Fibrowatt: The Farmer Squeeze?

Jim Turner -- April 29th, 2010

Guest blogger Jim Turner continues his series on the Fibrowatt power plant:

Once I located the information about the [potential] dangers of the permitted materials in the Fibrowatt Minnesota plant’s exhaust, it became difficult to stay uncommitted about the prospect of the plant. These are my opinions, but I found great irony when I considered what I had found in the context of “[Fibrowatt] only going where invited” – on their website, and the “good citizenship” comment that I had heard from Benson. Then I started to worry about how far down the path Page County had gotten with Fibrowatt.  With the county officials already locked up under non-disclosure agreements, how could they be relied on to let the community know about the risks of this plant?

Some local citizens had gotten in touch with me after reading my research. We decided to form a group to get the information we’d learned out, educate the county about the plant’s potential impact, and advocate against locating a Fibrowatt plant here. There were 20 or so of us:  a couple of bloggers, a couple of folks doing sustainable farming, and two or three that had been involved in economic development in the County. One member of the group joined a lobbying trip of Page County citizens who went to Richmond to meet with Delegate Gilbert.  Several folks made posters and flyers and started doing community outreach, and we even had one videographer doing production work on recording Supervisors meetings – these are on YouTube now. We worked hard on getting the word out through community outreach and letter writing campaigns.

There was discussion by some Page County supervisors, the local poultry association, and the Page County Economic Development Authority that the Fibrowatt plant would be good for the poultry farmers. These organizations often repeated the theme that pending legislation would regulate and perhaps outlaw spreading litter. We learned that there was a lot of pressure on this industry – economic, environmental and regulatory – and the suggestion that pending legislation might eliminate selling the litter as part of a farmer’s income resonated with those groups. Our local citizens group spoke with a River Keeper organization in Virginia and found that while a measure like this is discussed from time to time, there was no currently pending legislation, which contradicted these concerns and fears.

Then I found an article in the Winston-Salem, NC paper about Fibrowatt’s failure to negotiate a sales agreement for their power with Progress Energy and Duke Power, the two major utilities in the Carolinas.

…the utility companies didn’t mention Fibrowatt by name, but indicated that the “single poultry waste” generator proposed prices that would consume a significant amount of the companies’ money that they need to buy other types of renewable energy such as solar and wind power.

I learned that Fibrowatt had already been in touch with Page County farmers, extending an offer for their litter which was lower than current market competitive rates, a market that is supported by state and federal level agriculture agencies, which will pay a benefit to farmers outside of Page County for buying and spreading the local litter. One farmer wrote me about his opinion:

As far as poultry growers getting more in terms of total sales dollars for their litter [from Fibrowatt], I don’t really see that happening because of the current price of litter. I see a profit margin decrease happening for poultry growers instead of an increase.

In yesterday’s post, I mentioned the Lancaster Farming article, which mentioned one litter distributor’s fear of being put out of business, and the possibility of raising costs to farmers:

Deavers said he and his colleagues are concerned that a power plant could place such high demand for litter – already difficult to meet at times — that it will no longer be affordable as a fertilizer, and that brokers’ services won’t be needed.

Because it was becoming apparent that the arrival of a Fibrowatt plant might not be altogether a good thing for poultry farms, I began to call this “Fibrowatt’s Squeeze” – the plant would hit the revenue side of farmers’ litter operations, reducing their total sales dollars, and as the Lancaster Farming article mentions, there is also a squeeze from increased costs.

Without saying so, Fibrowatt confirmed the possibility of cost increases in their March 2, 2010 Page County Board of Supervisors presentation. Several things need to be done with the litter to ensure that it is a high-quality fuel for the burn process – and that one of the things that is done in the fuel storage room is to mix it with other “biomass” sources, including various raw materials that litter is produced from. In Minnesota, this can include sunflower seed hulls – so you have Fibrowatt actively competing with Minnesota farmers to buy these raw materials from the plant.

From my basic Economics courses, I recalled that when competition increases on the demand side, prices increase in the short term. Over the longer term, they may level out, but if production is increased to meet the new demand there will be pressure to keep market equilibrium at the higher price, or supplier/producers will switch to other commodities.

Here in Virginia, a large portion of litter comes from wood shavings, which are apparently already in short supply within the Shenandoah Valley region. This product was specifically mentioned as an example of what would be in the mix at the proposed Valley plant. So it’s my conclusion that Fibrowatt will compete with local poultry farmers for resources, in this case, driving up raw materials costs.

My next step was to compare the raw litter and the incinerated litter ash to determine which was a better fertilizer. I found a lot of information about absorption rates for component chemicals, their costs, and benefits, but I will spare the details. I will summarize the results here, though, quoting my blog:

From basic biology we learn that Nitrogen is essential to plant life. Chicken litter provides it, but Fibrowatt ash does not. So, if a farmer is forced to move to the ash as a fertilizer source, there will still be a requirement for a second application of Nitrogen. It’s not efficient due to the double application, and fertilizer costs increase. The end result is more pressure on the farmers both in production costs and very likely in the margins they make from selling their products.

Jim Turner is a management consultant in his day job, but his real passion is the weekends he spends at the Hawksbill Cabin, near Stanley and Luray, Virginia. He keeps a blog on the weekender lifestyle, which is where this material about Fibrowatt and Page County was first published.

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3 Responses to “Fibrowatt: The Farmer Squeeze?”

  1. Jim T says:

    So why do I call it a squeeze (these are my own conclusions now)? That’s because their presence in the market has the potential for raising the costs of inputs at the same time as reducing total sales revenues.

    For a company that claims to partner with the poultry industry, this is an ironic concept. I’ve heard one of the leaders of the local poultry association tout Fibrowatt as a long-term savior of the industry in Page County (the Lancaster Farming article also mentions this endorsement).

    In my opinion, it is more likely that these cost increases will put the smaller operations out of business by making them economically unsustainable. Fibrowatt’s market presence threatens the very existence of farming in the communities they are trying to go to.

  2. Lisa says:

    Based on your research Jim, and from what I gather, this type of operation would practically eliminate the jobs of all the “spreaders” of litter in the farming industry, thus losing jobs which would offset the jobs gained by locating a plant around here. Even more of a “squeeze”.

    Have you ever found research or come to any conclusions on what the impact of having 100 truckloads of litter making 2 trips per day would have on the roadways or air quality?

    I also wonder about the 300 ft smoke stack, what kind of emissions are they trying to diffuse that would require such a tall stack? That’s around 30 stories tall right?

    Thanks for sharing this information with the community…very enlightening.

  3. Jim T says:

    Lisa,

    I didn’t research further into the trucks’ impacts other than to assess where they would be coming from in Page County’s case. The route to the proposed site would generally follow BUS 340 – either from Luray or from Stanley. This is a two-lane road with some very tight curves and two-lane bridges from Luray, and goes through Stanley with an at-grade railroad crossing in Stanley – probably not the best infrastructure for truck traffic, so a major construction project would be in order to get the trucks to the proposed site.

    The 300-foot stack would be the tallest structure in Page County – there are some 100+ foot radio towers, but the prominent tall buildings are all well under 100 feet. I posted on the contents of the exhaust yesterday.

    The building that would support the furnace would also be 150 feet tall, so at least in Page Co.’s case, this project would involve the construction of the county’s two tallest edifices. I haven’t seen anything as tall as the stack in Rockingham either…

    Here’s a link to a photo of the Minnesota plant:
    http://hawksbillcabin.blogspot.com/2010/02/fibrowatts-citizen-council-in-minnesota.html

    Thanks for the questions!
    Cabin Jim

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