Authority OKs deal on wood pellets

pgannon@ncinsider.comMay 1, 2013 

  • Ports Authority at a glance

    The N.C. State Ports Authority Board of Directors has 11 members. Six are appointed by the governor and four by the General Assembly. The final position is filled by the state transportation secretary. Current Chairman Danny McComas, a former state representative from Wilmington, was appointed to the post last year by former Gov. Beverly Perdue.

    The board oversees operations at the ports of Wilmington and Morehead City, as well as inland terminals in Charlotte and Greensboro and a marina in Southport.

The N.C. State Ports Authority last week quietly agreed in principle on the frameworks of deals with two private companies to bring wood-pellet storage and exporting facilities to the state-operated ports in Wilmington and Morehead City.

The votes, which allow negotiations of final contract terms during the next few weeks, came last Thursday at a sparsely attended authority board of directors meeting in Raleigh with no public notice that the issue would be discussed.

The wood-pellet projects have sparked concern since last fall, with environmental groups and residents worried about potential effects on North Carolina’s forests, increased train traffic through Morehead City and the issue of whether the emerging and uncertain wood-pellet industry would give the Ports Authority an adequate return on its related investments at the ports.

The companies plan to manufacture wood pellets, a fuel source, in the state, then sell them to electric utilities in Europe and ship them through the ports.

Across Europe, utility companies are being pressed by governments to cut greenhouse gas emissions and rely more on renewable energy sources. State and industry officials have said the initiatives could create hundreds of jobs in economically depressed eastern North Carolina at the plants and at logging and trucking firms.

The industry would also provide income to landowners whose timber is cut to make the pellets.

No one has suggested that the Ports Authority, an agency of the state Department of Transportation that oversees the ports, has broken any open meetings laws, but its lack of transparency has raised concerns among critics of the project who didn’t know the votes were taken at last week’s board meeting until a reporter called them.

Geoff Gisler, a staff attorney at the Southern Environmental Law Center, a nonprofit environmental advocacy group, said the center and other groups previously called on the state to analyze the potential effect on state forests, in part because taxpayer money would be spent on the port facilities.

“The state is taking major steps on projects that could have significant environmental impacts, and there should be more public discussion, not less,” Gisler said.

Danny McComas, the former state representative who is now the authority board chairman, said the votes “should have been on the agenda.” But authority staff gave a different explanation. Spokeswoman Laura Blair said in written answers to questions that ports meeting agendas are “somewhat fluid and always subject to change” because of the nature of port business.

She said the authority’s Governance and Compensation Committee voted in closed session a day earlier on the framework of the deals to assure the pellet companies that the authority was “moving forward in a timely fashion” on the projects. The full board’s votes on the projects came the next day.

Environmental concerns

As far as environmental concerns, state officials say just a fraction of the state’s trees are cut down annually, leaving plenty untouched for the new industry.

Steve Mueller, president of International WoodFuels, which would ship pellets out of Morehead City, said Wednesday the pellet buyers in Europe would hire third-party companies to ensure WoodFuels employs sustainable practices in harvesting its lumber.

After last week’s votes, the Ports Authority released general summaries of the two projects but said details are still being negotiated and releasing more information could jeopardize the projects.

Maryland-based Enviva Holdings would pay for and build a pellet facility at the Port of Wilmington, including rail and truck unloading stations, two concrete storage domes and a ship-loading complex. A Ports Authority estimate showed the facility would cost $35 million to $40 million if built by the authority. Enviva also plans to build two or three wood-pellet manufacturing plants in eastern North Carolina. The new plants would produce at least 1 million metric tons of pellets a year, which would be transported to the Wilmington port by rail, generating about three trains per week.

The company would pay the Ports Authority for loading the cargo on ships and leasing the land on which its facility would be built. The authority would waive the first five years of lease payments, according to the documents. The value of the waived lease payments was not disclosed. According to the summary, the Ports Authority also would have the option to buy the ship-loading complex at an estimated cost of about $13 million.

Morehead City facility

In Morehead City, the Ports Authority would borrow money to build a similar pellet facility for use by International WoodFuels at a cost of up to $15 million. The project now proposed is a scaled-down version of the much larger facility first envisioned, but ports officials said it could be expanded to meet demands.

WoodFuels, which recently moved its headquarters from California to Raleigh, plans to invest about $60 million on a plant in Sims and begin shipping pellets by July 2014. The Sims plant would produce roughly 285,000 metric tons of pellets a year, all of which would be shipped out of Morehead City to a buyer in Europe. The pellets would be transported to the port primarily by rail.

A second WoodFuels manufacturing plant could open a year later, increasing the tonnage going through Morehead City. At the port, the authority would build one storage dome initially, then a second after the second WoodFuels plant opens.

WoodFuels would pay handling charges for each ton of pellets shipped, along with vessel dockage and other fees, which were not disclosed.

Effect of traffic

Neal Littman, general manager of the Morehead City Yacht Basin adjacent to the Morehead City port, said he is concerned about the effect of increased train traffic through the town.

He was also concerned that the vote was taken without advance notice. “If these ideas are great ideas, why isn’t their brass band marching down the street proclaiming them?” he said. “Why do we have to hear about them after they’ve been done in secret?”

Critics have also questioned whether the wood-pellet business is worth the investment from the state, given that the demand in Europe for the fuel is based on political energy policies that could change. Michael Lee, a ports board member from Wilmington, raised that question during the meeting. “We’re kind of going all in an area that’s policy-driven,” Lee said.

Protecting state interests

Jeff Miles, the authority’s acting executive director, said he believed state interests would be protected. The Ports Authority has had conversations with a European utility that affirmed it would buy the wood pellets from WoodFuels and ship them through Morehead City. He also said construction of the facility at the port won’t begin until the company starts building its pellet manufacturing plant. He added that if the pellet industry doesn’t pan out, the storage facility built by the ports can be used for agriculture or other forest products.

At the meeting, the Ports Authority board unanimously voted to give Miles the authority to negotiate the final deals in consultation with McComas. The ports board didn’t initially plan to take final votes on the projects, but Blair said this week that the board would vote again when agreements are finalized. The lease associated with the Wilmington project also must be approved by the Council of State, and any borrowing of money would have to be approved by Gov. Pat McCrory, port officials said.

Patrick Gannon writes for the NCInsider.com, a government news service owned by The News & Observer. For more information, visit www.ncinsider.com.

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