Pressing on
Pellet producer anticipates more reliable fiber supply for new plant in western Nova Scotia

    Scotia Atlantic Biomass is already one of the largest wood pellet producers in Eastern Canada, operating a plant in Upper Musquodoboit, N.S., with five presses that give it an annual capacity in the range of 120,000 to 150,000 tonnes. And if things go according to plan, the company may soon construct a new pellet mill in western Nova Scotia.
    The Upper Musquodoboit facility was originally affiliated with the MacTara sawmill, which closed in 2007. The pellet operation was subsequently operated by Enligna, which went under in 2011, and the following year it was purchased by Scotia Atlantic’s parent company, Vancouver-based Viridis Energy Inc. The operation has found success exporting industrial pellets, via the Port of Halifax, to European power plants – though as a stand-alone operation with neither a dedicated supply of wood residues nor a Crown allocation, it has sometimes struggled to obtain sufficient fiber.
    In 2014 Scotia Atlantic was among 16 companies collectively granted a 10-year license for Crown timber from the province’s western region, but in order to access its annual 50,000-tonne allocation, it must build a plant in that region. According to Julie Millington, Scotia Atlantic’s general manager, this could become a reality in little more than a year’s time.
    “We’ve got all the plans in place,” she says, adding that it would make sense to establish the new pellet operation at an existing facility such as the former Bowater Mersey site in Liverpool, although other locations are also under consideration. 
     “If you looked at something that already had cement and an area where you could put storage and a place for putting the pelletizers in, it would be a lot less expensive than taking a greenfield (site) and building from scratch. There are several options in that area.”

UTILIZATION
    Millington is enthusiastic about the consortium model being implemented by the provincial Department of Natural Resources (DNR) under the new Fiber Utilization License Agreement for Crown land in the western region. “It doesn’t matter what lot you go and cut on, whatever is biomass on that lot, we have to get our 50,000 green tonnes of biomass,” she says. “The right fiber is supposed to be directed to the right place, and the consortium is designed to work together.” 
    At Scotia Atlantic’s current location, by contrast, it’s a bit of a free-for-all. “Companies like Northern Pulp have an allocation, and it is not designated that they have to allocate fiber to us,” Millington says. 
    “We work very closely with all the different companies, like JDI, they have an allocation. Wagner, we work with them. But it’s not quite the same because you work at whatever their pricing level is. Wherever they happen to be cutting, their focus is going to be on woodlots that have the majority of the fiber that they require. . . . If there happens to be biomass, it comes to us, but if there’s a highly dense biomass area, with the shortage of people available to cut, they’ll skip that area.”
    Millington says obtaining an economical supply of feedstock is extremely important for the company. “Part of the challenge with pricing is that it’s been all over the place, and it’s a lot higher than we had originally forecast in this area. When we were given the pricing and we did our due diligence, Nova Scotia Power wasn’t using biomass, Port Hawkesbury Paper wasn’t using biomass. Brooklyn Energy wasn’t using as much biomass, and Bowater used to be able to provide them with supply. So there’s a lot more people competing. It doesn’t mean that there’s not fiber available, but there’s less fiber being produced in the formats that create the residuals. 
    “MacTara created the material to run this pellet mill. When the MacTara sawmill went away, they had to procure fiber from other sources. If you were building this pellet mill, you wouldn’t necessarily choose where it is, now that you don’t have a sawmill feeding it.”

Julie Millington, general manager of Scotia Atlantic Biomass, was at the Port of Halifax in mid-April to oversee the Ruddy, a bulk carrier registered in Cyprus, being loaded with pellets. This shipment was destined for the Port of Tyne, in northeast England – although a load may be traded enroute, requiring the vessel to change course. (Dan Hutt photos)

Julie Millington, general manager of Scotia Atlantic Biomass, was at the Port of Halifax in mid-April to oversee the Ruddy, a bulk carrier registered in Cyprus, being loaded with pellets. This shipment was destined for the Port of Tyne, in northeast England – although a load may be traded enroute, requiring the vessel to change course. (Dan Hutt photos)

DIVERSION
    Scotia Atlantic has gone to great lengths to tap into new sources of fiber along the supply chain. Millington cites the example of “pins and fines,” a white fiber byproduct that could be diverted from the production line at Northern Pulp. “Basically it’s residuals that they currently scoop up and use in their burner. Instead of using that, which is perfect for pellets, we would even look at providing them with hog replacement, to get that fiber coming to us.”
    A successful diversion system was set up at Harry Freeman and Son Limited, a large sawmill in Greenfield, N.S. “They had residuals and log ends that were being produced that were basically going into biomass for hog fuel but not for production of pellets,” says Millington. “We worked with them to install a collection system – a conveyor belt and a way to pull all those lumber ends and turn them into residuals for us. 
    “We paid for the conversion process with Freeman’s, so we made a deal where they would sell us the material that came out. We would do the same thing with Northern Pulp if they would allow us to do the conversion and direct that fiber to us. We’re working on it right now. And there are more opportunities like that. If there were incentives from DNR to help companies look for those opportunities, that would be good for us. . . . We’re working every angle. Garth Spencer is our fiber procurement manager, and he meets with all the different companies and tries to encourage them.”
    Currently residuals make up roughly half the pellet mill’s fiber supply, with the remainder being round wood. “We would prefer to have more residuals because you don’t have to process it, you don’t have to chip it, you don’t have the silviculture fees,” says Millington. 
    “Over the winter we had to increase a little bit, a little more round wood, because a couple of the sawmills shut down over Christmas, and JDI is doing an expansion of their facility, so we had to replace that with round wood. We’re targeting an average of 50/50. It would be nice to do 75/25. It really all depends on availability in the market.”

TRUCK DUMPER
    Even with more residuals available, trucking would be a limiting factor. “Right now there’s just not enough walking-floor capacity to increase the amount,” says Millington. 
    “We’re looking at putting in a truck dumper. We’ve purchased it already. And what that does is it allows us access to fiber, because right now fiber has to be delivered on walking-floor trucks. With shavings and sawdust, we get less on a walking-floor truck, because the mechanism takes up a portion of the truck. If we can get a truck dumper, we can use B-trains. You get more capacity, you can dump the material, and there’s more of those available.”
     Another recent upgrade, aimed at improving production efficiency, involved replacing screens and grates on the chipper, to make smaller particles that will dry faster. “We’ve been working with M-E-C, who is the dryer company, to make sure that we’re maximizing the dryer capacity,” says Millington. “We had them come in and do some training and do some adjustments to how we’re actually running our dryer.”

Vernon Logan, mill manager at Scotia Atlantic Biomass in Upper Musquodoboit, N.S., shows off a handful of wood fiber from the pellet line.

Vernon Logan, mill manager at Scotia Atlantic Biomass in Upper Musquodoboit, N.S., shows off a handful of wood fiber from the pellet line.

RIGHT-SIZING
    Due to the current fiber supply situation, the mill has not been operating at full capacity. Annual production has been a little below 100,000 tonnes, and in the near term it will be scaled back further, with no weekend shifts. “We are about to implement the right-sizing model, so we’re actually looking at taking us down to an 80,000 tonne capacity for the remainder of this year,” Millington says. 
    “We would like to go back to 24/7, but we’re going to be 24/5 until we can build inventory at the right price fiber. And then once we get that, the objective would be to get back to 100,000 or even 120,000 or more. . . . We didn’t build inventory last summer as much as we should have. Hindsight’s 20/20. If we build inventory at the right price, it allows us to work through winter months when it’s higher priced and it’s a harder commodity to get your hands on.” 
    Paradoxically, this belt-tightening exercise is being undertaken so the company can demonstrate that its business model is workable, so it can attract investors for a new plant in the western region, where the business model looks much better. “People need to see the viability of being in the province,” Millington says. 

MARKETS
    While Scotia Atlantic has to bang on a lot of doors to obtain fiber, selling its pellets is a breeze, thanks to a multi-year sales contract with international forest products broker Ekman. And Millington says there is every indication of continued strong demand from the power sector in Europe.
    “There is a lot of government support for converting from coal to wood pellets, so the large companies like (UK-based) Drax, and (French-based) GDF SUEZ, they are utilizing the opportunity of working with the government, getting government sponsorship and funding, to convert to boilers that take wood pellets, and building facilities where they can actually bring them in via rail to their sites. So there is a lot more volume coming on line.”
    Millington points out that this growth in Europe is driven by environmental objectives, so pellet suppliers must have verifiable, sustainable fiber sourcing. “DNR has been fantastic as far as implementing what the requirements are in Nova Scotia for forest management,” she says, “so it makes it easy for us to be an accredited site, to be able to supply Europe – which is another reason why Nova Scotia is definitely a good place for building another facility.”

Residuals make up roughly half the feedstock for the pellet mill, and there is an ongoing effort to increase that proportion. Using round wood means higher processing costs, as well as silviculture costs tied to procurement of primary forest products.

Residuals make up roughly half the feedstock for the pellet mill, and there is an ongoing effort to increase that proportion. Using round wood means higher processing costs, as well as silviculture costs tied to procurement of primary forest products.

DOMESTIC DEMAND
    Though exports are the company’s bread and butter, Scotia Atlantic sells some pellets within the province. “I would love to have a local market,” says Millington. “We have three or four different greenhouses come and purchase from us, and we have Cape Breton University, and there are other small users, but the challenge with that is it’s not a sustainable amount. When you have a 30,000-tonne ship, and you produce 2,000 tonnes per week, you build enough inventory and you bring the ship in and you load the ship. 
    “If we have people take 30 or 40 tonnes, four tonnes here and 10 tonnes there, it’s not enough. During the summertime people don’t want the pellets. We only have capacity to store 300 tonnes on-site, and we produce more than that in a day. Every day we have six to 10 trucks that come, and we store the material here (Halifax Grain Elevator).”
    But with the recent shortage of domestic pellets, the company had no objection to small bulk buyers bagging pellets for re-sale to pellet stove owners. “The warning we always give is that they are designed for industrial use,” says Millington. 
    “Higher ash content, different shape and size. People have to empty their ash bins more frequently, they need to check their augers to make sure that they don’t jam up. Other than that, people love them. The feedback has been great. People have said that they burn hotter, that it’s a smoother heat. I don’t know, it could be psychological. Whoo-hoo, we have heat!”
(With files from Dan Hutt.)