Biofuel Feasibility Study Bois Forte Band of Chippewa



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Biofuel Feasibility Study

Bois Forte Band of Chippewa

Nett Lake, Minnesota

SEH No. A-BOISF0702.00

January 2009





Mark J. Broses, PE

Project Manager

Bois Forte Band of Chippewa


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Biofuel Feasibility Study

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SEH No. Error: Reference source not found

January 2009

Prepared by:


Short Elliott Hendrickson Inc.

3535 Vadnais Center Drive

St. Paul, MN 55110-5196

651.490.2000



Executive Summary

The Bois Forte Band of Chippewa (Bois Forte) has completed a detailed feasibility study of the technical and economic viability of developing a renewable energy biofuel demonstration facility on Bois Forte Reservation land in Northeastern Minnesota. This study has been funded, in large part, via a grant from the State of Minnesota.

The primary goals of the project are to make more efficient use of resources of the Bois Forte Reservation and surrounding area, increased employment opportunities for tribal members, and production of domestic biofuels to reduce our energy dependence on fossil fuels and foreign sources.

The results of this study indicate that local sources are adequate to support a sustainable thru-put from 50 to 200 dry tons per day (dtpd) of forestry residual biomass. Production of bio-oil (via pyrolysis) in this range appears to be technically feasible and economically viable if petroleum crude oil prices are above $100/barrel (bbl). The USDOE’s Energy Information Administration (EIA) 2009Annual Energy Outlook predicts that by 2014, crude oil prices will return to prices exceeding $100/bbl and continue to steadily rise for the next twenty years.

This study initially recommends implementation of a smaller scale demonstration scale facility to process up to 5 to 10 dry dtpd of forestry residual biomass. The demonstration facility design, installation and startup would be implemented in 2009-2010 with operations planned for 2011. This will allow current low crude oil prices (<$50/bbl) to return to higher costs (>$100/bbl), opportunity for process improvements to increase bio-oil quality, and provide an acceptable timeframe to increase familiarity for the community, workforce, bio-oil users, and regulatory agencies. The long term project envisioned will process up to 200 dtpd biomass to create a sustainable renewable fuel or energy.

Bois Forte retained the services of Short Elliott Hendrickson Inc. (SEH) and the University of Minnesota Duluth- Natural Resources Research Institute (NRRI) to assist the Renewable Energy (RE) Planning Committee with this study. The RE Planning Committee includes members from Bois Forte Development Corporation and the Bois Forte Natural Resources Department (including Forestry and Environmental Services Departments).

Activities conducted since July 2007 included:


  • biomass resource assessment to identify feedstock availability;

  • multiple meetings with various technology developers, researchers, and vendors;

  • multiple meetings with potential customers;

  • meetings with other local bands (White Earth, Red Lake, Fond Du Lac and St. Croix) engaged in similar activities;

  • participation in quarterly Agricultural Utilization Research Institute (AURI) Energy Roundtable meetings; and

  • community and legislative updates.


Biomass Resource Assessment

The biomass resource assessment evaluated various sources including: forestry low-valued roundwood resources (within the allowable cut), logging residue, pine thinnings, sawmill waste, debris from forest/brushland clearing and roadway maintenance, and weed harvesting from Nett Lake. Forestry residual biomass estimates accounted for the Biomass Harvesting Guidelines for Forestry, Brushlands, and Open Lands (December 2007) recommended by the Minnesota Forest Resources Council.



The assessment evaluated availability of biomass (roundwood, residue, thinnings, etc) within distances of 25, 50, 75 and 100 miles from the Bois Forte Reservation lands surrounding Nett Lake.

Available biomass within the distance ranges was compared to two potential harvest levels:



  • 50 dtpd (equivalent to 18,250 dry tons/year);

  • 200 dtpd (73,000 dry tons/year).

The table and figure below summarizes the ratios of biomass (low-valued roundwood and residue) available compared to the harvest levels. For example, the amount of low-valued roundwood and residue within a 25 mile radius provides 1.5 times the amount of biomass required to support a 200 dtpd operation.



Forest Harvest Residue Biomass and Low-Valued Roundwood Biomass Availability and Ratio of Available:Demand with Distance from Nett Lake

Distance from Nett Lake

25 miles

50 miles

75 miles

100 miles

Residues (dry tons)

61,842

173,990

313,357

499,713

Low-Valued Roundwood (dry tons)

48,610

148,221

292,428

547,173

Total (dry tons)

110,452

322,211

605,785

1,046,887
















Coverage Ratio













Minimum Demand - 50 dtpd

6.1

17.7

33.2

57.4

Maximum Demand - 200 dtpd

1.5

4.4

8.3

14.3




It appears that the available biomass proximal to Nett Lake is more than adequate to support the range of harvest levels proposed.

The assessment also evaluated biomass availability on only tribal and allotted lands managed directly by Bois Forte. The total sustainable biomass available on lands managed directly by Bois Forte could supply 100% of the lower harvest level, 50% of the mid level, and 25% of the higher level.

Considering the availability of biomass within a 25 mile radius, and also within areas directly managed by Bois Forte, it appears reasonable to conclude that competition for the resource by other potential biomass-to-energy projects within a 100 mile radius should not be detrimental to this project’s long term sustainability.



Harvesting Methods

A significant factor in determining availability of harvest residues is the logging infrastructure. While resources are important, the logging industry will ultimately affect the ability to bring the resource to market. There is a variety of equipment that can be used to process forest harvest residues including chippers, grinders and potentially, slash bundlers. There is a need for the Bois Forte project to evaluate the equipment owned by local logging contractors, particularly tribal logging operations. In most cases, the lowest-cost option is to purchase a small chipper to be used to chip tops and limbs at the same time that roundwood is being produced. Integration of a chipper with the current roundwood production system is relatively straightforward. However, purchase of new equipment requires a steady market with a known revenue stream. Therefore, it may be necessary for active participation of Bois Forte in assisting tribal loggers with markets and financing for additional equipment. The report includes an evaluation of the costs and capital requirements for a typical logging operation to incorporate harvest and chipping of residues.



Biomass to Energy Technology Assessment

In Fall 2007, Bois Forte released a general solicitation to innovative biomass to energy technology developers, and subsequently initiated exploratory meetings with various companies. Potential options considered included:



  • Solid (wood chips, pellets, briquettes)

  • Liquid (ethanol, bio-oil)

  • Gas (gasification for combined heat and power; and gasification with further processing to produce dimethyl ether, methanol or diesel)

As part of the technology assessment Bois Forte met with several potential local customers for the various renewable energy products including: regional power companies, taconite mines/processing companies, and petrochemical industries in the Duluth/Superior area. Applications for heat and power on the Bois Forte Reservation were also evaluated.

The study included evaluation of:


  • Process (level of complexity)

  • Inputs, outputs and scale (demonstration or commercial)

  • Market for product (robustness, competition, sensitivity)

  • Technology Assessment (level of development, vendors, R&D interest)

  • Environmental Resources (feedstock, water, site selection, discharges, toxicity)

  • Economics (jobs, capital, OM, funding support)

  • Business Issues (ownership, access, royalties, branding, improvements)

  • Regulatory (CAA, CWA, RCRA, OSHA, BATF) and

  • Social Issues (24/7 operations, safety, noise, other).


Technology Comparison and Selection

The table below provides a comparison of the biomass to energy technologies evaluated with respect to the objectives of the study.




Based upon the above comparison, bio-oil was selected as the most appropriate technology for the Bois Forte project.



Bio-oil

Bio-oil production from woody biomass includes drying, grinding, and gasification via fast pyrolysis. A major fraction of the gas created is condensed into bio-oil. A by product of the process is char, a solid material that can either be used as a stand alone fuel, mixed back in with the bio-oil, or used as a soil amendment for agriculture.

Bio-oil has several uses. It may serve a replacement for bunker fuel and may be used as a fuel supply in industrial kilns or compatible boilers or gas turbines. Bio-oil may serve as a feedstock for ethanol or hydrogen production, and also may be potentially be further refined into higher end transportation fuels via catalytic cracking equipment typically located at petrochemical refineries. Bio-oil is used in production of the food flavoring Liquid Smoke®. Bio-oil may also be used in asphalt production.

There are few active commercial scale woody biomass bio-oil plants in operation in North America as uses for the fuel are still being developed. Bio-oil is currently considered to be suitable for storage for periods of up to 6 months, before stabilization issues begin to occur. The federal government has indicated a strong interest in bio-oil and is spending significant funds on research and development to improve fuel stability issues and improve its properties to allow easier refining.

The manufacturing process does not require significant water inputs, does not require significant air pollution controls, creates a relatively safe combustible product, and does not create significant waste byproducts.

Demonstration Phase

The next phase of this project is recommended to be a pilot scale demonstration phase. The demonstration phase will include three major components:



  • Residual woody biomass harvesting and harvesting;

  • Construction of a 10 dtpd demonstration scale bio-oil production facility; and

  • Testing of bio-oil at local industrial target customers.

The pilot demonstration phase is recommended in order to:



  • Establish local workforce operations for residual wood harvesting and preliminary processing (chipping, drying);

  • Develop familiarity and support of the local community for the bio-oil technology;

  • Further improve the technology for bio-oil production and quality;

  • Increase market interest for improved bio-oil products;

  • Build confidence in potential industrial customers for use of the bio-oil and char as fuel or other uses;

  • Build a baseline for regulatory permitting approvals for both production and use of the biofuels; and

  • Allow local and national economic situation to stabilize (fuel prices, market).

Engineering, procurement, and implementation of the pilot demonstration program is targeted for 2009 and 2010, pending availability of project financing. A 10 dtpd system would produce approximately 400,000 gallons of bio-oil and 600 tons of char on an annual basis at full production. Combined costs of capital and five years net operating costs for the 10 dtpd system are estimated to cost approximately seven million dollars.

Preliminary negotiations are currently ongoing with two bio-oil technology providers. The demonstration plant is proposed to be located at the Nett Lake Sector of the Bois Forte Reservation. The University of Minnesota Duluth NRRI staff and resources would likely be involved with setup and testing of the demonstration program.

Jobs and Economics – Commercial Scale Plant

A 200 dtpd system would produce approximately 8,000,000 gallons of bio-oil and 12,000 tons of char on an annual basis at full production. Capital costs for the 200 dtpd system are estimated to cost approximately thirty million dollars and would create more than 100 short-term construction jobs and 35 long-term jobs. The jobs would likely be classified as medium to high skilled labor.

The study evaluated short term capital, and long term operations costs for three levels of sustainable, full scale commercial production (50 dtpd, 100 dtpd, 200 dtpd). The economics for this technology at “commercial scale” appear to look positive if field-chipped and delivered biomass feedstock costs are below $30/green ton and crude oil costs are above $100/barrel. Return on investment appears to be most promising at the higher end of the sustainable scale (200 dtpd).

In 2008, crude oil prices drastically fluctuated from greater than $140/bbl to less than $50/bbl. Factors that affect the short-term market are global economic outlook, hurricanes, decreased oil demand and terrorism.

While the price of oil will remain volatile over the next few years, the USDOE EIA 2009 Annual Energy Outlook predicts that by 2014 crude oil prices will return to prices exceeding $100/bbl, and continue to steadily rise for the next twenty years, exceeding $110/bbl by 2018.

Mandated carbon dioxide emission reduction programs may be an additional factor that may positively impact the value of the bio-oil. Replacement of fossil fuels with bio-oil would likely qualify the end user for carbon credits. Although federal legislative mandates are not currently in effect for carbon reduction, a lively market exists. The value of carbon dioxide reduction credits ranges between $1/ton and $10/ton dependant on the application. The value may exceed $30/ton dependant on when/if/and how federal carbon reduction programs are promulgated.



Funding Approach and Business Plan

The report includes detailed business plan and economic analysis for use in definition of project financing options, current grant/funding assistance opportunities and other potential incentives (green tag renewable energy credits, carbon credits, production credits, etc).

Several potential funding sources exist or are being set up to promote both the demonstration phase and commercial phases identified in this study. Several funding opportunities are associated with the National Biofuels Action Plan, the Farm Bill, and the Energy Independence and Security Act. Administration of the funding mechanisms is being executed by various entities within the USDOE, USDA, and USFS. Matching monetary and/or in-kind contributions from the State of Minnesota, local governments, and/or private sources will likely be required to secure overall funding.

Conclusions and Recommendations

The results of the study conclude that:



  • Adequate woody biomass is available for a sustainable 50 to 200 dtpd process

  • Production of bio-oil is technically feasible but the process can be improved to lower costs and improve bio-oil quality

  • A local market exists for bio-oil use provided petroleum crude oil costs exceed $100/bbl

  • A 50 to 200 dtpd commercial scaled bio-oil production facility would result in significant jobs and economic benefit for the Nett Lake Community, and

  • a smaller scale 5 to 10 dtpd pilot demonstration facility is recommended to allow system improvements, increase familiarity, and prepare for a future market with higher crude oil prices and mandated carbon reduction programs.



Table of Contents
Executive Summary

Table of Contents

Acknowledgements

Abbreviations



Page

1.0Introduction 1

1.1Goals of Study 1

1.2Scope of Services 1

1.3Project Background 2

1.4Cellulosic Biofuels 2

1.5Bois Forte Reservation 3

1.6Report Layout 4

2.0Resource Analysis 5

2.1Introduction and Background 5

2.2Resource Analysis 6

2.3Roundwood Sources 6

2.3.1Low Stumpage-Value Roundwood Resource 9

2.3.2Energy Content by Tree Species 11

2.3.3Stumpage Price 12

2.3.4Trucking Costs 13

2.3.5Estimated Delivery Price 13

2.4Forest Harvest Residues 14

2.4.1Site Level Guidelines 14

2.4.2Estimate of Statewide Harvest Residue Biomass 15

2.4.3Estimate of Nett Lake Low-Valued Roundwood and Harvest Residue Biomass 16

2.4.4Forest Harvest Residue Pricing 18

2.4.5Delivered Harvest Residue Price 18

2.4.6Current Demand for Forest Harvest Residues 18

2.4.7Harvest Residue Processing Equipment 19

2.4.7.1Equipment and Cost Calculations 20

2.4.7.2In-Line Chipping Systems 20

2.4.7.3Larger Chipping and Grinding System 23

2.5Forest Thinnings 24

2.6Fire Hazard Reduction 25

2.7Brushland Biomass 25

3.0Cellulosic Biomass to Energy Technology Review 26

3.1Introduction 26

3.1.1Intellectual Property Protection 26

3.2Green Wood Chips 26

3.2.1Description 26

3.2.2Project Team Activities 26

3.2.3Technology Providers 26

3.2.4Potential Markets for Products 26

3.2.5Relevance to Technology Development in Minnesota 26

3.2.6Impact on Resources 27

3.2.7Economic Overview 27

3.2.8Discussion 27

3.3Wood Pellets or Briquettes 27

3.3.1Description 27

3.3.2Project Team Activities 27

3.3.3Technology Providers 27

3.3.4Potential Markets for Products 27

3.3.5Relevance to Technology Development in Minnesota 28

3.3.6Impact on Resources 28

3.3.7Economic Overview 28

3.3.8Discussion 28

3.4Cellulosic Ethanol 28

3.4.1Description 28

3.4.2Project Team Activities 29

3.4.3Technology Providers 29

3.4.4Potential Markets for Products 29

3.4.5Relevance to Technology Development in Minnesota 29

3.4.6Impact on Resources 29

3.4.7Economic Overview 29

3.4.8Discussion 29

3.5Bio-oil 30

3.5.1Description 30

3.5.2Project Team Activities 30

3.5.3Technology Providers 30

3.5.4Potential Markets for Products 31

3.5.5Relevance to Technology Development in Minnesota 31

3.5.6Impact on Resources 31

3.5.7Economic Overview 32

3.5.8Discussion 32

3.6Gasification for Combined Heat and Power 32

3.6.1Description 32

3.6.2Project Team Activities 32

3.6.3Technology Providers 32

3.6.4Potential Markets for Products 32

3.6.5Relevance to Technology Development in Minnesota 32

3.6.6Impact on Resources 32

3.6.7Economic Overview 33

3.6.8Discussion 33

3.7Gasification for Production of Syn Gas with Further Processing to Methanol or Diesel 33

3.7.1Description 33

3.7.2Project Team Activities 33

3.7.3Technology Providers 33

3.7.4Potential Markets for Products 33

3.7.5Relevance to Technology Development in Minnesota 33

3.7.6Impact on Resources 33

3.7.7Economic Overview 33

3.7.8Discussion 34

3.8Comparison of Options 34

3.9Technology Selection 34

4.0Preliminary Design Considerations for Bio-oil Production Facility 36

4.1Bio-oil Overview 36

4.1.1Current Interest and Research 37

4.2Scale and Development 37

4.2.1Pilot 37

4.2.2Demonstration 38

4.2.3Commercial 38

4.3Bio-oil Production Facility Components 38

4.3.1Biomass Feedstock Acceptance and Storage 38

4.3.2Feedstock Preparation 39

4.3.3Bio-oil Production 39

4.3.4Product Storage and Offloading 40

4.3.5Administration Offices and Building 40

4.3.6Laboratory 40

4.4Employee Requirements 41

4.5Physical Site Requirements 41

4.5.1Location 41

4.5.2Size 41

4.5.3Transportation Infrastructure 41

4.5.4Electricity 41

4.5.5Fuel 41

4.5.6Water 42

4.5.7Wastewater 42

4.5.8Waste Management 42

4.6Products and Properties 42

4.6.1Primary Product: Bio-oil 42

4.6.1.1Grades of Bio-oil 42

4.6.1.2Chemical and Physical Properties 42

4.6.1.3Stability 43

4.6.1.4Environmental and Human Health 43

4.6.1.5Storage and Handling 43

4.6.2Other Products: Char 44

4.6.2.1Chemical and Physical Properties 44

4.6.2.2Stability 44

4.6.2.3Environmental and Human Health 44

4.6.2.4Storage and Handling 44

4.6.3Other Products: Heat 44

4.7Carbon Life Cycle Analysis 44

4.8Permitting and Regulatory Considerations 44

4.8.1Biomass Harvesting 45

4.8.1.1Harvest Guidelines 45

4.8.1.2Quarantine on Transport of Wood 45

4.8.2Land Use and Construction Code 45

4.8.2.1Land Use 45

4.8.2.2Traffic 46

4.8.2.3Building and Construction Codes 46

4.8.2.4Alcohol Storage 46

4.8.3Environmental Permits 46

4.8.3.1National Environmental Policy Act (NEPA) 46

4.8.3.2Air Emissions 47

4.8.3.3Water Supply 47

4.8.3.4Stormwater 47

4.8.3.5Wastewater 47

4.8.3.6Solid and Hazardous Wastes 47

4.8.3.7Spill Prevention, Control, and Countermeasures (SPCC) Plan 47

4.8.4Fuel Quality and Transport 47

4.8.4.1Fuel Quality Standards 47

4.8.4.2Transportation and Handling 48



5.0Business Planning 49

5.1Economic Projections for Bio-oil Production 49

5.1.1Capital Costs 49

5.1.2Operations and Maintenance Costs 49

5.1.3Annual Revenue and Cash Flow 50

5.2Payback Timeframe Sensitivity 50

5.2.1Scale of Full Size Project 51

5.2.2Financing of Initial Capital Costs 51

5.2.3Feedstock Costs 51

5.2.4Market Price for BioFuels 51

5.2.5Royalty Charges 52

5.2.6Pessimistic, Base and Optimistic Case Scenarios 52

5.3Pilot Scale Demonstration 52

5.4Business Plan 57

5.4.1Statement of Purpose 57

5.4.2The Business 57

5.4.2.1Legal Structure 57

5.4.2.2Description of The Business 57

5.4.2.3Services 58

5.4.2.3.1Biomass Harvesting 58

5.4.2.3.2Biomass Procurement 58

5.4.2.3.3Bio-oil Facility Construction 58

5.4.2.3.4Biomass Conversion Into Bio-oils and Char 58

5.4.2.3.5Customer Development 58

5.4.2.3.6Transport to Customers 58

5.4.2.4Location 58

5.4.2.5Management 58

5.4.2.6Personnel 58

5.4.2.7Training 59

5.4.2.8Permits 59

5.4.2.9Legal Aspects 59

5.4.2.10Taxes 59

5.4.2.11Insurance 59

5.4.3Market Evaluation 59

5.5Potential Business Partners 60

5.5.1Bio-oil Technology Providers 60

5.5.2Research and Development Institutes 61

5.5.3Refineries 61

5.5.4Large Industrial Customers for the Bio-oil 61

5.6Potential Barriers 61

5.7Communication Plan 62

5.8Funding Sources 62



6.0Conclusions and Recommendations 64

7.0Resources and References 65


List of Tables

List of Figures

List of Appendices

Acknowledgements

The State of Minnesota for providing funding in support of this project.



Bois Forte Tribal Council

Kevin W. Leecy, Tribal Chair

David C. Morrison, Sr.

Cathy Chavers

Ray Villebrun

Ray Toutloff



Renewable Energy Planning Team

Andrew Datko, CEO Bois Forte Development Corporation

Corey Strong, Bois Forte Natural Resources Commissioner

David Larson, Bois Forte Reservation Forester

Darrin Steen, Bois Forte Environmental Director

Chris Holm, Bois Forte Biologist

Mark Broses, Short Elliott Hendrickson Inc.

George Johnson, Short Elliott Hendrickson Inc.

Bill Berguson, University of Minnesota Duluth - Natural Resources Research Institute
Abbreviations

AEO Annual Energy Outlook

ASTM American Society of Testing Materials

AURI Agricultural Utilization Research Institute

bbl barrel (42 gallons)

BIA Bureau of Indian Affairs

Bois Forte Bois Forte Band of Chippewa

BTU British thermal unit

C degrees Celsius

CERTS Clean Energy Resource Teams

cft cubic feet

CH4 Methane

CHP combined heat and power

CO Carbon Monoxide

CO2 Carbon Dioxide

CTL cut to length

DME Dimethyl Ether

DNR Department of Natural Resources

DOE United States Department of Energy

dtpd dry tons per day

EIA Energy Information Administration

F degrees Fahrenheit

FIA Forest Inventory and Analysis

FS Feasibility Study

gpm gallons per minute

gtpd green tons per day

kW kiloWatt

IRRB Iron Range Resources Board

IRMP Integrated Resources Management Plan

lbs pounds

LEA Laurentian Energy Authority




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