Southern Sprawl

Some of the biggest names in the wood pellet industry continue to make port infrastructure investments in the southern U.S. to facilitate exportation of added tonnage from pellet mill construction or expansion projects.
By Ron Kotrba | December 05, 2019

When Hurricane Michael stormed onshore Florida’s panhandle Oct. 10, 2018, between Mexico Beach and Panama City, it was the first Category 5 hurricane to reach the U.S. mainland since Andrew in 1992. Michael was the third-most intense hurricane on record to hit the U.S. with wind speeds clocked at 160 miles per hour. The damage caused by this monstrous storm is estimated to have exceeded $25 billion, placing it among the top 10 most costly hurricanes in U.S. history.

Port Panama City was ravaged, suffering approximately $17 million in damages, says Wayne Stubbs, the port’s executive director. “We’re not a huge port, so that’s significant,” he says. “Almost every building we own was damaged to one degree or another. Eighteen of 19 buildings throughout the port had damage. The primary wood pellet handling facility had serious roof damage, a 200-foot section was missing and the integrity of the rest [of the roof] was questionable. We weren’t very sure how long we could rely on what was still up there. So that’s what we were dealing with.”

After three days, power was restored to the port. “Our employees did a remarkable job getting us back in business, despite most of them also dealing with personal problems as a result of the storm,” Stubbs says. Following the hurricane, the area experienced more than a week of good, clear, dry weather. “That’s usually the case after a hurricane,” Stubbs says. “The pellet warehouse roof damage had occurred late in the storm, so not a lot of cargo was wet from the rain. A little was, but not deep into the stockpile. We were able to scrape off the wet product and dispose of it and get a ship in here within a week to load the remaining cargo, before it suffered any more degradation.”

After assessing the damage, Stubbs says more than half of the warehouse was usable while repairs were arranged. “We had a temporary patch on the roof within two weeks,” he tells Pellet Mill Magazine. “That was about the time it took for the pellet producer (Enviva) to get its mill back in operation and for the railroad to clear thousands of trees off 50 miles of tracks.”

The permanent repair to the pellet warehouse took six months to complete and cost $2 million. “We were totally insured and were able to maintain all our businesses and keep our customers happy,” Stubbs says. “Some had to make temporary diversions, but all returned to normal operations as soon as we were ready for them. For the pellets, we were able to bring ships in early on a regular basis and load them earlier than we normally would have, to use them for storage. We ended up achieving the budgeted amount of shipments last year. That was a nice success story for them, and for us. Getting hit with a Class 5 hurricane—we can check that one off our bucket list. All things considered, we managed the situation as well as we could have. Looking back, we lost $1.5 million in total revenue as a result, but we still had a decent year.”

In July, Port Panama City announced it was receiving a $10 million grant from the U.S. Economic Development Administration in combination with a $2.7 million grant from the Florida Department of Transportation to construct a new biomass storage dome, expanding its current bulk pellet storage capacity. The new dome will be capable of storing up to 20,000 metric tons of pellets and, along with the new handling infrastructure, will allow for an additional 200,000 to 300,000 tons of annual throughput, pushing the total annual pellet export capacity of wood pellets to 1 million tons. 

In 2014, Enviva announced its intention to acquire the 650,000-ton Green Circle Energy wood pellet mill in Cottondale, Florida, and the acquisition was finalized in early January 2015. “This was one of the first plants built in the U.S.,” Stubbs says. Green Circle went into operation in 2008. “We were one of the only ports with a dedicated wood pellet handling facility,” he says. “The total production of that plant is exported through this port. We’re located 50 miles from that plant, 100 percent of which relies on railcars operated by Bay Line Railroad.” Stubbs says Enviva is the sole shipper of wood pellets serviced by Port Panama City. Enviva is the port’s customer via a terminal operating agreement. “It’s a multiyear contract to handle their product for an agreed-upon rate,” Stubbs says. “In turn, they ship a minimum volume for those years per a volume agreement.”

Port Panama City consists of east and west terminals. Wood pellet storage and handling reside in the west terminal, which features a 36-foot-deep channel, allowing for the possibility of Panamax vessels but, as Stubbs says, “We mostly see Handymax ships in the 30,000-ton range.” The current pellet storage warehouse is also sized at 30,000 tons. “That matches the size of the vessels coming in,” he says. “We see a high frequency of vessels—twice a month for 700,000 tons a year.”

The additional pellet storage at Port Panama City will provide several benefits to both Enviva and the port. “It gives Enviva 20,000 more tons of storage so the constraint on vessel size now is not the depth of water but storage in the port,” Stubbs says. “Enviva can use larger ships and handle more pellets per year that way.” The other benefit of building the new dome is provision of storage redundancy. “We had a fire in 2012 and Hurricane Michael last year, so the new dome gives us more storage and provides a more dependable structure in terms of hurricane damage—it’ll have a greater wind-load rating than our current building. We’ll then have two buildings, which gives the shipper more assurance of continuity following a natural disaster. So, on top of additional capacity, it’ll provide redundancy and resiliency.”

The actual construction of the project, however, depends on Enviva’s commitment to expand the Cottondale mill. “It’s all contingent on their commitment,” Stubbs says. “Their commitment to expand the plant is the largest investment of this agreement and will have the greatest economic impact.

They are reviewing the plan now. Once they make their decision, then we will conclude our agreement to build, which will be an expansion of our current service agreement. Our award of the grants sets the table for expanding here at the port and allowing them to expand their plant. We’re looking forward to their decision. We have up to 24 months to begin construction under the terms of the grant, and we wouldn’t want to spend that money without [Enviva’s] commitment.”

Enviva had little to say about the project or its plans to expand the Cottondale facility. “The grants from federal and state governments will allow for higher throughput capacity at Port Panama City, therefore allowing for expansion of production capacity at our Cottondale plant,” a spokesperson for Enviva tells Pellet Mill Magazine. “We are currently evaluating this potential expansion opportunity.”

Port of Greater Baton Rouge
Drax Biomass, a Monroe, Louisiana-headquartered subsidiary of U.K.-based Drax Group plc, owns three large pellet mills in the southern U.S. and announced plans in July to significantly expand production at its existing mills by a combined 350,000 tons annually. Currently, Drax Biomass has about 1.5 million tons of pellet production capacity.

Construction on Morehouse BioEnergy in Bastrop, Louisiana, sized at 512,500 tons annually, was completed in April 2015. The company simultaneously built its Amite BioEnergy mill in Gloster, Mississippi, with the same capacity as its Morehouse plant, which was completed in February 2015. Two years later, Drax Biomass acquired German Pellets’ mill in Urania, Louisiana, and commissioned the facility in 2018. This plant, called LaSalle BioEnergy, is scaled at 450,000 tons. In addition to Drax Biomass’ plans to expand production at its three existing mills, on Nov. 19, the company announced its intention to develop an additional 3 million tons of capacity by 2027.

To accommodate exportation of significant tonnage from its two then-newly built mills in Louisiana and Mississippi for use in Drax Group’s U.K. power plants, Drax Biomass began work in 2013 at the Port of Greater Baton Rouge. According to Lloyd Wedblad, Drax Biomass’ director of logistics, the cost of the project was approximately $50 million, and contractors involved in the building of the terminal include Gray Construction, Amteck, AHR and Bruks, to name a few. “While various pieces of equipment were commissioned in the later part of 2014, the port’s final commissioning took place during the loading of the first vessel in April 2015,” Wedblad says. “This was a green field site before Drax began construction.”

Drax and the Port of Greater Baton Rouge enjoy a long-term lease agreement, Wedblad says. “The port remains the owners of the land and Drax the owners of the assets,” he tells Pellet Mill Magazine. “Our Baton Rouge transit facility is the first port facility for Drax in the U.S.” Currently, Drax Biomass does not have positions in any other ports. “That’s not to say we wouldn’t in the future,” Wedblad says.

In May, Drax commissioned a new rail spur linking its LaSalle BioEnergy plant to the regional rail network and its port facility in Baton Rouge. “This will increase transportation efficiency, provide economies of scale and reduce both cost and carbon footprint,” the company stated in its financial report for the first half of 2019. “We expect to benefit from further economies of scale in rail associated with the commissioning of an enlarged chambering yard at the Port of Baton Rouge, allowing 80-car train sets to operate from our LaSalle and Morehouse sites.”

Greg Johnson, business development director of the Port of Greater Baton Rouge, tells Pellet Mill Magazine that the chambering yard project is not an expansion of an existing chambering yard—as suggested by the words “enlarged chambering yard” in Drax’s financial report—but rather it is greenfield construction of a new chambering yard. The term is railroad lingo for a logistics facility that holds overflow unit trains waiting for delivery in such a way that it does not impede other rail activity. “No other operations are done there except to hold the train for delivery,” Johnson says.

The project stems from Drax Biomass’ need to have additional rail storage. “What’s happening now, with only one track interchange, is the railroad has to drop an 80-car unit-train load in two pieces, 40 cars each, and bring the load in 40-car increments, unload, then pull out and reassemble. It takes a lot of coordination effort right now, only accommodating one train at a time at the port. With the new chambering yard, we’ll be able to handle three unit-trains at any given time. The purpose of the chambering yard is to be able to land two additional 80-car unit trains, either loaded or empty, to accommodate rail deliveries from three individual pellet mills.” 

According to Johnson, the chambering yard project at the Port of Greater Baton Rouge involves construction of three railroad tracks, with a total of 22,549 track-feet, two ladder tracks capable of handling 80-car unit trains, one runaround track and two mainline turnout spurs. The location is off-site, about a mile away on property owned by the port. The total cost of the chambering yard project is $21.5 million, $14.5 million of which will be spent on construction, $5.5 million on utility protection and relocation, and $1.5 million on Union Pacific switches and connection, Johnson says. He adds that the state of Louisiana Capital Outlay Program is contributing $5 million toward the project while the Port of Greater Baton Rouge is contributing another $5 million, with the balance being funded through a state bond issue. When asked whether Drax Biomass was paying any of the cost, Johnson says, “We’re going to garner more tonnage, so we’ll be dedicating the fees from the additional tonnage to pay out the chambering yard project over a 12-year period.”

Bids for construction were accepted July 10 and the contract was awarded to Brown Industrial Construction LLC of Baton Rouge, Louisiana. Notice to proceed was issued Nov. 14, according to Johnson. “The project is currently under construction,” he says. Completion is expected in August.

Port of Pascagoula
To meet rapidly growing demand from Europe and Asia, Enviva is further building out its wood pellet production portfolio in the southern U.S. The monolithic pellet producer currently has eight manufacturing plants throughout the Southeast, capable of producing more than 4 million metric tons of pellets, three of which are under expansion to produce an additional 550,000 tons. Enviva plans to develop several more plants, with its Lucedale, Mississippi, project currently under construction.

A spokesperson for Enviva says the Lucedale plant in George County, Mississippi, is permitted to produce more than 1 million tons of wood pellets per year but will initially produce about 700,000 tons a year. Its Epes, Alabama, proposed facility, scaled at the same size as the Lucedale project, is expected to begin construction early next year, pending approval of required permits.

Given Enviva’s immense scale of production and vast exportation activities, the company owns or operates out of several terminals in port facilities throughout the Southeast. Existing terminals wholly owned by Enviva include its Port of Chesapeake terminal in Virginia and its Port of Wilmington terminal in North Carolina. Third-party terminal agreements include the previously mentioned Port Panama City in Florida and the Port of Mobile in Alabama.

On Nov. 7, the company broke ground on what will be its newest wholly owned deep-water marine terminal in the Port of Pascagoula, Mississippi. “The Pascagoula terminal is expected to be a ‘build-and-copy’ replica of our existing Port of Wilmington terminal,” a spokesperson for Enviva tells Pellet Mill Magazine. Pellets from the Lucedale plant will be transported primarily on railcars by the Mississippi Export Railroad to the Port of Pascagoula, where they will be exported to Europe and Asia.

Pellets from the Epes plant in Alabama are expected to be transported primarily by barge on the Tennessee-Tombigbee Waterway destined for the Port of Pascagoula where they too will be exported to Europe and Asia. The cost of the new terminal in Pascagoula is $90 million, $60 million of which Enviva is paying for while the remaining $30 million is being covered by the Jackson Port Authority. Two on-site domes will provide storage capacity for up to 90,000 tons of wood pellets and will be serviced by state-of-the-art handling equipment. Enviva would not disclose with which companies it was working on the terminal project.

“Today we take a major step in helping to meet the increasing global demand for sustainable biomass fuel, and to ensure greater security of supply to our customers, particularly for the rapidly growing demand from our Asian customers,” said Nic Lane, Enviva’s executive vice president of human capital, in a Nov. 7 press release. “We are thrilled to be partnering with one of the top-ranking ports in the U.S., the Port of Pascagoula, a major commercial engine and key driving force in local, regional and international economies.”

Mississippi Gov. Phil Bryant said, “I am thrilled to have Enviva Biomass as a Mississippi business partner. Their work in renewable energy is vital to the global economy.”

The terminal construction project is expected to be complete in early 2021, timed with completion of its Lucedale plant. Enviva said it expects the number of vessels calling the port will grow as it develops greater production capacity in the region.

Author: Ron Kotrba
Senior Editor, Pellet Mill Magazine
rkotrba@bbiinternational.com
218-745-8347