to what is now called the Mascoma project, including an undisclosed equity share from General Motors Corp. (NYSE: GM) and $23.5 million from the Michigan state government, which had been engaged in a heated race with Tennessee to bring the facility to the state.

Michigan won that battle and hopes to be the first state in the nation to produce commercially viable biofuel from forest resources. But examining the costs and benefits, it is unclear if the plan to extract fuel from Michigan’s trees will work in the long run. Those involved in the project, including high-level state Department of Natural Resources officials, cite a key statistic when they trumpet Mascoma’s promise: Michigan grows about 2.5 times more wood fiber annually than it harvests.

But that claim may be misleading.

“It’s a bogus statistic and they’ve been using it for years,” said Anne Woiwode, executive director of the Michigan Sierra Club. According to Woiwode, if that figure is accurate, which many foresters doubt, it would also have to include wood on private lands – lawns, golf courses, parks, small wood lots and preserves.

Overall, state and federal foresters have not been included in the planning process for Mascoma, and the company has not released details about the planned operations. A Mascoma spokeswoman, Kate Casolaro, said an operations plan is still in the works and will be presented to the public sometime this year. In the meantime there are more questions than answers.

An Idea Born in the Lab

In the late 1990s two Dartmouth professors, Drs. Lee Lynd and Charles Wyman, announced a breakthrough in the hunt for a simpler, easier way to break down plant material into fuel, or ethanol. Their method, which they trademark as “Consolidated Bio-Processing,” or CBP, concentrated on wood fiber, or cellulose.

Out of that technological find, several venture capitalists created a new Boston-based company, Mascoma, which in turn began gathering additional venture capital and other financing to turn the technology into a commercially viable company. In 2006 the company issued a Series B bond and in 2008 issued a Series C bond, attracting more than $100 million in private equity funding, most from seven other venture funds. Marathon Oil Corp. (NYSE:MRO) has a $10 million stake in Mascoma, and its senior vice president of supply, distribution and planning, Cliff Cook, is listed as a member of Mascoma’s board of directors.

The company has also been able to attract government funding. To date it lists $100 million in federal and state grants. Initial funding went into a laboratory it owns and runs in Lebanon, N.H. With another $25 million grant from the New York state government, it created a demonstration plant in Rome, N.Y. It then set about copying its method of attracting state funds for a commercial plant and for a period had a two-horse race pitting Michigan against Tennessee, with the Great Lakes State securing the Mascoma deal in June 2008.

The Michigan state government has pledged $23.5 million, which will be matched by another $26 million from the U.S. Department of Energy. But it is unlikely that the Mascoma project will get additional federal funding, including stimulus dollars. “The company has gotten all the federal money it’s going to get,” said Nick Choate, a spokesman for U.S. Rep. Bart Stupak, D-Menominee.

The current funding will be used to create a commercial biofuel plant in the eastern portion of Michigan’s Upper Peninsula at Kinross near Sault Ste. Marie. To date neither the company nor the state is releasing specific information on the project, except their goals to create 50 to 75 jobs and meet production capacity by 2012.

Technically the Mascoma project is called “Frontier Renewable Resources” and is a joint venture between Mascoma and JM Longyear, a 120-year-old Upper Peninsula forestry and development company based in Marquette.

The Local Partner

Longyear holds at least 100,000 acres of private forest land in the U.P. and an unknown amount in northern Ontario. The company recently won accreditation by the Forestry Stewardship Council as a responsible forester.

Before the Mascoma project came about, Steve Hicks, JM Longyear’s CEO, had just come off the successful development of a taconite-to-steel plant in Minnesota’s Iron Range, a facility that can produce steel on site, bypassing traditional steel mills located hundreds of miles away. Last year the plant secured the largest air emissions permit in North American history, Hicks said in an interview. Once the company had succeeded with is taconite-to-steel plant, it sold the project to a Mumbai, India-based company, Essar, which has interests in shipping, steel, telecommunications and energy.

Hicks said he heard about the Mascoma project “and invited them to lunch.” Out of the talks came a partnership. Mascoma holds 75 percent of the new company and Longyear 25 percent. Hicks is the managing partner and is responsible for finding a construction site at the former Kincheloe Air Force base and for beginning to secure permits to build the facility.

Longyear has been in talks with the Michigan Department of Natural Resources and at least three local governments in the Kinross area. “We hope to break ground by the end of the year,” Hicks said in an interview. Full production is scheduled for 2012.

The location is critical: Why Michigan? Why the Upper Peninsula?

Hicks and others, including high-level state DNR officials, cite the same statistic: Michigan grows about 2.5 times more wood fiber annually than it harvests.

Hicks said that although the project operation is still developing, he estimates that the plant will require 375,000 cords of wood every year to manufacture 40 million gallons of biofuel.

That cord wood will come from within a radius of 150 miles from the plant’s site. This largely rural area includes both state and federal forests, Interstate 75 and access to the Mackinac Bridge, which puts forests in the northern Lower Peninsula within reach. So too are the forests of northern Ontario, via Sault Ste. Marie’s international crossing with Canada. The Ontario provincial government hasn’t given any grant money for the project and does not have a stake in the Mascoma project.

Questioning Long-Term Success

Both state and federal foresters in the area told Michigan Messenger that no one has ever contacted them about the project. The foresters, who spoke on the condition of anonymity, had no idea how much forest and wood may need to be harvested to feed the biofuel facility.

One federal official who works in the Upper Peninsula’s Hiawatha National Forest, when told the amount of “feed stock” required, analyzed the number and said, “That would take the entire annual harvest in the Eastern Hiawatha forest in 180 days.”

In Lansing a highly placed state forestry official, who would comment only under the condition of anonymity, also denied having been contacted. And the official is worried: “They’re going to need a lot of other sources, probably private, for that much feed stock,” the official said.

And that is sparking some concern. Neither Michigan nor federal rules require private landowners to harvest for long-term forest sustainability. Private landowners can simply harvest everything they have, leaving meadows and fields.

One answer is to grow wood quickly. Foresters agreed that a project like Mascoma will pressure forestry planners to concentrate on fast-growing woods and that the state would have to consider “short-rotation energy crops,” such as aspen, poplar and willow.

The Sierra Club’s Woiwode disagreed: “Again, no one knows the effect. What does it do to the nutrient cycle, to wildlife habitat?”

She cited one of the organization’s concerns that repeated aspen growth may not be able to sustain any forest growth after a certain number of rotations.

State foresters are also concerned about how the wood would be harvested. A new term of art in forestry is “bio-harvesting,” a process that removes all the trees and undergrowth. In bio-harvesting, none of the nutrients that rotting and decaying remnants create will replenish the forests, the forestry officials contend.

JM Longyear’s Hicks is not worried. While state and federal foresters Michigan Messenger spoke with said they have not talked to anyone about the Mascoma project, Hicks said they have “been in contact with Lansing.”

The state has put a full-time former forester, Donna LaCourt, on the project as part of the Michigan Economic Development Corp.’s grant. When contacted, LaCourt referred all forest and harvesting questions to Hicks.

Hicks, meanwhile, contended that the project will use only traditional wood harvesting methods and the plant will take only whole logs, which will be chipped in the pre-process. He said the bio-harvesting technique will not be used for the project, which may please state foresters.

According to Hicks, because several wood processors left the area in the last several years, there is more than enough room to expand harvesting. He said shuttered plants, such as Georgia-Pacific’s Gaylord facility, used as much as 2 million more cords five years ago and that this project will use only a fraction of that available supply.

(Patrick Egan is a former publisher and owner of two small dailies in Michigan’s Upper Peninsula. He is a recipient of a William Allen White award for editorial writing.)

[Ed. note: Nick Choate, Legislative Director and Press Secretary for Rep. Bart Stupak, has offered a clarification of his comments, explaining, “There is nothing in the stimulus bill specifically for the Mascoma project (no earmarks at all) but there is more than $800 million for biomass grants. Additional federal funding is certainly a possibility for the project, even from the stimulus. But to my knowledge the company is not seeking any additional federal funding at this time.”

Representatives for the Mascoma project pointed out that their Consolidated Bio-processing (CBP) results in cellulosic ethanol, and not bio-diesel fuel as described in this feature at time of publication. They also point out that grant figures for the New York demonstration project were $26 million from the Department of Energy and $14.8 from New York State, not $25 million, and $23.5, not $23.9 from the State of Michigan for their project at Kinross. Michigan Messenger regrets the error.]

Leave a comment

Become a fan on Facebook

mfranz

I have heard news reports of similar technology being applied to the white pine forests of the South, which has an abundance of fast growing pines, particularly in North Carolina All of the tree can be utilized according to the report I heard.

Biofuelsimon

This is interesting. But doesn't look to be more than half the volume harvested by the state-owned forests (according to Timber Harvest Trends). The conversion rate looks quite low. With only about one gal in nine of harvested tree turning into ethanol, according to this article. Is that conversion right? you can see what I think in the Big Biofuels Blog

Rayne1

Perhaps you missed this point in the article:

One federal official who works in the Upper Peninsula’s Hiawatha National Forest, when told the amount of “feed stock” required, analyzed the number and said, “That would take the entire annual harvest in the Eastern Hiawatha forest in 180 days.”

Assuming the amount of feed stock in question is 375,000 cord of wood, the harvest of the Eastern Hiawatha forest is 48 million cubic feet of wood over 365 days.

Let's look at <a href=”
http://www.michigan.gov/documents/dnr/TimberHar… State Timber Harvest Trends” dd. 16-SEP-05, prepared by Dr. Larry Pedersen and submitted to MDNR's Chief Lynne Boyd said,

The most recent forest inventory estimates net annual forest growth in Michigan to be about 930 million cubic feet per year, while removals represent approximately 1/3 that growth. There are a variety of factors that contribute to this statistic. Much of the growth is on private lands and timber harvesting is a low priority for most private landowners. National forests have expanded their protection of recreational and ecological values which are contributing factors to reduced harvests from federal holdings.

(930 million CF) x 0.3 = 279 million CF annual removals BEFORE Mascoma's demands on these forests.

We don't know if the remaining 651 million CF of annual growth can support Mascoma's additional demand because state and federal foresters haven't been asked, and a substantial amount of that 651 million CF of growth is located on private lands which may not ever be subject to commercial harvest or are not located in areas that are economically feasible for harvest.

There's simply not enough information to confirm the viability of UP forests for cellulosic ethanol production — at least not publicly available.

Biofuelsimon

Hi Rayne1,

Isn't the Michigan peninsula is flat, there are no insurmountable obstacles to building roads through it are there? So there should be no great difficulty in getting the wood to the plant.

If the price of the wood is high enough then people will harvest it and replant for future profits. Also the numbers are from 2005 (Global Boom Time) not 2009 (Depressions Ville) the amount of wood extracted during the bad times for building, paper etc is likely to be much lower than during good time. So having a new outlet for wood will keep the price up and encourage people to invest in Michigan's forests. Who grows any crop just to stand and look at it?

The key is to encourage them to do it sustainably isn't it? The point that you're all missing is fuel efficiency.

Rayne1

No, the UP is not flat. Check a topographic map, you'll see that much of it is actually mountainous.

Much of the land is also in private ownership, and even a good portion of that is in possession of entities who are intent on conservation.

Sustainability is definitely key, but assessing sustainability requires actually doing thorough and effective due diligence — unlike the kind of due diligence that too many investment firms and banks have done for the last two decades.

We're not addressing fuel efficiency with regard to this series on Mascoma; we are only looking at the business proposition and the short- and long-term return on public investment.

cinnamonfern

I've lived in Michigan my entire life (in a variety of locations across the state, including the UP), and I definitely would not classify any part of the state as mountainous. And although the western half of the UP is part of the Canadian shield and is quite hilly and rocky, the location that Mascoma will be getting most of their feedstock from is in the eastern half of the UP, which is very flat.

I agree that it will be important to develop harvesting methods that are sustainable in the long term. This is a key issue to those of us involved in lignocellulosic ethanol research. We have seen too many situations where people were not concerned with long-term consequences of their actions and ended up devastating the environment. Hopefully we will be able to learn from others' past mistakes and take steps during these beginning stages to develop a more sustainable industry.

Rayne1

Do the Porcupine Mountains ring a bell? Mount Ripley?

I've lived in Michigan for nearly 40 years and I know the terrain pretty well, was born here.

The problem with the eastern portion of the UP is described by Champlain at Louisiana Pacific; the easy wood is already becoming expensive, and putting more demand on these same resources will drive up the price, likely making one or both businesses (LP or Mascoma) untenable.

Is there a genuine effort to create more jobs or reduce carbon in the atmosphere or both? There doesn't seem to be a solid answer or commitment.

allstihl24

I live in the eastern U.P. and much of it is wet and protected but my concern is how about the ones who heat with would like me will I have to fight for it. I cut all my own wood my self I pull a forest permit every year and make enough wood for the winter are they going to stop selling me a permit. Many of us up here can't afford propane or fuel oil so we cut are own wood for heat and a company like this could out bid even the local foresters on goverment contracted wood plots. Then they won't have wood to sell to the local people around them and when they do get there hands on some wood the cost will be jacked up for a face cord. So really is anyone looking at the big picture here. I'm all for cheaper and better fuel but I'm sick of the quick fix bull that never works out Kinda like the NAFTA bill that worked out great all our jobs left the US so I just hope they are thinking about everything and not just there pockets.

Redbaron

As a forester I am not for or against this project. I would point out that 691,000,000 cubic feet of wood is equal to over 500,000 standard cords of wood at 128 cf per cord. The actual number of cf of wood in a stacked cord is closer to 95 cf. So there seems to be an overrun of 125,000 cords per year based on the figures put forth. Also, in the South as well as Michigan and the rest of the country the majority of forest land is owned by private landowner not government or forest industry and these people have ,for years, been the backbone of the forest products industry. Good forest management is good wildlife management, good resource management and a commonsense way to deal with land ownership.
Also, all trees throughout their life cycle shed leaves, needles, limbs and fruit onto the forest floor and the majority of this biomass is created from water, air and sunlight. Better utilization may be a problem with a short rotation but in Michigan the normal rotation is long enough to produce plenty of biomass to rot back into the soil.

Rayne1

What kinds of incentives/deterrents are there to encourage effective forestry management on private lands? As a forester you know there are studies which show that simply harvesting a limited amount of wood is not enough to ensure good wildlife management. What prevents a private owner from simply taking 30% of wood off his own woodlot without consideration for the rest of the ecosystem or for regrowth? Longyear could be an exception to the rule with regard to woodlot management.

Initially there was no information from Mascoma indicating they were limiting their cellulose harvest to whole logs. What if there is a shortage of whole logs — do producers of cellulosic ethanol like Mascoma begin to look at “forest waste” including limbs, leaves, needles as part of the harvest?

And what if any incentives/deterrents are there in place to prevent excessive use of short-rotation wood crops, particularly near areas where wildlife may be more fragile? (I'm thinking of areas theoretically where Kirtland Warblers may have been sighted, jack pine stands in areas logged over the last 60 years.)

There are a lot more questions than ready answers. If you have some answers, feel free to share.

bailcon

Redbaron;
Thanks for the comments. The issues evolving out of this new event are just forming. Perhaps the biggest question is the totality of forest harvest for biofuel. The trouble is that Michigan has no idea how the sum total of the projects proposed, and yet to be proposed, will have on forest sustainability. And the Sierra Club asks that the answer precede the problem. There is also the question of value. Is this the best use of the investment, in manpower, taxes fees, and quite literally the land? How much value does a project like this really create? Are the forests more valuable as habitat, laboratories, tourist destinations? And are we managing forests toward farms?

Pat Egan

blog comments powered by Disqus

CATEGORIES AND TAGS: Economy, Energy, Environment, Cellulosic Ethanol, JM Longyear, Mascoma

Top Stories:

Uncertainty clouds plan to extract biofuel from Michigan’s forests

Upper Peninsula plant has attracted hundreds of millions in private, public funds