From the Director's Desk:
Dusting Our Broom (April Data)
One aspect of data sets that report things that already happen is that they bring into sharp focus events that have already transpired. The latest installment of the Monthly Densified Biomass Report offers a fully articulated look at a heating season that all of us are ready to officially put in the rear-view mirror. April feels like the end of the heating season to me. It is presumable that any pellets sold in April found themselves burned that heating season whereas any pellets sold in May seem destined for use in the upcoming heating season. So what did the data tell us? Overall sales for the entire country were off about 20% compared to the six-year average with only the East holding serve with normal April volume with sales of 62,398 tons. The West had a particularly light April with just 13,504 tons against an April average of 17,625. That isn’t as jarring as the departure from last year’s sales total of 21,888 tons or 2020s 25,007 tons, but those years are outliers.
Through April U.S. sales totals are 371,184 tons, well off the six-year, first four-month average of 540,186 tons. Production data would suggest that despite historically soft sales in the first trimester of the calendar year, producers haven’t curtailed production in any significant way. Production through April is 520,207 tons against a six-year average of 502,222. It would seem producers are unphased by last year’s mild winter and are bracing for the ramifications of even a normal winter set into the context of historically high heating oil prices. Stories of brisk wood pellet appliance sales in the northeast are bubbling up throughout the wood pellet network and I think confidence is high that wood pellet sales will rebound, so long as this year’s Heating Degree Day (HDD) totals hew anywhere close to historic norms. More difficult to discern but certainly a factor in production totals is the demand being felt from Europe as the subcontinent works to replace Russian wood pellet volumes lost to global sanctions.
U.S. pellet inventory levels have been building steadily since the “low fuel light” came on in early 2020. The sector is already approaching last July’s high water mark of 304,185 tons with April inventories reported at 297,115 tons. The late spring/early-summer inventory build has evolved since 2016. Just a handful of years ago, May-July saw producers regularly add 100,000 tons or more to inventory levels. More recently, producers have shown a reluctance to really pile it on in those months. A comparison of 2019 and 2021 illustrates the point. From May to June, inventory in 2019 swelled by 125,000 tons. Last year, the sector added just half that volume showing a resistance to eclipsing the 300,000-ton mark. Prediction time: I suspect production and the inventory build will look more like 2019 than 2021. I wouldn’t be surprised with a high water mark this July approaching 400,000 tons. This should go a long way in shoring up retailer confidence that if Old Man Winter comes to party this year, our sector will be prepared.
A Predicted Setback in Our Tax Credit Effort
Just as the last edition of the Pellet Wire landed in email boxes two weeks ago, Senator Joe Manchin indicated that he continues to have little appetite for the Build Back Better-Lite spending plan being pursued by the Biden White House. The Build Back Better-Lite spending package was the administration’s revised spending package that excised many of the spending proposals being pursued by the administration leaving health care, infrastructure and climate change and clean energy provisions. This spending package was one of the vehicles by which we could have seen the wood pellet appliance tax credit extended and expanded. That said, in our conversations not only with Senator Manchin’s staff but also during a conversation with Senator Mike Crapo (Idaho) we learned weeks ago that while there is support for our tax credit on its own merits, that didn’t necessarily translate into support for the whole Build Back Better-Lite enchilada. I’m learning that spending packages tend to be more of a package deal as opposed to an a la carte menu.
The NPR story attached in the industry news section is worth your time and contains some quotes from Senator Manchin that leave me largely optimistic. Consider this quote from the story:
“Manchin also said he saw progress on the climate side of the talks, despite disagreements about the magnitude of fossil fuel cuts, and he wanted to look at passing a bill in September. He added he did not want to stop future negotiations.”
I’m also emboldened by quotes from Senator Ron Wyden in the story. We had a member call with staff from the Wyden office and know that the Senator supports our tax credit and understands the importance of wood pellet manufacturing in Oregon. I’m confident we’ve been talking to the right folks at the right time and that when discussions about how to support home-grown clean, renewable energy reboots in September we will be top of mind.
THIS JUST IN!
I’m going to leave the preceding section in the Pellet Wire because I think it serves as a great illustration of how quickly things can change in federal advocacy. Yesterday (Wednesday, June 27) I authored the section above, with a high degree of certainty that we would very likely have to wait until September or October and a tax extenders package to see any action on the wood pellet appliance tax credit expansion and extension. Yesterday just as the business day wound down I received a phone call from our colleagues at O’Neill and Associates that Senator Joe Manchin (WV) and Senator Charles Schumer (NY) had announced they had reached a deal on a climate, health care, and tax package. While we do not yet know the specifics of what is included in the deal, there is real cause for optimism. Next week the Senate will take up the bill and likely move to a vote. We are hopeful that our outreach efforts to key Senators, including Senator Manchin were well timed and compelling enough to see the residential tax credit included in this package. I have added a CBS News story announcing the deal in the Industry News section of the Pellet Wire. The PFI will be watching this development closely and we will issue a special alert when we learn what exactly is in the bill and if our legislative asks were included.
Government Relations Committee Seeking Members
In the context of the PFI actively engaging in a targeted federal policy action, the PFI Board of Directors directed me to reestablish an active Government Relations Committee. The reality is our organization is always engaged with federal and state governments because our industry operates in those jurisdictions. An active Government Relations committee is a way of formalizing the PFI’s efforts to monitor, act and react to state and federal policy and regulatory matters that impact wood pellet producers. Many of you have been engaged in active government relations efforts periodically via our fly-ins and most recently our spring Senate outreach efforts.
I’m actively seeking members who would like to formalize their participation in the PFI’s government relations work. Please consider committing some time to this important discussion. The committee will meet monthly and participation in state ad federal outreach outside of the committee meeting should be anticipated. Please e-mail or call me directly and I will add you to the roster. I’ve included a short list of potential agenda items informed by active conversations and efforts that have crossed my desk in the last six months:
- Advocacy Effort to Extend and Expand the Wood and Pellet Heating Tax Credit
- Monitoring of Anti-Combustion Policies in International Building Codes
- Monitoring of Anti-Combustion Policies in State and Federal Governments or Wood
- Heat Exclusion in Renewable Energy Portfolios
- The PFI Standards Program and the NSPS
- Wood appliance stove testing protocols
—Tim Portz
Executive Director
