Bio-energy Economics Offer Opportunities to Rural Communities

At a recent WSCA silviculture field tour mayors and regional directors heard how silviculture, forest restoration, wildfire threat abatement and bio-energy can form a virtuous circle of ecological and economic activity benefitting communities, particularly if bio-generation is kept on a modest scale and includes generating heat for municipal infrastructure.

NCMA Field Tour.doc

Biomass – Economic Review of Issues for MPB Stands

Summarizing themes presented at the WSCA North Central Municipal Association Silviculture Field Tour Prince George 5 September 2008

Tom Hobby
SCR Management Inc.
President

1. Biomass value per Ha could represent a range of value between $5,000 – $25,000 for electricity and thermal heat value. If an average of $12,500/ ha were used and if half of the 14 million Ha’s of MPB affected timber could be utilized, this would have the potential for $75 billion value.

2. Smaller co-generation facilities ranging from 1-5 MW would be lower risk (fibre risk due to wildfire, shorter hauling distances that would be less affected by rising fuel prices) than large facilities, and could feasibly be developed by local communities that could benefit over the next 30 years.

Example: a 2.5 MW heat and power facility would utilize an approximate 25,000-40,000 BDT of MPB biomass per year (depending upon technologies used). This would translate into an estimated 250-400 Ha per year harvested, and would assume utilizing MPB fibre for 10-15 years, then upon plantations and slash etc., thereafter for ongoing operations.

This strategy would be most effective to deal with issues of MPB fuels hazards that will increase in the WUI over time and would provide a new source of employment and provide community economic development.

Communities should be willing to invest in these projects base upon the social discount rate or return on investment that is typically lower than a corporate rate of return as there are numerous positive externalities with developing co-generation facilities (i.e. local revenue multiplier effects, environmental benefits of converting to green power).

3. Larger Scale projects would be potentially feasible if briquette technology would be analyzed versus hog fuel, as transportation is a key limiting factor for developing a fibre supply that meets the cost constraints for economic feasibility of feedstock costs (i.e. the use of briquettes may expand the feasible hauling distances.

4. Pellet producers are constrained by lower volume of mill residues currently being produced in the MPB affected area and may be forced to expand operations to collect fibre from the bush between 20-30% of their total fibre demand in the near future in order to maintain, and or expand their current production levels. If this were realized, that would potentially absorb hundreds of thousands of BDT per year.

5. BC Hydro – power pricing is a limiting factor for new production facilities as current bioenergy facilities for power production alone are not economically feasible. There should be an advocated position to support BC Hydro in paying for the marginal cost of new energy production facilities vs. the current power prices offered.

6. Tenures- Working with the major licensees via non-renewable forest licenses NRFLs and developing a new Bio-energy Tenure as forestry license to cut FLtC up to 50,000 m3 per year should be considered at the variable cost of sale administration and could be offered competitively. There should also be an exemption from the silvicultural obligations as the benefit to MFR would be the land would be cleared and prepared for silvilculture operations for establishing the next rotation.

7. New MPB reforestation could be supported by an expansion of the Forest for Tomorrow program and may need to consider the development of a new Silviculture Tenure concept. If reforestation of all MPB stands is too expensive for being handled by MFR under existing programs, then silviculture tenures could be established that would allow for companies, First Nations, communities, or a separate Crown corporation by the province, to raise capital to support the development reforesting MPB affected stands.

These tenures could be set up to be developed over 30-60 year terms, which then could be sold/ traded in marketable increments (say 1000 Ha increments). Once these stands are well established, they could be offered back to the Crown (less the land rent established per year) to support or increase the AAC for the region. Any increased AAC would then be apportioned via the methods of apportionment that would be applicable in the future.

This approach would potentially save hundreds of millions of dollars that would be required for silvicultural costs that would be necessary today, but may not be politically feasible to support. Therefore, by allowing the marketplace (and society) to support the investment of future forests, this would support the future of rural BC communities would allow for the reestablishment of MPB affected areas in a potentially efficient and timely method.

Other reasons why acting upon Biomass utilization and developing a restoration plan should be considered now.

If the province does not remediate and restore the MPB affected stands in a timely manner, the potential for environmental destruction due to severe wildfires will be extensive.

Studies in the US have documented the non-market values of mitigating wildfire hazards and risk, and have associated the cost savings after fuels treatments to be worth several thousand dollars per hectare. While there has not been a study conducted in BC, the cost savings should be studied in an MPB context and would include the following:

1. reduced wildland fire suppression costs
2. water quality issues
3. emissions reductions
4. fatalities avoided
5. soils and forest productivity losses do to high fire severity
6. Local employment losses
7. Recreation and tourism losses

This does not include the loss of adjacent stands that may not be MPB affected and may be damaged due to wildfire, nor does this figure include property values which would be destroyed by wildfires.