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Sawmill Project Planning - A Southwestern U.S. Case Study.

January 10, 2019

This blog post describes an ongoing Beck Group sawmill planning project.  Highlighted are the many considerations involved in the process; the unique challenges facing forest products businesses in the Southwestern U.S.; and opportunities for entrepreneurs to develop related businesses. 

 

Project Overview

The San Carlos Apache Tribe, located in Eastern Arizona, have a 1.8 million acre reservation with approximately half classified as timberlands or woodlands. 

 

During 2016, with assistance from The Beck Group, the San Carlos Tribe reached a settlement with the U.S. Government regarding mismanagement of Tribal resources including reservation timberlands.  As a result, improving forest health has become a focus area of Tribal leaders who recognized development of a modern sawmill as a tool for facilitating improved forest health through more active forest management and for Tribal economic development. Tribal leadership retained The Beck Group to begin developing a vision and a plan for a sawmill operation matched to the Tribe’s Ponderosa Pine timber resource, which comprises about 200,000 acres of the 1.8 million acre reservation total.

 

History

The San Carlos historically regularly harvested reservation timber to supply a sawmill located in Cutter, AZ (on the reservation), and to supply other regional mills with sawlogs and/or pulpwood.  The Cutter Sawmill was built in

the 1980’s with used equipment, some of which is now more than 60 years old.  It was designed to process large diameter Ponderosa Pine sawlogs – logs that now represent a small percentage of the standing timber available. And the mill is obsolete, in very poor condition, and has not operated on a consistent basis for several years.  Consequently, the Tribe has not been able to maintain a regular timber harvest program needed to thin and actively manage its forests.

 

The Challenges

In developing a viable sawmill business plan for the San Carlos Tribe, we faced several challenges, including:

  • Sawmill Scale Is Limited by the Timber Resource – the amount of saw timber from the Tribe’s Ponderosa Pine forest is limited (less than 10 million board feet per year), and there are no other reliable sources of timber in the area as most of the surrounding land is in National Forests, which harvest very little timber.  As a point of reference, new pine mills now under construction in the Southeastern U.S. are targeted to produce more than 300 million board feet per mill per year.  A Tribal mill’s disadvantage in economy of scale is a key issue.

 

  • Wide Range in Log Size – another timber resource challenge is that the available saw timber includes a substantial proportion of relatively small diameter sawlogs (6 to 11 inches), as well as portion of larger, higher grade sawlogs up to 30+ inches in diameter.  Attempting to design a small scale sawmill with the ability to efficiently process this wide range of log sizes and qualities presents a significant challenge.

 

  • Limited Markets for Non-Sawlog Material – a final timber resource related challenge is the non-sawlog component of the timber to be harvested, which includes the small diameter biomass or pulpwood, as well as other species (juniper, pinyon, oak, etc.).  The non-saw material currently has very limited or no markets.

 

  • Product Lines and Markets – in order to maximize the revenue from the available timber, it’s important for the mill to be able to produce a wide range of sizes and qualities of products, including high-grade appearance lumber, industrial shop and moulding lumber grades, specialty products such as landscape timbers and large dimension (i.e., 6 x 6 – 12 x 12) architectural timbers, structural lumber products (2 x 4, 2 x 6, etc.), and finally lower grade pallet and packaging lumber products.  Selecting equipment and designing the mill with material handling capabilities to achieve this product flexibility – especially in a relatively small scale sawmill – is another key challenge.

 

  • Training Needed for Employees – as with any modern sawmill operation, skilled and experienced personnel are needed in several areas including: equipment operators, saw filers, millwrights, electricians, and electronic technicians.  While there are some former Cutter sawmill employees in the area, most will need to be trained in modern sawmill technology and associated maintenance.  In addition, the former Cutter Sawmill produced only rough, green lumber products. There were no lumber dry kilns or planer mill operations.  The new mill complex will include these operations, and will therefore require experienced personnel for lumber drying, planer set-up and operation, certified lumber graders, and staff to manage and maintain these operations.  With very few other sawmills in the region that have lumber drying and planing capabilities – and none that have been modernized in recent years – there is a limited pool of skilled personnel to draw from without recruiting from other regions (i.e., Pacific Northwest, Southeast, Canada).

 

The Solution

The Cutter Sawmill was located on a site that provides many advantages for a new operation.  It is a relatively large site with good transportation options (highway access, rail siding, etc.), and with basic infrastructure in place (electrical power, water, natural gas, office building, etc.).  The Cutter Sawmill site was selected because of these advantages and because site redevelopment costs at Cutter will be much lower than at other alternative sites.

 

We incorporated the following elements into development of an engineering, operational and financial/business plan for a new sawmill business:

  • The Sawmill Facilities – the sawmill will be a single-line, lineal system designed to handle the full range of log sizes and produce the varied products targeted.  It will be developed with good quality, heavy-duty used equipment that will be refurbished before installation.  In addition, the sawmill will be fully optimized with modern scanning and optimization systems and will be automated throughout.  Much of the sawmill equipment will be sourced from Western Canada, where mills have been closing as a result of the Mountain Pine Beetle attack.  Good quality used equipment is available at reasonable prices, resulting in substantial cost savings as compared to new equipment alternatives.

     

     

 

  • Lumber Drying – the new operation will also include lumber dry kilns and a new natural gas-fired boiler system.

 

  • Planing Mill - a used planing mill has already been purchased and transported to the site.  It is a complete line from breakdown hoist to planer, trimmer, tray sorter, lumber packaging and paper-wrap system. 

 

  • Related Business(es) to Utilize the Non-sawlog Component – the vision also includes co-located businesses such as a firewood processing facility for the pinyon, oak and juniper species; a pole peeling operation to produce utility poles and other pole products from small diameter timber; a portable sawmill operation to produce rustic furniture from larger juniper logs; and a wood fuel pellet plant or a wood shavings facility to produce animal bedding products to utilize the bio-mass and small diameter forestry thinnings.  The firewood processing facility is already in operation and much of the equipment for the pole peeling and juniper furniture operation are already available.  The sawmill operations will serve as the “hub”, with these other related businesses to expand both forest management and Tribal employment opportunities.  These other businesses provide new business opportunities for both Tribal and nontribal entrepreneurs/investors.

 

  • Innovative Financing – The project will be financed with a combination of Tribal investment, plus low interest loans and grants that are available to the San Carlos Tribe, including New Market Tax Credit financing. 

 

  • Training for Tribal Members and Non-tribal Employees – The development plan includes extensive training programs, utilizing grants available for Tribal employee development; established training programs and a Community College currently under development by the Tribe; as well as vendor training and the use of experienced industry veterans for specialized training.  Finally, another Northwest Tribe has offered to host San Carlos Tribal members and provide supervised on-the-job training at their sawmill operation.

     

If you are interested in developing one of the related businesses (i.e., wood shavings business or wood fuel pellet operation), please call or e-mail us at The Beck Group. Or, if you have a need for planning assistance for a different forest products related business, please feel free to contact us.  Thank you!

 

The Beck Group is a forest products planning and consulting firm based in Portland, Oregon.  We take a results-oriented, practical approach to helping clients make better decisions and improving their financial and operational performance.  We offer a variety of services and we operate throughout North America and overseas.  Our blog posts highlight work from recent consulting assignments and feature topics relevant to anyone interested in forest products.  We welcome your feedback and comments.

 

 

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