By Kristen Poland
Staff Writer

At a recent state forestry conference billed as one that would make its industry greener, a roomful of coffee-drinking attendees had only a few reusable ceramic mugs. Nearly everyone sipped from disposable paper cups as they listened to presentations on energy crisis and alternative fuel sources. And yet at this conference, the paper cups weren’t seen as wasteful —they were considered lifeblood.

The South Carolina forestry industry funnels approximately $15 billion into the state’s economy each year, according to data compiled by the state Forestry Commission and the U.S. Forest Service. Timber, with a delivered value of more than $870 million each year, is the state’s most lucrative agricultural crop. Delivered value includes the value of the logs plus harvesting and transportation costs. The industry employs more than 30,000 South Carolinians and exports $1 billion in forest products annually.

The future could reap even greater profits for this industry as South Carolina recruits companies on the cutting edge of the forestry wood product industry. Two such firms are Grant Forestry Products, a Canadian company that invested about $400 million in two plants it opened last year in South Carolina, and ArborGen, a genetics company in Summerville that is developing fast-growing drought- and heat-resistant trees. In addition, new opportunities for foresters are on the horizon, including ethanol production from wood byproducts and credits for carbon sequestration through forestry management.

With approximately 12.4 million acres of commercial forestland, South Carolina is at a disadvantage compared to other Southern states such as Tennessee, Alabama, Mississippi, North Carolina and Georgia, which have up to twice as much forested acreage. Still, South Carolina is aggressively competing with these other states in its efforts to recruit large companies and smaller niche businesses, as well as in its research into future opportunities for the industry. Despite rising transportation costs and a strong Canadian import market, forestry is moving ahead.

“The industry is definitely growing,” said Bob Scott, president of the South Carolina Forestry Association. “As a general rule, the economics of forestry are consistent across the South, predicated across the forest that sustains it. We’re all growing at a similar pace.”

The Palmetto Institute, a Columbia-based nonprofit research and educational institution that aims to promote economic growth, is analyzing the present and potential impact of the forestry industry within the state. The study is examining the agribusiness cluster, which includes forestry, agriculture and other similar ventures. By looking at the strengths and weaknesses within the cluster, the institute expects to determine how to further improve the state’s ability to compete nationally and globally in agribusiness-related industries. Much of that opportunity includes scientific research that could create new ways for the industry to compete in the market.

“We have a lot of clusters in the state but we think this one (agribusiness) has the potential to develop and grow the fastest,” said James P. Fields, executive director of the Palmetto Institute.

Creating alternative fuels from agricultural byproducts is one avenue of opportunity for the agribusiness cluster. Developing alternative fuel production within South Carolina would not only provide new income for the agribusiness cluster, but would also be a way to keep money in the state that goes out to buy gasoline transported in from refineries.

“Right now, about $5.8 billion leaves the state annually for gas,” Fields said. “What if we had a way to convert byproducts into a saleable bioethanol feedstock?”

The study will examine planning and production, and will seek ways to add value to what is already being produced in the state, increase production and get products to market at a faster pace.

“We’ve got an economic engine and it’s doing well, but we simply think in the global economy we’re facing today, it can do much better if we find ways to add value to its product, for example, wood chips for burning to make energy,” Fields said.

The future may come within the next two to three years in the form of commercial cellulosic ethanol production. While crops like corn and switchgrass quickly surface in conversations about ethanol production, wood scraps from the forestry industry can also be converted to ethanol in a gasification process. Currently, the U.S. Department of Energy’s Office of Biomass Program has invested more than $540 million in 10 different biorefinery projects around the country.

The companies are experimenting with varied technologies and feedstock sources ranging from citrus peels and other agricultural scraps to grass clippings from landfills. The project closest to South Carolina is also the one that promises the most opportunity for the forestry industry. Range Fuels, based in Soporton, Ga., broke ground in November 2007 to build the country’s first commercial cellulosic ethanol plant. The company predicts it will convert timber scraps and wood-based energy crops into about 40 million gallons of ethanol annually.

Currently, no partnerships exist between South Carolina forestry companies and Range Fuels, but the company’s existence and the future it represents could be significant, said Stephen S. Kelley, head of the wood and paper science department at North Carolina State University. Range Fuels and the other nine cellulosic ethanol companies receiving government funding are the first companies to experiment with this technology on a commercial basis. None of these companies is currently operating and only a handful have begun construction.

In addition, a major hurdle is making the technology cost-effective for landowners and foresters. With increasing transportation costs, it currently isn’t practical for South Carolina foresters to transport their wood waste even to the Georgia plant.

However, Kelley expects that within three to five years, the companies may streamline their processes and implement the most effective and efficient technologies. In addition, there likely will be a second round of companies that will learn from and build off this first group’s successes and failures. At that point, he said, the industry may expand and provide more lucrative opportunities for landowners and existing forestry companies.

“From my point of view, there is a lot of potential opportunity here,” Kelley said. “There’s a lot of technological risk, but companies will have to make those decisions.”