Investors put their hope in wood pellets

MARCELL -- Tink Birchem believes she has a solution to high heating prices as well as all the pollutants they produce. She and other investors are putting millions of dollars into making what they believe is the heating fuel of the future: wood p...

MARCELL -- Tink Birchem believes she has a solution to high heating prices as well as all the pollutants they produce.

She and other investors are putting millions of dollars into making what they believe is the heating fuel of the future: wood pellets.

European countries are far ahead of the United States in use of pellets fuel. If Birchem's new company, Valley Forest Wood Products, can't sell at home its 50,000 ton capacity, she'll sell the pellets abroad, she said.

Eventually, though, she's sure there will be a big market for them domestically. "The United States is going to catch on, but when?" Birchem said.

Opening of the plant in Marcell is a new chapter for Tink Birchem and her husband, Jerry Birchem, who also own Birchem Logging of Mountain Iron and are founding members of a logging cooperative, Forest Management Systems in Buhl. The investors include other loggers, family members and a Spanish company. Tink Birchem is the company's CEO.


Not the last

Valley Forest Wood Products began producing pellets on Dec. 29 and is the first of what Birchem expects will be several wood pellet manufacturing plants. Already she plans to build an $8.5 million plant with a 100,000-ton capacity from the ground up in Mountain Iron. Construction will begin when the state approves air quality permits. That plant will have a 100,000-ton annual capacity.

Both the Marcell plant, which was bought for $800,000 last summer, and the Mountain Iron plant are in tax-free JobZ zones. The Marcell operation has been updated with $2 million worth of equipment since it was purchased. It has 13 people on the payroll working around the clock and Birchem said wages are $14 an hour and up, with benefits.

Birchem also said she is close to an agreement on a Wisconsin location, with construction expected to begin this spring, and is considering another Minnesota location for yet another pellet plant.

Her optimism about wood pellets stems only partly from their popularity in Europe. Price is a big selling point, she said. Calculations vary, but there's general agreement that wood pellets could reduce residential heating costs by as much as 30 percent to 50 percent when compared with fuel oil and propane. A 40-pound bag of pellets from Valley Forest retails for $3.50 and a ton of bagged pellets is $175.

Proponents also point out that the fuel comes from a renewable resource. Premium pellets produce little ash and are considered "carbon neutral," meaning that the wood in them consumes carbon dioxide, a greenhouse gas, while growing and releases it when it is burned. The Valley Forest pellets produce less than 1 percent ash.

The pellets are made of wood from sawmill waste and wood species that have no markets. Eventually, Birchem said, the plant also will take excess biomass from logging operations. Nothing is added to the pellets, such as fillers or glues.

Birchem has plans to make pet bedding from waste wood and in 2009 Valley Forest will begin working with Xcel Energy and North Dakota State University to experiment with making methanol from waste wood to generate electricity.


Good deal

Pellets burn at 80 percent efficiency -- the same as fuel oil but slightly less than the 85 percent of propane, natural gas and kerosene. By comparison, hardwood firewood burns at 60 percent efficiency. Wood-burning stoves create far more smoke and particulates, said Chris Wiberg, chief operations officer of Twin Ports Testing in Superior. Unlike firewood, pellets are burned in a controlled environment that mixes the fuel with oxygen to minimize emissions, he said.

Valley Forest will make pellets for both residential and commercial heating. Right now the market for pellets is mostly residential, but a special residential stove, furnace or boiler is needed and the investment can be $700 to $4,000.

Commercial heating also is a potentially large market for wood pellet heating. The French River Hatchery, for example, has heated with wood pellets since the early 1980s, according to Fred Tureson, hatchery supervisor. It also has a fuel oil boiler that it uses when oil is cheaper, but that hasn't happened for several years.

Although burning pellets takes more labor, such as cleaning out ash twice a day and doing further maintenance twice a week, it's still cheaper than fuel oil, Tureson said. Right now, the hatchery burns pellets 24 hours a day.

Valley Forest has contracts with several schools, a car wash and a YMCA, Birchem said.

Industrial boilers that burn coal often can be converted to burn pellets.

Interest high


Interest in wood pellet manufacturing apparently is high. "When you look at the cost of propane, which a lot of people use, pellets are a good deal," said Bill Berguson of the University of Minnesota's Natural Resources Research Institute. "That's what driving a lot of it."

Valley Forest apparently is the only plant in Minnesota that is making fuel pellets from sawmill and useless wood. However, Elkhorn Industries in Superior has been making wood pellets from industrial waste since the fall of 2006, said Erik Monge, the company's president.

That plant uses pine, maple and oak shavings discarded by truss, molding, car part and cabinet-makers within a 150-mile radius, he said. It produces 30,000 to 35,000 tons of pellets annually.

Advisers to the Kedco Group, based in Cork, Ireland, have talked with the Duluth Seaway Port Authority about suitable sites for a wood pellet processing facility at the port and shipping the product to Ireland. Monge said last week that his company has been talking with Kedco to see whether they could work together.

Great Lakes Renewable Energy Inc. of Rice Lake, Wis., expects to break ground on a $6 million wood pellet plant this spring along Highway 63 in Hayward Township. A group of loggers from Northwestern Wisconsin will own the plant, according to Herb Seeger, general manager. It is expected to produce about 36,000 tons of pellets per year.

Minnesota Gov. Tim Pawlenty and his forest industry task forces have urged the industry to find innovative ways to add value to wood products to lift up the depressed industry and Birchem said pellets are one way to do that.

Conditions are so depressed that some logging and related businesses are failing, prices are low and manufacturers are curtailing production. That's why Bill Jokela, owner of J&J Forest Products, invested in Valley Forest. "I could see no future in logging in the size of company I was running," he said. "I think [Valley Forest] is ... an opportunity to make a living."

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