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Strategic move into wood chips
BC logger Greg Joe has diversified into wood chipping with a Peterson 5000G chipper, and is finding there’s good demand for product due to sawmill curtailments.

By Paul MacDonald

logger Greg Joe has put an awful lot of chips on the table starting up a new business in the BC Interior, in wood chipping. But at a time when there looks to be an ample supply of raw material—in the form of beetle-killed wood—and good chip demand from pulp mills, it’s more of a strategic business decision than a gamble.

“It’s exciting, but it’s a big investment,” says Joe, sitting in his pick-up truck watching the Peterson 5000G chipper work, just north of the BC town of Merritt. “We’re a small logging contractor, and we’ve put ourselves on the line with this investment. But at this point, it’s looking like customers want as much as we can chip.”

There’s a good supply of mountain pine beetle-affected timber in the Merritt area, so the timber supply side of the chipping equation is there. In general, the mountain pine beetle infestation in BC is clearly far too extensive for the industry to keep on top of, and options are being explored—and acted upon.

“The pace of the beetle’s advance has been unbelievable,” says Joe, who knows the situation first-hand from his logging operation, Skylin Contracting. The industry has tried to keep up, but it simply can’t log enough. And sawmills simply can’t use some of the beetle timber.

“We’re left with stands that are too dry to make dimensional lumber—and the question is what are you going to do with them?” The best utilization for some of this wood, which is already cracking and checking and usually headed for the cull pile, now looks to be chips.

On the customer side, some pulp mills in the province are finding themselves looking far and wide for wood chips. Normally, they would get a good portion of their chip material from sawmills. But with the downturn in lumber markets, and the resulting sawmill closures—temporary and, in some cases, permanent—the pulp mills have to source their wood chips elsewhere. Enter Joe’s company, Cascade Wood Chips.

Even though there now looks to be a healthy chip market, the decision to enter the business was made carefully, as was their choice of equipment. “We put a lot of time into trying to figure it all out, and developed a business plan,” says Joe. “We tried to determine whether a portable chipper was the way to go or whether we should establish a permanent chipping base.

“In the end, we decided portability was important in case we required that capability, and we figured a Peterson 5000G portable chipper was the way to go for us. That proved to be a good move because in the beginning we had to move around because we did not have enough fibre coming in around the Merritt area.” The Peterson 5000G was purchased through Woodland Equipment, the Peterson Dealer for BC and Alberta.

That portability proved to be a huge benefit. While waiting for the wood situation to settle itself out a bit in Merritt, they subcontracted for Kamloops-based Westwood Fibre, doing chipping for pulp producer Zellstoff Celgar in Castlegar, in the Kootenays region of BC.

“It was a good experience, and Marv Kempston of Westwood Fibre was very helpful,” says Joe. “We were dealing with things new to us, moisture content, how chips are graded, productivity and Marv was a great source of information for us.”

Joe notes that before they took on the Zellstoff Celgar work, they set up the Peterson 5000G chipper in Merritt and ran about 25 truck loads of wood through it. “We were able to get things tightened up.” When things were running to their satisfaction, they headed down the highway to take on the work.

These days, however, they have set up the chipper on a more permanent basis, on a site near Spences Bridge, north of Merritt. From here, they’ll be supplying chips to both the Domtar pulp mill in Kamloops, and trucking chips to Catalyst Paper mill operations on the BC Coast. Both companies were looking for additional sources of chips.

Part of Domtar’s chip supply disappeared when Weyerhaeuser made the decision to close its Kamloops sawmill. And on the coast, Catalyst has had to deal with a generally tight wood chip situation due to mill closures. The most recent closure was the TimberWest sawmill in Campbell River, adjacent to the Catalyst operation there.

Joe reports that the Peterson 5000G chipper, and a Roadrunner six-foot-by -16-foot screen from Construction Equipment Company (CEC), of Tualatin, Oregon, sold through Woodland Equipment has worked out well for them, though there has been the inevitable learning curve.

Joe moved some people over from his logging operation, Skylin Contracting, to operate the equipment. And while they are very capable, they are still working with equipment new to them. “We all had to learn and we had to hit the ground running,” says Joe. “But I have good confidence in them, and knew they would make a good team.

“There is a lot to learn. In general, chippers are complicated machines. It may look like all you have to do is put sticks in the end and let the chipper do its stuff, but there is a lot of maintenance that you have to be aware of.”

Joe had owned and operated a small Bush Bandit chipper before, and did right-of-way chipping for BC Hydro under power lines. “That knowledge helped.”

The chipping fundamentals were the same, but it meant scaling it up to a more ambitious level. “Compared to what I was doing before, there is more of everything— more hydraulics, more electricals, and more maintenance.”

The maintenance side was critical, Joe reports. They knew that with the high demands put on the chipper, for every set number of operating hours per week, they would have to build in a set number of maintenance hours.

“When we did our business plan, we tried to research as much as possible how much downtime is required,” he says. A fair number of portable chippers are run in northern BC and the local Peterson chipper dealer, Woodland Equipment, has customers up there. They were able to help out with some estimates on how much maintenance time would be required. “We tried to utilize that knowledge, and in the end we went with a goal of a 70/30 split, 70 per cent uptime and 30 per cent maintenance time.

“When we first started out chipping, we might have been around 60/40 because we did not know a lot about the machine, and we were looking for ways to be more efficient. The longer you run it, you’re just a little bit quicker at changing the knives, making the oil changes and doing the greasing—you get into a routine.

“At first, we were trying to achieve the 70/30 ratio and weren’t keeping up on the little things. In the end, we decided to concentrate heavily on maintenance to make sure that everything runs smoothly, and we know that 70/30 ratio will come with a bit of time and as we get quicker and more efficient with the operation.”

In particular on the maintenance side, Joe says they learned there are different definitions of what “tight” means when it comes to belts on the chipper. “When someone involved with chipping equipment says keep your belts tight, well, that means something different to someone who has never seen a tight chipper belt.

Our guys jumped on it and the belts were fairly tight, but the Woodland Equipment guys let us know that was not tight enough. These were little things that we learned along the way.”

On the mobile equipment side, moving the timber around the yard are two Hyundai HL770-7A loaders, also from Woodland Equipment.

They are working almost 100 per cent with beetle-affected lodgepole pine, though they also take in some spruce, balsam and a limited amount of yellow pine. The wood is in generally reasonable shape, though it has a lot of the spiral cracking that poses so much of a challenge at the sawmill. Although BC sawmills have made changes to better handle beetle wood, beyond a certain point, it is just not worth running beetle timber through the mill.

Poor quality timber slows down the production process at the mill. And if the end result—the lumber—is less than good quality, the mills hardly want to send that out to customers, especially at a time when there is a downturn in the industry and customers can pick and choose who they buy their lumber from. “Lumber customers can be pretty picky these days,” notes Joe.

They can chip up to a 23-inch log, though Joe notes they have to be pretty round 23-inchers. If logs have an oval shape, or knots, they like to stick to a 21-inch diameter to keep the chipping equipment humming.

Most of their logs are cut-to-length, rather than tree-length, simply because the mills, and the loggers, in the area are set up for cut-to-length. And Joe explains that most of their wood comes from red attack wood, rather than the next phase, grey attack. The logging is focused on the red attack stands, to get the pulp and sawlogs. It’s taking everything the industry can do now just to tackle the red attack stands, let alone dealing with the grey attack stands.

Joe notes that before they made the decision to get involved in chipping for the pulp industry, he considered supplying the still-emerging biofuels industry in BC.

Prompted by a request for proposals from provincial utility BC Hydro, there are all kinds of proposals out there now in BC for using beetle-killed wood for generating power. Earlier this year, for example, West Fraser and power company EPCOR announced that they are working together to explore the potential of a biomass fueled 50 to 70 megawatt power generation facility in the area of Houston, BC. The project would utilize sawmill waste, forest residuals from harvesting activities such as slash and tree limbs—and low-grade beetle-killed wood.

“We considered getting involved with biofuels, but that requires a grinder, and at the time we thought the chip market was a few years ahead of the biofuels and the grinding market. We went with the chipping because we needed to make a move right now.” Down the road, he adds, they could take a look at getting a grinder and become part of the supply chain for a bioenergy operation.

The relatively huge investment Joe made in the equipment left them capital shy when it came to buying fibre for chipping. They are getting some help from chip hungry Domtar and Catalyst on that front. “It’s a huge relief because we already have so much money tied up in our equipment.”

With some time under its belt, and a lot of hours operating the chipper, Joe is starting to feel a bit more comfortable with the relatively new business of chipping these days, and its future. “The feeling out there is that the pulp industry might stay strong for three more years, so I feel confident that we have a few years of good business ahead of us. I think we’re in at the right time.”