Europe’s increasing emphasis on renewable energy lies behind the announcements this summer that two companies plan to build wood pellet plants in Arkansas, one in Pine Bluff and one in Monticello.
Demand for the pellets, which energy-producing companies in Europe use to generate electricity, led to a doubling of U.S. exports of the pellets last year, from 1.6 million tons in 2012 to 3.2 million tons in 2013.
In July, Zilkha Biomass Energy LLC of Houston announced it would build a $90 million facility, creating 52 jobs in Monticello. In August, Highland Pellets LLC announced that it would build a $130 million plant in Pine Bluff, creating 35 jobs. Highland Pellets, incorporated and registered in Arkansas, is a subsidiary of Highland LLC of Boston.
Zilkha will be producing 375,000 metric tons of torrefied, or black, pellets annually. Highland will be producing 500,000 metric tons of traditional wood pellets annually. Torrefied pellets have been roasted to remove moisture and have a greater energy density. They are also easier to handle and transport.
“I think the pellet industry is working its way into Arkansas,” said Matthew Pelkki, a professor of natural resource economics and timber management at the Arkansas Forest Resources Center in Monticello. Although, he added, “I don’t know that there’s been a major push to focus on pellets in the state.”
“The pellet mills are coming in because we’ve got a tremendous supply of pulpwood, standing pine pulpwood, that’s pretty low cost,” Pelkki said. “So they’re looking at it as there’s a resource opportunity for them here.”
Pellets are made from wood waste such as the sawdust, shavings and chips that are the byproducts of wood processing. Most pellet-producing plants are in the southeastern U.S., the location of much of the forest products industry. And because the Southeast is closer to European ports than wood-producing areas in South America and western Canada, transportation costs — a big component of the expense of wood pellets — are lower. Both Highland and Zilkha said they would be sourcing their raw materials in Arkansas.
Arkansas is home to several small-scale wood pellet makers, though these produce a different kind of pellet, the kind used in wood stoves for home heating.
The state started exploring the potential for industrial wood pellet production three or four years ago, said Grant Tennille, director of the Arkansas Economic Development Commission.
Tennille said that at that time, transport costs to Europe prevented pellet manufacturing in the U.S. from being cost effective. Now, however, an increase in both pellet prices and demand has made pellet production more attractive.
Wood pellets are a form of biomass, material that comes from organic products like trees and crops, and biomass is a form of renewable energy because it can be cultivated. Biomass is considered a more environmentally friendly energy source.
The European Union has enacted mandatory energy targets that have three goals: cut greenhouse gases by 20 percent from 1990 levels, increase the renewable energy share of energy consumption by 20 percent and improve energy efficiency by 20 percent.
The use of wood pellets in energy production is helping many European countries come closer to these goals. Some wood pellets can be used in coal-fired plants to reduce greenhouse gas emissions. The United Kingdom has adopted even more stringent standards with the goal of eventually phasing out coal plants.
In 2013, the United Kingdom, Belgium, Denmark, the Netherlands and Italy were the top importers of American wood pellets, with the U.K. accounting for 59 percent of the total.
Under Construction
Construction has begun on the road leading to the Highland plant in the Jefferson Industrial Park, and the company expects the building of the plant to take 16 months. Highland has hired Fagen Inc. of Granite Falls, Minnesota, and Wagner Construction Co. of International Falls, Minnesota, as contractors. In addition to the 35 jobs directly created by the pellet plant, Highland estimates that another 482 will be created indirectly.
Zilkha Biomass said construction of its Monticello plant should start late in the second quarter of 2015 or early in the third. Construction is expected to be completed by the third quarter of 2016, with commission of the plant expected in the fourth quarter. Zilkha is still in the permit preparation stage of the project, though clearing of the site has begun with the help of the Arkansas Heavy Equipment Operator Training Academy at the University of Arkansas at Monticello, according to Zilkha spokesman Jonathan Ohueri. Zilkha expects “hundreds” of jobs to be created indirectly by the plant.
“The forecast for the biomass energy sector is a relatively bright one,” Ohueri told Arkansas Business. “Many energy plants in Europe are required to lower their carbon impact so they’re trying to create a mix of renewable energy solutions.”
Zilkha is also working on a plant in Selma, Alabama, a pellet-producing facility that it’s retrofitting to work with the company’s technology and that it expects to be completed by the end of this year. In addition, Zilkha has a plant in Crockett, Texas, that it’s transitioning from production to research and development uses.
Five years ago, the city of Camden was looking forward to groundbreaking on a $110 million wood pellet plant announced by Phoenix Renewable Energy LLC of Hot Springs. That facility was never built, and Phoenix’s chief operating officer, Stephen R. Walker, wound up in serious legal trouble. Phoenix went on to file for bankruptcy, and Walker was convicted of theft, tax evasion and bank fraud in cases unrelated to the energy company.
Asked how well the AEDC had vetted Highland and Zilkha, Tennille said,
“Very, very well. And in both cases everything checked out. They are stout companies with strong balance sheets.”
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