ANCA Adirondack forest industry supply - INRS 10.2016

Forest Industry Supply Chain Assessment

.

October 12, 2016

Innovative Natural Resource Solution LLCfor the

Adirondack North Country Association

Counties

• Clinton

• Essex

• Franklin

• Fulton

• Hamilton

• Herkimer

• Jefferson

• Lewis

• Oneida

• St. Lawrence

• Saratoga

• Warren

• Washington

Innovative Natural Resource Solutions LLC 2


• Task 1: Collection and analysis of USDA Forest Inventory and Analysis data (FIA) on the forest resource of the targeted New York counties

• Task 2: Landowner decision‐making and the availability of timber for harvest in the region

• Task 3: Logging infrastructure • Task 4: Transportation


For FIA Runs, we conducted:

• Full (no screens) assessment of resource• FIA runs using some preliminary screens (slope, distance to roads, etc.)

• Further analysis – using BPE and / or spreadsheet‐based analysis – using further screens based upon NWOS and stakeholder interviews


12,035,467

8,834,042

6,307,0655,393,196

3,631,528

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

All Land Forestland Timberland FIA ScreenedTimberland

BPE ScreenedTimberland

Acres of Land by Screening Category

Standing

Volum

e by Species,

Growing Stock ‐1

993 and 20

14*

(Unscreened)


Screened Forest Inventory & Analysis Results• Based upon information and suggestions from a number of foresters, regulators, land managers and conservation organizations in the region, INRS conducted another assessment of the region’s forest resource, estimating the resource only on timberland that met the following criteria:

• In private ownership (while timber harvesting can and does occur on public lands, volume from this type of ownership is driven largely by non‐market forces and is often not a reliable source of material for forest industries);

• Is less than one mile away from a road (includes maintained woods roads);

• Having a slope of less than or equal to 35 percent.



Eastern white and red pine

Spruce and balsam fir

Eastern hemlock

Other eastern softwoods

Select white oaks

Select red oaks

Hickory

Yellow birch

Hard maple

Soft maple

Beech

Ash

Cottonwood and aspen

Basswood

Growing Stock on Private Timberland by Species, Cubic FeetDistance to Road <= 1 mile

Slope <= 35%


(5,000,000)

‐

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

Easternwhite andred pine

Spruce andbalsam fir

Easternhemlock

Othereastern

softwoods

Select whiteoaks

Select redoaks

Hickory Yellow birch Hard maple Soft maple Beech Ash Cottonwoodand aspen

Basswood

Net Change (Total Growth ‐Mortality ‐ Removals)growing stock, all private timberland, <= 1 mile to road, <= 35% slope

cubic feet

Summary total = 78 million cubic feet increase per year (2.4 million tons) available


(60,000,000)

(40,000,000)

(20,000,000)

‐

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

Easternwhite andred pine

Spruce andbalsam fir

Easternhemlock

Othereastern

softwoods

Select whiteoaks

Select redoaks

Hickory Yellow birch Hard maple Soft maple Beech Ash Cottonwoodand aspen

Basswood

Net Change (Total Growth ‐Mortality ‐ Removals)sawlog portion, all private timberland, <= 1 mile to road, <= 35% slope

board feet

Summary Total = 341 million board feet annual increase available

Literature search – Family forest owner attitudes towards timber harvesting:

• Landowner attitudes and beliefs are more important to a landowner deciding to harvest than are social influences (my neighbor did it) or professional ones (foresters)

• Parcel size (i.e. bigger more likely), outreach activity participation (attended workshop), harvest price, and distance from residence were the most common significant predictors of harvesting intention

• In New England & New York, over 50% of family forest owners have harvested timber on their land in the past

• Harvesting on family forest ownerships in New York has increased dramatically in recent years and it should continue (2009 study).


Landowner attitudes and the National Woodland Owner Survey (NWOS)

• 2013 NWOS is most recent

• 632 surveys for all of NY with 313 returned surveys

• Unable to query just 14 counties

• 44 different query results.


NWOS NY Major Timber Findings (private family forest owners with more than 10 acres)

• Over 65% harvested timber of some sort since they owned their forestland

• Nearly 50% harvested sawlogs since they owned their forestland

• At least 33% used a professional forester to help with harvest• In last 5 years 64% harvested some timber for sale or personal use

• In the next 5 years, 64% of forest owners say that they will harvest timber for sale or personal use.


Northern Forest Biomass Project Evaluator

Northern Forest Biomass Project Evaluator model was created by INRS on behalf of the North East State Foresters Association through grant support from the USDA Forest Service.

• intended to be used as a decision support tool for analyses of wood supply under different conditions for a geographic area

• Using FIA data as its core dataset, BPE estimates available timber volumes over time for a specific geographic area based on a series of parameter assumptions

• We’ve chosen 4 separate model runs.


BPE Scenario RunsAvailable Timber after Existing Harvesting (green tons)

550,000 550,000 550,000 550,000

1,796,000

1,510,000

1,282,000

2,095,000

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

Run 1 ‐ Constant Run 2 ‐ Reduced Growth Run 3 ‐ Increased Demand Run 4 ‐ Increased ForestGrowth

2016 2036







Understanding Market Cycles• The region has a number of markets for wood

• Pulp and paper mills• Biomass electricity facilities• Wood pellet mills• Firewood• Sawmills

• There are also demands on the resource from outside of the region• Each of these markets faces (somewhat) unique economic drivers• Markets drive wood demand, not logging infrastructure (though logging infrastructure can certainly limit supply)


Pulp & Paper Mill

Biomass Electricity

Wood Pellet

Energy Markets Can Change QuicklyAnd when they do, markets for biomass chips, wood pellets, and firewood can all change


$‐

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

$4.00

$4.50

$5.00

$‐

$20.00

$40.00

$60.00

$80.00

$100.00

$120.00

$140.00

$160.00

$180.00

$200.00

Jan‐14

Feb‐14

Mar‐14

Apr‐14

May‐14

Jun‐14

Jul‐1

4

Aug‐14

Sep‐14

Oct‐14

Nov

‐14

Dec‐14

Jan‐15

Feb‐15

Mar‐15

Apr‐15

May‐15

Jun‐15

Jul‐1

5

Aug‐15

Sep‐15

Oct‐15

Nov

‐15

Dec‐15

Jan‐16

Feb‐16

Mar‐16

Apr‐16

May‐16

Jun‐16

Jul‐1

6

Electricity Heating Oil

Electricity

–Average RT

$/M

Wh

Home He

ating Oil ‐$

/gallon

The world changes quickly

Winter 2015

• Pulp mills operating at normal capacity

• Electricity prices high• biomass plants operating as much as they can

• New biomass plant at Black River• Oil prices high

• Strong demand for wood pellets• Strong demand for firewood

• Pulp mills from PA, ME and Canada all looking for wood in the region

• Markets wide open

Today

• Pulp mills operating at normal capacity

• Electricity prices low• Seasonal curtailments and operation below capacity at biomass plants

• Oil prices low• Low demand for wood pellets and firewood

• Latent supply left from a warm winter• Other regions not pulling wood from the Adirondacks

• Markets on quota


Phone Interviews conducted:

• Phone interviews with logging companies, trucking companies, forestry companies and mills

• 24 interviews conducted

• Dozens of questions asked of each interviewee.


Do we need more loggers?


Troubling…both answers are correct

Logging Capacity in the Adirondacks• There are enough loggers and equipment to meet today’s market needsMany markets on quota, so some underutilized capacity

• Just +/‐ 18 months ago, logging capacity strainedIf markets returned to prior levels, there would be enormous strain on the existing capacity to meet demand

• A much bigger issue loomsA meaningful portion of the workforce and leadership plans to leave the business in +/‐ 5 yearsThey are on their last set of equipmentWhen this happens the region faces a significant logging shortfall.


Are people entering or leaving logging?

• Some loss to retirement, other industries• Prison guards• Construction

• Some firms are downsizing• Perhaps permanently moving from two crews to one• This means some jobs will be lost

• In current market, loggers told us they are not investing in new equipment, and not needing new people.


Capital for Logging Equipment

• Every logger we spoke to said that they currently had access to capital at attractive ratesLocal banksEquipment dealers.

• Just because they have access to money does not mean they are using itMost said they currently have the equipment configuration they want, and would not add new equipment until age required or markets strengthened.

• We spoke to suppliers with a combined production of ~450,000 tons, a substantial portion of the region’s market.


Mill Support for Logging Infrastructure• Providing a market is providing support for loggersA stable market is even better, but often beyond control of the mill

• The days of company logging crews are (pretty much) gone• Some mills providing MOUs for future volume purchases, loggers using this as part of dealing with lendersOften non‐binding, expressions of intent

• One facility provided a financing program to add chipping capacity to existing logging firmsEquipment loan paid off through debits to wood paymentsOften a re‐allocation of capacity, but not wholly new capacity.


Dealing with Local Communities• In general, loggers, truckers and mills expressed that communities were neutral or supportive of timber harvesting and truckingProbably more neutral, but that’s positiveHeard some concerns about specific communities > how do we handle in the report?

• For roads and bridges…Some specific complaints, because bridges were being fixed and upgradedNobody could name a location that was a real problem / bottleneck / drive around that was not part of current constructionSeasonal restrictions (mud season) very real – most truckers said they knew how to deal with this and generally found towns cooperative

• Weight limits in New York are viewed as good• Some desire for increased trucking capacity (Canadian B‐Trains).


Logger Training Programs

• Designed for people currently logging

• Chainsaw Operation, Safety, & Productivity (Game of Logging)

• Environmental Concerns (Forest Ecology & Silviculture); and

• Adult First Aid & CPR• Continuing education requirements

• Well‐liked by current loggers• Required lots of “on the job” training time

• A nascent program, funded beginning of this year

• Designed to bring new people into the industry

• May offer some continuing professional development as well

• Mechanical harvesting• Purchased a simulator• Get a student “60% there”

• Opportunity for industry to help shape the program.







Trucking• At current market demand, clearly enough trucks and drivers• However, anecdotally this appears to be the first bottleneck in the supply chainIf demand increased, not enough trucks to supply all marketsWas an issue this year during mud season, when truckers face changed operating hours and mills get tight on wood

• Trucking a highly transferrable skill set (to other trucking)Seems like this would aid liquidity – people come and go as markets changeAppears to be a one‐way street – away from forest products.


Innovative Natural Resource Solutions LLC

Charles Levesque• [email protected]• 603‐588‐3272

Eric Kingsley• [email protected]• 207‐233‐9910
