-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-06-694T		

TITLE:     Natural Resources: Woody Biomass Users' Experiences 
Provide Insights for Ongoing Government Efforts to Promote Its Use

DATE:   04/27/2006 
				                                                                         
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GAO-06-694T

     

     * Summary
     * Background
     * Financial Incentives and Benefits, Access to an Affordable S
          * Financial Incentives and Benefits Encouraged Woody Biomass U
          * An Affordable Supply Facilitated the Use of Woody Biomass
          * Environmental Benefits and Other Factors Played a Role in th
     * Challenges Faced by Woody Biomass Users Included Inadequate
          * Woody Biomass Was Not Always Sufficiently Available
          * Users Choosing Woody Biomass over Oil or Natural Gas Made Ad
     * Current Users' Experiences Offer Insights for Government Eff
          * Market Forces May Lead Wood Users to Forgo Small-Diameter Tr
          * The Effectiveness of Efforts to Encourage Woody Biomass Use
          * Efforts to Encourage Woody Biomass Use May Be More Effective
     * Concluding Observations
     * GAO Contact and Staff Acknowledgments
          * Order by Mail or Phone

Testimony

Before the Subcommittee on Forests and Forest Health, Committee on
Resources, House of Representatives

United States Government Accountability Office

GAO

For Release on Delivery Expected at 1:00 p.m. EDT

Thursday, April 27, 2006

NATURAL RESOURCES

Woody Biomass Users' Experiences Provide Insights for Ongoing Government
Efforts to Promote Its Use

Statement of Robin M. Nazzaro, Director Natural Resources and Environment

GAO-06-694T

Mr. Chairman and Members of the Subcommittee:

I am pleased to be here today to discuss factors influencing woody biomass
use among several users we reviewed, as well as potential insights these
users' experiences may offer as the federal government seeks to increase
woody biomass use. As you know, the federal government has responded to
our nation's increasing wildland fire threat by placing greater emphasis
on thinning forests and rangelands to help reduce the buildup of
potentially hazardous fuels. These thinning efforts are expected to
generate large amounts of woody material, including many small trees,
limbs, and brush-often referred to as woody biomass-that traditionally
have had little commercial value.1

Widespread thinning efforts will be costly to the federal government. To
help defray these costs, and to enhance rural employment and economic
development, the government is promoting a market for woody biomass.
However, as we have reported in the past,2 increasing the use of the
material faces several obstacles. Officials in federal agencies promoting
woody biomass use-including the Departments of Agriculture, Energy, and
the Interior-told us that its use is hampered by the high costs of
harvesting and transporting it and the difficulty in obtaining a reliable
supply in some areas. Nevertheless, some businesses and government
entities are using woody biomass for various purposes, including heating
buildings, making lumber, and generating electricity.

My testimony today summarizes the findings of our report being released
today that discusses factors facilitating woody biomass use among selected
users, the challenges these users faced in using the material, and the
insights these users' experiences may have for the federal government as
it seeks to promote greater use of woody biomass.3 This report is based on
information we collected from 13 users of woody biomass, including power
plants, pulp and paper mills, and school and hospital facilities in
various locations around the United States, as well as on our prior study
of woody biomass.

1Although biomass can be considered any sort of organic material-including
trees, grasses, agricultural crops, and animal wastes-the term woody
biomass in this testimony refers to small-diameter trees and other
traditionally noncommercial material cut as part of thinning, harvesting,
or other activities in forests or on rangelands. For the purposes of this
testimony, we distinguish woody biomass from other wood residues such as
sawmill residues or urban wood waste.

2See GAO, Natural Resources: Federal Agencies Are Engaged in Various
Efforts to Promote the Utilization of Woody Biomass, but Significant
Obstacles to Its Use Remain, GAO-05-373 (Washington, D.C.: May 13, 2005).

3GAO, Natural Resources: Woody Biomass Users' Experiences Offer Insights
for Government Efforts Aimed at Promoting Its Use, GAO-06-336 (Washington,
D.C.: Mar. 22, 2006).

                                    Summary

The primary factors facilitating woody biomass use among users we reviewed
were financial incentives and benefits associated with its use, while
other factors included the availability of an affordable supply of woody
biomass and users' interest in environmental benefits associated with its
use. Four of the 13 users in our review had received federal or state
financial assistance to begin using woody biomass, while 3 users received
ongoing support as a result of their use of the material. Other factors
included energy cost savings from using woody biomass in place of fossil
fuels such as natural gas; the availability of an affordable supply of the
material (particularly in cases where it was already being removed as a
byproduct of other activities); and anticipated environmental benefits
associated with using the material, such as promoting forest health and
reducing air pollution.

Using woody biomass, however, was not without challenges for the users we
reviewed. Users cited insufficient supply, increased equipment and
maintenance costs, and other factors that limited their use of woody
biomass or made it more difficult or expensive to use. Several users
reported they found it difficult or impossible to obtain a sufficient
supply of the material, particularly from federal lands. Such users relied
more on woody biomass from private lands or on alternative wood materials
such as sawmill residues (including sawdust, chips, bark, and similar
materials) or urban wood waste (made up of tree trimmings, construction
debris, and the like). Several users also told us that, despite the
financial advantages of using woody biomass in place of oil or natural
gas, they had incurred increased equipment, operation, and maintenance
costs in using woody biomass that they would not have incurred had they
burned the other fuels.

Our findings offer several insights for the federal government as it seeks
to promote greater use of woody biomass. First, if not appropriately
designed, efforts to encourage its use may instead stimulate the use of
sawmill residues or other alternative wood materials, which some users
told us are cheaper or easier to use than woody biomass. Second, the lack
of a local logging and milling infrastructure to collect and process
forest materials may limit the availability of woody biomass; thus,
government activities may be more effective in stimulating its use if they
take into account the extent of existing infrastructure. And finally,
government activities such as awarding grants or supplying woody biomass
may stimulate its use more effectively if they are tailored to the scale
and nature of the targeted users. However, agencies must remain alert to
potential unintended ecological consequences of their efforts, such as
excessive thinning to meet demand for woody biomass.

                                   Background

Woody biomass-small-diameter trees, branches, and the like-is generated as
a result of timber-related activities in forests or on rangelands.
Small-diameter trees may be removed to reduce the risk of wildland fire or
to improve forest health, while treetops, branches, and limbs,
collectively known as "slash," are often the byproduct of traditional
logging activities or thinning projects. Slash is generally removed from
trees on site, before the logs are hauled for processing. It may be
scattered on the ground and left to decay or to burn in a subsequent
prescribed fire, or piled and either burned or hauled away for use or
disposal.

Woody biomass can be put to various uses. Among other uses, small-diameter
logs can be sawed into structural lumber or can be chipped and processed
to make pulp, the raw material from which paper, cardboard, and other
products are made. Woody biomass also can be used for fuel. Various
entities, including power plants, schools, pulp and paper mills, and
others, burn woody biomass in boilers to turn water into steam, which can
be used to make electricity, heat buildings, or provide heat for
industrial processes.

Federal, state, and local governments, as well as private organizations,
are working to expand the use of woody biomass. Recent federal legislation
contains provisions for woody biomass research and financial assistance.
For example, the Consolidated Appropriations Act for Fiscal Year 2005 made
up to $5 million in appropriations available for grants to create
incentives for increased use of woody biomass from national forest lands.4
In response, the Forest Service awarded $4.4 million in such grants in
fiscal year 2005. State and local governments also are encouraging the
material's use through grants, research, and technical assistance, while
private corporations are researching new ways to use woody biomass, often
in partnership with government and universities.

4Pub. L. No. 108-447, 118 Stat. 3076 (2004).

     Financial Incentives and Benefits, Access to an Affordable Supply, and
Environmental Benefits Facilitated the Use of Woody Biomass among Users We
                                    Reviewed

The users in our review cited several factors contributing to their use of
woody biomass. The primary factors they cited were financial incentives
and benefits associated with its use, while other factors included having
access to an affordable supply of woody biomass and environmental
considerations.

Financial Incentives and Benefits Encouraged Woody Biomass Use by Several Users

Financial incentives for, and benefits from, using woody biomass were the
primary factors for its use among several users we reviewed. Three public
entities-a state college in Nebraska, a state hospital in Georgia, and a
rural school district in Montana-received financial grants covering the
initial cost of the equipment that they needed to begin using woody
biomass. The state college received a state grant of about $1 million in
1989, the Georgia hospital received about $2.5 million in state funds in
the early 1980s, and the Montana school district received about $900,000
in federal funds in 2003 for the same purpose.5 A fourth user-a wood-fired
power plant in California-received financial assistance in the form of
tax-exempt state bonds to finance a portion of the plant's construction.

Three users in our review also received additional financial assistance,
including subsidies and other payments that helped them continue their use
of woody biomass. For example, the California power plant benefited from
an artificially high price received for electricity during its first 10
years of operation, a result of California's implementation of the federal
Public Utility Regulatory Policies Act of 1978.6 Under the act, state
regulators established rates for electricity from certain facilities
producing it from renewable sources, including woody biomass. However, the
initial prices set by California substantially exceeded market prices in
some years, benefiting this user by increasing its profit margin.7 The
Montana school district also received ongoing financial assistance from a
nearby nonprofit organization. The nonprofit organization paid for the
installation of a 1,000-ton wood fuel storage facility (capable of storing
over a year's supply of fuel) and financed the purchase of a year's supply
of fuel for the district, which the district repays as it uses the fuel.
The third user, a Colorado power plant generating electricity by firing
woody biomass with coal, realized ongoing financial benefits by selling
renewable energy certificates associated with the electricity it generated
from woody biomass.8

5Dollars are unadjusted for inflation.

6Pub. L. No. 95-617, 92 Stat. 3117 (1978).

Energy cost savings also were a major incentive for using woody biomass
among six users we reviewed. Two users-rural school districts in
Pennsylvania and Montana-told us that they individually had saved about
$50,000 and $60,000 in annual fuel costs by using wood instead of natural
gas or fuel oil. Similarly, the state college in Nebraska typically saves
about $120,000 to $150,000 annually, while the Georgia state hospital
reported saving at least $150,000 in 1999, the last year for which
information was available. And the two pulp and paper mills we reviewed
each reported saving several million dollars annually by using wood rather
than natural gas or fuel oil to generate steam heat for their processes.

An Affordable Supply Facilitated the Use of Woody Biomass

An affordable supply of woody biomass also facilitated its use, especially
in areas where commercial activities such as logging or land clearing
generated woody biomass as a byproduct. For example, the Nebraska state
college was able to purchase woody biomass for an affordable price because
logging companies harvested timber in the vicinity of the college, hauling
the logs to sawmills and leaving their slash; the college paid only the
cost to collect, chip, and transport the slash to the college for burning.
Similarly, a Pennsylvania power plant obtains a portion of its wood fuel
from land-clearing operations in which, according to a plant official, the
developers clearing the land are required to dispose of the cleared
material but are not allowed to burn or bury it. The plant official told
us developers often are willing to partially subsidize removal and
transportation costs in order to have an outlet for it.

7States set rates, pursuant to general regulations issued by the Federal
Energy Regulatory Commission, based on the buyer's "avoided cost"-this is,
the energy and facilities costs that would have been incurred by the
purchasing utility if it had to provide its own generating capacity.
According to the commission, while it provides general avoided cost
regulations, states set rates that often are above market rates.

8Renewable energy certificates represent the environmental benefits of
renewable energy generation-that is, the benefits of displacing
electricity generated from nonrenewable sources, such as fossil fuels,
from the electric grid. The certificates are sold separately from the
electricity with which they are associated, and their sale can serve as an
additional source of revenue to power plants using such sources.

Thinning activities by area landowners also contributed to an affordable
supply for a large pulp and paper mill in Mississippi. In this area, as in
much of the southeastern United States, small-diameter trees are
periodically thinned from forests to promote the growth of other trees,
and traditionally have been sold for use in making pulp and paper.
Further, according to mill officials, the level terrain and extensive road
access typical of southeastern forests keep harvesting and hauling costs
affordable-particularly in contrast to other parts of the country where
steep terrain and limited road access may result in high harvesting and
hauling costs.

Environmental Benefits and Other Factors Played a Role in the Use of Woody
Biomass

Three users cited potential environmental benefits, such as improved
forest health and air quality, as prompting their use of woody biomass;
other users told us about additional factors that increased their use of
woody biomass. Two users-the Montana school district and the coal-fired
power plant in Colorado-started using woody biomass in part because of
concerns about forest health and the need to reduce hazardous fuels in
forest land. They hoped that by providing a market for woody biomass, they
could help stimulate thinning efforts. Another user, a Vermont power
plant, began using woody biomass because of air-quality concerns.
According to plant officials, the utilities that funded it were concerned
about air quality and as a result chose to build a plant fired by wood
instead of coal because wood emits lower amounts of pollutants.

Other factors and business arrangements specific to individual users also
made using woody biomass advantageous. For example, one user, which chips
woody biomass for use as fuel in a nearby power plant, has an arrangement
under which the plant purchases the user's product at a price slightly
higher than the cost the user incurred in obtaining and processing woody
biomass, as long as the product is competitively priced and meets
fuel-quality standards. Three users whose operations include chipping of
woody biomass and other activities, such as commercial logging or
sawmilling, also told us that having the operations within the same
business is important because equipment and personnel costs can be shared
between the chipping operation and the other activities. And some users
helped offset the cost of obtaining and using woody biomass by selling
byproducts resulting from its use. One pulp and paper mill in our review
sold turpentine and other byproducts from the production of pulp and
paper, while a wood-fired power plant sold steam extracted from its
turbine to a nearby food-canning factory. Other byproducts sold by users
in our review included ash used as a fertilizer and sawdust used by
particle board plants.

  Challenges Faced by Woody Biomass Users Included Inadequate Supply and Costs
                Associated with Handling and Using the Material

Users in our review experienced several factors that limited their use of
woody biomass or made it more difficult or expensive to use. These factors
included an insufficient supply of the material and increased costs
related to equipment and maintenance.

Woody Biomass Was Not Always Sufficiently Available

Seven users in our review told us they had difficulty obtaining a
sufficient supply of woody biomass, echoing a concern raised by federal
officials in our previous report. Two power plants reported to us that
they were operating at about 60 percent of their capacity because they
were unable to obtain sufficient woody biomass or other fuel for their
plants. Officials at both plants told us that their shortages of wood were
due at least in part to a shortage of nearby logging contractors, which
prevented nearby landowners from carrying out all of the projects they
wished to undertake. While officials at one plant attributed the plant's
shortage entirely to the lack of sufficient logging contractors, an
official at the other plant stated that the lack of woody biomass from
federal lands-particularly Forest Service lands-also was a significant
problem.

The lack of supply from federal lands was a commonly expressed concern
among woody biomass users on the West Coast and in the Rocky Mountain
region, with five of the seven users we reviewed in these regions telling
us they had difficulty obtaining supply from federal lands. Users with
problems obtaining supply from federal lands generally expressed concern
about the Forest Service's ability to conduct projects generating woody
biomass; in fact, two users expressed skepticism that the large amounts of
woody biomass expected to result from widespread thinning activities will
ever materialize. One official stated, "We keep hearing about this coming
`wall of wood,' but we haven't seen any of it yet." In response to these
concerns, officials from both the Department of the Interior and the
Forest Service told us that their agencies are seeking to increase the
availability of woody biomass from federal lands.

Users Choosing Woody Biomass over Oil or Natural Gas Made Additional Investments
in Equipment and Incurred Additional Operations and Maintenance Costs

Several users in our review told us they incurred costs to purchase and
install the equipment necessary to use woody biomass beyond the costs that
would have been required for using fuel oil or natural gas. The cost of
this equipment varied considerably among users, from about $385,000 for a
school district to $15 million for a pulp and paper mill. Wood utilization
also increased operation and maintenance costs for some users, in some
cases because of problems associated with handling wood. During our visit
to one facility, wood chips jammed on a conveyor belt, dumping wood chips
over the side of the conveyor and requiring a maintenance crew member to
clear the blockage manually. At the power plant mixing woody biomass with
coal, an official told us that a wood blockage in the feed mechanism led
to a fire in a coal-storage unit, requiring the plant to temporarily
reduce its output of electricity and pay $9,000 to rechip its remaining
wood.

Other issues specific to individual users also decreased woody biomass use
or increased costs for using the material. For example, the Vermont
wood-fired power plant is required by the state to obtain 75 percent of
its raw material by rail, in order to minimize truck traffic in a
populated area. According to plant officials, shipping the material by
rail is more expensive than shipping by truck and creates fuel supply
problems because the railroad serving the plant is unreliable and
inefficient and experiences regular derailments. Another power plant was
required to obtain a new emissions permit in order to begin burning wood
in its coal-fired system.

 Current Users' Experiences Offer Insights for Government Efforts to Expand the
                              Use of Woody Biomass

Our findings offer several insights for promoting greater use of woody
biomass. First, rather than helping to defray the costs of forest
thinning, attempts to encourage the use of woody biomass may instead
stimulate the use of other wood materials such as mill residues or
commercial logging slash. Second, government activities may be more
effective in stimulating woody biomass use if they take into account the
extent to which a logging and milling infrastructure to collect and
process forest materials is in place. And finally, the type of efforts
employed to encourage woody biomass use may need to be tailored to the
scale and nature of individual recipients' use.

Market Forces May Lead Wood Users to Forgo Small-Diameter Trees in Favor of
Alternatives

Unless efforts to stimulate woody biomass utilization are focused on
small-diameter trees and other material contributing to the risk of
wildland fire, such efforts may simply increase the use of alternative
wood materials (such as mill residues) or slash from commercial logging
operations. In fact, several users told us that they prefer such materials
because they are cheaper or easier to use than woody biomass.

Indeed, an indirect attempt to stimulate woody biomass use by one Montana
user in our review led to the increased use of available mill residues
instead. The Forest Service provided grant funds to finance the Montana
school district's 2003 conversion to a wood heating system in order to
stimulate the use of woody biomass in the area. As a condition of the
grant, the agency required that at least 50 percent of the district's fuel
consist of woody biomass during the initial 2 years of the system's
operation. Officials told us that the district complied with the
requirement for those 2 years, but for the 2005-2006 school year, the
district chose to use less expensive wood residues from a nearby log-home
builder.9

It should be noted that the use of mill residues is not entirely to the
detriment of woody biomass. Using mill residues can facilitate woody
biomass utilization by providing a market for the byproducts (such as
sawdust) of industries using woody biomass directly; this, in turn, can
enhance these users' profitability and thereby improve their ability to
continue using the material cost-effectively. In addition, the
availability of both mill residues and woody biomass provides diversity of
supply, allowing users to continue operations even if one source of supply
is interrupted or becomes prohibitively expensive. Nevertheless, these
indirect effects, even where present, may be insufficient to substantially
influence the use of woody biomass.

Mill residues aside, even those users that consumed material we define as
woody biomass often used the tops and limbs from trees harvested for
merchantable timber or other uses rather than small-diameter trees
contributing to the problem of overstocked forests. Logging slash can be
cheaper to obtain than small-diameter trees when it has been removed from
the forest by commercial logging projects-which often leave slash piles at
roadside "landings," where trees are delimbed before being loaded onto
trucks. Unless woody biomass users specifically need small-diameter
logs-for use in sawing lumber, for example-they may find it cheaper to
collect slash piled in roadside areas than to enter the forest to cut and
remove small-diameter trees.

9The district has since obtained about 550 tons of woody biomass (about 75
percent of its annual consumption) from a nearby thinning project.

The Effectiveness of Efforts to Encourage Woody Biomass Use May Depend on the
Presence of Other Wood-Related Industries

Government activities may be more effective in stimulating woody biomass
use if they take into account the extent to which a logging and milling
infrastructure is in place in potential users' locations. The availability
of an affordable supply of woody biomass depends to a significant degree
on the presence of a local logging and milling infrastructure to collect
and process forest materials. Without a milling infrastructure, there may
be little demand for forest materials, and without a logging
infrastructure, there may be no way to obtain them. For example, an
official with the Nebraska college in our review told us that the lack of
a local logging infrastructure could jeopardize the college's future woody
biomass use. The college relied on slash from commercial loggers working
nearby, but this official told us that the loggers were based in another
state and the timber they were harvesting was hauled to sawmills over 100
miles away. According to the official, if more timber-harvesting projects
were offered closer to the sawmills, these loggers would move their
operations in order to reduce transportation costs-eliminating the nearby
source of woody biomass available to the college.

In contrast, users located near a milling and logging infrastructure are
likely to have more readily available sources of woody biomass. One
Montana official told us that woody biomass in the form of logging slash
is plentiful in the Missoula area, which is home to numerous milling and
logging activities, and that about 90 percent of this slash is burned
because it has no market. The presence of such an infrastructure, however,
may increase the availability of mill residues or other materials,
potentially complicating efforts to promote woody biomass use by offering
more attractive alternatives.

Efforts to Encourage Woody Biomass Use May Be More Effective If They Are
Tailored to the Scale and Nature of Recipients' Use

Government activities may be more effective in stimulating woody biomass
use if their efforts are tailored to the scale and nature of the users
being targeted. Most of the large wood users we reviewed were primarily
concerned about supply, and thus might benefit most from federal efforts
to provide a predictable and stable supply of woody biomass. Such
stability might come, for example, from long-term contracts signed under
stewardship contracting authority, which allows contracts of up to 10
years.10 In fact, one company currently plans to build a $23 million woody
biomass power plant in eastern Arizona, largely in response to a nearby
stewardship project that is expected to treat 50,000 to 250,000 acres over
10 years. Similarly, officials of a South Carolina utility told us that
the utility was planning to invest several million dollars in equipment
that would allow a coal-fired power plant to burn woody biomass from
thinning efforts in a nearby national forest. In both cases, the assurance
of a long-term supply of woody biomass was a key factor in the companies'
willingness to invest in these efforts.

In contrast, small users we reviewed did not express concerns about the
availability of supply, in part because their consumption was relatively
small. However, three of these users relied on external financing for
their up-front costs to convert to woody biomass use. Such
users-particularly small, rural school districts or other public
facilities that may face difficulties raising the capital to pay needed
conversion costs-might benefit most from financial assistance such as
grants or loan guarantees to fund their initial conversion efforts. And as
we noted in our previous report on woody biomass, several federal
agencies, particularly the Forest Service, provide grants for woody
biomass use.

However, federal agencies must take care that their efforts to assist
users are appropriately aligned with the agencies' own interests and do
not create unintended consequences. For example, while individual grant
recipients might benefit from using woody biomass-through fuel cost
savings, for example-benefits to the government, such as reduced thinning
costs, are uncertain. Without such benefits, agency grants may simply
increase outlays but not produce comparable savings in thinning costs. The
agencies also risk adverse ecological consequences if their efforts to
develop markets for woody biomass result in these markets inappropriately
influencing land management decisions. As noted in our prior report on
woody biomass, agency and nonagency officials cautioned that efforts to
supply woody biomass in response to market demand rather than ecological
necessity might result in inappropriate or excessive thinning.

10Stewardship contracting involves the use of any of several contracting
authorities on the part of the Forest Service and Interior's Bureau of
Land Management. See GAO, Federal Land Management: Additional Guidance on
Community Involvement Could Enhance Effectiveness of Stewardship
Contracting, GAO-04-652 (Washington, D.C.: June 14, 2004).

                            Concluding Observations

Drawing long-term conclusions from the experiences of users in our review
must be done with care because (1) our review represents only a snapshot
in time and a small number of woody biomass users and (2) changes in
market conditions could have substantial effects on the options available
to users and the materials they choose to consume. Even so, the variety of
factors influencing woody biomass use among users in our review-including
regulatory, geographic, market-based, and other factors-suggests that the
federal government may be able to take many different approaches as it
seeks to stimulate additional use of the material. Because these
approaches have different costs, and likely will provide different returns
in terms of defraying thinning expenses, it will be important to identify
what kinds of mechanisms are most cost-effective in different
circumstances. In doing so, it also will be important for the agencies to
take into account the variation in different users' needs and available
resources, differences in regional markets and forest types, and the
multitude of available alternatives to woody biomass. If federal agencies
are to maximize the long-term impact of the millions of dollars being
spent to stimulate woody biomass use, they will need to design approaches
that take these elements into account rather than using boilerplate
solutions.

Mr. Chairman, this concludes my prepared statement. I would be pleased to
answer any questions that you or other Members of the Subcommittee may
have at this time.

                     GAO Contact and Staff Acknowledgments

For further information about this testimony, please contact me at (202)
512-3841 or [email protected]. David P. Bixler, Lee Carroll, Steve Gaty,
and Richard Johnson made key contributions to this statement.

(360703)

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and methodology, click on the link above.

For more information, contact Robin M. Nazzaro at (202) 512-3841 or
[email protected].

Highlights of GAO-06-694T, a testimony before the Subcommittee on Forests
and Forest Health, Committee on Resources, House of Representatives

April 272006

NATURAL RESOURCES

Woody Biomass Users' Experiences Provide Insights for Ongoing Government
Efforts to Promote Its Use

The federal government is placing greater emphasis on thinning vegetation
on public lands to reduce the risk of wildland fire. To help defray the
cost of thinning efforts, it also is seeking to stimulate a market for the
resulting material, including the smaller trees, limbs, and brush-referred
to as woody biomass-that traditionally have had little or no commercial
value. As GAO has reported in the past, the increased use of woody biomass
faces obstacles, including the high cost of harvesting and transporting it
and an unpredictable supply in some locations. Nevertheless, some
entities, such as schools and businesses, are utilizing the material,
potentially offering insights for broadening its use.

GAO agreed to (1) identify key factors facilitating the use of woody
biomass among selected users, (2) identify challenges these users have
faced in using woody biomass, and (3) discuss any insights that these
findings may offer for promoting greater use of woody biomass.

This testimony is based on GAO's report Natural Resources: Woody Biomass
Users' Experiences Offer Insights for Government Efforts Aimed at
Promoting Its Use (GAO-06-336).

Financial incentives and benefits associated with using woody biomass were
the primary factors facilitating its use among the 13 users GAO reviewed.
Four users received financial assistance (such as state or federal grants)
to begin their use of woody biomass, three received ongoing financial
support related to its use, and several reported energy cost savings over
fossil fuels. Using woody biomass also was attractive to some users
because it was available, affordable, and environmentally beneficial.

Several users GAO reviewed, however, cited challenges in using woody
biomass, such as difficulty obtaining a sufficient supply of the material.
For example, two power plants reported running at about 60 percent of
capacity because they could not obtain enough material. Some users also
reported that they had difficulty obtaining woody biomass from federal
lands, instead relying on woody biomass from private lands or on
alternatives such as sawmill residues. Some users also cited increased
equipment and maintenance costs associated with using the material.

The experiences of the 13 users offer several important insights for the
federal government to consider as it attempts to promote greater use of
woody biomass. First, if not appropriately designed, efforts to encourage
its use may simply stimulate the use of sawmill residues or other
alternative wood materials, which some users stated are cheaper or easier
to use than woody biomass. Second, the lack of a local logging and milling
infrastructure to collect and process forest materials may limit the
availability of woody biomass; thus, government activities may be more
effective in stimulating its use if they take into account the extent of
infrastructure in place. Similarly, government activities such as awarding
grants or supplying woody biomass may stimulate its use more effectively
if they are tailored to the scale and nature of the targeted users.
However, agencies must remain alert to potential unintended ecological
consequences of their efforts, such as excessive thinning to meet demand
for woody biomass.

Examples of Woody Biomass Users GAO Reviewed
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