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New plan aims to build wood pellet mills in Northern Minnesota

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DEER RIVER, MN -- The forest industry is struggling in Minnesota's north woods.

According to the DNR, in the last 15 years, more than 150 of the state's lumber mills have closed.

It is due to evolving technologies, new forms of energy and growing competition in other parts of the country.

Most recently, the pandemic led to the shuttering of Verso in Duluth.

However, there is a new proposal aiming to transform, and maybe even revive Minnesota's forest industry. Wood pellet plants.

Matt Rajala is the plant manager of Rajala Timber Company near Grand Rapids.

It is a sawmill that has been in his family for four generations,
churning out lumber for home building and other industries.

But Rajala is concerned the fifth generation will have to find a different line of work.

"Companies this size are getting really rare. They're definitely not starting and we're shrinking," said Rajala.

Those struggles are due in large part to a trend across the country, and right down the road.

"This was directly tied to our paper market here in the Grand Rapids area and a cogen facility," said Rajala. "They've made the decision to go to strictly natural gas."

Fewer companies are burning and utilizing the leftover bits of wood that pile up around lumber mills, resulting in giant mounds all over the timber yards. That material is called residuals, and the market for them is shrinking.

"It leaves us with stockpiles of things with which we don't know what to do," said Rajala.

But there's a new proposal to help the lumber mills unload the residuals and capitalize on growing demand overseas.

An initiative called NorthStar Pellets is backed by several timber companies and at least one economic development group in Northern Minnesota.

It calls for the construction of one or more wood pellet plants in the Grand Rapids and Bemidji areas, close to existing lumber mills.

The pellets would be made of those piles of sawmill residuals.

"The rest of the world has decided wood pellets are part of reducing the carbon footprint," said Marty Goulet, Director of Highland Pellets.

Highland Pellets is the company that would build the plants.

Highland already operates a large pellet facility in Arkansas and wants to do the same here, shipping the final product overseas where demand is growing.

"So foreign governments have provided incentives to move from coal to wood," said Goulet. "Asian coal plants are being incentivized by the government to convert fully, or use some pellets."

"Wood makes sense from a climate change perspective," said Greater Bemidji Forestry Director, Peter Aube. "The wood has already been harvested and transported and processed through a mill, so the carbon has already been spent."

So a lot of wood harvested across Northern Minnesota and Northern Wisconsin, then processed at Potlatch in Bemidji or Rajala in Deer River, would later head to Japan in the form of pellets.

"This is an opportunity to build an industry in Minnesota," said Goulet.

Goulet says the current plan would create 245 direct and indirect jobs, generating $57 million per year for Minnesota.

But the company is also asking for help from the state
in the form of $2.5 million per year for 10 years, and it seems the timing for that is not ideal.

"I support the project completely," said DFL Senator David Tomassoni. "Whether we have the money to do it is the question."

"Now we're looking at a $2.5 billion deficit, so i just see it as a tough push," said DFL Representative Rob Ecklund.

Tomassoni and Ecklund are two of the lawmakers who will decide whether to give NorthStar Pellets the money and green light.

They say the pandemic is eating into the state budget, and the ability to invest in pellets.

"It's a no-brainer of a project if there's no subsidy, but the big subsidy makes it a bit of a problem," said Senator Tomassoni.

Meanwhile back at Rajala, they are trying to figure out what to do with a product they are unable to sell.

"Spending real money that we don't have trying to stockpile, move and store these piles," said Rajala.

The family business -- hoping and waiting for a future with pellets.

"I'd hate to think of the consequences of this not panning out," said Rajala.

There are currently no pellet plants in Minnesota, but many in Wisconsin and Michigan, and more are popping up in western Canada, as the overseas market grows.

As for what comes next for the NorthStar Pellets proposal, the project and money it needs will likely go before the State Legislature during the next session.

It does have some republican support as well.

Project leaders say if they got the green light, a pellet plant in the Grand Rapids or Bemidji area could be built and running within 18 months.

We will keep following the progress.

Dan Wolfe

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