Industry checkoff program development discussed at PFI conference

By Katie Fletcher | July 24, 2015

An update of the proposed wood-to-energy (WTE) checkoff program was provided at the 2015 Pellet Fuels Institute conference in Williamsburg, Virginia. The concept is under review by industry, and a draft is expected late this year or early 2016.

Rob Davis, president of Forest Energy Corp., gave the presentation at the conference held earlier this week, July 19-21. “It has been talked about in the past, and now we have really formulated something and are moving forward on what the possibilities would be for the wood-to-energy sector,” Davis said. “This is not a PFI initiative, it is really an industry initiative. PFI is helping assimilate information, but it is strictly an industry program.”

The WTE checkoff program is administered through the USDA as a way to raise funds for research and promotion of the industry to grow the markets. An example of a successful checkoff program was the one for beef through the widely recognized campaign, “Beef. It’s what’s for dinner,” and others such as for cotton, eggs, popcorn, pork, milk, almonds and sorghum. There are a few just within the forest products industry, including the softwood lumber program, paper and packaging board and Christmas tree checkoff program. A fourth hardwood industry program is up for an authorization vote later this year. “You’ve seen the benefits and you’ve seen the results of such a program many times,” Davis states in his presentation. “One is the softwood lumber program, with the funding they’ve increased their sales considerably. Pulp and paper has a $20 million campaign to promote their industry.”

Davis adds that the checkoff program is really where the industry comes together, a way of assessing the industry equitably. “Everyone is going to be paying the same,” Davis said. “You utilize that money for research and promotion of an agricultural product, which in this case is biomass.”

Some of the issues Davis listed as being areas of focus if passed include, but are not limited to, greenhouse gas (GHG) and carbon accounting for wood as a source of energy, forest health and sustainability, value of wood for heat, as well as economic and employment impacts in the industry. “We’ll raise money and spend money to do things that will be beneficial to the industry,” Davis said. “No more than 15 percent can be used on overhead, the rest has to go directly into research and promotion of the product for the industry.”

The checkoff program was first brought about when some in the industry decided this was something worth pursuing. Currently, an ad-hoc group of nine individuals make up the board working on the program. According to Davis, on the board are three export representatives, three domestic pellet producers and three power producers. “This initial group is really just trying to put a package together that complies with the law and USDA requirements in order to get out to people this is something we want to do and would be beneficial to the industry,” Davis said. “There were people concerned enough to put money up to help people pursue this.”

Davis said that Bob Simpson serves as the group’s managing consultant, and with the U.S. endowment to match funding, the program can move forward. Davis announced in his presentation that just within the last week, the forest service agreed if the program moves forward they would contribute some funding to the endowment to help with the matching funds effort. “I think that is really beneficial from not only the viewpoint that we will have additional funding if we move forward, but also that we are getting support from those organizations,” Davis said. “It’s very positive everyone involved is really looking at that this can be something that is beneficial.”

Participants to the program will be pellet producers and power producers in the U.S. In the presentation, it was indicated that 95 percent of the potential population was determined. “We’re looking at somewhere around 80 to 110 participants,” Davis said.

This number indicates companies, not plants. Ultimately, everyone will be buying in except for some considered under the de minimis exemption, for example a biomass power plant producing 1 MW or a 2,000 to 4,000-ton pellet plant. Davis said it is likely a limit will be set and smaller producers will be exempt. He added that all other producers not exempt will not have to pay up to that capacity amount, they will only pay on what they have over that amount.

The amount of money is based on sales back to what is actually used, looking at assessing bone-dry tons (BDT). The board is looking at a possible annual target of $5 million assessed on BDT going into the plant. This is an area that is currently being discussed by the board. “We’re working on a draft,” Davis said. “That draft is going to go out for comment, we have to have an order that goes to the USDA that has to be approved. After they do, we have to go back out to participating companies to vote on it and decide if this is something that will be beneficial to you. If we continue to stand back and not look ahead and watch the public perception of carbon to biomass we won’t be in a very good position four to five years from now.”

Right now, Davis said, they expect to have a draft early next year, and they are looking at issuing a straw poll sometime later this year to gain feedback for 2016 to decide if this is something industry wishes to pursue. After the draft is circulated, edits will be made based on feedback and it will be submitted to the USDA secretary of agriculture during quarter one or two of 2016. A formal vote is targeted for late next year.

The program would be managed by a board of directors, composed of approximately 11 to 15 members. The secretary of agriculture appoints the board, but the board decides how much money within a range and what to do with research and promotional items.

Davis mentioned the program is not long term. After approved, there is a mandatory evaluation a few years after implementation and then another vote will take place around seven years after initial approval. “Now, it’s a matter of hopefully getting feedback from you than hopefully moving forward,” Davis said. “To me, it’s something we can’t not do. We’ve waited too long to do it. We have obstacles potentially in front of us that we’ve done little work to combat.”