Biomass Subsidy Faces Opposition From Wood Products Industry

Posted by Carol Sonenklar on January 12, 2010 at 12:59 pm

Sawdust: the unlikely commodity sought after by the biofuel and wood products industries. (image: thedailygreen.com)

In the world of government subsidies, there are good intentions and unintended consequences. The good intention was Congress’s Biomass Crop Assistance Program, designed to convert wood shavings and plant waste into renewable energy. The unintended consequences are pitting sawmill and lumber wholesalers against composite wood manufacturers for cheap wood byproducts, reports the Washington Post.

The Biomass Crop Assistance Program, a relatively small provision that was a part of Congress’s 2008 farm bill, has grown into a half-a-billion dollar subsidy that provides an incentive for sawmills and lumber mills to sell their leftovers wood byproducts to be converted into biofuel. So-called second-generation biofuels, like biofuel made from wood scraps or cellulosic ethanol made from the husks and leaves of corn, are extremely promising because they does not compete with any food source, unlike corn ethanol or soy-based biofuel.

However, the biomass subsidy is causing grief to the country’s composite wood manufacturers, who use wood byproducts to make items such as home entertainment centers and kitchen cabinets out of particle board and composite panels.

“It’s not right. It’s not serving any purpose,” said Bob Jordan, president of Jordan Lumber & Supply in North Carolina, who acknowledged that under the program his mill’s sawdust might fetch twice as much as it does now. “The best thing they could do is forget about it. All it’s doing is driving the price of wood up.”

T.J. Rosengarth, the vice president and chief operating officer of Flakeboard, the largest composite panel producer in North America, said that the biomass subsidy program could eliminate them. “You can say, ‘I’ve made more alternative energy,’ but at what expense?”

Not only might the subsidy drive up costs but it could also take a serious toll on the composite wood industry, which has about 21,000 employees and annual sales of $7.9 billion, vastly outflanking the biomass industry, which has been struggling since its inception in the 1970s. That was when the federal government required that utilities get a portion of their resources from independent power producers. Many of those producers’ contracts have now expired, and without a boost in funding, the biomass industry would be in dire straits.

Subsidies play a critical role in the biomass industry, as well as other alternative energy industries. Bob Cleaves, the Biomass Power Association president, says that they are critical to supporting a sector that supplies half of the nation’s renewable energy, and that seven of Maine’s ten biomass energy plants would have closed without the new funds.

“The industry needs help,” Cleaves said. “Is the country not prepared to spend half a billion dollars on half the country’s renewable energy resources?”

Regardless of what happens, the money is moving. Last fall, the Obama administration sent $23 million to the state offices of the Farm Service Agency and will soon be sending another $514 million.

Correction: The original post misstated the annual sales figure of the composite wood industry.