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Timber Talk 10/21/13

Posted By John Dorka, Monday, October 21, 2013
PUCO Testifies on "Balanced Energy Sources” for Ohio’s Future
Last week, PUCO Chairman Todd Snitchler testified in front of the House Policy and Legislative Oversight Committee and told the committee that Ohio should use a combination of coal, natural gas, and other cost-effective renewable and alternative energy sources to meet its needs in the future. By 2015, Ohio is expected to lose 6.5 GW of energy production due to closures of facilities for a number of factors, among them federal emissions regulations. He indicated that according to studies by PUCO staff, consumer rates could increase from 0.3% to 28.35% if coal-fired utility boilers are converted to combined-cycle natural gas turbines. He stated that US EPA regulations will not allow states to develop diverse portfolios that incorporate resources unique to a region. He argued that states must be able to keep all fuels, including coal, in the mix. From 2011 through 2016, the PJM region will lose 22,000 MW of production capacity due to plant retirements. In 2007, coal produced 55% of electricity; by 2012 it dropped to 42%. Over that same time, power from natural gas increased from 7% to 19%. Several other power experts testified at the hearing and essentially said that natural gas will be available at competitive rates in Ohio for years to come. However, one expert testified to be cautious with the conventional wisdom that the U.S. has "100-year supply of cheap natural gas.” Estimates are based on some preliminary and sometimes flimsy evidence. The purpose of the committee hearing is to review energy issues with the hope that the legislature will develop a bipartisan policy that creates a tax and regulatory structure for Ohio that encourages production of new baseload facilities

Ohio Medicaid Overhaul Remains Up in the Air
This past year, it has been an ongoing debate between the Kasich Administration and the legislature on reforming Medicaid in Ohio and easing eligibility standards for Ohio citizens that would allow nearly 250,000 to receive benefits, by increasing eligibility for those earning up to 138% of the federal poverty level. The administration is for easing the standards and proceeding as quickly as possible while the legislature prefers to take a slower approach and to look at a broader reform of the program. Recently, the administration elected to take the proposal outside the legislative process to the Ohio Controlling Board to get permission to proceed with spending federal money for the program expansion. The proposal goes before the Controlling Board (CB) on Monday, October 21. The CB is dominated by Republicans and many are trying to figure out how they will vote, in light of the legislature working on 3 bills dealing with Medicaid reform. The prevailing wisdom at the moment is that the CB will pass the proposal. The bills before the legislature include language involving the same proposal the administration is pushing, but they go much further with more comprehensive reform of Medicaid, with the intent of controlling current and future program costs. Some in the legislature are questioning the legality of expanding the program outside the legislative process. The law firm of Vorys, Sater, Seymour, and Peace LLC, who provides counsel to the Ohio Provider Resource Association says it is the firms opinion that the Ohio Controlling Board which will rule on the request has the authority to do so. Not talked about much in the debate is that if the change is approved, there could be a savings to state expenses due to funding coming from the federal government. This could pave the way for the Governor to discuss further tax reductions. Finally, as the meeting is looming, House Speaker Bill Batchelder (R-Medina) plans to replace two Republican members of the CB, Rep. Ron Amstutz (R-Wooster) and Rep. Cliff Rosenberger (R-Clarksville) with Rep. Ross McGregor (R-Springfield) and Rep. Jeff McClain (R-Upper Sandusky). Both Amstutz and Rosenberger were either opposed to the move or preferred that the CB delay a vote on the issue until the legislature could review and take action. Rep. McGregor is in favor of the expansion preferred delaying the vote.

Notes from the Hardwood Leader
The following are notes from the November 2013 issue of the Hardwood Leader, produced by Hardwood Publishing.

  • Heavy domestic purchasing will lead to tight supplies and higher prices through the remainder of the year
  • Export and domestic demand for 2014 is expected to increase strongly, but will be met with concerns over lumber shortages;
  • The government shutdown and debt ceiling crisis have been in the news for weeks; one Goldman Sachs economist says a shutdown could cut GDP by 0.5% which would amount to 20% of the projected 2.5% GDP for the year (not a high mark to begin with).
  • Hickory/Pecan is in high demand for rising domestic flooring markets and for export; through July 2013 Hickory exports were up 21% from last year. Half of exports go to China and a quarter to Mexico, where strong demand is expected to continue.
  • Appalachian Red oak prices have risen recently due to increased demand for exports, domestic flooring, and moulding and stair manufacturing. Rising prices are expected to increase through November as demand continues to rise.
  • White oak European exports increased earlier in the year and are expected to see better demand through the end of the year. However, exports to China and Vietnam were lower due to increased domestic demand and sales for residential use and truck flooring.
  • For Poplar, the Leader is predicting weaker pricing, but not due to weakening demand, which remains strong domestically and for export. Pricing will be stable due to balanced supply and demand.
  • In export markets, shipments to China in November are expected to set a record for November, if not an all-time monthly record. Shipments to Vietnam jumped up this spring and summer and that is expected to carry through the year. European hardwood exports are expected to be more robust in November and after the first of the year;
  • At the end of August, the annual inflation was running at 1.52%;
  • U.S. residential furniture factory shipments was $1.769 billion in July, up 9% from July 2012 and the highest July since 2007; Factory order backlogs were up 12% from last year so shipments should remain strong in the coming months;
  • U.S. wood furniture factory were $1.264 billion for the 3rd quarter 2013, a 5% decline from the same period in 2012; imports comprised nearly 75% of the residential wood furniture sales for the first half of 2013, an increase from 2012;
  • August 2013 existing single family home sales were 13% higher than August 2012 and up 24% from August 2011;
  • Pending home sales declined in August although still 5.8% higher than August 2012; the August decline was the third month of a decline trend;
  • Mortgage rates declined in September due to a looming federal shutdown and concerns about the debt ceiling, as well as because the Federal Reserve continued buying mortgage backed securities;
  • Sept. job gains were 166,000 but below expectations; Ohio was among the 8 top states for producing new jobs (FL,TX, SC, WA, NC, IN, OH, and UT);
  • The consulting firm Mann, Armistead, and Epperson forecasts that 2014 will be the best year for the U.S. furniture industry since 2006. The company cites increased employment, household creation, household mobility, household net worth, home sales, remodeling, and credit availability as reasons for the expected surge. The company expects upholstered furniture to show the majority of the gains, with wood furniture manufacturers gaining slightly. Many have already heard that Masco is closing the Merillat facility in Jackson, OH affecting nearly 200 jobs. The move was taken due to increased efficiencies at other company facilities.

NCASI Study on Greenhouse Gas Benefits of Biomass Manufacturing Residuals for Energy
The National Council for Air and Stream Improvement (NCASI) recently released its bulletin Greenhouse Gas and Fossil Fuel Reduction Benefits of Using Biomass Manufacturing Residuals for Energy Production in Forest Products Manufacturing Facilities (Technical Bulletin 1016), and it shows the greenhouse gas reduction benefits of using manufacturing residuals for energy in the forest products industry. In a summary paper released by the American Forest & Paper Association (AF&PA), it states that each year, the burning of manufacturing residuals in forest products facilities avoids the emission of 218 million metric tons of CO2. This is equivalent to taking 40 million cars off of U.S. highways. It further concludes that compared to fossil fuels, the reduction benefits are realized in less than a year; and even more, compared to disposing of the residuals, the cumulative greenhouse gas benefits are lower in 2.4 years when burning. You can find the full report on-line here and a copy of the AF&PA summary here.

Kentucky Approves Contract for Biomass Energy
The Kentucky Public Service Commission (KPSC) approved a contract that would allow Kentucky Power to purchase energy from a proposed eastern Kentucky biomass power plant in Hazard, KY owned by ecoPower. Here is an article about the KPSC approval and another article that provides more explanation about the project. Interestingly, Kentucky has no renewable portfolio standards in place so utilities are not required to purchase energy from renewable sources. In addition, it appears that electric rates in the state are expected to rise to pay for the new energy generation. The actions are being driven by the imminent closure of the coal-fired Big Sandy Power Plant in 2015. Woody biomass is expected to be the fuel source for the new power plant.

Former Ohio Farm Bureau Lobbyist Larry Gearhardt Now with OSU Extension as Field Specialist for Taxation
Larry Gearhardt worked for many years as a lobbyist with the Ohio Farm Bureau and often worked with OFA on many issues. Larry left Farm Bureau last year to spend more time farming in western Ohio, but he has also accepted an appointment with OSU Extension working on Agricultural Income Tax issues. He will be the OSU Income Tax School Director. Larry recently advised that as part of his teaching agricultural tax issues, his instruction will include timber tax education for forest landowners. He is working on curricula now but plans to offer classes in the near future. In the meantime, you can visit the Income Tax Schools website to see what kind of training is offered as well as register for upcoming classes. You can also contact Larry directly at

Federal Shutdown is Over
On Wednesday, October 16, both the House and Senate voted to approve an agreement to "re-open” government and to set the stage for dealing with the national debt. The deal funds government through January 15, 2014 and lifts the debt ceiling until February 7. The deal calls for a conference committee of House and Senate Budget members to hammer out details on longer term debt and budget issues.

Webinar on Wood Product Declarations
The American Wood Council and the Canadian Wood Council are cooperating on a webinar on Wood Products and Environmental Products Declarations. The webinar is free and will be held at 12:00 noon, eastern time, November 12, 2013. You can register on-line here. Here is the statement on the registration form explain the purpose: "Company executives, mill managers, and sales and marketing staff are invited to learn about the latest information regarding EPDs. Recently-released EPDs for lumber, plywood, OSB, glulam, LVL, I-joists and redwood decking can help distinguish product advantages and facilitate product improvement, as well as support specifiers and customers to make informed product selection decisions to comply with ‘green’ codes, programs, and rating systems.”

Upcoming Events:

  • Northwest Ohio Logger Chapters Charter Meeting, October 22, 2013, Findlay, Ohio. Last Call! This is the organization meeting for the newly-forming Northwest Ohio Loggers Chapter. All loggers who may be interested in becoming a Master Logger and joining the chapter are welcome to attend. There will be drinks and food at 5:30 followed by a meeting at 6 pm to discuss details. The meeting will be held at the ODNR District Office in Findlay. See the OFA website for more information.
  • Best Management Practices Training, October 24, 2013, Scioto Trail State Forest. See the OFA website to register and get more information. Spaces still open
  • CSAW Level 1 Chainsaw Training, October 25, 2013, Scioto Trail State Forest. See the OFA website to register. Check with OFA, available registration spaces may be gone.
  • 4-Day Lumber Grading Short Course/1-Day Walnut Grading Short Course, November 4-8, 2013, Taylor Lumber Co., McDermott, Ohio. There will be a 4-day lumber grading short course conducted by NHLA Instructor Barry Kibbey from Nov. 4-7, followed by a separate 1-day walnut grading short course on Nov. 8, 2013 at Taylor Lumber Co. in McDermott. You are welcome to take either or both courses. If attending both, separate registration is required. To register, go to the OFA website. For those coming from a distance, there is hotel information available.

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