The Eastport Port Authority has taken a significant step forward in finally being able to export wood chips through the port with agreements that will allow for the completion of the phytosanitation equipment necessary to export into the European market. Financing for the equipment has been the key missing link in being able to proceed with the project. With the board's action, it's expected that the first trial shipment will take place this spring.
      At its December 19 meeting, the port authority board approved motions so that it will hold the license to the new  phytosanitation technology and will be able to obtain $1.65 million in state financing to complete the shipboard heat-treating system. The board then agreed to contract with a firm to finish building it. The port authority will sign an agreement with Phyto-Charter LLC, which currently holds the license, to have the exclusive license to develop, build and deploy the phytosanitation equipment at the port of Eastport. Under the agreement, the equipment cannot be used at any other location during a term that is the same length as the term for repaying the state's loan to build the equipment C either 10 or 15 years.
      Phyto-Charter will receive a royalty fee of 50 cents a ton when wood product is moved through the port using the phytosanitation equipment. The port authority also will be purchasing the equipment that has been partially completed at Nyle Systems in Brewer for $50,000. The equipment is worth approximately $500,000.
     While Phyto-Charter invested a considerable amount of money to develop the equipment, Chris Gardner, the executive director of the port authority, says it was "difficult to attract new capital into this, because it's never been deployed full scale. It was hard to get a financing package." The delays that have been encountered in shipping wood chips for the past several years have occurred because of the difficulty in acquiring the funding to finish the project. "The design is already completed and perfected to get a passing grade from the USDA," says Gardner. "This takes it out of the laboratory and puts it on the pier."
      Phyto‑Charter's innovative shipboard heat-treating system operates as the vessel is being loaded. Gardner says the phytosanitation equipment provides the most cost-effective means of heat-treating wood chips, which is necessary to meet the European Union requirements aimed at preventing the spread of the pinewood nematode. "You're just treating what you're selling," he explains. "Otherwise, you're treating mass quantities and selling a portion. There's a limit before it needs to be done again. This eliminates that rehandling of materials."
     According to Gardner, the Maine Department of Transportation (MDOT) agreed to provide a $1.65 million loan to finance the construction of the equipment because it "recognizes what this offers the forest products industry as a whole." He praises the department, especially Commissioner David Bernhardt and Deputy Commissioner Jonathan Nass, for their assistance. And he says he's proud that the port authority "has been out in front" in being able to ship wood chips, with the completion of the bulk conveyor system in 2012. "With the collapse of the forest products industry in Maine, if we were starting today, the industry couldn't hold on."
      Concerning the loan, Deputy Commissioner Nass says that MDOT tries "to make smart investments that help the economy of the state. We think this will help both the port and the region." The exporting of the low-grade wood will help the forest products industry because it makes the entire wood-harvesting process more economical.
      While the private sector will need to find the markets for the wood chips, Nass notes that MDOT believes "there is an excellent chance they will do that. We're just helping with the infrastructure."
      As for the port authority's role, Gardner observes, "If we are going to take the risk, then we are going to own the technology." The port authority will pay back the loan by assessing a $1 per ton tariff on chips that are phytosanitized and shipped through the port. The phytosanitation equipment should be ready to be deployed at the port in March, but the state "has given us to March 2018 to actually start making payments," Gardner notes. "We should be able to pay off the loan in an accelerated fashion."
      At the December 19 meeting the board also approved having four contracts signed with Player Design Inc. of Presque Isle to finish the construction and to deploy the equipment.
      Concerning the risks that the port authority is taking on, Gardner says the only risk is if the technology doesn't work. However, all of the engineers and designers, including Player Design Inc., do not see any problems with the technology.
      Gardner expects that the first trial shipment, of perhaps 5,000 to 10,000 metric tons, will take place in early April. Full-size vessels can carry 25,000 to 35,000 tons, and Gardner would be happy with five vessels the first year. "Over 100,000 tons would be success," he says. He's hoping the port will be shipping a couple of hundred thousand tons a year. Gardner notes, though, that the port authority is mindful of the pressure on the local wood basket and the needs of the Woodland Pulp mill for wood. "This has to be co-beneficial with the mill. It needs to be a symbiotic relationship. We're very cognizant of that."
      The board also approved amending its lease agreement with Costigan Chip LLC to reduce the wharfage rate from $1 a ton to 50 cents for all wood chips that undergo the phytosanitation process. The reduction recognizes the significant investment that the Carrier family, which owns Costigan Chip, has already made in the phytosanitation equipment. Larry Carrier is a partner with Stephean Chute in Phyto-Charter. Gardner says that the rate reduction will not mean that the port authority will lose any money, but rather the port authority is trying to reduce the shipping costs, as he notes, "This is a large-volume, low-margin business."
       The shipments will be to the European market, with the port authority having been looking for a number of years at the biomass energy market there, both in Ireland and other countries. "There is a tremendous need" for chips in the European mid-range energy market, Gardner says. "The European market is being completely underserved" because of the European Union's requirement that wood be heat treated. "This will be the first shipboard heat treatment ever developed. Nobody's been able to figure it out to make it price competitive. We think we have done that. We think we'll open up the European market, especially here in Maine."
       Obtaining the financing to complete the phytosanitation equipment "is the step that has held us up for so long. We've never been able to clear that hurdle," says Gardner. Of now being able to ship wood chips into the European Union, he says, "This is the key that unlocks that door, for sure." He adds, "I didn't think the port authority's place was to take a capital position, but we recognized that if we don't do it, it may not get done."
       During the three- to four-year period the port authority has been trying to line up a market for wood chips, Gardner says he learned a great deal about the forest products industry in Maine. "We've been very methodical and very slow, which has been a source of frustration," he says. "It's been no small feat. We had to be very smart, we had to be very humble and we had to be willing to learn."
       The shipments will be "a tremendous boon" for loggers and truckers within a 100-mile radius of Eastport and also will provide more work for longshoremen at the port. While truck traffic to the port will increase, Gardner notes that the port had previously shipped 450,000 metric tons of wood pulp in some years but is now down 30% to 300,000 tons. "We anticipate the increase in traffic will still be under what we were at the height."
       But he points out, "We need to diversify. We're 30% down on our pulp." While the port authority appreciates the Woodland Pulp mill's shipments through the port, Gardner says, "We can't just depend on the mill to make our port work." But he says the larger picture is that "the forest products industry is suffering, suffering."
       Gardner observes that the wood chips will be from low-grade wood that was already being burned in biomass plants in Maine. "Being able to have a market for the 70% that is low-grade wood makes it possible to have markets for the 30% that is high-grade wood," he says. "We're not taking our best asset and sending it overseas." The woods are currently being underharvested, he says, with the state growing more trees than are being cut. "If we don't cut any, they'll kill each other off. A wall of wood is coming at Maine. If we don't find a market for low-grade wood, we're doing a tremendous disservice to the forests."
        Of the port authority's decision to go forward with the phytosanitation investment, Gardner says, "The real driver is the impact on the forest products industry will be tenfold compared to our port. There are no markets for the vast majority of the tree species in Maine. This goes well beyond our port. We're helping the renewable energy markets in Europe, helping the forests here in Maine and doing it in a way that's good for the economy."
Other action
       Also during the December 19 port authority board meeting, Gardner reported that the cost for Morrison Manufacturing Inc. (MMI) of Perry to construct the floats for the rebuilt breakwater will be $215,246 for 2017, since it's been agreed not to build the floats for the north side of the breakwater at this time. MMI's bid for those additional floats is for $98,850. The floats will be constructed at the former Guilford mill building owned by the city, and the city council, at its December 14 meeting, approved the leasing of the space. The port authority will be responsible only for any additional utility costs at the mill building. Following some discussion about insurance coverage, with the port authority having an agreement with MMI to use the space and MMI having insurance on its equipment, the board authorized Gardner to enter into a lease agreement with the city for the building of the floats.
       The board approved an operating budget for 2017 with $1,582,964 in income and $1,559,010 in expenses, for a net income of $23,954. Gardner noted that not only is the budget conservative, since it doesn't include any income from revenue streams such as wood chips or cruise ships, but it is also very fluid and will be adjusted after the first three months of the year. Also approved were a Coast Guard account budget with a net income of $18,852, which will be adjusted once a new 10-year agreement for the lease of the Coast Guard building is signed with the General Services Administration, and a harbor account budget of $14,779, which also will be adjusted later in the year once harbor berthing fees start to be collected again.
       Engine technicians from Texas have repaired the port authority's tugboat Ahoskie, with the cost expected to be under $20,000. Gardner noted that this result is good news, since earlier cost projections were much higher.
       Al Day, manager of Federal Marine Terminals's operations at the port, reported that 306,000 metric tons will be shipped through the port this year, with about 290,000 tons being wood pulp.