Sep 182013

By Nick Worth
Good Earth Power, a company based in the Sultanate of Oman, has purchased the assets of Pioneer Forest Products, the U.S. Forest Service announced last Friday. Along with the purchase of the company, the Forest Service announced the transfer of the Four Forest Restoration Initiative (4FRI) thinning contract from Pioneer to Good Earth.
The 4FRI contract was originally awarded to Pioneer Forest Products in May 2012 for thinning work on the Apache-Sitgreaves, Tonto, Kaibab and Coconino national forests.
The awarding of the contract to Pioneer proved to be a controversial decision at the time. Critics cited perceived flaws in Pioneer’s business plan, which called for building a $230 million lumber mill in Winslow, which would use the wood from the contract to make furniture and produce bio diesel from the waste products. The new firm’s plans also call for a lumber mill in Winslow.
Pioneer Forest Products then ran into trouble in securing financing for the project and delays resulted in starting the work.
Cal Joiner, Southwestern Regional Forester with the Forest Service, announced the sale of Pioneer and the transfer of the contract during a webinar last Friday.
In a press release issued immediately following the webinar, the Forest Service said the contract has been transferred from Pioneer Forest Products to Good Earth Power AZ LLC.
“As part of the novation (transfer) process, the Forest Service determined that Good Earth is both financially and technically sound to successfully perform the terms of the existing contract originally awarded to Pioneer. The Forest Service agreed to the novation proposal submitted by Pioneer and will recognize the transfer of the contract to Good Earth as part of its larger acquisition of Pioneer’s assets.”
The Forest Service also noted that Good Earth is now contractually obligated to carry out the terms and conditions of the phase one 4FRI stewardship contract, which remain the same.
The first task order to Pioneer was issued in April of this year and, according to the Forest Service, work is nearing completion on the treatment of 932 acres on the Apache-Sitgreaves National Forests.
As part of the novation agreement, the Forest Service will assess the performance of Good Earth based on the accomplishment of the current and future task orders.
According to the Forest Service, 4FRI seeks to accelerate restoration at landscape levels to restore the ecological resilience and function of 2.4 million acres of ponderosa pine forests. Over the lifetime of the contract, approximately 300,000 acres will be treated.
“There is no other project in this country that is pursuing forest restoration in such a rapid way,” said Joiner.
Kaibab National Forest Superintendent Mike Williams outlined the Forest Service position on the sale of Pioneer to Good Earth for the webinar audience.
“The Forest Service does not have the authority to approve the sale of one company to another,” said Williams. He added, however, that the government agency does have the ability to approve the transfer of the contract and that a novation agreement has been approved between Pioneer and Good Earth Power Global.
“We (the Forest Service) will issue additional task orders to Good Earth within the next few weeks,” Williams said, noting that additional orders covering up to 15,000 acres will then be issued to Good Earth.
Jason Rosamond, Good Earth’s Global CEO, said the company is a global organization focusing on sustainable projects. He said the company has no experience with forestry projects in the United States, but has extensive experience in Africa.
Rosamond said Good Earth has hired an experienced forestry company to carry out the actual logging operations, but declined to name the company, as they were still in negotiations, “but I can tell you they manage millions of acres across the U.S. and are on the Forest Service list of approved contractors.”
Williams added that the work will be monitored throughout the life of the project.
“There will be a Forest Service person on the ground daily to ensure the prescription is being followed,” said Williams. “We will be retaining one of the Pioneer employees who has extensive experience. We’re pleased to be retaining Marlin Johnson.”
“When we were first approached with 4FRI project we wanted to investigate if the same approach we use internationally would work in the U.S.,” said Rosamond. He outlined three parts of Good Earth’s plan for the 4FRI project that would be emphasized, the first being the forest and the preservation of the environment.
“We will work hand in hand with the Forest Service to protect the forest, prevent wildfires and help wildlife thrive,” Rosamond said.
The second emphasis will be on communities, said Rosamond.
“On the community side, we will focus on making sure local communities benefit from any projects we take on,” Rosamond said. “We will hire locally and use local resources in our projects.”
He said Good Earth plans to coordinate with local community colleges to find the personnel it needs for the work.
“Fifty percent of our profits will go back to the communities where we are located,” Rosamond said. “Not in cash, but in healthcare and education.”
Viability is the third part of Good Earth’s plan, Rosamond said.
“In order for this to be a sustainable project we need to make sure it is financially vialble,” he said, “so we reviewed every facet to make sure it was viable.”
Rosamond said Good Earth has a three-phase program that will allow it to do an optimized version of the 4FRI contract, and that it would employ all local management made up of experienced foresters.
The first phase will be to build a lumber mill.
“We will build a mill in Winslow,” said Rosamond. “We are looking at sites right now.”
He also noted the company would be looking at other mills already located in the area and would be making improvements.
“We’ll be buying a number of pellet mills and locating them throughout the forests,” Rosamond said and added, “We know there is an existing pellet mill and we will be talking with them.
“We will build a power plant using our technology and then other facilities,” Rosamond said. “We’re very excited about the project. We think this can actually change the entire region.”
He said the third part of the plan would be to implement biofuels production.
Johnson, formerly of Pioneer Forest Products, told the webinar audience that hard equity for the 4FRI project is required because of the current financial climate.
“Our goal has always been to bring wood processing technology to the area,” he said.
“When found we couldn’t do it financially, we put out the word that we would sell our interest to another company,” Johnson said. “We feel very good that we’re leaving 4FRI in good hands.”
Pascal Berlioux, 4FRI Stakeholder Group co-chair, said the group is looking forward to meeting with the new contractor at their earliest convenience.
“The 4FRI Stakeholder Group members have invested enormous amounts of effort, and will continue monitoring 4FRI progress on the ground, and insuring social and economic accountability by the contractor,” Berlioux said.
Asked if the contract change still involves the same business strategy, Rosamond said the product mix will be relatively similar.
“Our mill will not cost $230 million,” he said. “We will be building our own mill.
“You’ll see a slow and steady progression from phase 1 through phase three as we develop those products,” Rosamond said.
Referencing the part of Pioneer’s original business plan that called for the production of biofuels, Rosamond told the gathering at the webinar that aspect is “not tied into the financial viability of the 4FRI project.”
In response to a question, he also described the production process to convert biomass to biofuels.
“It’s clean green technology that takes any biomass material and converts it to fuel,” Rosamond said. He explained that heating the biomass to 1,000 degree Celsius converts it to a “blue gas,” which is cooled down and scrubbed with cleaners to become 99.9 percent pure hydrogen gas, which is then converted into bio fuel.
Asked if there were any downfall to having the project so far behind schedule, Williams conceded, “As much as we’d like to be ahead of our schedule, it is what it is and we’ll move ahead as quickly as we can.”
Roberta Buskirk of the Forest Service said task orders will be issued for 15,000 acres this year, 25,000 acres in 2014, and 30,000 acres the following year to get the project back up to speed and on schedule.
Winslow City Councilman Harold Soehner asked if there is a time frame on the building of the mill.
Rosamond replied the building would take place in two phases, the first being reviewing appropriate sites.
“Within three to six months we will have finished all work on sites and permissions, with the help of local officials,” said Rosamond. He then added the construction of a “lift and ship” mill will take up to 18 months.
In another press release issued immediately following the webinar, Forest Service officials said they have issued four new task orders in the 4FRI projects to Good Earth.
“The Alder Task Order for 1,307 acres on the Apache-Sitgreaves National Forests was issued on Sept. 9,” read the statement. The other three task orders total another 4,400 acres on the Kaibab National Forest, including the Dog Town Task Order for 1,716 acres, the KA Task Order for 1,047 acres and the Pomeroy Task Order for 1,646 acres.
Referring to the coming task orders, Rosamond said, “We are looking to be fully mobilized on those task orders by the middle of October.”