Lignetics: Manufacturer of Premium Wood Pellets, Pres-to-Logs® Fire Logs, and Fire Starters

Welcome to Lignetics' blog where we will be posting current information about the wood pellet, fire log, and fire starter industry. We welcome your comments and additions as we develop what we hope will be an up-to-date information center on all developments concerning wood pellets and fire logs.

By Gus Trompiz, Edited by Mark Heinrich

(Reuters) - Euronext is to launch its first derivatives focused on the energy sector by introducing wood pellet futures later this year, tapping into demand for wood pellets as a renewable source for heating, the exchange said on Monday.
Set for introduction this autumn, the scheme will be backed by physical delivery to offer price hedging for producers and distributors in a European market that consumes 80 percent of global production of wood pellets for heating, it said.
"This is our first contract dedicated exclusively to renewable energy," Ulrich von Furstenberg, commodities product manager at Euronext, told Reuters.

"There is significant volatility on this market. Operators can also choose between fuel, gas and wood pellets so they are exposed to volatility on all three products."

Euronext would apply the ENplus A1 standard of the European Pellet Council to target the residential and institutional heating market, as opposed to the power plant segment, he said.

Physical delivery at the expiry of futures would be in a zone encompassing the ports of Amsterdam, Rotterdam, Antwerp and Ghent and be on a free-on-barge basis.

The euro-denominated futures would trade in 25-tonne lots with four positions - March, June, September, December - listed per year. Options will not be offered initially.

Euronext, best known for its equities markets, runs commodity derivatives spanning cereals, oilseeds and dairy products.

It has cited energy along with metals as potential areas of development in commodities. Euronext's rapeseed oil contract launched last year is aimed partly at the biofuel sector that uses the edible oil as a feedstock in biodiesel.

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In 2011, we noticed a glaring omission in an annual U.S. government publication.  The annual Winter Fuel Report failed to mention wood and pellets, one of the most common heating fuels in America. Members of Congress were also appalled. The next year, the report began covering wood and pellet heat, not just fossil fuel heat.

Now we find the same parent agency, the U.S. DOE, omitting any mention of wood and pellet heating in a major, consumer-oriented publication and inserting the word solar where wood and pellets should be. The publication, Energy Saver: Tips on Saving Money & Energy at Home, is one of the DOE’s main consumer-oriented energy efficiency     publications. The glossy, 41-page booklet is distributed free of charge and contains scores of excellent suggestions on how to save on your utility bills.

The section on renewable energy tells consumers they have many options for using renewable energy at home, including solar and small wind turbines. The booklet also discusses geothermal and solar thermal.  It states: “Solar panels are the most popular form of renewable energy today.”

There are not even half a million homes with solar panels and about 10 million homes with wood or pellet stoves. On an annual basis, wood and pellet stoves still outsell solar panels. By 2020, there still be less than one million homes with solar. Even if the high estimates are correct, the number of homes using solar is still less than half the number of those with installed stoves. So why does the DOE say solar panels are the most popular form of residential energy, and why does it not even mention wood or pellet stoves in the renewable energy section?

It’s understandable that wood stoves aren’t being endorsed as an energy pathway that should rapidly expand (particularly in western states where inversions often trap particulates). But pellet stoves and boilers provide an excellent option for homeowners in most of the country to reduce fossil fuels and affordably heat their homes without producing excessive emissions. 

About 10 states offer rebates or tax incentives to install pellet stoves or boilers. There are liberal leading states that are trying to expand residential renewable energy deployment, such as Maryland, Massachusetts, New York, Oregon and Vermont. Then there are more conservative states, like Idaho, Maine, Montana and New Hampshire, which also see the benefits of helping households use a local renewable resource to affordably heat their homes. Why is the DOE so out of touch with what is happening around the country?

As the Obama administration and much of the country is increasingly focused on reducing fossil fuel use, the main federal agency in charge does not even see fit to mention a powerful HVAC device that drastically reduces or eliminates fossil heating fuels in more than 10 million U.S. homes. 
A $2,000 or $3,000 dollar pellet stove can easily provide 40 to 100 percent of most homes’ space heating needs.  A typical 5-kW array of solar panels can provide about the same amount of energy in a year as a pellet stove can provide in four to five months. 

The DOE should initiate more programmatic work on wood heat.  Short of that, it should at least acknowledge the existence of wood and pellets in booklets like this and help educate homeowners about how they can best use them.  For instance, this booklet could urge homeowners to upgrade from an old, uncertified wood stove to a cleaner, more efficient pellet stove.  It could also explain how modern, automated pellet boilers, like the ones that are so popular now in Europe, can provide both space and water heating and are a great complement to solar panels.

Accuracy and honesty are above all important, and ignoring the efforts of more than 10 million homes does not advance our common efforts to reduce fossil fuel use. The DOE should be striving to reach diverse constituencies, not just the urban, affluent people who can afford more expensive energy upgrades like solar panels or wind turbines.  The booklet even suggests small wind turbines are good to charge a sailboat battery.  A sailboat battery?  What audience is DOE trying to reach? 

The demographic who could install small wind turbines is relatively small, and those who would use them to charge a sailboat battery is miniscule, but the demographic that could benefit from pellet stoves is huge.

It would help if there were an Energy Star label for wood and pellet stoves, so that federal and state agencies could better guide the deployment of these technologies as they do for all other major HVAC appliances. However, the development of such a label may be years away. For now, simply acknowledging the existence of wood and pellet stoves as a popular renewable energy option and educating the public about how and where to best use them is a good start.

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From Biomass Magazine

By Erin Voegele

The USDA has announced its intent to prepare a programmatic environmental impact statement (PEIS) to assess the potential environmental consequences associated with proposed discretionary changes to the Biomass Crop Assistance Program. A public comment period on the matter is now open.

According to a notice posted in the Federal Register, the USDA’s Farm Service Agency will prepare the PEIS on behalf of the Commodity Credit Corp. The notice informs the public of FSA’s intent to seek public comment on potential changes being considered for BCAP and on environmental concerns related to the proposed changes. Preparation of the PEIS is required by the National Environmental Policy Act of 1969. The USDA indicated the input it receives as part of the notice will enable the development of alternatives for implementing the proposed changes to BCAP and begin to evaluate the impacts of those alternatives, as required by NEPA.  

The notice explains that the purpose of the PEIS process is to provide FSA decision makers, other agencies, tribes and the public with an analysis of the potential beneficial, adverse, and cumulative environmental impacts associated with proposed discretionary changes to BCAP.

In 2010, a final PEIS for BCAP was published by the FSA.  According to the notice, that PEIS evaluated environmental consequences of establishing and administering the BCAP as specified in the 2008 Farm Bill. Since 2010, environmental assessments have been prepared for various project areas and for specific feedstocks.

The 2014 Farm Bill amended and reauthorized BCAP through 2018. According to the notice, the 2014 Farm Bill included a number of non-discretionary changes to the program. Those changes are primarily administrative in nature, do not alter the general scope of the program, and have already been implemented through rulemaking.

The notice explains the FSA is currently considering discretionary changes to the way BCAP is implemented. Those discretionary changes define the scope for the new PEIS.

According to the notice, the proposed discretionary changes aim to improve the functionality and flexibility of the establishment and annual payments as part of BCAP. No discretionary changes are being proposed for the matching payments part of BCAP.

The proposed changes include consideration and review of additional crops, such as pongamia pinnata, giant miscanthus seeded and rhizome clones, giant reed, pennycress, energy cane, biomass sorghum, sweet sorghum, yellowhorned fruit tree, eastern cottonwood, kenaf, jatropha, eucalyptus (fast growing), castor beans, short-rotation pine, tropical maze, hybrid willow, sweetgum, black locust, loblolly pine, aspen, rubber rabbitbrush, and guayule.

A separate proposed change would add requirements or additional practices for conservation plans on expiring conservation reserve program (CRP) or agricultural conservation easement program (ACEP) land acres that would be enrolled in BCAP project areas.

In addition, the notice includes the potential for enrolling annual crops in BCAP project areas for contracts of less than five years.

Additional proposed changes would establish program management processes that could help offset the lack of crop insurance for biomass crops or provide sufficient information for the Noninsured Crop Disaster Assistance Program to establish coverage, and would address treatment of the required FSA annual rental reductions in the event of no bioenergy market and use for the harvested or collected biomass crops.
According to information published in the notice, the FSA plans to hold a series of scoping meetings to provide information on the proposed changes to BCAP and solicit input from program participants, the public and other stakeholders on the environmental impacts of the proposed changes and alternatives to the proposed changes. Meetings are scheduled to be held July 14 in Sacramento, California; July 15 in Honolulu; Aug. 3 in Raleigh, North Carolina; Aug. 4 in Orlando, Florida; and Aug. 5 in Sioux City, Iowa.
Comments on the proposed discretionary changes are due July 13. An additional opportunities for public comment will be available on the PEIS when it is developed.

Additional information is available in the Federal Register notice.

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From Biomass Magazine

By Katie Fletcher

Type and location define pellet fuel's quality and prospective markets. These realities differ for Western producers compared to their Eastern peers in the quest to run a successful plant.

Location, location, location, is real estate’s greatest determining factor in value, and if that real estate is a pellet plant, it also determines  the product it produces. A series of forested mountain ranges-the Sierra Nevada, the Rockies and the temperate rainforests of the Pacific Northwest-span the Western United States. Many of these and other forested lands in the region are publically owned. The opposite is true for the other half of the country. Privately owned land occupies the Eastern seaboard, the largely forested highlands in the Northeast, including the Piedmont and the Appalachian Mountains, ranging down to the Southeastern coniferous forests that occupy the Gulf coastal plain to the south. Land ownership and forest type are two components that play into what sets pellet production and distribution in the West apart from that which occurs in the East.

Successful producers across the country have learned how to sustainably source the fiber their location provides and, in turn, tap the surrounding markets to distribute the pellets they produce. The markets currently gaining the most momentum are those accessed in the Southeast and Northeast. For example, in April, Portucel Sporcel Group broke ground on a pellet plant in South Carolina, and Northeast Wood Products is retrofitting its third pellet manufacturing plant in Tennessee. Another big player coming onboard in the South is Drax Biomass. The company recently spent 15 months building port infrastructure to handle and ship pellets to Europe from the company’s two 450,000-metric-ton-per-year plants: Amite BioEnergy in Mississippi and Morehouse BioEnergy in Louisiana.

While many of these plants gear up for the expanding market in Europe, further up the East Coast, spikes in demand and supply disruptions have created periods of shortages. On the other hand, an oversupply is occurring in the West, with mild weather and competing inexpensive natural gas. Some Western producers have even funneled excess pellets to the Northeast when requested and customers willing to pay a higher premium for shipping.

As for new Western plants, Centennial Renewable Energy announced plans to build a 160,000-metric-ton wood pellet plant in northern Idaho. Other than this announcement, Western producers agree new production capacity is not likely with an oversupply on the domestic side, and a lack of lucrative export market opportunities. However, as in most energy markets, the volatility makes the future unclear. As the East Coast has had success in Europe, the West may hold promise with their neighbors across the pond. Three producers, from locations in the West, share their decades of experience running successful pellet operations to provide a glimpse at what makes the region's industry tick. 

A Southwest Example
Rob Davis, president of Forest Energy Corp. with the help of Gary Moore, director of operations, and 33 employees, runs a 60,000-ton-per-year plant in Show Low, Arizona, serving primarily residential customers in the surrounding Southwestern region. Whereas most Western producers buy sawmill byproduct for their feedstock, Davis’ mill obtains its feedstock differently. “We’re a little unique in the Southwest,” Davis says. “We bring a lot of our wood directly from the forest to the plant—small diameter trees that need to be removed for forest restoration and fire hazard mitigation.”

FEC was the first mill to take material directly out of the forest and make pellets from it in the late ‘90s due to the lack of sawmill operations in the area. Even today, not many producers in the country do, because historically it’s been more economical to purchase byproduct from a sawmill or similar operation when available. Over the past decade, the plant’s feedstock had been guaranteed through the White Mountain Stewardship Project, a 10-year stewardship contract that ended in August. Davis is a founding partner of Future Forest LLC, the prime contractor for the project, which had the aim to thin 150,000 acres of forest to protect communities from wildfire and stimulate the wood industry. Although this helped Davis guarantee feedstock for the plant, stewardship contracts are not common in the West, and the high volume of public land ownership makes a huge difference when obtaining feedstock. “We’re relying on forest management plans by the BLM (Bureau of Land Management) or the U.S. Forest Service to be consistent and reliable so we can have some idea of what is going to happen in the future,” Davis says. “Whereas in the East, you would probably buy a lot more from private land owners, it’s harder to obtain longer term assurances on public lands.”

Although FEC has been able to sustainably source feedstock to churn out pellets and restore forestland, growing the market for pellets has been a challenge in the Southwest. Davis says, in general, the market is spread out much more in the West than in the East. High consumption areas, paired with the region’s population densities, are vastly distributed.  FEC can only serve customers located within an economical transportation radius from the plant to make commerce work.
Another impact on market growth is competing heating fuels. “In the West, we have pockets of propane, but we also have, in the past several years, had very inexpensive natural gas, which has made it difficult for the Western markets to grow,” Davis says. “If you look at New England, they’ve had pretty high-priced fuel oil, which has caused more stove sales because it’s very competitive.”

FEC primarily uses ponderosa pine, with a small amount of the Douglas fir species to make its Heat’rs, TerrAmigo and Green Tree product lines. Within the past year, the pellets are now qualified under the Pellet Fuels Institute standards program. When it comes to hardwood species versus softwood, Davis says they don’t see it having a significant impact on the marketplace. He adds that for the most part pellets consumed in a region are produced there. “We shipped more to New England this year because they had a short-term demand and we had some extra product, but that’s not typical,” Davis says.
FEC went into business in 1992, and has experienced consistent, gradual market growth since. Ultimately though, “I don’t see a huge change in the market, or demand for pellets in the West unless outside influences create an impact,” Davis says.

Producing Coast To Coast
Ken Tucker, CEO of Lignetics Inc., agrees with Davis’ outlook. “I think the West is going to be pretty flat and the growth is going to be in the East,” he says.

Lignetics has plants on both sides of the country. The company’s flagship plant, built in 1979, is located in Sandpoint, Idaho. Its East Coast plants are located in Linn, West Virginia, and Kenbridge, Virginia. This February, Lignetics merged with Western pellet producer Bear Mountain Forest Products, adding two facilities in Oregon to the mix, one in Brownsville and the other in Cascade Locks. “We wanted to expand our footprint in the West,” Tucker says. “We wanted to expand our shipping corridors; freight has become a big part of our business lately. There is only so far you can truck our product and still be competitive.”
Lignetics is also in the midst of some expansion projects and upgrades. “At our Cascade Locks plant in Oregon we’re putting in a complete new dryer line, upgrading the pellet equipment and automating the bagging operation,” Tucker says. “We’re upgrading our Virginia facility right now to include additional production capability, and we have just finished an upgrade in our West Virginia plant allowing us to process chips more efficiently than we were before.”

The recent merger and upgrades have increased Lignetics capacity. Its facility in Idaho is designed to produce about 80,000 tons per year with about 5,000 of the tonnage going into log production. The recent Cascade Locks acquisition has the capability now to produce between 30,000 and 40,000 tons of pellets per year, but will soon be raised to 60,000 or more. The company’s Virginia plant will also be ramped up from its current operating capacity of 65,000 tons to 75,000 or more per year. Finally, both the Brownsville plant and the West Virginia facility are permitted at 125,000 tons per year.

Lignetics produces pellets qualified under the PFI standards program at its Idaho plant from premium quality Western conifer sawdust, and has changed the product’s distribution pattern over the years. “We started out supplying 100 percent of our production as bulk pellets as a replacement for industrial and commercial users to displace coal,” Tucker says. “The first pellet stoves became available in 1984, and the Lignetics Idaho plant was the first plant in the U.S. to bag fuel for residential use. We have gradually gone from 100 percent bulk to right now we’re at about 2 percent bulk.”

Now, although almost exclusively residential, Tucker sees tentative potential to export from the Cascade Locks plant located on the Columbia River. “At some point we’d like to be able to think we can export to Asia, but we’re frankly not holding our breath on that happening anytime soon,” Tucker says. “We’re certainly in a good position to do that on the river, which leads us right out to the Pacific Ocean.”

Overall domestically, Eastern and Western producers have access to a similar, diverse retail base. “Hearth product dealers are the people who really brought us to the dance 25 years ago,” Tucker says.

He adds that it’s a mix of the independent dealers who sell hearth products, hardware chains, big box retailers and farm supply stores amongst others. While the markets are similar across the country, pricing varies slightly. “One of the things that keeps the Western pricing down is, quite honestly, there is more supply of pellets in the West than there is demand, which is just the opposite in the East,” he says.

Due to the oversupply, Tucker doesn’t see a lot of expansion opportunity in the West, especially in the domestic market. He believes, “Before you are going to see too much growth it will have to come from offshore opportunities.”

Exploring Any, All Markets
Chris Sharron, CEO of West Oregon Wood Products, echoes Davis’ and Tucker’s thoughts on the status of the current market. “We see pellet plants not running to capacity out here and/or trying to find some other markets,” Sharron says. “The pie stays the same size, yet the slices are getting smaller and smaller.”

WOWP creates pellets predominantly from Douglas fir at its two plants in Oregon; a 30,000-ton-per-year facility in Banks and a 50,000-ton-per-year facility in Columbia City. Like Davis, WOWP has shipped some pellets to the Northeast at a higher freight cost. Sharron attributes their success in selling across the country to the customer base they’ve built who prefer a Douglas fir pellet. “We hope to hang on to at least some of that market looking for a super high-quality pellet,” he says.

Besides the Northeast, Sharron says they continue to look at any and every market. For now, the domestic, residential West Coast is the most suitable with the highest return. WOWP has also sold its bagged fuel into the residential market in Italy. However, over the past few months with the return of the dollar, the increased tax on pellets in Italy, along with port issues, and mild heating seasons in Europe that export business is no longer there. Recently, Sharron has also taken his business to Asia. “We’ve been getting excited because at least we’re on the right beach to service that market,” he says. “We shipped some pretty good tonnage into Asia in  2014, they don’t have a very big thermal market as of yet, so a majority of the pellets are being used to make electricity.”

One of the advantages of shipping to this market was that it helped keep the two Oregon plants running during the spring and summer offseason. Now, with oil prices down and the strength of the dollar back, Sharron says they are debating whether to continue with that business as well. There has been some talk about aggregating pellets together from other plants to get volume up, but the market potential in Asia remains uncertain.

As most Western producers, WOWP uses sawmill residuals as its feedstock. Sharron says in the Pacific Northwest there is a lot of biomass to be used for pellet production, but due to the terrain and often wet conditions it is expensive to harvest the material. “Unlike the Southeast U.S. where whole logs are being harvested in more of a plantation type scenario—flatter ground, large plots—that model just doesn’t work out here in the Pacific Northwest,” he says.

Sharron adds that with the market for the finished product and the pricing where it’s at in the West, it just doesn’t pencil out for his business to use anything but sawmill residuals. Currently, market pricing in the West for residential pellets freight on board (FOB) the mill is less than in the East. West Oregon is in the $150 to $160 per ton FOB mill range. Whereas in the Northeast, the plants there are in the upper 100s, some reaching over $200 per ton FOB the plant. “That’s why you see some people chipping whole logs in the East to use for pellet production,” Sharron says.

Running a successful Western pellet operation parallels in almost all aspects among these three producers. The tale is told of little market growth due in part to the West’s ample natural gas infrastructure, consecutive mild heating seasons and widely distributed markets and population density. These realities differ from the other half of the country, with the Northeast’s intermittently high fuel oil prices spiking pellet stove and boiler sales. The increasing demand for pellets in Europe gives way to increased pellet production along the Eastern seaboard. While, these three Western producers see potential opportunity on their opposing side of the beach, little can be said on how quickly the demand will come, and whether it might rival  the growing volumes in Europe. Also, the current oversupply deters future plant construction, and with the exception of Centennial Renewable Energy, little talk of new capacity has occurred.

Sharron says you need all three legs of the stool when assessing whether to build: source of fiber, know-how to construct and operate a plant and a market for the product. “All three legs are an issue right now,” he says. “Maybe not so much with the actual manufacturing, but the biggest issues are raw material supply and probably the biggest, lack of market, at least at the right price.”

A few tough years following the recession slowed down Western sawmills, which drove the price up for the fiber, and pellet prices haven’t followed. Even so, producers in the West have learned how to get creative to find market opportunity, and the variability in the marketplace could soon change the current landscape. In the meantime, with an occupation sometimes based on predicting the unpredictable, producers focus on the present. “I’m dealing with the day-to-day, keeping things running and keeping things going until hopefully some things do change in the future, which helps make things a little bit brighter,” Sharron says. “We celebrated our 30-year anniversary this May, and we're looking forward to the next 30.”

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