One of the federal regulatory efforts with a major impact on construction and demolition (C&D) recyclers in the previous eight years has involved emissions control rules on wood-fueled boilers and other energy-related end markets for scrap wood.
The U.S. Environmental Protection Agency (EPA) Boiler MACT (Maximum Achievable Control Technology) rule had a stated purpose of reining in emissions from industrial boilers and other point sources. Critics, however, feared the unintended consequences of closing off a waste-to-energy (WTE) outlet for discarded materials.
At the same time the Boiler MACT rule was being debated, finalized and implemented, energy prices—as measured by the price of oil, natural gas and coal—were heading downward, drying up an incentive for fuel consumers to even try something more experimental.
As the calendar turns to 2017, recyclers and alternative fuel providers may have reasons to be optimistic that each of those trends is beginning to turn in a different direction.
A considerable fraction
The amount of scrap wood that C&D recyclers in North America process and sell to the energy markets can vary greatly by region.
In the Northeast, Ray Kvedaras of Brooklyn, New York-based Cooper Tank Recycling says just 6.5 percent of the scrap wood he accepted for processing in 2016 ended up being sold to energy producers.
In that region, several states have scrap wood-to-energy regulations that can be even more stringent than the EPA’s regulations, providing one reason why the fuel market is not as bountiful there.
As well, investments in biomass energy, refuse-derived fuel (RDF) production and other WTE technologies have gravitated toward the Midwest and South, where plentiful streams of agricultural or forestry residues and byproducts help ensure feedstock for larger plants.
Kvedaras says currently, “We have three fuel markets, and two of those have similar specifications. I prepare all my fuel to meet the specs of the most stringent one.”
Even with the market hurdles in the Northeast, Kvedaras says Cooper Tank is investing to have a greater presence in the wood-to-fuel markets in 2017 and beyond.
“In 2017 we are opening a new recycling plant, and there we will process three grades of wood: mulch, fuel and RDF,” he says.
Reflecting its location in the interior of the U.S., Shakopee, Minnesota-based Dem-Con directs three-quarters of the scrap wood it takes in toward the energy markets. “The other 25 percent was split among multiple other markets,” says Jason Haus, Dem-Con’s CEO.
Haus says he sends most of his energy product to one preferred consumer, but he does not see this as a limiting factor or as a cause of concern heading into 2017. “The market remains strong,” he comments. He anticipates 75 percent of his scrap wood will continue to be prepared as fuel. “We still will plan to keep sending approximately 25 percent to the other markets to keep those pipelines open,” he adds.
In America’s largest state, Michael Gross at San Jose, California-based Zanker Recycling says he has been watching the capacity of California’s biomass energy sector dwindle in the past several years.
About a decade ago Gross says California had nearly 40 active biomass plants with more than 860 megawatts (MW) of capacity and the ability to consume 6.7 million tons of forestry and agricultural residues and wood scrap.
In part because of low-cost natural gas and solar power, those numbers have dwindled to just 13 plants with less than 350 MW of capacity and the ability to consume just 2.7 million tons of material.
“We’re treating biomass as an energy source when, fundamentally, it’s a way to treat a waste product,” says Gross. He adds 75 percent of the scrap wood and tree trimmings that Zanker Recycling takes in is sold to the biomass market.
Gross says there are signs of support for biomass in California’s legislature and state house, and the future of biomass in the state may depend on the creation of a subsidy or mandate by utilities to use a small percentage of biomass power.
The future of the scrap wood-to-fuel markets may also be affected by the shift in power in Washington. The change in administrations can have a significant impact both on private investment capital flows and a federal regulatory climate that can encourage some activities and discourage others.
New sheriff in town
During the Obama administration, the EPA consistently emphasized rules, regulations and enforcement efforts pertaining to reining in carbon dioxide (CO2) and other emissions tied to greenhouse gases and climate change.
In some ways, this benefitted the alternative energy sector, whether in the form of renewable fuel credits or an overall sense that increased attention to the issue in the U.S. and the rest of the world ensured that alternative energy was a safe investment.
Victorious presidential candidate Donald Trump made several public statements throughout the election cycle that he is less convinced CO2 emissions control needs to be a priority.
As of this writing in mid-December 2016, President-elect Trump was preparing to nominate several top-level appointees who appear to be in line with those beliefs, including:
- Rex Tillerson as Secretary of State. Tillerson is the CEO of ExxonMobil, Irving, Texas, which derives most of its revenue from oil and natural gas. He has expressed support for CO2 emissions controls or taxes, but also has said that challenges posed by climate change can be overcome with “solutions [that] will present themselves.”
- Scott Pruitt as head of the EPA. Pruitt, currently the Oklahoma attorney general, has in that role on more than one occasion sued the U.S. EPA to block emissions regulations from taking effect.
- Rick Perry as Secretary of Energy. Perry is a former two-term governor of Texas who, like Pruitt, has been supportive of the fossil fuel industry and its skepticism toward human activity as a factor in climate change.
Specific to the wood-to-fuel markets, Kevin Herb, president of the Construction and Demolition Recycling Association (CDRA), Milwaukee, and a principal with Manassas, Virginia-based Broad Run Recycling, points to one specific policy tool he would like the Trump administration to consider. “One step would be to develop federal renewable energy credits (RECs) for C&D biomass,” says Herb. “RECs are certificates that show a certain amount of electricity was generated from a renewable energy resource.”
Such support is critical, says Herb. “By volume, wood makes up about 40 percent of the incoming materials to a mixed C&D plant. Without some kind of end market for wood, the economic viability of a C&D recycling plant becomes vulnerable,” he states.
The transcript of a May 2016 speech given by Trump to a North Dakota audience focuses predominantly on the fossil fuel sector, saying of America’s fossil fuel reserves, “This is your treasure, and you—the American people—are entitled to share in the riches.”
Regarding alternative or renewable energy, Trump stated, “We will get the bureaucracy out of the way of innovation so we can pursue all forms of energy. This includes renewable energies and the technologies of the future. It includes nuclear, wind and solar energy—but not to the exclusion of other energy. The government should not pick winners and losers. Instead, it should remove obstacles to exploration.”
As C&D recyclers make their business plans for 2017 and beyond, they will be keeping an eye on the actions of what may be starkly different federal agencies, including the EPA, that could either open up new opportunities or shut the door on existing ones.