Panel on Optimizing Wood Harvesting in Maine Notes of February 5, 2009 Meeting Bolton Hill, Augusta Attending Sandy Brawders John Kerry Nick Bennett Tony Lyons Chip Bessie Kevin McCarthy Bruce Bornstein Les Otten Jim Contino Rosaire Pelletier Gordon Gamble George Soffron Alec Giffen Pat Sirois Nathan Hebel Call to Order Chairman Giffen called the meeting to order at 1:07 p.m. Panel members briefly introduced themselves. Review of Notes from January 7, 2009 Meeting Chairman Giffen asked Panel members if there were any changes needed to the notes from the January 7, 2009 meeting. There were no changes requested by members. Information on Massachusetts Renewable Portfolio Standards Chairman Giffen asked Alan Hammond to briefly review proposed rule changes to Massachusetts Renewable Portfolio Standards. Alan gave a brief synopsis of the proposed changes for Class I and Class II REC’s and proposed changes to Massachusetts’ Alternative Energy Portfolio Standard. A handout was provided the Panel. Nathan Hebel provided additional information on this topic to the Panel. Discussion of Potential Recommendations and Selection of Those to be Pursued Rosaire Pelletier briefly reviewed Governor Baldacci’s charge to the Panel. The Governor’s major focus is for Maine to achieve, as nearly as possible, the highest and best use of wood; and hence, it’s value for landowners and the Maine economy. Chairman Giffen reported to the Panel that he had met with the Governor and that the Governor had expressed his concern that Maine wood be used for its maximum value. Pat Sirois asked if the Governor was convinced that something was broken. He suggested that there needed to be a conversation with loggers. Tony Lyons stated that he would like time during the meeting to read a letter into the record sharing New Page Corporation’s position. Sandy Brawders shared what is coming out at the Logger’s Congress: * Loggers feeling they are not getting a fair rate of return on their investment; * Concern over unstable, high fuel prices; * That there is not a relationship between landowners, loggers and mills so everyone is getting a fair shake. Sandy commented that the loggers who are still in business are very good managers and understand free markets and that they need diversified markets to remain profitable. She commented that the current modeling of logging costs are not keeping pace with what wood costs to produce and that they, the loggers, are hoping that this Panel comes up with additional markets. Chairman Giffen commented that there are a number of suggestions coming out of the Loggers Congress meetings, and that a plenary session is being planned to coalesce their ideas. Tony Lyons read a letter from New Page into the record promoting regulatory solutions (see Attachment 1). Chairman Giffen introduced a matrix of “Ideas for Recommendations from the Panel on Optimizing Wood Harvesting in Maine.” Alec commented that he tried to catalog what Panel members have suggested and, what he felt were logical spin-offs (see table below). There was a discussion on REC’s and how they are driving the price of wood in Maine. Les Otten asked, “How do we change what we are consuming in biomass when Connecticut and Massachusetts are paying for REC’s.” He questioned how we could make the playing field level. Chairman Giffen shared with the Panel an “Alternative Voluntary and Collaborative Approach” outline as an alternative to a regulatory approach and asked if the Panel if they would support it as a concept (see Attachment 2). Tony Lyons stated that he didn’t see a voluntary approach as meeting the needs of New Page. George Soffron stated it wasn’t the Panel’s purpose to address New Page’s needs. There was a discussion on who would determine “highest and best use”. Chairman Giffen summarized how it might be done. Nathan Hebel stated he would not support a regulatory process to determine “highest and best use” of wood. Chairman Giffen reviewed the “An Alternative Voluntary and Collaborative Approach” point by point. There was a discussion on the item relating to using railroads to reduce costs and improve delivery of forest products. Some commented that the railroads didn’t seem to be interested in talking with them. Rosaire Pelletier stated that the Governor’s office would facilitate a meeting with the railroads and invite the forest industry to attend. Jim Contino asked how you would get people there with a voluntary approach. He stated that Verso would support some regulatory promises. Sandy Brawders commented that if there was a regulatory approach that she wanted to make sure it included an accurate fiscal note. Chairman Giffen inquired how many of the Panel supported a voluntary collaborative approach. A vote was taken on supporting such an approach: For: Sandy Brawders George Soffron Less Otten John Kerry Pat Sirois Gordon Gamble Nathan Hebel Bruce Bornstein Chip Bessey Rosaire Pelletier Opposed: Tony Lyons Nick Bennett commented that he would support a regulatory approach related to RPS and sustainably management of forests. Les Otten asked what was meant by “sustainably management forests.” Chairman Giffen explained the history of how the definition was developed (Montreal Process and Santiago Declaration), and what the proxies for sustainable management of forests are in Maine (3rd party certification through three programs: FFC, SFI, Tree Farm and, in some cases, through the Master Logger Program). Chairman Giffen suggested the Panel go through all the items on the “Ideas for Recommendations form the Panel on Optimizing Wood Harvesting in Maine” to gauge the Panel’s support for them recognizing that there might be modifications made to items and that the Panel would have a final vote on what to include in the report. The voting results are in the table below: Meeting Conclusion Chairman Giffen suggested that members meet again next week on Tuesday at 1:00 p.m. for further discussion. Ideas for Recommendation from the Panel on Optimizing Wood Harvesting in Maine1 Panel Vote Item Preventing over exploitation Encouraging Use that has the greatest economic benefit Leveling the playing field among wood purchasers Promote sustainable management Increase Supply Agree: 8 Disagree or Abstain: 6 1. Refine Maine’s Renewable Portfolio Standards (RPS) to include: * Credit for behind the meter production of electricity: * Fuels from certified managed forests * A productive use of the waste heat (existing plants could be given a period of years to comply) * * * * Agree: 9 Abstain: 1 Disagree: 3 2. Advocate for similar RPS standards in the other ISO New England states (the New England Governors’ Conference could be used as a venue for advocacy to the other governors) * * * * Agree: 8 Abstain: 1 Disagree: 4 3. Charge biomass electricity producers in Maine a system benefit charge used to promote energy efficiency improvements and sustainable forest management – producers that adhere to the standards articulated above for Maine’s refined RPS would be exempt from the charge * * * * Agree: 5 Abstain: 1 Disagree: 7 4. Require a wood supply analysis for all new wood users and link regulatory approval with a finding of surplus fiber or great public benefit from the proposed use – an impact analysis * * Agree: 9 Abstain: 0 Disagree: 4 5. Send landowners information on the proportion of wood products they should expect from typical harvests of various sorts (size and quality of timber, species, silvicultural system, etc.) * Agree: 0 Abstain: 0 Disagree: 13 6. Send the Maine Forest Service copies of trip tickets and scale slips so an analysis can be conducted of whether or not suboptimum use is a significant problem * Agree: 3 Abstain: 1 Disagree: 9 7. Require that landowners sign off on harvests that have a high proportion of low value products unless harvested by a third party certified logger. (Note – This is not likely to be an issue at times of the year hen mill yards are typically full – e.g., mud season) * * Agree: 0 Abstain: 0 Disagree: 13 8. Unless the landowner agrees otherwise, require that landowners be paid for highest and best use of materials that is practicable (considering markets, transportation distances and costs at the time, etc. [Note – Highest and best use will vary over time as markets change]) * * Ideas for Recommendation from the Panel on Optimizing Wood Harvesting in Maine Panel Vote Item Preventing over exploitation Encouraging Use that has the greatest economic benefit Leveling the playing field among wood purchasers Promote sustainable management Increase Supply Agree: 13 Abstain: 0 Disagree: 1 9. Provide incentives for landowners to hire a forester (e.g., a tax write-off for the expense) (Tie with standards for foresters to practice sustainable forestry to demonstrate public benefit) * * * Below items were voted on by Panel members with limited discussion. These items will be discussed further at subsequent meetings. Agree: 9 Abstain or Disagree: 5 10. Support Representative Michaud’s bill to provide a federal production tax credit for behind-the-meter electrical production * Agree: 5 Abstain or Disagree: 9 11. Provide tax incentives for individuals and businesses to convert to wood heat * Agree: 0 Abstain or Disagree: 14 12. Provide tax incentives for wood-using industries that do not use wood for energy products (e.g., solid wood products and pulp vs. pellets, electricity, ethanol and other fuels) * * Agree: 9 Abstain or Disagree: 5 13. Encourage wood-using industries that use wood to produce energy products to procure their wood from sustainably managed forests (Note – This would be redundant if ideas 1 and 3 were pursued; but if not, could be encouraged by a resolution in the Legislature) * * Agree: 12 Abstain or Disagree: 1 14. Provide incentives for loggers to invest in equipment that can expand supply * Agree: 12 Abstain or Disagree: 1 15. Provide incentives for active forest management on small ownerships (e.g., eliminate the federal rules on passive losses for small landowners and others?) * Place on hold pending results of Logger’s Congress 16. Implement recommendations forthcoming from the Loggers Congresses * Eliminate: Same as Item 15 17. Provide incentives for more productive forest management (e.g., eliminate the federal rules on passive losses for small landowners and others?) * Agree: 0 Abstain or Disagree: 14 18. Establish a charge for companies that produce process steam from fossil fuels and use the proceeds to provide a tax incentive for using wood fuels for the same purpose and energy efficiency projects * Ideas for Recommendation from the Panel on Optimizing Wood Harvesting in Maine Panel Vote Item Preventing over exploitation Encouraging Use that has the greatest economic benefit Leveling the playing field among wood purchasers Promote sustainable management Increase Supply No need to vote. FIA will be continued. 19. Continue the Forest Inventory & Analysis Program * Agree: 13 Abstain or Disagree: 1 20. Develop an accurate model for predicting future timber supplies * Agree: 12 Abstain or Disagree: 1 21. Provide more frequent and more robust reports on the value of stumpage * Agree: 9 Abstain or Disagree: 4 22. Encourage siting of new wood-using mills in places where there is excess supply (Note – This would be redundant if idea 4 were pursued; if not, it could involve advice? Tax incentives? e.g., Pine Tree Zones or Tax Increment Financing [TIFs]) * * Agree: 9 Abstain or Disagree: 4 23. Provide incentives for the most efficient uses of wood for the production of electricity, e.g., combined heat and power vs. condensing power (Note – This would be redundant if ideas 1 and 3 were pursued) * Not voted on 24. Document on the Forest Operations Notification those times when demand is high for round wood. Thus, informing the landowner of those times when the highest and best value is generally round wood, as opposed to biomass. This would provide the landowner with a reference for demand that could help the landowner make an informed decision on where the wood is going. This might also help round wood mills with their supply issues at times during the year * 25. Other? Attachment 1 – New Page Letter Attachment 2 – An Alternative Voluntary and Collaborative Approach An Alternative Voluntary and Collaborative Approach Panel on Optimizing Wood Harvesting in Maine As an alternative to the specific ideas outlined separately, consider an approach which is based on the following: 1. An aggressive effort to increase the supply of wood that is affordably available to all of Maine’s wood-using industries. This could involve: a. Incentives for loggers to purchase small equipment to enable them to operate profitably in small diameter stands. b. Incentives for loggers to operate in stands that have not been commercial up until now c. Reducing costs and improving delivery times on the railroads that serve Maine’s forest products industry d. Incentives for improving forest management e. Coordinating wood movement to reduce costs 2. A voluntary commitment by all segments of the industry to purchasing wood from certified sources 3. Providing foresters who represent the landowners interest for small landowners undertaking a harvest 4. A voluntary commitment by producers of electricity from biomass to include a productive use for the waste heat 5. A commitment to a relationship among landowners, loggers, and mills that, while maintaining confidentiality regarding specific contracts, is for the good of all transparent regarding the rates paid for materials and services and provides a fair rate of return for all efficient operations. Such an approach would avoid the need for regulatory approaches, and could simultaneously increase wood supply, reduce costs, and achieve the public policy goals of maximizing economic benefits and energy efficiency. It would, however, require a cooperative approach to addressing a variety of issues. 1 These items are conceptual only. It is recognized that each item must be described in detail prior to the Panel’s final approval for recommendation for inclusion in the report. ?? ?? ?? ??