Supply squeeze in store for bioenergy

The province's bioenergy sector will not escape the effects of a looming decline in the timber supply as beetle-killed pine is logged out or becomes too worthless to process, a forest industry consultant warned Thursday.

Speaking at the International Bioenergy Conference, which continues today at the Civic Centre, Jim Girvan, principal of MDT Ltd., said the beetle has now killed about half of the province's pine, which in turn represents a quarter of the Interior's allowable cut.

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Girvan, who gave his presentation during a panel discussion on the future of fibre, is co-developer of an economic model that predicts log and chip availability over 15 years.

He said the annual allowable cut was increased from about 50 million cubic metres in 2000 to a peak of 70 million cubic metres in 2009-10, just as the recession struck and the U.S. housing market collapsed.

In response, lumber producers closed 18 sawmills and a majority will not be revived prompting a significant curtailment in the province's processing capacity.

About 1.2 million cubic metres of sawlog capacity has been taken out of the industry and the residual fibre that comes out of those sawmills represents about 50 per cent of current consumption.

"The flags are going up here that the consumption of biomass is going up at the same time that the supply from sawmills is going down despite the fact that there is still a lot of dead timber," Girvan said.

He predicted that over the next 20 years, the annual allowable cut will fall down to about 40 million cubic metres from the current 70 million cubic metres but in the interim, Girvan said "there probably still is a gap between the current capacity for sawlogs and the likely available supply of them in the mid-term probably to the tune of about 8 million cubic metres."

Further, the cost of processing those logs has increased to about $280 per 1,000 board feet of dead wood from $220 per 1,000 board feet.

"It's getting harder and harder to use this wood and that's going to be just the impetus, I think, to eventually bring curtailment to some of those mills," Girvan said.

As it stands, Girvan said that there is about 10 to 14 million cubic metres of timber available for new bioenergy projects once consumption by all sawmills, pulp mills, pellet plants, board plants and power boilers in the project is subtracted.

But it may not last.

"There is a lot of wood available in the province over the next 10 years but eventually, if sawmills continue to curtail, as the annual allowable cut comes down, all of those mills continue running, they are also going to need some wood to be able to continue operating," Girvan said.

Even the estimated 120 million cubic metres of so-called undercut - annual allowable cut that has not been used - is going to start to be drawn down in the midterm as pulp plants and pellet plants turn to utilizing more of this fibre.

"As we look forward, virtually all low-cost sawmill fibre is being consumed and if it isn't being consumed today, projects are on the books where it's going to be consumed within the next couple of years," Girvan said.

The cost of fibre to support bioenergy-related projects is going to rise in the face of growing competition, Girvan continued.

However, bioenergy may get a break courtesy of the provincial government. Also a panel participant, Blair Pigeon, Ministry of Forests senior timber tenures forester, said that within a matter of months two new types of licences will be available.

One will be an updated restricted forest licence that will allow the minister to provide a tendering opportunity for pellet plants, bioenergy and biochemical plants.

The other will give tenure to road and landing waste which continues to be burned out in the field.

"You won't be able to be the first person to go out and get it," Pigeon said. "The person that harvested the wood will have first right of refusal on those piles but they won't be able to go and just burn them."

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