University of Maine at Fort Kent contracts with Northeast Pellets

By Katie Fletcher | October 11, 2016

Located in the thinly populated, heavily forested North Maine Woods, Ashland, Maine, is home to Northeast Pellets’ mill, which is now ramping up production for the heating season fortified by a new contract with the University of Maine at Fort Kent.

On the morning of Sept. 21, NEP trucking contractor Agri-Cal Inc. out of Houlton, Maine, simultaneously delivered two loads of NEP’s pellets to UMFK. Agri-Cal owner Doug Callnan has worked with NEP for around a decade. “They also provide the transportation to Northern Maine Community College and University of Maine Presque Isle, as well as several of their own accounts they service with our pellets,” said Matthew Bell, president and CEO of NEP.

In order to meet the needs of this new contract with UMFK, Bell said, Agri-Cal purchased a new truck trailer and hired a driver. During peak heating, the university could require as many as three truckload deliveries per week.

UMFK has been burning pellets in two boiler systems for the past two heating seasons. According to Bell, one system is a central heat plant that services the local school, in addition to most of the UMFK campus. This system has two, 33-ton silos for storage. The second boiler system is accompanied by two, 16-ton storage silos and provides heat to UMFK’s athletic complex and a dormitory. Bell said they anticipate firing up the systems sometime this week.

UMFK is conservatively estimated to consume 1,300 pellets per year, based off of a combination of last year’s mild weather and oil consumption terms set by its previous contracted supplier of both oil and pellets, Daigle Oil Co.

Although NEP has never directly supplied pellets to the university, it has been involved in the supply chain. According to Bell, his business has served as local distributor Daigle Oil’s sole supplier of pellets per a previous agreement between the companies. NEP would not solicit bulk account and Daigle Oil would purchase exclusively from NEP. “This worked well until the exchange rate gap widened,” Bell said. As a result, Daigle Oil opted for cheaper Canadian imports, which, according to Bell, have flooded the Northeast. “We cannot compete with their subsidies and the exchange rate,” he said. “This will continue to happen as long as the exchange rate is down and NAFTA exists.”

The loss of this supply contract coupled with less than favorable market conditions made NEP produce about 5,000 tons less last year than its usual 15,000 short tons. NEP had actually been in the process of increasing production to better meet its bagged and bulk customer needs. “Last year, we were on pace to produce 20,000,” Bell said. “When the market fell apart, we were sitting on thousands of tons of bagged pellets without a home, as well as our bulk silos were full.”

In fact, the company installed a third pelleting machine in the summer of 2015 to bring plant production capacity to 55,000 tons per year. Bell said, they installed the pelleting machine specifically for the UMFK account, along with a second large bulk storage silo capable of holding 650 tons and load out system with a 1.5 tons-per-minute load time. They’ve also made several line improvements to increase capacity and efficiency in recent years.

Luckily, a change in requirements in the University of Maine System’s request for proposals (RFP) issued in June allowed the company to step back into the picture. Bell referenced two provisions to the RFP scoring criteria that worked in their favor: economic impact and development for the state of Maine, and sustainable forest practices. “UMaine feels it makes sense for the local campus to support local jobs and the economy,” Bell said.

The consideration of state economic impact was a priority for members of the Aroostook County Legislative Delegation who engaged university leaders on the topic at the State House earlier in the year. This brought about proposed legislation LD 1588, which requires that public postsecondary education institutions in the state give preference to Maine producers when entering into contracts related to heating fuel. “Maine’s pellet industry is still relatively new,” Bell said.  “We appreciate the willingness of our elected representatives and university leaders to consider industry concerns and respond to opportunities to boost Maine-based manufacturing.”

This Maine-based company is feeling the boost. Within the next few weeks, Bell will be hiring new employees and increasing hours of operation. The mill currently employs 11 and will require 15 to meet production needs. Now, NEP is operating 12-hour days, five days per week, but will be ramping up this fall to a 24-hour operation four days per week.

The initial contract with UMFK is for one year, which Bell hopes the university will consider extending for a second and third year as the company progresses. NEP could potentially see more than $750,000 in direct sales over a three-year period of manufacturing and delivering pellets to the university. The economic impact goes beyond the mill, with multipliers developed by the state that project a seven-fold increase in economic activity tied to manufacturing. The impact to the region could equate to as much as $5.25 million, including $200,000 in additional revenue from the purchase of residuals from large sawmills for pellet feedstock along the Route 11 corridor.

“We look forward to working with the university, helping them reduce their carbon footprint through the use of locally-manufactured wood pellets,” Bell said. “It’s all about sustainability and boosting Maine’s economy at the same time.”

In the event that NEP can’t supply the amount of pellets needed, another Maine-based operation, Corinth Pellets, has agreed to provide backup.

Although oil is still low and the exchange rate is not in NEP’s favor, Bell is trying to stay optimistic. “So far, things are looking up compared to last year, but we still have some ways to go,” he said.