stimulate this

[Splinter]

Hey was talking to a forester the other day and he said that "stimulus money" was responsible for a drop in chip prices from 40/ton to 20/ton. many of the area chips are for fuel here and he thought it was something to do with renewable energy credits. something about the power co stockpiling chips with a subsidy and not buying so much now.

Anyone know about that? looking to do some chipping on a couple hundred acres but i can wait for a better price.

d

[Kansas]

The stimulus money he was referring to is probably a matching payment for fuel. My guess is it may have caused the price to go up temporarily, then drop back down. There were a whole lot of companies going after that money, way more than they had funding for. One outfit in western Kansas just went bankrupt. They were bringing in blue stained pine and making pellets with it. The stimulus money was basically paying the freight.

[Gary_C]

What he is probably refering to was the Biomass Assistance Program that was run thru the Farm Service Agency of the USDA. It was a gross give away of taxpayers money under the stimulus program and if continued would have been a very market distorting fiasco. It was temporarily pulled because of protests from some buyers of forest products because it would unfairly raise their costs of their raw material. It's unclear if a revised program will resurface in the future.

And yes, it would provide a payment to a biomass supplier that was registered at their local FSA office that was greater than the payment received from the purchaser who also had to be registered as a biomass facility. And yes some people got a lot of money from this Obama boondoggle before it was temporarily suspended.

[SwampDonkey]

I suppose if your going to give out welfare, might as well work for it. Gives ya a reason to get out of bed. :D

[Kansas]

You want to know why this got into the stimulus package? Here is a website explaining the original rule,  the proposed revised rule, and the list of companies getting BCAP money. Take a look at the list of recepient companies. Those are some heavy hitters. I don't know how much they spent lobbying to get that in, but if they spent 5 million, or even 10 million, they got one hell of a return. Looking at the locations, looks like they bought a lot of votes in the northeast and southern part of the states, with something else thrown in around the rest of the country.

[Gary_C]

Kansas, where's the website? Couldn't find the link.

[Kansas]

Here it is.. It helps to remember the send button


http://www.risiinfo.com/techchannels/powerenergy/FSA-suspends-new-applications-for-BCAP-biomass-suppliers.html

[Rocky_Ranger]

I think you are mixing the BCAP with the stimulus; BCAP came first, and is part of the 2008 Farm Bill.  Looked like a way to keep the mills (chip and energy) propped up for a spell.  I'd rather see my hard earned tax money spent on helping a "brother/sister" in the business than building a monument to some yahoo.  Just my two cents, but working in BCAP I can tell you there are mills now still working that would have been closed down.  To me that's a win. 

[Randy88]

GaryC, the way it was explained to me by the chip plant buying the chips was the landowner got a subsidy from the fsa and the plant paid the other half, nowhere did the guy doing the work or delivering them get anything but half the original amount and it ended up benifiting the power plant buying the chips and the landowner, I backed out and said, I'll sit tight and wait until the governments done handing out dollars without sense.    The fsa office gave me the same story and I'm sitting there thinking, how does this benefit biomass other than the plants got a bailout from the government by paying half their costs.   I'm missing something here somewhere, did the plants need a bailout again with taxpayer money??  Didn't grants and low interest loans start them in the first place? 

[SwampDonkey]

Around here with every round of hard times, you might as well say I own every mill in the province with my tax dollars I contribute just to save less than 1000 union jobs so the rest (40,000 woodlot owners) can get peanuts ($$) for product. The price of lumber here locally is inflated higher than what they quote in the reports and it's not #1 either. If the average consumer knew what the grade stamp said on that lumber compared to their invoice they would be calling the Lumber Bureau.

[Gary_C]

Randy just how this BCAP worked was a mystery to me too. The plant that you deliver the biomass product to had to be signed up and I had to be signed up at my local FSA office to receive payments. But when I tried to sign up at my local FSA office, they knew nothing about the program and did not have the forms for sign up. But at that time, many of the plants had not been signed up yet. Then the program was suspended because of complaints from some other buyers of chips because it would take away their raw material supply and it was true.

There were already some large loggers that already had chippers that were bidding up the stumpage on hardwood sales and planned to chip the entire sale to get paid twice for the chips. And it was true that this would be a market distorting giveaway of taxpayers money because these chips could only go to a biomass plant.

As far as I know the plant receiving the biomass did not get anything for being enrolled in the program other than their suppliers were given a double payment for deliveries, one from them and a matching one from the FSA. I guess this would allow them to offer a lower price and still get deliveries of product.

It's my understanding that new rules are due out this fall, but I doubt they have enough money to continue the program for very long. There are a lot of big players lined up to take advantage of this boondoggle and eat up the remaining money very fast.

[Rocky_Ranger]

The way we used it was to pay for some handling, storage, and transportation of the low value chips, that otherwise would have rotted in the woods.  Yes, they had to go to biomass for fuel(s), but it got a low value product out of the forest floor.  I certainly never heard anything negative about the program until the plants that were not on the "approved" list started stirring it up.  Don't blame them for it, just like most FSA programs it pays to keep informed. 

Whether we like it or not, biomass is going to be gaining lots of traction in the upcoming future for forest industries, no matter which political party is in power  8)

[Randy88]

I've never deliverd chips to the cogen plant yet they contacted me and the price they were willing to pay was 15 bcuks a bone dry ton delivered and I just laughed, that wouldn't even cover my fuel cost to get it there and then they called back and were telling me about the program and how it worked and I'm thinking now its up to 30 dollars a ton and we started to discuss maybe on a wet basis and they said no the price was 7.50 per ton and the government fsa paid the other 7.50 per ton and its still on a bone dry basis, I just said when they pay like anyone else to give me a call and I've never heard back since, I've talked to several other guys that chip and they all got the same call and turned them down flat as well and now they have someone bringing chips in from almost 125 miles out and further, not sure how that all works but they've got to be paying him a lot more than either 7.5 or 15 bucks a bone dry ton.    If the chips and biomass are a  think of the future then someone has to pay more than that, I think it figured out to somthing like 175 bucks a load delivered if my math was correct or a little less even depending on the moisture or less than 90 a load and the governemt paid the other 90 and when I asked the fsa they gave me the same story but they had no forms at all and didn't really know how to do the forms let alone anything about the payment of actuall dollars but it had to go directly to the landowner and not the person doing the chipping, so to me it was a waste of time.   Is this the price everyone is paying for chips?   I've talked to some and they are getting 22-28 a wet ton and the skys the limit for need and here they are starting up the plant and payine on the dry ton basis and virtually nothing for the chips.  I figured I'd sit back and wait to see what happened and who went broke before doing anything.    The biomass thing is great in theory but nobodys putting in the facilities to use them around here, there was talk of a hospital doing it and an ethanol plant but all fizzled out and nothing happened, now a cogen plants starting up but if thats all they are paying who's gonna supply the chips and for how long?     

One of the higher ups in the electric company I know told me not to get excited because its a government program to even start up the facility and they really didn't care if it worked or not there were government dollars going to the electric company to even try and thats what they were going to do and all they were going to do was try and once the free money's dried up it'll close again.   Now I'm sure there a lot of arguement that this will bring about how great biomass is and how hard they are trying and the long line that needs plenty of tissues to dry the eyes but until it makes sense someone's gonna have to do a lot of talking to make me a believer that its serious and here to stay and not just political and for the moment.   

[beenthere]

Randy
I think you have it pretty well figured out.

In WI, there was a push to convince people that biomass was the way to go, and there were so many uses for it. But they emphasized that they were not going to infringe on the market of chips and logs (dreamers they were, practical/realistic they were not).

Downtown Madison there has been a coal-fired electric generating plant to supply electric to the UW-Madison campus. The dreamers have managed to get some 35 million bucks to build a new plant that will run on biofuels (no coal). That is happening, not a dream any more.

There are already streams of coal cars supplying the plant now (I think 6-8 a day on average). They know full well there will be 7 times that many rail cars needed to get the same btu's out of the biomass which will make for a much bigger downtown congestion of moving rail cars in and out.

To top off the travesty, there is no biomass supply in the pipeline. All the biomass supply is purely conjecture and "out there" somewhere.  Not sure where these dreamers expect to "reach out" for material to replace the coal (which is still pretty cheap), but I assume they are counting on more free taxpayer money to make it work. And will it affect the price and supply of wood? Certainly. Will it clean up the twigs in the woods?  Doubt it will.

The electric company has tried to talk sense to these people, but the Gov. doesn't listen.

[Gary_C]

In Minnesota we have had for some years now a biomass plant in St. Paul that goes under the name of District Energy and they supply steam for downtown St. Paul. It is a private company and they buy as much as 50-60 semi loads of chips per day. And they have dealt with some large loggers and chipping operations in northern MN in the past. From what I've heard they only pay about $25 per ton and most loggers refuse to haul the biomass that far for that money. But then when district Energy gets desperate, those same loggers start hauling to them though there is never a mention of what they have raised the price to.

But then the MN DNR gives them some biomass from certain jobs for free and District Energy has their own crew that gets the free wood. So these biomass markets are in such turmoil all the time that you can't count on anything.

Plus all the pulp mills buy biomass (and always have) to feed their own boilers. So they are in competition for the existing supply along with all the other biomass operations that have sprung up. Plus the landscaping companies have an ever increasing demand for mulch that is no longer being met from land clearing operations for housing developments.

And all these buyers want to get this biomass for free or nearly so. So there is no way that this BCAP program that offers to pay a matching payment of up to $40 per dry ton delivered can do anything but cause more turmoil in the markets. And then what's going to happen when the money is quickly eaten up by large scale operations.

And by the way, that District Energy has not as yet signed up to be a buyer under this program.

[SwampDonkey]

Wonder why they would expect anyone to haul dry chips for $15/ton when you can haul round green wood 100" for anywhere from $38-46 a ton non stop?

Fort Fairfield, Maine has been burning chips at the Boralex 45 MW plant for 20 years now. We just closed a coal mine and took a coal fired generator off the grid and another coal burning plant to be closed up soon. There is no extra demand when your population growth is stagnate or declining and your customer base disappears (pulp mills closing). Those pulp mills draw a lot of juice with 300 HP electric motors. The one just down river from here takes as much juice as a city of 60,000 they say.

[Rocky_Ranger]

I certainly never said biomass was market driven, biomass is here and will stay here.  Several States are already requiring energy from green &/or biomass sources.  Don't matter what it costs, that's what we will end up paying for our "juice".  BCAP is not that big a deal to understand, find an FSA office, that actually knows the program, and have them explain it to you.  $15/ton?  Yeah right, somebody is fishing for a bargain on that one.  Our folks had $20/ton just in production to the gate - no profit at all.  I know of $35.00/ton then a match of $35.00, but that is based on bone dry ton.  Can't change that one. 8)

[SwampDonkey]

Well, maybe the producer will start seeing better prices on pulp. But, my theory is those states dictating biomass will loose mills.

[Rocky_Ranger]

Most can't lose any more than they already have, I sure don't see a win for market forces there....

Tough issue, that.

[SwampDonkey]

We have the largest outfit here in NB that will truck wood from further away even if it costs more just so the producer keeps beat down. They have always payed the least of any mill owner in NB. They can't get away with that in my county because we have a Maine market and this company has not one mill in my county. One (two) reason(s) for no mills is they don't have a crown lease here and they only hold a couple parcels of freehold land that wouldn't keep a mill going for long. I guess a third, McCain's don't want them here anyway. They stopped them from building a potato plant here and McCain also had part ownership of a mill in the county as well until they sold their share. But the guy running it was a McCain man (former employee up in the ranks).