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Appendix I
Biomass

The economic competitiveness of short-rotation woody crop (SRWC) systems in the United States varies widely depending on a large number of factors such as end-product use, product price, conversion technology, yields, and land costs.1 Such SRWC systems are considered to be economically viable for production of a stable, secure supply of wood for pulp under some conditions, as evidenced by recent increased interest in these systems by several pulp and paper companies. There are several million acres in the United States on which production of wood for energy feedstocks could be viable today, without subsidies, if there was a market for the wood.

A survey of the literature shows a range of $494 to $780 per hectare in anticipated establishment costs, where establishment includes all site preparation, planting, and weed competition control activities that are necessary to ensure good establishment and survival (Table I.1). The lowest cost per hectare of $494 is very similar to the average cost of establishing loblolly pines in plantations in the Southeast on cropland. It would be relatively rare, however, for the minimal site preparation efforts described by the North Carolina State University (NCSU) Hardwood-Industry Cooperative (Table I.1) to be sufficient to ensure good establishment and survival of hardwood energy crops. Such minimal establishment activity would likely lead to considerable weed competition. Some trees such as sweetgum might survive but exhibit slower growth during the first few years. The estimate provided by Strauss and Wright (1990) of $621 per hectare for establishment of hybrid poplars was developed by obtaining a consensus of several economists and silviculturalists associated with the Short Rotation Woody Crops Program.

Sensitivity analyses have shown that energy crop production costs are most sensitive to yield per hectare, with harvesting costs being the second



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Page 779 Appendix I Biomass The economic competitiveness of short-rotation woody crop (SRWC) systems in the United States varies widely depending on a large number of factors such as end-product use, product price, conversion technology, yields, and land costs.1 Such SRWC systems are considered to be economically viable for production of a stable, secure supply of wood for pulp under some conditions, as evidenced by recent increased interest in these systems by several pulp and paper companies. There are several million acres in the United States on which production of wood for energy feedstocks could be viable today, without subsidies, if there was a market for the wood. A survey of the literature shows a range of $494 to $780 per hectare in anticipated establishment costs, where establishment includes all site preparation, planting, and weed competition control activities that are necessary to ensure good establishment and survival (Table I.1). The lowest cost per hectare of $494 is very similar to the average cost of establishing loblolly pines in plantations in the Southeast on cropland. It would be relatively rare, however, for the minimal site preparation efforts described by the North Carolina State University (NCSU) Hardwood-Industry Cooperative (Table I.1) to be sufficient to ensure good establishment and survival of hardwood energy crops. Such minimal establishment activity would likely lead to considerable weed competition. Some trees such as sweetgum might survive but exhibit slower growth during the first few years. The estimate provided by Strauss and Wright (1990) of $621 per hectare for establishment of hybrid poplars was developed by obtaining a consensus of several economists and silviculturalists associated with the Short Rotation Woody Crops Program. Sensitivity analyses have shown that energy crop production costs are most sensitive to yield per hectare, with harvesting costs being the second

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Page 780 TABLE I.1 Variations in Establishment Operations and Costs for SRWC Plantations Established on Cropland Strauss and Wright (1990) Campbell (1988) Lothner et al. (1988) Heilman et al. (in press) NCSU Hardwood Co-opa Unpublished Report Fall Site Preparation           Herbicide Herbicide Herbicide Herbicide     Non/brush — —       Plow Plow Plow/disk Plow/disk/subsoil Plow/mark rows   Lime Lime — Herbicide   Spring Site Preparation           Disk/mark rows Disk Disk/mark rows Disk/mark rows     Herbicide Herbicide Herbicide Herbicide     Fertilize Fertilize       Planting           Cuttings (2100/ha) Seedlings (2100/hab Cuttings (1735/ha) Cuttings (2150/ha) Seedlings (2150/ha) Weed Control Year 1           Herbicide Herbicide and cultivate Cultivate and herbicide Cultivate and herbicide Herbicide Weed Control Year 2           Herbicide Herbicide and cultivate Cultivate and herbicide Cultivate Herbicide Weed Control Year 3                 Cultivate   Establishment Cost ($/ha)           621 695 727 780 494 aBased on a comparison with data in ''Cost and Cost Trends for Forestry Practices in the South" by Straka et al. (1989), these practices and costs are very similar to those required for establishing loblolly pine on old-field sites in the South. bCampbell chose 6735 trees/ha for evaluation of costs. Using his estimate of $0.17/seedling, the costs were modified to assume 2100 trees/ha and use of weed control methods for 2 years instead of 1 year.

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Page 781 most important factor. However, at a given yield, land rental rates can be very important in determining the cost of production, although at higher yields the effect of land rent becomes less pronounced (Figure I.1). Cropland rental rates vary both within region and between regions. Table I.2 indicates some of the land rental estimates and other annual costs assumed by various economists. None of the establishment or maintenance operations summarized in Tables I.1 and I.2 include the cost of road building, draining, installation of drainage tile, or activities that may be required to prevent damage from large herbivores and small mammals. These are all activities that might be required under some circumstances and might result in SRWC being economically unattractive. For most analyses, it is assumed that harvest, chipping, and transportation costs will total $20 to $24 per dry megagram (Mg; 1 Mg = 1 million grams). This is based on research by the forest service that showed that smaller-sized feller bunchers, skidders, and chippers were more cost-effective for SRWC when the equipment had to handle a high density of small diameter stems (Stokes et al., 1986). However, if the need for chipping could be eliminated (such as by using the whole-tree burner concept) and image FIGURE I.1 SRWC delivered cost for wood chips harvested on a 6-year rotation as a function of land cost and yield.

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Page 782 TABLE I.2 Variations in SRWC Tending Operations and Other Annual Costs During the First Rotation Strauss and Wright (1990) Campbell (1988) Lothner et al. (1988) Heilman et al. (in press) NCSU Hardwood Co-op Unpublished Report Insecticide/fungicide years 2, 4, 6 at $25/ha/appl. NA NA NA NA Fertilizer applied years 3 and 5 at $35/ha/appl. Fertilizer applied year 2 at $55/ha/appl. Fertilizer applied year 2 at $99/ha/appl. NA NA Land rent at $85/ha/yr Land rent at $66/ha/yr Land rent at $99/ha/yr Land rent at $123.50/ha/yr Land renta $88/ha/yr Land tax at $13/ha Land tax at $14/ha Land tax at $12/ha Land tax no estimate Land tax no estimate Labor and facilities at $35/ha Labor and facilities at $25/ha Labor and facilities no estimate Labor and facilities at $61.75/ha Labor and facilities no estimate aBased on average 1990 rental rates for cropland in South Carolina, Georgia, Alabama, Mississippi, Arkansas, and Louisiana (USDA/ERS, 1989).

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Page 783 greater efficiencies in harvesting and transportation operations incorporated, it might be possible to reduce that cost to about $14 to $16 per dry ton. Some analysts of SRWC costs have used even lower estimates (Lothner et al., 1988). The summary of 1989 research status in Table I.3 attempts to draw from the above estimates of cost elements and to evaluate total delivered costs in different regions of the country. Because the recent cost analysis by Strauss and Wright (1990) was based on synthesizing information from a number of SRWC researchers around the country, it was used for basic cost assumptions on establishment, maintenance, and harvesting. A simple cost accounting spreadsheet was used to evaluate the effect of various levels of yield and land rental cost on the final delivered cost with an assumed discount rate of 10 percent. The yield levels used are not the best yields observed in experimental trials in the region, but rather yields that are assumed to be obtainable with currently available plant materials on a variety of cropland conditions in the region.

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Page 784 TABLE I.3 Short Rotation Woody Crops Program 1989 Research Status and Future Research Goals by Region   1989 Research Status 2010 Research Goals Regions Yielda (Mg/ha/yr) Costb ($/GJ) Costb ($/Mg) Yieldc (Mg/ha/yr) Cost ($/GJ) Cost ($/Mg) 2010 Land Resourced Northeast (NE) 9 2.75 54.45 15 1.90 37.62 0.5 South/Southeast (S/SE) 9 2.51 49.70 18 1.90 37.62 5.0 Midwest/Lake (MW/L) 11 2.75 54.45 20 1.90 37.62 21.0 Northwest (NW) 17 2.15 42.57 30 1.90 37.62 1.2 Subtropics 17 2.36 46.73 30 1.90 37.62 0.5 aDry weight, above ground, leafless standing yields at harvest age. Numbers are selected values from production research results considered most representative of current technology in the region. Yield after processing and storage is assumed to be 15 percent less than standing yields. bDelivered costs of chips including production, harvest, in-field chipping, and transportation costs and regional land costs, assuming yields shown in column one and no federal subsidies. Assumed land rental rates of $100/ha in NE, $75/ha in S/SE, $150/ha in MW/L, $150/ha in NW, and $200/ha in subtropics. cDry weight, above ground, leafless standing yields at harvest age. Numbers are based on projections of possible "average" yields if the best available plant materials were further improved for disease resistance and adaptability. dThe potential land base that is estimated to be available and capable of sustaining economically viable energy crop production by 2010, assuming average annual budgets of $10 million or more to allow development of several species. With continued research, up to 77 million ha might produce economically competitive energy crops by 2030.

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Page 785 Note 1. The biomass analysis presented in this report is based on work by Wright and Ehrenshaft (1990), who helped in the development of this section. References Campbell, G. E. 1988. The Economics of Short-Rotation Intensive Culture in Illinois and the Central States. Forestry Research Report 88-12. Urbana: Agricultural Experiment Station, University of Illinois. Heilman, P. E., R. F. Stettler, D. P. Hanley, and R. W. Gartner. In press. Intensive Culture of High Yield Poplar Plantations in the Pacific Northwest. Puyallup: Washington State University. Lothner, D. D., E. E. Hansen, and D. A. Netzer. 1988. Growing and utilizing intensively cultured woody crops for energy: Some recent evidence from the north central United States. In Proceedings of the IEA Bioenergy, Task III, Activity 4, Workshop, Economic Evaluations of Biomass Oriented Systems for Fuel, G. Lonner and A. Tornquist, eds. Uppsala: Swedish University of Agricultural Sciences. North Carolina State University Hardwood Research Cooperative. 1987. Economics and risk of SRWC in the Southeast. Unpublished report submitted to the U.S. Department of Energy's Short Rotation Woody Crops Program. School of Forest Resources, North Carolina State University, Raleigh. Stokes, B. J., J. Frederick, and D. T. Curtin. 1986. Field trials of a short-rotation biomass feller buncher and selected harvesting systems. North Carolina State University, School of Forest Resources 11(3):185–204. Straka, T. J., W. F. Watson, and M. Dubois. 1989. Costs and cost trends for forestry practices in the South. Forest Farmer Manual 1989:8–14. Strauss, C. H., and L. L. Wright. 1990. Woody biomass production costs in the United States: An economic summary of commercial Populus plantations systems. Solar Energy 45(2):105–110. U.S. Department of Agriculture, ERS. 1989. Agricultural Resources: Agricultural Land Values and Markets—Situation and Outlook Report. Report AR-14. Washington, D.C.: U.S. Government Printing Office. Wright, L. L., and A. R. Ehrenshaft. 1990. Short Rotation Woody Crops Program: Annual Progress Report for 1986. ORNL-6635. Oak Ridge, Tenn.: Oak Ridge National Laboratory.