Definition of Biomass Clarified in North Carolina

In August 2007, the State of North Carolina became the second state in the South to implement a renewable electricity standard. (Texas was the first.) The standards were set at the following levels:

• 6% of 2014 North Carolina retail sales by 2015
• 10% of 2017 North Carolina retail sales by 2018
• 12.5% of 2020 North Carolina retail sales by 2021

A utility company may meet the requirements in one or more of the following ways:

• Generate electric power at a new renewable energy facility.
• Use a renewable energy resource to generate electric power at a generating facility (co-firing a renewable source with coal, for instance)
• Reduce energy consumption through the implementation of an energy efficiency measure (these savings can be used to meet up to 25% of the requirements through 2020, 40% in 2021 and beyond)
• Purchase electric power from a new renewable energy facility.
• Purchase renewable energy certificates derived from in-State or out-of-state new renewable energy facilities. Certificates can offset only 25% of the total requirement

According to the legislation, renewable energy source refers to any “ solar electric, solar thermal, wind, hydropower, geothermal, or ocean current or wave energy resource; a biomass resource, including agricultural waste, animal waste, wood waste, spent pulping liquors, combustible residues, combustible liquids, combustible gases, energy crops, or landfill methane,” but does not include “peat, a fossil fuel, or nuclear energy resource.”

In order to meet these standards, Duke Energy, North Carolina’s largest utility, began test firing biomass with coal at its Lee Steam Station coal plant in Williamson, SC and at its Buck Steam Station in Salisbury, NC in 2009. On March 1 of this year, Duke petitioned the NC Utilities Commission to register these stations as new renewable energy facilities. The renewable energy sources used by Duke varied. At the Lee Steam Station, in-woods chips were sourced from local loggers and may have included both wood waste and whole trees. At the Buck Steam Station, sawdust and chips derived from an on-site ash basin land clearing project were used.

As part of the regulatory process, other entities were given time to intervene and present arguments in support of, or against, Duke’s petitions. Among these interveners were the NC Farm Bureau Federation, the NC Forestry Association, the NC Sustainable Energy Association, the Environmental Defense Fund, the Southern Environmental Law Center and MeadWestvaco.

Those opposed to Duke’s petitions, led by the Environmental Defense Fund and the Southern Environmental Law Center argued that the Duke facilities should not be considered renewable energy facilities, since the biomass they were using was not consistent with the definition of biomass (above) and because the whole trees that made up a portion of their wood fuel were not renewable resources.

At the heart of the decision was the definition of biomass, specifically the section highlighted above, “a biomass resource, including agricultural waste, animal waste, wood waste, spent pulping liquors, combustible residues, combustible liquids, combustible gases, energy crops, or landfill methane.“ Opponents argued that the NC legislature intended the list of biomass sources that follows the word including was exhaustive.

According to the findings of the commission, however, the case law on this is clear: “the use of the word ‘including’ indicates that the specified list...that follows is illustrative, not exclusive,” and “by use of the word ‘including’ the lawmakers intended merely to list examples..., but not to exclude others equally well known.” In addition, the commission found that had the legislature intended to preclude the use of whole trees, it would have included them in the list of exclusions with “peat, a fossil fuel, or nuclear energy resource.”

Based on basic scientific information from Bob Slocum of the NC Forestry Association, the commission also rejected the argument that whole trees that may be used as part of Duke’s fuel mix are not available on a renewable and recurring basis. Once harvested, trees regenerate naturally. Duke has opted to take a more proactive approach, however. In its findings, the Commission summarized the testimony of Duke Energy:

• “To assure sustainability in fuel supply, such that the wood biomass fuel would be available on a renewable and recurring basis, Duke has specifically sized (in terms of capacity) its proposed biomass projects...Duke commissioned a fuel supply forecast for the life of the repowered asset, which applied specific constraints related to the volume of material and associated pricing that could be sustainably supplied while maintaining 2008 harvest levels for existing users and without impacting the economic viability of any existing user of forest resources within the relevant supply shed...Duke’s intentional constraints on its fuel supply forecast in this manner provided an explicit sustainability function from both an economic and environmental perspective as both existing uses and previous harvest levels acted as clear limits on fuel supply procurement for the project.”
• “As an end-user of forest resources in NC, Duke will support the sustainability of forest resources by paying the assessment on primary forest products that is remitted to the State for inclusion in the NC Forest Development Program, ...a reforestation cost-sharing program through which a landowner is reimbursed for a portion of the costs of site preparation, seedling purchases, tree planting, release of desirable seedlings from competitive vegetation, or any other work needed to establish a new forest on his or her land after harvesting."

Ultimately, the Commission found that Duke had taken the steps necessary to ensure the sustainable availability of affordable wood fuel, had strategically sized and located its operations to reduce impacts on existing users and had explored opportunities to invest in energy crops and trees to help fuel its operations. As a result, they approved Duke’s petition to classify the plants as renewable energy facilities, using a fuel mix that includes both forest residues and whole trees.

It remains to be seen how widely this favorable ruling for biomass energy in North Carolina will resonate. As more states throughout the South are currently considering renewable electricity portfolio standards, the timing of the Commission’s decision could be fortuitous.

In the meantime, those concerned that whole forests will be razed in order to supply Duke with biomass can rest assured that this decision will not lead to the wholesale clearcutting of the state’s forests. Unless mixed with lower cost fuel sources (logging slash, tops and limbs, bark, mill residues, etc.), whole trees quickly become too costly. In addition, selling small diameter logs to pulp and paper companies and to small-dimension lumber mills is a much more lucrative proposition. Selling large diameter trees to mills manufacturing wood products is even more lucrative, a fact which incentivizes landowners to allow trees to grow to maturity. Forest landowners will not be willing to forego these bigger paydays for the smaller returns of biomass.

Read the entire NC Utilities Commission decision.