Texas city officials call potential Millinocket pellet mill producer ‘an asset’

The interior of the pellet manufacturing facility in Crockett, Texas, whose owner, Zilkha Biomass Energy, will provide the technology for a proposed pellet facility in Millinocket.
Crockett Economic & Industrial Development Corporation | Crockett Economic & Industrial Development Corp.
The interior of the pellet manufacturing facility in Crockett, Texas, whose owner, Zilkha Biomass Energy, will provide the technology for a proposed pellet facility in Millinocket.
By Nick Sambides Jr., BDN Staff
Posted March 08, 2014, at 2:13 p.m.

Like many East Texas lumber towns, the city of Crockett has for years been losing its battle against the impact of government-subsidized Canadian wood products flooding the U.S. housing market, former City Administrator Ron Duncan says.

Then, Duncan says, Zilkha Biomass Energy came to the city. The company opened its first commercial black pellet plant in October 2010 in a former furniture factory on the outskirts of the town named after Davy Crockett, which is the seat of Houston County and 120 miles north of Houston.

Zilkha hired about 50 people — a nice number, Duncan said, for a town of about 6,900 — and began making pellets around the clock for European electricity producers seeking an enviro-friendly coal substitute. Its goal was to consume from the pine and oak forests surrounding Crockett about 750,000 tons of wood wastes annually, enough by most economic studies to support at least four jobs indirectly for every direct job the company created.

Today, the company is the town’s ninth-largest employer with 23 workers, according to Crockett Economic & Industrial Development Corp. website, crockett.org. Duncan says that when he left town for another job in May 2013, Zilkha had laid off workers because it had problems shipping its product overseas.

“There was supposed to be a big market for their pellets in Europe,” Duncan recalled Friday. “To the day I left, we had high hopes that whatever the problem was at the receiving port would be cleared up and their production would pick up again.”

‘An asset for us’

Fledgling pellet producer Cate Street Capital jarred some Katahdin region officials this week when it announced that Houston-based Zilkha had effectively become Cate Street’s new partner in plans to open New England’s first torrefied wood facility in Millinocket later this year.

Finance Authority of Maine staff members reported the changes at FAME’s Feb. 20 board of directors meeting. Cate Street spokesman Scott Tranchemontagne described Zilkha’s pellet-manufacturing process as “steam exploded.” It wasn’t clear whether torrefaction is involved.

Crockett Interim City Manager Mitzi Thompson and Chris von Doenhoff, president of the board of directors of Crockett’s development corporation, were also surprised to hear of the partnership.

They described Zilkha as a good corporate neighbor — quick to respond to complaints, well-financed and organized, but not close to being one of the larger employers in Crockett, . During the Crockett mill’s design and permitting phases, Zilkha officials attended city council meetings regularly and answered questions readily, Thompson said.

“They are an asset for us, although I haven’t really dealt with them,” Thompson said. “They pay their bills on time.”

According to the company website, zilkha.com, the company is dedicated to pellet manufacture and also supplies pellet burners. Crockett operation can produce 40,000 tons of pellets annually and functions “supply test volume to potential customers.” It has “shipped pellets to over a dozen utilities in Europe and North America for use in coal-fired power plants.”

In May 2010, Zilkha bought a 500,000-metric-ton-per-year pellet plant in Selma, Ala., at a bankruptcy auction. This plant has 15 pellet mills and had been operating for less than two years. Zilkha Biomass Selma will be commissioned in late 2014 as a 275,000-metric-ton black pellet plant as the company’s first full-scale commercial black pellet plant, the site states.

“They are a well-financed company, not by any means a fly-by-night operation,” Duncan said. “They have a pretty good, solid group of engineers and people that understand the wood-process business, so on the face of it, I would say that Zilkha would probably be a very good corporate partner simply because of my experience with them in the engineering of the plant, the initial set-up.”

The company’s co-owners, Selim K. and Michael Zilkha, worked in retail and wind energy for decades before transitioning to biomass pellet manufacture, the company’s website state. Both from 1998 to 2005 founded and ran Zilkha Renewable Energy, which Goldman Sachs bought and renamed Horizon Wind Energy LLC of Texas in July 2005.

Horizon’s attempt through subsidiary Aroostook Wind to build an 800-megawatt wind-to-energy industrial site in Fort Kent apparently halted when the Maine Public Utilities Commission formally dismissed a $625 million power grid expansion necessary to support the project in February 2009.

From 1960 to 1982, Selim Zilkha founded and ran Mothercare, PLC, a retail chain catering to mothers-to-be and small children in Great Britain, Europe and the U.S. Michael Zilkha owned and ran ZE Records, a New York-based record label, from 1978 to 1986, according to the website.

“They were people who who did their homework,” Duncan said.

A bad odor

The only problem Crockett officials have had with Zilkha, Thompson said, was an odor that came from the mill’s stacks shortly after it started production. Some of the mill’s neighbors complained about it. Zilkha largely fixed the problem by installing a filtration unit on the stack.

“The Zilkha company worked hard to eliminate that odor,” Thompson said. To me, I used to live in Louisiana by a creosote plant, so the smell didn’t bother me, but people who lived near it didn’t like it. We don’t hardly notice it now except on windy days.”

“It wasn’t process as much as product, material. At the time, if they used a certain type of wood, they had an odor,” Duncan said.

A ‘revolutionary’ pellet

The officials described the jobs as well-paying but could not supply salary figures. Most jobs listed on the Crockett economic development site listed per-hour wages in the single and double digits.

A press release Zilkha issued last month hints at a potential solution to the marketing problems Duncan saw. Zilkha and Finland-based Valmet — which describes itself on its website as a “leading global developer and supplier of services and technologies for the pulp, paper and energy industries” employing 11,000 people — signed a five-year agreement to bring steam-exploded black pellets to market, according to the company’s website.

Valmet’s net sales in 2012 were approximately 3 billion euros or $3.38 billion, according to valmet.com.

Zilkha describes steam-exploded black pellets as being more durable, water-resistant, energy efficient, and easier to ship than other bio-based pellets, calling the pellet “a revolutionary advancement in the pellet industry.”

Other forms of pellets can disintegrate when exposed to moisture, but black pellets’ water-resistance allows them to be shipped like coal. “This significantly reduces, or even removes, the need for expensive investments in logistics and plant rebuilds,” the site states.

Thompson and von Doenhoff didn’t know how much in property taxes the company pays. Zilkha’s CEO, John B. Holmes Jr., did not return requests for telephone interviews on Thursday and Friday.

“The only thing I can say is, those jobs weren’t there when they came to town,” von Doenhoff said, adding that Crockett’s unemployment rate hovers a little over 10 percent annually. “As far as I know, they have been a responsible corporate citizen. We’re glad they are here.”

 

http://bangordailynews.com/2014/03/08/news/penobscot/texas-city-officials-call-potential-millinocket-pellet-mill-producer-an-asset/ printed on December 25, 2014