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Area Loggers Say the Cost of Sununu’s Veto of Biomass Subsidies Is Hitting Them Hard

  • Steven Farnsworda drags trees to the cutting site using a skidder in Bath, N.H., on Wednesday, June 27, 2018. (Valley News - August Frank) Copyright Valley News. May not be reprinted or used online without permission. Send requests to permission@vnews.com.

  • Trees are cut into logs by the the loader/slasher at one of Stacey Thomson's timber sites in Bath, N.H., on Wednesday, June 27, 2018. (Valley News - August Frank) Copyright Valley News. May not be reprinted or used online without permission. Send requests to permission@vnews.com.

  • Stacey Thomson manages one of his timber sites spanning 200 acres in Bath, N.H., on Wednesday, June 27, 2018. Thomson will have to look at cutbacks in the wake of Republican Gov. Chris Sununu vetoing an energy bill related to wood chip power plants last month. (Valley News - August Frank) Copyright Valley News. May not be reprinted or used online without permission. Send requests to permission@vnews.com.

  • From left, Peter Chaloux, of Topsham, Vt., and truck driver Jeff Gordon, of Orford, N.H., work on a Chipper at a timber site in Bath, N.H., on Wednesday, June 27, 2018. (Valley News - August Frank) Copyright Valley News. May not be reprinted or used online without permission. Send requests to permission@vnews.com.

  • Stacey Thomson operates a feller buncher at one of his timber sites spanning 200 acres in Bath, N.H., on Wednesday, June 27, 2018. (Valley News - August Frank) Copyright Valley News. May not be reprinted or used online without permission. Send requests to permission@vnews.com.



Valley News Business Writer
Saturday, June 30, 2018

Lebanon — Eric Cole was at home on Poverty Lane making dinner earlier this month when his phone rang. One of his customers was calling with bad news: A new $390,000 logging skidder that Cole, a heavy equipment salesman, had just delivered would have to be returned.

The customer, an Upper Valley logger whom Cole declined to identify, explained that Gov. Chris Sununu’s veto the day before of a bill that would have required utilities to purchase a portion of their electricity from the state’s wood-burning power plants had dealt a blow to his business. He would no longer be able to afford the $5,000 monthly payments for the piece of machinery that grabs logs, hauls them out of the woods and loads them onto trucks.

Cole, who works for New England heavy equipment distributor Milton Cat, dispatched a crew at 7 a.m. the following Monday to retrieve the skidder. It is now back on the sales lot in Londonderry, N.H.

Within days, two other sales Cole had in the works with loggers to purchase heavy equipment also fell apart.

“I lost about $600,000 worth of deals right off the bat,” Cole said. “The impact is huge.”

Forest industry-related businesses — loggers, chippers, shippers and equipment suppliers — say that Sununu’s veto on June 19 of Senate Bill 365 that would have required utilities to purchase electricity generated by New Hampshire’s six non-utility-owned biomass power plants will have a crippling blow on their livelihoods and express bafflement over the governor’s action.

“Chips and biomass is 60 percent of my timber business,” said Stacey Thomson, owner of Thomson Timber Trucking and Harvesting in Orford. “It directly affects us.” He had been delivering an average of about 600 tons of wood chips per week to New Hampshire biomass plants until orders nearly ground to a halt in the wake of the veto, he said.

Thomson is threatening to express his unhappiness by taking punitive measures against the state.

“Unless the governor figures something out, I’m going to close my land down to all snowmobiling, fishing, hunting,” he said. Thomson owns about 800 acres in Orford and surrounding towns and notes that the state receives revenue from the recreational use of private land through the issuance of licenses, permits and fees.

“This is my livelihood,” he said.

The reaction to Sununu’s veto from officials at the biomass plants was no less blunt.

One day after the veto, Pinetree Power, operator of biomass plants in Bethlehem and Tamworth, announced it would stop taking wood deliveries immediately and begin operating in “reserve shut-down status” once the wood currently on site has been consumed, said Carol Churchill, a spokeswoman for ENGIE North America, the Houston-based owner of Pinetree Power.

The two plants buy a total of 550,000 tons of biomass annually — the vast majority of it from New Hampshire suppliers — and spent $13.4 million purchasing wood fuel in 2017, she said. Each of the power plants employs about 20 workers and together contribute $50 million into the local economy through operating expenses, taxes and payroll, according to Churchill.

“Given the outlook for power prices, it’s unlikely the plants will run through to the end of the summer,” Churchill added. “Then in September, the company will evaluate the next steps.”

One of the state’s six independent biomass plants, located in Alexandria, already was idled in April. Indeck Energy Services, its Illinois-based owner, had decided that the weak wholesale price for electricity in the region had made the facility too costly to operate. Biomass suppliers said the biomass plants in Whitefield and Springfield have initiated a “quota” that limits the amount of fuel purchases.

The state’s six independent biomass plants, when running at full throttle, consume about 1.4 million tons of wood fuel annually, according to the New Hampshire Timberland Owners Association, and produce about 100 megawatt hours of electricity — about one-tenth of the supply generated in the state but close to half of that generated from renewable resources, according to the U.S. Energy Information Administration.

“I’ve lost a third of my income from wood chips right now,” said David Rondeau, an Orford-based forester who has been logging for 30 years. He estimates the veto is costing him $1,600 per week in lost income as a result of trucking four fewer loads of chips to plants.

But Rondeau said his loan payment on his chipper runs $5,200 per month.

A ton of wood chips sells for about $21 to $25 per ton, a price level that has remained flat for at least five years.

“There’s just too many chips in the market right now and not enough places to take them,” Rondeau said. “I’m looking at having to go to a four-day work week.”

Grafton County is normally the No. 1 supplier of whole tree chips among New Hampshire’s 10 counties, according to data compiled by Jonathan Horton, a forest resource analyst with the state’s Department of Natural and Cultural Resources. Based on timber tax data collected by the New Hampshire Department of Revenue Administration, Horton estimates that Grafton County’s wood chip yield was 198,000 “green tons” — chips that still contain moisture — in 2015, the most recent year for which data is available.

That accounted for 15 percent of the approximately 1.3 million tons of wood chips produced in New Hampshire that year.

“We think of Grafton County as the wood basket of New Hampshire,” said Karen Bennett, a forest resources specialist and professor with UNH Cooperative Extension. “Because Grafton County is so big, there are large parcels of property where high quality hardwood is available.”

Senate Bill 365, whose sponsors included Sens. Bob Giuda, R-Warren, and Ruth Ward, R-Stoddard — both who represent parts of the Upper Valley — was designed to shore up the state’s biomass plants, all which have been pummeled as cheaper natural gas has reduced the wholesale cost of electricity.

Under the bill, three utilities — Eversource, Unitil and Liberty Utilities — would have been required to buy power from the biomass plants and other renewable sources at above-market prices. In vetoing the bill, Sununu argued that the measure would have meant higher electricity bills for ratepayers and would have accomplished nothing to ensure the financial health of the plants, which face competition from electricity produced by hydro and natural gas.

“New Hampshire is struggling with some of the highest electricity rates in the country,” he said.

“If the Governor had signed this bill, those rates would be considerably higher,” Jared Chicoine, director of the state’s Office of Strategic Initiatives, said in an email. “(The) veto did not take anything away from the biomass industry; it simply didn’t give them $30 million a year in additional subsidies. Good policy must account for the long-term as well as the short-term, and consider the costs for everyone.”

Proponents of the vetoed measure have their own economic data and analysis to marshal on their behalf. A Plymouth State University study commissioned by the New Hampshire Timberland Owners Association found that biomass plants “support 931 jobs and produce $254.5 million in annual economic activity” in the state.

Moreover, the biomass plants use more than 40 percent of all the timber harvested annually in New Hampshire, and the industry employs around 1,100 loggers, according to New Hampshire Timberland Owners Association Executive Director Jasen Stock, although the total can fluctuate depending on the season.

“Traditionally, paper mills up and down the Connecticut River consumed a lot of this wood,” Stock said. “When those went away, the vacuum in New Hampshire was filled by biomass.”

Heath Bunnell, a third-generation logger based in Monroe in northern Grafton County, said he had been transporting about 60 tractor-trailer loads of wood chips a week to supply four to five biomass plants. Now, with the quotas in effect, he’s transporting 10 loads a week to two plants.

Bunnell said he employs 13 people, and biomass fuel has accounted for 45 percent of his business.

He recently bought a new $360,000 chipper — it has only 300 hours on it — and said the fall-off in demand for biomass material will have a cascading effect among the vendors and other businesses with whom he deals.

“I pay $160,000 in insurance alone on my business,” he said. “Some weeks I am burning $15,000 to $20,000 in fuel and oil for trucks. It affects the tire guy. I provide health care for my men. This is a real company. There’s probably over 100 companies in New Hampshire that are in the same place I am. The amount of people this is going to impact in the state is drastic.”

By its very nature, the logging industry produces a high degree of waste in search of a market. A typical tree produces only a small quantity of wood that is of sufficient quality for lumber or furniture.

The remainder, consisting of branches and “tops” and categorized as “low quality wood” because of its blemishes, has limited uses such as shipping pallets or biomass fuel.

“When a forest is cut, 90 percent of the value comes from 10 percent of the trees,” said Scott Nichols, owner of Nichols Tree Farm in Lyme and a contractor of imported, high-end wood-burning heating systems for residences and businesses. “Everything else gets chopped. It used to be a lot of these chips went to paper mills. It’s making things tight in the logging and forestry business. The biomass plants were one of the few local markets remaining.”

The biomass bill enjoyed overwhelming support among New Hampshire lawmakers: It passed in the Senate in March, 17-4 and in the House in May, 225–108. Those majorities give proponents hope that there will be the two-thirds majority needed to override when the governor’s vetoes come up for review in September.

“We had more than simple majorities,” the Timberland Association’s Stock said. “We had strong bipartisan support. People are starting to see the fallout from the veto and that will help our chances.”

Giuda said that 16 of the state’s 24 senators already had signed onto a letter to the governor affirming their support for the bill he co-sponsored, which meets the two-thirds threshold required to overide the bill.

“I’m cautiously optimistic we can hold that and even increase the number,” he said, although he is less certain about the chances in the House, which would require 264 votes out of 400.

“I don’t know if there’s a veto-proof number, but we’re going to be working very hard to convince those who voted against it to reconsider,” Giuda said.

The veto had many loggers scratching their heads because Sununu also signed House Bill 557, which extends for three years the above-market rates that the utility Eversource pays for power from the biomass plant in Berlin operated by Burgess BioPower.

The argument advanced in favor of the bill echoed the same one made in favor of loggers and chip suppliers whose businesses are tied to the six other biomass plants in the state: The subsidy would bolster the surrounding economy in Berlin and those who work in the industry.

However, unlike the six independent biomass plants covered in Senate Bill 365, the Berlin biomass facility has a long-term power purchase agreement with Eversource. The other plants generate electricity that is sold on the spot market or through short-term contracts.

Chicoine and Sununu’s press secretary did not respond to a request to explain the reasons why the governor approved the bill to support the Berlin biomass plant while vetoing the bill to support the other six biomass plants.

John Lippman can be reached at jlippman@vnews.com.