A company that has yet to be identified seeks to open a new wood products plant somewhere in North America. A Hoyt Lakes site is under consideration. The product in question is wood siding, such as this siding made by Louisiana Pacific, a randomly selected company because SHHHHHHHHHH it’s a SEEEEE-CRET.
A $440 million wood siding plant on the Iron Range. More than 800 jobs. Economic diversification.
It’s hard not to get excited about information like this. But, as usual, the big bluster requires closer inspection.
For instance, how much of that $440 million will come from public sources?
At least $40 million, according to this Bill Hanna story in the Mesabi Daily News, on top of state sales tax breaks passed in the last legislative session, but left in limbo with Gov. Mark Dayton’s pocket veto of the tax bill over a major calculations error found in the bill. A special session would be needed to get that bill on the books.
The Iron Range Resources and Rehabilitation Board (IRRRB) would be on the hook for most of the money, paid through the Douglas Johnson economic development fund and the 21st Century Minerals Fund. Additional funding from St. Louis County and Minnesota Power is expected, along with $400 million in private funding from the company. The big coup is a sales tax rebate that lasts until 2035.
And 800 jobs? That’s huge! And it is. Two-hundred and fifty of the jobs would be at the plant that makes the wood siding. An additional 500-600 jobs would be “secondary,” which is a nebulous term used often at this stage of development projects. Logically, many of those jobs would be in timber acquisition. I’m not sure where they’d all come from.
But it’s economic diversification, right?
More accurately, it’s adding value to our existing wood products industry, which is good for the region’s economy. It’s a form of economic diversification, but still relies on things like the price of natural resources to succeed in its business model.
And, oh yeah, what company are we talking about?
It’s the same one that lawmakers whispered about in hushed tones last month. The company is still asking for anonymity because it’s considering multiple options for its expansion, though its name will be revealed at tomorrow’s IRRRB meeting in debate over the incentives to lure the company to Northern Minnesota.
For months, public officials and mid-level bureaucrats have been tittering like teenagers about Louisiana Pacific being the company. It’s a secret that everyone knows.
Actually, that’s the biggest thing that concerns me about the project. This company has worked anonymously, pitting regions all over the continent against each other in an attempt to secure the most public money. I understand this is an aspect of their business model, but it’s a risky strategy for the regions in question. I don’t know who’s seen the financial statements for the project or its parent company, since most people have been held on a need-to-know basis.
But our questions will be answered at Tuesday’s IRRRB meeting. At least, they ought to be. And if all this leads to value added wood products being made on the Iron Range for a reasonable public investment, well, that’s certainly worth our time.
First question. If it is in fact Louisiana Pacific would this be at the expense of LP’s siding plant making the same product near Two Harbors? If that’s the case the overall gains from the project would be much less.
I personally don’t count on the IRRRB or the local politicians to be smart enough to ask this question, but someone should.
Or honest enough….
Very good question.
That said, to the best of my knowledge, the LP plant in Two Harbors has been running at near full capacity, and their smart side product is doing very well and picking up significant market share. (Truthfully, i think its a good product, and I’ve used it on my house) So, assuming all of that is true, and assuming LP is the company, adding another plant in the region would make sense business wise.
That said, I think the secondary job estimate is too high. Many of the secondary jobs will be with existing logging contractors, some of whom have slack capacity right now. But, given the weak timber markets in northeastern St Lois County and northwestern Lake county, I think this could be a positive development for Hoyt Lakes, and better for stable long-term growth than the uncertain and potentially toxic PolyMet project.
My only real concern is that I hope they will accept other species in addition to aspen. Conifers seem to be better adapted to many parts of that area, and there is also concern that aspen will decline in a warming climate, so I hope they take that into account and design that plant to accept a diverse species mix.
That explains why I can’t stop the damn aspen from growing weeds on my property. Global cooling!
If you don’t believe me about potential aspen declines related to climate change induced droughts, read this report:
http://www.fs.fed.us/psw/publications/documents/psw_gtr235/psw_gtr235.pdf
It’s not entirely certain that results in the Western US will completely apply in the Western great Lakes, but it’s worth keeping in mind – and not putting all our eggs in the aspen bag.
Yeah – Aspen grow like weeds around here. I’ve heard people consider Aspens to almost be an invasive species that has taken over areas following logging of the more desirable slower growing breeds.
Yes, aspen sure is weedy following logging. No doubt. But with our relatively short growing season, pines – particularly red and white pines – have greater productivity over the long term. And – as I’m sure you’ve seen, balsam fir is also a prolific “weed” tree, and it’s important that we have a market for that, too. The current LP plant doesn’t take balsam fir.
Furthermore, on some of the thin sandy soils over bedrock in the Ely/Fernberg/Birch Lake area, Jack pine and black spruce seem to grow better than aspen. Although there are concerns about loosing some of those species to climate change, too – and perhaps sooner than aspen – as they are at the southern edge of their range.
The point is, don’t put all your eggs in the aspen basket. If possible, design your plant to take multiple species, so you have options in a changing world. Common sense, really.
Even though I am against global warming, I’m all for seeing more big conifers and less aspen in the northland.
I’m for a variety of species. As you say, hopefully this plant won’t be tied to only one or two species of fast growing trees.
Okay, so now that the details of this plant have come out in the Duluth News Tribune, the size of the plant is also concerning. 800,000 cords/year is an awful lot of wood, equivalent to clearcutting roughly 35-50 square miles every year, depending on timber yields. By contrast the existing Two Harbors LP plants uses ~150,000 cords per year. While we could certainly cut that much more wood over the entire state, most of the harvest increase would be within a roughly 100-150 mile radius of Hoyt Lakes, because timber markets are regional due to trucking costs. Can the forests in the Hoyt Lakes area sustain over the long-term that much more harvesting in addition to what is already being harvested?
And to we have the logging capacity to actually harvest that much? With so many loggers having gone out of business or retired since the great recession, it’s likely that we don’t. Nor do we necessarily have the foresters to put up all that wood after years of budget cuts and retirements at DNR and the USFS.
Finally, what happens to the wood market if there is too much demand and not enough supply? Wood prices spike rapidly, causing mill closings, and then a wood price crash. This is precisely what happened in the mid-2000s when all the Ainworth plants were running full-tilt, and it didn’t end well.
Furthermore, if this plant is using only aspen and birch, as the Two Harbors plant does, it will undermine various efforts to restore tree diversity (particularly pines) in the Hoyt Lake’s area by incentivizing aspen-only management. But, like our economy, our forests are more resilient and more productive over the long term when they are diversified.
And I’m not alone in being concerned about the size of this plant. The Minnesota Timber Producers Association – a consortium of loggers and truckers – has also publically raised concerns about capacity and wood availability.
A right-sized wood products plant that takes a variety of species in the Hoyt Lakes / Ely / Isabella area would be a win for forestry, loggers, and jobs. If they cut the capacity of this project roughly in half to 300-400 thousand cords/year, I think it would be a great fit. But this particular proposal is so large it may do more harm than good.
If “right-to-work” states are being considered, we’re screwed.
Yes, that is definitely a concern. That and the much higher forest productivity in the southeastern US.
The image is of FAKE wood siding made out of oriented strand board. What a dumb idea. It would likely be a short-lived, undesirable product.
Dumb, dumb, dumb….. In my experience “economic development” officials are typically mega-gullible and rarely carry out “due diligence” before giving away other peoples’ money on half-assed schemes.
Alan, look at their sales numbers. This product has been around for decades and has continuously improved. You sure are a positive fella eh? Wow!
I’m guessing you don’t live on the iron range
Independent – it doesn’t matter whether Alan lives on the range or not – an uniformed comment is the problem. And such comments can come from people living anywhere. I mean, it’s not as if folks here on the range always write positive thoughtful comments all the time.
Your right, it is just that continuous negativity about any significant project that will bring economic benefit to your region by someone who doesn’t live in your region just becomes a real drag. I don’t personally know people from the iron range that continuously interject themselves in every new mile of pavement and concrete or new commercial project destroying natural prairie in the states metro areas every day. Just say’n.
Good point. But to be fair to Alan, he’s a very loud critic of development projects in his own area, too. An equal opportunity curmudgeon.
Alan, whether you like it or not, OSB is a major component in most new construction. And this product improves on OSB by giving it an exterior grade finish and texture, which gives it a market advantage over plain vanilla OSB. While I prefer real wood aesthetically, this stuff is a pretty attractive and inexpensive alternative to siding over OSB or that terrible crappy ginger-board. And the increasing sales seem to show the public likes it. And, I might add, by producing a moderately long lived building product – rather than paper – the carbon in the trees is effectively sequestered for a 30-40 years, while creating space for more trees to sequester more carbon, thus slowing climate change.
This siding lasts longer, holds paint better, and doesn’t require high quality saw logs to make compared to sawn and planed wood siding. It’s a good fit for the area.
The aspen forests we have are the natural result of logging the white pine forests in the early 1900’s. Aspen is the natural first growth replacement for a logged or burned over pine forest.
Aspen sprouts naturally from airborne seeds and the roots of other aspen trees. You don’t have to “manage for aspen” any more than you have to manage for weeds in your garden. In fact the USDA and State DNR have been trying to manage for other softwood species in place of aspen for over 40 years.
Think of the aspen as a crop, just like corn. Corn has a definite life span and is clear cut every year. Aspen has a natural lifespan of about 70 years and will regenerate itself after logging. It’s also nearly impossible to burn a living aspen forest.
A natural aspen forest also probably has much more biodiversity than a single species pine forest.
I’m sure LP has looked at this but I would guess with the demise of the paper mills around here and loss of Ainsworth that their wood needs are very sustainable. We went through a period in the late 1900’s early 2000’s where the first growth of aspen was starting to die off and regrowth hadn’t become mature yet. During that period supplies were tight and stumpage prices were high. We are largely past that now.
In short, this type of plant is a natural fit for the area from a technical standpoint. From that aspect, I support it.
My only concerns are the fate of the existing LP plant at Two Harbors and that Hoyt Lakes is at the end of two county roads that will have to support the logging traffic in and at least some of the product transport out. Downtown Aurora especially could become much busier.
I agree the traffic volume will be something that needs to be figured out but what a great problem to have if this comes to fruition. This will have a massive economic impact on a community that needs it. Luckily from what I understand the access to existing rail lines at this site will provide for easy shipping of the finished product.
True. It’s a good problem to have.
I just really hope they modify the proposal to be realistic enough to succeed. If they create too much demand too suddenly, wood prices will spike and cause closures. The last thing we need is the forestry equivalent of Essar Steel or Mesabi Nugget.
I criticize because I want this project to succeed.
In response to B – yes, you don’t have to “manage” for aspen, but that’s exactly my point. Precisely because it is so easy to grow as a “crop” – usually at 40-50 year rotations where markets are good – large plants that take only aspen and birch can undermine efforts to restore other softwoods. Why bother restoring other species when you can just clearcut over and over without having to replant?
And, while it is true that a dense single species pine plantation has lower biodiversity than a pure aspen stand, it’s also true that a mixed-wood aspen-spruce-pine stand has more biodiversity than either. For example – just considering a game species – grouse success is best in areas with a mixture of aspen age classes (young dense aspen regen for brood cover, and mature to old aspen for feeding) AND conifer cover for better winter survival in cold winters. Or consider Moose – which current research is demonstrating need brush and young regenerating aspen to browse, but also need mature trees – and particularly conifers – for shade in hot summers.
There are also some suggestions in the literature that mixed deciduous-conifer stands might have higher productivity due to myco-rhyzical fungi that allow resource sharing between the deciduous and conifer trees.
Furthermore, in the face of a changing climate, it makes sense to have a high diversity of tree species on the landscape, because we don’t know which ones will do best – and which ones will decline – with climate change.
Blandin paper realized these things years ago, and have been doing quite a bit of mixed-wood management on their lands over the past 10 years. Of course, their plant can take both conifers and deciduous trees.
Finally, it is not true that we now have a smooth, even flow of age classes ready for harvest in all areas. There are some areas that have a smaller number of acres of trees that are 30-40 years old right now for whatever reason – be it past over harvesting, insects, disease, windstorms, what have you. For example, I’ve heard that Lake County may be facing a slight shortage of mature aspen in the next decade. We have made a lot of progress, but it will still take decades to convert the one large age class of trees from settlement logging into a nice even flow of many equally sized age classes. We aren’t there yet. And if Wayne Brandt thinks there might not be enough capacity, we would do well to listen.
I did some more research into this project, and it appears that the plant will be designed to have 2 lines, with the second one not coming online for several years. Which means that – at least at first – the plant will have an annual demand of 350-400 thousand cords. That is a size I feel is more reasonable and should not shock timber markets and supply as much. And if timber markets tighten, then they have the option of not building the second line indefinitely – which is what I suspect might end up happening.
I also found information that the plant will take up to 20% of species other than aspen and birch, although i need to confirm it. Again, I think that its still too heavy a reliance on aspen and birch – but it’s still an improvement on the Two Harbors plant.
Finally, I am also still concerned that this project won’t result in shutting down the Two Harbors plant.
But, I have to say that this project is looking somewhat more sustainable than I thought – although I still have concerns.