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Weathering the Downturn--with Wood Pellets

Following the closure of a nearby paper mill that was taking most of its wood chips, the family that owns Newfoundland's Cottles Island Lumber Co. took a deep breath, and made the choice to weather the downturn--and invest in a new wood pellet plant.

wood pelletsBy Tony Kryzanowski

Given the current recovering markets for solid wood products, a timely investment in a wood pellet plant is helping to paint a brighter future at Cottles Island Lumber Co. in northeastern Newfoundland.

The company is currently supplying pellets in 20 lb and 40 lb bags to major retailers in Atlantic Canada. It's a good start, says company owner Rex Philpott, but there is still some distance to travel on the marketing side of the business.

A number of other family members are actively involved in the business. Brother Tony looks after the woodlands operation and another brother, Dennis, is the general manager of the mill. Daughter Lori is the general manager of the office and son Andy is the sales manager.

Rex feels that government has a role to play, and can help spur growth in wood pellet use. Government could make it more worthwhile for businesses, government facilities, and homeowners to make the switch to wood pellets from heating oil, particularly within a 350 kilometre radius of the pellet plant.

"My vision of the pellet industry is for government institutions such as hospitals, government buildings, airports and commercial buildings within a 350 kilometre radius of the pellet plant to convert from oil to pellets and go green," he says. "I think you just have to grow that market within your area."

There are wood pellet markets further afield. Ontario has chosen to phase out power generation from coal by 2012 and power utility company Ontario Power Generation has made the decision to switch to burning wood pellets exclusively in some of its facilities. But Philpott says it's more likely that local suppliers will win that business because of cheaper transportation costs. Transportation is a determining factor when marketing wood pellets, he adds.

In addition to supplying Newfoundland, Cottles Island Lumber can also ship wood pellets economically to the rest of Atlantic Canada and Maine. Fortunately for the company, there are many transport trucks shipping goods to Newfoundland that are looking for a back haul load.

"I can actually put pellets into Halifax cheaper than I can put them into St. John's," says Philpott.

The Newfoundland government has offered some support to the industry through a program that provides a 25 per cent rebate on the cost of purchasing a wood pellet stove to a maximum of $1000 and a wood pellet furnace to a maximum of $1500.

Cottles Island Lumber appreciates the support offered by the government, but the feedback they are hearing from customers since the program was launched in April 2008 is that it is not quite enough to encourage them to make the switch. With the program coming to a close, Philpott is hoping the government will launch a new program that will make it even more attractive for people to go green and make the switch to wood pellets.

Cottles Island Lumber began producing wood pellets in November 2008 with an investment of about $2 million. At present, they are producing just over one tonne per hour and plan to eventually reach annual production of about 10,000 tonnes.

Survival was a bit touch and go at points over the past two years. Philpott describes it as the most dangerous time the forest company has ever experienced in its 40 year history. The combination of the U.S. tariff on softwood lumber, the climbing Canadian dollar, and the closure of the AbitibiBowater Grand Falls–Windsor paper mill in February 2009 created some turbulent business waters.

"It was the perfect storm but we have a deep keel," says Philpott. "Making a conscious decision in 2007 to either give up or keep going was one of the biggest hurdles. I just decided that you are never beat till you give up. The value-added, I guess, is what's kept us alive."

Cottles Island Lumber produces a lot more than wood pellets, and has a long, storied history in Newfoundland's forest industry.

Like many families in Newfoundland, their roots are in the fishery, but given the unforgiving and unpredictable nature of that industry, Rex's father, Ralph, started the family's journey into forestry because wood products were always in high demand.

Wood was sawn for wood sashes, clapboard, and matched lumber for sheathing and floors. The sawmill also manufactured timbers, planks, material for wharves, stages and fishing traps.

Over the years, value-added products such as cladding, paneling, and flooring became a significant part of the business, in addition to commodity lumber. At present, the company manufactures between 10 and 12 million board feet of lumber annually, and has an annual allowable cut of about 50,000 cubic metres of black spruce from Crown land.

The closure of the AbitibiBowater Grand Falls-Windsor paper mill was a major blow to Cottles Island Lumber because it consumed most of the chips generated by the sawmill. It really threw a wrench into the company's plans for building a pellet plant because of a sudden massive additional supply of wood chips.

"Thank God for the bit of foresight that we had to have a pellet plant added in but not yet in production," says Philpott. "That would actually save our life, because we are able to use the wood chips in our own pellet mill and stay in business."

The pellet plant is attached to the sawmill and operates 24 hours a day five days a week, as opposed to the sawmill that operates nine hours a day, five days a week. Philpott says the pellet mill is a lot harder to switch on and off.

At present, a mixture of chips, planer shavings and sawdust are fed into a silo with a front end loader. From the silo, the material is processed through a Jacobs hammermill and then fed into a three tonne drum dryer the company acquired from China. Because of the large volume of material the pellet mill must now process, the company is planning to purchase a larger capacity dryer.

After the dryer, the material proceeds to a smaller feed bin, and is then transported through a series of screw conveyors and bucket conveyors to a separation process where a portion is fed into a 12 million BTU dust burner that produces heat for the dryer. The rest of the material is processed further through a second hammermill, and collected in a second feed bin.

From that point, the material is manufactured into pellets using a 501 Sprout Bauer pellet mill. After the pellet mill, the material undergoes two screening processes before it is bagged into 20 and 40 lb bags.

Cottles Island Lumber is hoping to be able to process most of the material it previously sent to the paper mill into wood pellets by the fall of 2010.

In terms of the sawmill, it was an entirely new mill designed and built by Valley Machinery in New Brunswick in 2001. The black spruce logs entering the sawmill are only about 6" in diameter on average but are noted for their strength.

The logs are processed through a single line, first encountering a VK debarker. Next, the logs are processed through a chipper canter with side saws, with the cants conveyed to a bull edger.

"The Valley bull edger has three different arrangements of saws," says Philpott, "so when the cant comes to the operator, he decides whether it is value added or not. If it is a 12' cant, it will go into siding and if it is an 8', we just do premium studs from 2" X 3" to 2" X 6"."

From that point, the lumber is processed through a trimmer and if it has wane, it is diverted to a board edger and then back to the green chain.

The highest volume product each day proceeds to a semi-automatic stacker, while the rest of the green lumber is collected, sorted and stacked manually based on length, size and quality. From that point, each stickered stack is queued up for kiln drying in the company's Kotter dry kilns.

The drying schedule varies for different lumber sizes and end products. Commodity lumber is dried to 19 per cent moisture content, siding material to 14 per cent, and flooring to between 8 and 10 per cent.

"The flooring is mainly used in cottage construction," says Philpott. "We do a cottage country package like V-joint paneling, round siding and flooring. You'll find 100 per cent of our product on both the inside and the outside of a lot of cottages."

All of the dried lumber is finished on a Weinig moulder capable of processing between 200 and 250 board feet per minute. By switching knives and set ups, the company can manufacture its variety of products using this one machine. By using the Weinig moulder as both a moulder and planer, all of Cottles Island Lumber's commodity grade lumber has the same high quality finish as the flooring.

Once through the planer, siding product is manufactured using a Baker bandsaw. The flooring material is finished on a Doucet end matcher.

Philpott says siding is the company's highest volume product, with the company's main markets for all its products at present being the domestic market.

Over its 40 year history, Cottles Island Lumber hasn't been afraid to navigate the company to the most fertile waters, whether it's selling log homes to Japan or manufacturing home packages for Chile. Today, though, they are a Newfoundland pioneer in wood pellet manufacturing, as the Canadian forest industry looks for ways to profit from the growing bio-economy.

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August/September 2010

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