New Markets for Small Roundwood and Forest Residues in Appalachia?

Gaurav Dhungel and Justin S. Baker

Appalachian forests are inextricably tied to the region’s economic development, environmental quality, and cultural heritage. Despite the geographic adjacency to the nation’s productive timber basket (the Southeastern U.S.), most of the Appalachia region is quite different in terms of forest, market, and resource conditions. Unlike the pine-dominated timber sheds to the immediate source, Appalachia is defined by dominance of hardwoods, heavy reliance on natural regeneration, longer rotations, limited outlets for small roundwoods, grade and species-specific timber prices, widespread exploitative harvesting practices such as high-grading, rarity of improved silvicultural practices like thinning, and niche market for premium wood products like whiskey barrel and veneer. The region, however, bears some semblance to the Southeast in terms of forest ownership and extent: non-industrial private landowners dominate the Appalachian region as a whole and the region has a tremendous standing timber volume, woody biomass, and dead standing biomass volume. These trends suggest prospective market avenues for forest products, but recently the region has seen declining investments and capacity in hardwood forest product mills.

The pulp and paper industry has seen declining mill capacity over the past few decades across the U.S. and the Appalachia region is no exception. Closure of significant portions of pulp and paper mills in central Maine in early 2010s, Verso mill in western Kentucky in 2015, and more recently Canton mill in western North Carolina have resulted in thousands of job losses and millions of lost economic output. Not only do these mill closures have local economic repercussions, but they could also pose a challenge to sustainable forest management given the importance of low-grade markets to sound hardwood silviculture.

In the absence of such a market, landowners would have little incentive (if any) to harvest smaller, densely populated trees, as such harvests will only incur additional short-term costs for landowners. Consequently, high-grading would become pervasive, further degrading the future stand quality and economic profitability. If such conditions persist, Appalachian hardwood forests would be at higher risks of wildfire and pest/disease outbreak, and less desirable species like maples and beech would proliferate at the expense of oaks. New markets for small diameter pulpwood in the Appalachian region can help compensate for declining mill capacity in the region. Here, we discuss two potential demand sources that could also complement renewable energy and climate policy goals – wood-derived bioenergy and biochar.

Bioenergy

While the market for southern US-sourced wood pellets has grown substantially over the last decade, most of the final market demand for this material is international, driven by renewable energy developments in the EU and UK. Given the confluence of declining market demands for hardwood pulpwood and relatively high inventories of merchantable wood, there are opportunities to support sustainable forest bioenergy systems in the US as well. Forest-based bioenergy markets could be a win-win development in Appalachia to also diversify the forest products industry while contributing to rural economic development goals, especially to areas experiencing declining pulp mill capacity. In addition to addressing the region’s broader energy-related concerns (including energy independence), forest bioenergy systems could increase income opportunities and reduce opportunity costs of forestland ownership in the region, as well as enhance economic feasibility of certain silvicultural prescriptions promoting oak restoration and (in some cases) preservation.

Lower-valued trees in hardwood forests can yield high quality wood chips for bioenergy, and wood pellet mills offer a potential substitute market for small diameter stumpage. Although the economic contributions of wood pellet mills could be smaller than other forest product manufacturing facilities, these mills could still provide significant activity to regional forest industries (and associated supply chains). A study in Maine examined the possibility of collocating a biorefinery with existing pulp or paper mill infrastructure and concluded that the direct economic impacts of such a system would be small relative to the total forest products industry in the state, suggesting that economic benefits would be localized and may not supplant jobs lost from larger mill closings.

Nevertheless, local bioenergy systems could provide a boost to rural communities experiencing a decline in wood demand, as well as improve forest health. Another study of upland mixed hardwoods in Kentucky indicated that co-production of biomass for energy and other traditional forest products could shift management strategies and increase financial returns to forest managers. In a different regional context, another study shows how thinning small-diameter roundwood for bioenergy can improve forest health and reduce long-term disturbance risks.

Bioenergy development in Appalachia is not without challenges. First, biophysical constraints, including the region’s remoteness and rough terrain, could make resource access and extraction cost-prohibitive; higher market price or complementary incentives may thus be required to make biomass harvests economically viable. Second, operations based solely on biomass harvests might be a marginal proposition at best if the existing mills run exclusively on by-product chips from sawmills. Third, should demand for woody biomass exceed the supply of forest residues, marginal wood consumers in existing markets for pulpwood and sawtimber could be displaced. Lastly, most states in the Appalachia region have not established renewable energy portfolio standards; the lack of policy requirements and/or standards for wood-based bioenergy could impose additional risk to prospective investors.

Biochar    

Biochar is produced through pyrolysis of organic material and can be thought of as concentrated black carbon produced from biogenic carbon sources. The increased stability of biochar could offer a more permanent source of biomass carbon storage. Further, biochar has several valuable end uses, including as an amendment to agricultural soils to increase soil health and crop productivity, in various industrial applications, as a source of heat and power, to support wastewater treatment, and to reduce invasive species growth. Biochar is a promising alternative for lower valued wood as it can be produced at either manufacturing facilities or using portable units, thus reducing production costs. Further, the syngas and oil produced from the pyrolysis could be marketed as alternative renewable energy sources. The recent Roads2Removals report identified several bioenergy production pathways where biochar could be a key co-product.

Forest-based biochar is an emerging market in the US. Very few studies have examined the potential of biochar production from low-value forest-origin biomass, and such studies are focused on the West as biochar is promoted as an alternative fuel reduction strategy to counteract forest fires. A study in Oregon indicated that forest-origin biochar plants offer greatest economic opportunity where dryland food crops, limited water availability, existing energy delivery grids, and high fire-hazard forests are co-located within a regional landscape. Appalachia, however, has lower rates of agricultural land use compared to the US and the region’s agricultural sales lean much more heavily toward animal products. Hence, forest-based biochar can instead be promoted as a potential amendment for reforestation and/or ecological restoration of legacy coal mines, or in other industrial applications.     

Policy and Market Options

Under current market conditions, conventional hardwood markets do not offer sufficient economic incentives to remove the excess small low-grade timber. In the absence of such incentives, or until the market for low-grade timber re-emerges, landowners interested in forest management activities could enroll in state and/or federal government cost-share programs like North Carolina Forest Service’s Forest Development Program and/or USDA’s NRCS initiatives, including Environmental Quality Incentive Program. Under the Inflation Reduction Act of 2022, biomass projects are eligible for Production Tax Credit (PTC) that allow taxpayers to deduct a percentage of the cost of renewable energy systems from their federal taxes.

Building rural resiliency aside, transitioning to a value-added system such as biomass harvest for energy and biochar production, however, may have virtuous effects on the region’s oak resources: market opportunity for low grade timber and forest industry residues may incentivize silvicultural practices leading to improved oak regeneration and recruitment. Indeed, federal incentives for renewable energy development through the Inflation Reduction Act of 2022, the REPLANT Act of 2021, and a concerted white oak restoration program – H.R. 5582 White Oak Resilience Act should provide tailwinds for bioenergy development and sustainable oak management in the region. New USDA programs such as the Partnership for Climate-Smart Commodities could also support niche markets by recognizing the climate-oriented benefits of regional bioenergy and biochar production systems. Finally, recent federal research and policy focus on the bioeconomy could further support new markets for bioenergy and biochar in regions with substantial biomass resources and shifting traditional market demands. New research is needed to evaluate policy and market incentives for biochar and bioenergy production from Appalachian forests, with a focus on pathways that can support rural economic development goals, energy transformations, and sustainable forest management. . 

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