Changes in the Fuel Pellet Industry in the Lake States 2005 to 2008

Premium fuel pellets are popular for home heating fuel and standard fuel pellets are finding increased use for electrical generation. In 2005, 41 percent of the fiber feed stock used to produce pellets in the Lake States was wood residue, 27 percent waste paper or agricultural residue, and 32 percent multiple or unspecified fiber feed stocks. Between 2005 and 2008, the number of wood pellet processing facilities in the region nearly doubled and this expansion required an additional 592 thousand dry tons of fiber feed stock. Currently, two facilities producing 67 thousand tons of pellets are under construction and four plants slated to produce an additional 600 thousand tons of product are in the planning stage. The primary product manufactured in these new or planned facilities will be commercial fuel pellets and the primary feed stock will be roundwood or harvest residues and paper and agriculture waste. The potential increase in the demand for lower quality roundwood by these new facilities could replace the declining demand for this material by the paper industry. However, if the fuel pellet industry continues to expand, it could bid roundwood away from the remaining pulp and paper mills.