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Testimony: 

Before the Subcommittee on Forests and Forest Health, Committee on 
Resources, House of Representatives: 

United States Government Accountability Office: 

GAO: 

For Release on Delivery Expected at 1:00 p.m. EDT: 

Thursday, April 27, 2006: 

Natural Resources: 

Woody Biomass Users' Experiences Provide Insights for Ongoing 
Government Efforts to Promote Its Use: 

Statement of Robin M. Nazzaro, Director Natural Resources and 
Environment: 

GAO-06-694T: 

GAO Highlights: 

Highlights of GAO-06-694T, a testimony before the Subcommittee on 
Forests and Forest Health, Committee on Resources, House of 
Representatives. 

Why GAO Did This Study: 

The federal government is placing greater emphasis on thinning 
vegetation on public lands to reduce the risk of wildland fire. To help 
defray the cost of thinning efforts, it also is seeking to stimulate a 
market for the resulting material, including the smaller trees, limbs, 
and brush—referred to as woody biomass—that traditionally have had 
little or no commercial value. As GAO has reported in the past, the 
increased use of woody biomass faces obstacles, including the high cost 
of harvesting and transporting it and an unpredictable supply in some 
locations. Nevertheless, some entities, such as schools and businesses, 
are utilizing the material, potentially offering insights for 
broadening its use. 

GAO agreed to (1) identify key factors facilitating the use of woody 
biomass among selected users, (2) identify challenges these users have 
faced in using woody biomass, and (3) discuss any insights that these 
findings may offer for promoting greater use of woody biomass. 

This testimony is based on GAO’s report Natural Resources: Woody 
Biomass Users’ Experiences Offer Insights for Government Efforts Aimed 
at Promoting Its Use (GAO-06-336). 

What GAO Found: 

Financial incentives and benefits associated with using woody biomass 
were the primary factors facilitating its use among the 13 users GAO 
reviewed. Four users received financial assistance (such as state or 
federal grants) to begin their use of woody biomass, three received 
ongoing financial support related to its use, and several reported 
energy cost savings over fossil fuels. Using woody biomass also was 
attractive to some users because it was available, affordable, and 
environmentally beneficial. 

Several users GAO reviewed, however, cited challenges in using woody 
biomass, such as difficulty obtaining a sufficient supply of the 
material. For example, two power plants reported running at about 60 
percent of capacity because they could not obtain enough material. Some 
users also reported that they had difficulty obtaining woody biomass 
from federal lands, instead relying on woody biomass from private lands 
or on alternatives such as sawmill residues. Some users also cited 
increased equipment and maintenance costs associated with using the 
material. 

The experiences of the 13 users offer several important insights for 
the federal government to consider as it attempts to promote greater 
use of woody biomass. First, if not appropriately designed, efforts to 
encourage its use may simply stimulate the use of sawmill residues or 
other alternative wood materials, which some users stated are cheaper 
or easier to use than woody biomass. Second, the lack of a local 
logging and milling infrastructure to collect and process forest 
materials may limit the availability of woody biomass; thus, government 
activities may be more effective in stimulating its use if they take 
into account the extent of infrastructure in place. Similarly, 
government activities such as awarding grants or supplying woody 
biomass may stimulate its use more effectively if they are tailored to 
the scale and nature of the targeted users. However, agencies must 
remain alert to potential unintended ecological consequences of their 
efforts, such as excessive thinning to meet demand for woody biomass. 

Figure: Examples of Woody Biomass Users GAO Reviewed: 

[See PDF for Image] 

[End of Figure] 

[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-06-694T]. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Robin M. Nazzaro at (202) 
512-3841 or nazzaror@gao.gov. 

[End of Section] 

Mr. Chairman and Members of the Subcommittee: 

I am pleased to be here today to discuss factors influencing woody 
biomass use among several users we reviewed, as well as potential 
insights these users' experiences may offer as the federal government 
seeks to increase woody biomass use. As you know, the federal 
government has responded to our nation's increasing wildland fire 
threat by placing greater emphasis on thinning forests and rangelands 
to help reduce the buildup of potentially hazardous fuels. These 
thinning efforts are expected to generate large amounts of woody 
material, including many small trees, limbs, and brush--often referred 
to as woody biomass--that traditionally have had little commercial 
value.[Footnote 1] 

Widespread thinning efforts will be costly to the federal government. 
To help defray these costs, and to enhance rural employment and 
economic development, the government is promoting a market for woody 
biomass. However, as we have reported in the past,[Footnote 2] 
increasing the use of the material faces several obstacles. Officials 
in federal agencies promoting woody biomass use--including the 
Departments of Agriculture, Energy, and the Interior--told us that its 
use is hampered by the high costs of harvesting and transporting it and 
the difficulty in obtaining a reliable supply in some areas. 
Nevertheless, some businesses and government entities are using woody 
biomass for various purposes, including heating buildings, making 
lumber, and generating electricity. 

My testimony today summarizes the findings of our report being released 
today that discusses factors facilitating woody biomass use among 
selected users, the challenges these users faced in using the material, 
and the insights these users' experiences may have for the federal 
government as it seeks to promote greater use of woody 
biomass.[Footnote 3] This report is based on information we collected 
from 13 users of woody biomass, including power plants, pulp and paper 
mills, and school and hospital facilities in various locations around 
the United States, as well as on our prior study of woody biomass. 

Summary: 

The primary factors facilitating woody biomass use among users we 
reviewed were financial incentives and benefits associated with its 
use, while other factors included the availability of an affordable 
supply of woody biomass and users' interest in environmental benefits 
associated with its use. Four of the 13 users in our review had 
received federal or state financial assistance to begin using woody 
biomass, while 3 users received ongoing support as a result of their 
use of the material. Other factors included energy cost savings from 
using woody biomass in place of fossil fuels such as natural gas; the 
availability of an affordable supply of the material (particularly in 
cases where it was already being removed as a byproduct of other 
activities); and anticipated environmental benefits associated with 
using the material, such as promoting forest health and reducing air 
pollution. 

Using woody biomass, however, was not without challenges for the users 
we reviewed. Users cited insufficient supply, increased equipment and 
maintenance costs, and other factors that limited their use of woody 
biomass or made it more difficult or expensive to use. Several users 
reported they found it difficult or impossible to obtain a sufficient 
supply of the material, particularly from federal lands. Such users 
relied more on woody biomass from private lands or on alternative wood 
materials such as sawmill residues (including sawdust, chips, bark, and 
similar materials) or urban wood waste (made up of tree trimmings, 
construction debris, and the like). Several users also told us that, 
despite the financial advantages of using woody biomass in place of oil 
or natural gas, they had incurred increased equipment, operation, and 
maintenance costs in using woody biomass that they would not have 
incurred had they burned the other fuels. 

Our findings offer several insights for the federal government as it 
seeks to promote greater use of woody biomass. First, if not 
appropriately designed, efforts to encourage its use may instead 
stimulate the use of sawmill residues or other alternative wood 
materials, which some users told us are cheaper or easier to use than 
woody biomass. Second, the lack of a local logging and milling 
infrastructure to collect and process forest materials may limit the 
availability of woody biomass; thus, government activities may be more 
effective in stimulating its use if they take into account the extent 
of existing infrastructure. And finally, government activities such as 
awarding grants or supplying woody biomass may stimulate its use more 
effectively if they are tailored to the scale and nature of the 
targeted users. However, agencies must remain alert to potential 
unintended ecological consequences of their efforts, such as excessive 
thinning to meet demand for woody biomass. 

Background: 

Woody biomass--small-diameter trees, branches, and the like--is 
generated as a result of timber-related activities in forests or on 
rangelands. Small-diameter trees may be removed to reduce the risk of 
wildland fire or to improve forest health, while treetops, branches, 
and limbs, collectively known as "slash," are often the byproduct of 
traditional logging activities or thinning projects. Slash is generally 
removed from trees on site, before the logs are hauled for processing. 
It may be scattered on the ground and left to decay or to burn in a 
subsequent prescribed fire, or piled and either burned or hauled away 
for use or disposal. 

Woody biomass can be put to various uses. Among other uses, small- 
diameter logs can be sawed into structural lumber or can be chipped and 
processed to make pulp, the raw material from which paper, cardboard, 
and other products are made. Woody biomass also can be used for fuel. 
Various entities, including power plants, schools, pulp and paper 
mills, and others, burn woody biomass in boilers to turn water into 
steam, which can be used to make electricity, heat buildings, or 
provide heat for industrial processes. 

Federal, state, and local governments, as well as private 
organizations, are working to expand the use of woody biomass. Recent 
federal legislation contains provisions for woody biomass research and 
financial assistance. For example, the Consolidated Appropriations Act 
for Fiscal Year 2005 made up to $5 million in appropriations available 
for grants to create incentives for increased use of woody biomass from 
national forest lands.[Footnote 4] In response, the Forest Service 
awarded $4.4 million in such grants in fiscal year 2005. State and 
local governments also are encouraging the material's use through 
grants, research, and technical assistance, while private corporations 
are researching new ways to use woody biomass, often in partnership 
with government and universities. 

Financial Incentives and Benefits, Access to an Affordable Supply, and 
Environmental Benefits Facilitated the Use of Woody Biomass among Users 
We Reviewed: 

The users in our review cited several factors contributing to their use 
of woody biomass. The primary factors they cited were financial 
incentives and benefits associated with its use, while other factors 
included having access to an affordable supply of woody biomass and 
environmental considerations. 

Financial Incentives and Benefits Encouraged Woody Biomass Use by 
Several Users: 

Financial incentives for, and benefits from, using woody biomass were 
the primary factors for its use among several users we reviewed. Three 
public entities--a state college in Nebraska, a state hospital in 
Georgia, and a rural school district in Montana--received financial 
grants covering the initial cost of the equipment that they needed to 
begin using woody biomass. The state college received a state grant of 
about $1 million in 1989, the Georgia hospital received about $2.5 
million in state funds in the early 1980s, and the Montana school 
district received about $900,000 in federal funds in 2003 for the same 
purpose.[Footnote 5] A fourth user--a wood-fired power plant in 
California--received financial assistance in the form of tax-exempt 
state bonds to finance a portion of the plant's construction. 

Three users in our review also received additional financial 
assistance, including subsidies and other payments that helped them 
continue their use of woody biomass. For example, the California power 
plant benefited from an artificially high price received for 
electricity during its first 10 years of operation, a result of 
California's implementation of the federal Public Utility Regulatory 
Policies Act of 1978.[Footnote 6] Under the act, state regulators 
established rates for electricity from certain facilities producing it 
from renewable sources, including woody biomass. However, the initial 
prices set by California substantially exceeded market prices in some 
years, benefiting this user by increasing its profit margin.[Footnote 
7] The Montana school district also received ongoing financial 
assistance from a nearby nonprofit organization. The nonprofit 
organization paid for the installation of a 1,000-ton wood fuel storage 
facility (capable of storing over a year's supply of fuel) and financed 
the purchase of a year's supply of fuel for the district, which the 
district repays as it uses the fuel. The third user, a Colorado power 
plant generating electricity by firing woody biomass with coal, 
realized ongoing financial benefits by selling renewable energy 
certificates associated with the electricity it generated from woody 
biomass.[Footnote 8] 

Energy cost savings also were a major incentive for using woody biomass 
among six users we reviewed. Two users--rural school districts in 
Pennsylvania and Montana--told us that they individually had saved 
about $50,000 and $60,000 in annual fuel costs by using wood instead of 
natural gas or fuel oil. Similarly, the state college in Nebraska 
typically saves about $120,000 to $150,000 annually, while the Georgia 
state hospital reported saving at least $150,000 in 1999, the last year 
for which information was available. And the two pulp and paper mills 
we reviewed each reported saving several million dollars annually by 
using wood rather than natural gas or fuel oil to generate steam heat 
for their processes. 

An Affordable Supply Facilitated the Use of Woody Biomass: 

An affordable supply of woody biomass also facilitated its use, 
especially in areas where commercial activities such as logging or land 
clearing generated woody biomass as a byproduct. For example, the 
Nebraska state college was able to purchase woody biomass for an 
affordable price because logging companies harvested timber in the 
vicinity of the college, hauling the logs to sawmills and leaving their 
slash; the college paid only the cost to collect, chip, and transport 
the slash to the college for burning. Similarly, a Pennsylvania power 
plant obtains a portion of its wood fuel from land-clearing operations 
in which, according to a plant official, the developers clearing the 
land are required to dispose of the cleared material but are not 
allowed to burn or bury it. The plant official told us developers often 
are willing to partially subsidize removal and transportation costs in 
order to have an outlet for it. 

Thinning activities by area landowners also contributed to an 
affordable supply for a large pulp and paper mill in Mississippi. In 
this area, as in much of the southeastern United States, small-diameter 
trees are periodically thinned from forests to promote the growth of 
other trees, and traditionally have been sold for use in making pulp 
and paper. Further, according to mill officials, the level terrain and 
extensive road access typical of southeastern forests keep harvesting 
and hauling costs affordable--particularly in contrast to other parts 
of the country where steep terrain and limited road access may result 
in high harvesting and hauling costs. 

Environmental Benefits and Other Factors Played a Role in the Use of 
Woody Biomass: 

Three users cited potential environmental benefits, such as improved 
forest health and air quality, as prompting their use of woody biomass; 
other users told us about additional factors that increased their use 
of woody biomass. Two users--the Montana school district and the coal- 
fired power plant in Colorado--started using woody biomass in part 
because of concerns about forest health and the need to reduce 
hazardous fuels in forest land. They hoped that by providing a market 
for woody biomass, they could help stimulate thinning efforts. Another 
user, a Vermont power plant, began using woody biomass because of air- 
quality concerns. According to plant officials, the utilities that 
funded it were concerned about air quality and as a result chose to 
build a plant fired by wood instead of coal because wood emits lower 
amounts of pollutants. 

Other factors and business arrangements specific to individual users 
also made using woody biomass advantageous. For example, one user, 
which chips woody biomass for use as fuel in a nearby power plant, has 
an arrangement under which the plant purchases the user's product at a 
price slightly higher than the cost the user incurred in obtaining and 
processing woody biomass, as long as the product is competitively 
priced and meets fuel-quality standards. Three users whose operations 
include chipping of woody biomass and other activities, such as 
commercial logging or sawmilling, also told us that having the 
operations within the same business is important because equipment and 
personnel costs can be shared between the chipping operation and the 
other activities. And some users helped offset the cost of obtaining 
and using woody biomass by selling byproducts resulting from its use. 
One pulp and paper mill in our review sold turpentine and other 
byproducts from the production of pulp and paper, while a wood-fired 
power plant sold steam extracted from its turbine to a nearby food- 
canning factory. Other byproducts sold by users in our review included 
ash used as a fertilizer and sawdust used by particle board plants. 

Challenges Faced by Woody Biomass Users Included Inadequate Supply and 
Costs Associated with Handling and Using the Material: 

Users in our review experienced several factors that limited their use 
of woody biomass or made it more difficult or expensive to use. These 
factors included an insufficient supply of the material and increased 
costs related to equipment and maintenance. 

Woody Biomass Was Not Always Sufficiently Available: 

Seven users in our review told us they had difficulty obtaining a 
sufficient supply of woody biomass, echoing a concern raised by federal 
officials in our previous report. Two power plants reported to us that 
they were operating at about 60 percent of their capacity because they 
were unable to obtain sufficient woody biomass or other fuel for their 
plants. Officials at both plants told us that their shortages of wood 
were due at least in part to a shortage of nearby logging contractors, 
which prevented nearby landowners from carrying out all of the projects 
they wished to undertake. While officials at one plant attributed the 
plant's shortage entirely to the lack of sufficient logging 
contractors, an official at the other plant stated that the lack of 
woody biomass from federal lands--particularly Forest Service lands-- 
also was a significant problem. 

The lack of supply from federal lands was a commonly expressed concern 
among woody biomass users on the West Coast and in the Rocky Mountain 
region, with five of the seven users we reviewed in these regions 
telling us they had difficulty obtaining supply from federal lands. 
Users with problems obtaining supply from federal lands generally 
expressed concern about the Forest Service's ability to conduct 
projects generating woody biomass; in fact, two users expressed 
skepticism that the large amounts of woody biomass expected to result 
from widespread thinning activities will ever materialize. One official 
stated, "We keep hearing about this coming 'wall of wood,' but we 
haven't seen any of it yet." In response to these concerns, officials 
from both the Department of the Interior and the Forest Service told us 
that their agencies are seeking to increase the availability of woody 
biomass from federal lands. 

Users Choosing Woody Biomass over Oil or Natural Gas Made Additional 
Investments in Equipment and Incurred Additional Operations and 
Maintenance Costs: 

Several users in our review told us they incurred costs to purchase and 
install the equipment necessary to use woody biomass beyond the costs 
that would have been required for using fuel oil or natural gas. The 
cost of this equipment varied considerably among users, from about 
$385,000 for a school district to $15 million for a pulp and paper 
mill. Wood utilization also increased operation and maintenance costs 
for some users, in some cases because of problems associated with 
handling wood. During our visit to one facility, wood chips jammed on a 
conveyor belt, dumping wood chips over the side of the conveyor and 
requiring a maintenance crew member to clear the blockage manually. At 
the power plant mixing woody biomass with coal, an official told us 
that a wood blockage in the feed mechanism led to a fire in a coal- 
storage unit, requiring the plant to temporarily reduce its output of 
electricity and pay $9,000 to rechip its remaining wood. 

Other issues specific to individual users also decreased woody biomass 
use or increased costs for using the material. For example, the Vermont 
wood-fired power plant is required by the state to obtain 75 percent of 
its raw material by rail, in order to minimize truck traffic in a 
populated area. According to plant officials, shipping the material by 
rail is more expensive than shipping by truck and creates fuel supply 
problems because the railroad serving the plant is unreliable and 
inefficient and experiences regular derailments. Another power plant 
was required to obtain a new emissions permit in order to begin burning 
wood in its coal-fired system. 

Current Users' Experiences Offer Insights for Government Efforts to 
Expand the Use of Woody Biomass: 

Our findings offer several insights for promoting greater use of woody 
biomass. First, rather than helping to defray the costs of forest 
thinning, attempts to encourage the use of woody biomass may instead 
stimulate the use of other wood materials such as mill residues or 
commercial logging slash. Second, government activities may be more 
effective in stimulating woody biomass use if they take into account 
the extent to which a logging and milling infrastructure to collect and 
process forest materials is in place. And finally, the type of efforts 
employed to encourage woody biomass use may need to be tailored to the 
scale and nature of individual recipients' use. 

Market Forces May Lead Wood Users to Forgo Small-Diameter Trees in 
Favor of Alternatives: 

Unless efforts to stimulate woody biomass utilization are focused on 
small-diameter trees and other material contributing to the risk of 
wildland fire, such efforts may simply increase the use of alternative 
wood materials (such as mill residues) or slash from commercial logging 
operations. In fact, several users told us that they prefer such 
materials because they are cheaper or easier to use than woody biomass. 

Indeed, an indirect attempt to stimulate woody biomass use by one 
Montana user in our review led to the increased use of available mill 
residues instead. The Forest Service provided grant funds to finance 
the Montana school district's 2003 conversion to a wood heating system 
in order to stimulate the use of woody biomass in the area. As a 
condition of the grant, the agency required that at least 50 percent of 
the district's fuel consist of woody biomass during the initial 2 years 
of the system's operation. Officials told us that the district complied 
with the requirement for those 2 years, but for the 2005-2006 school 
year, the district chose to use less expensive wood residues from a 
nearby log-home builder.[Footnote 9] 

It should be noted that the use of mill residues is not entirely to the 
detriment of woody biomass. Using mill residues can facilitate woody 
biomass utilization by providing a market for the byproducts (such as 
sawdust) of industries using woody biomass directly; this, in turn, can 
enhance these users' profitability and thereby improve their ability to 
continue using the material cost-effectively. In addition, the 
availability of both mill residues and woody biomass provides diversity 
of supply, allowing users to continue operations even if one source of 
supply is interrupted or becomes prohibitively expensive. Nevertheless, 
these indirect effects, even where present, may be insufficient to 
substantially influence the use of woody biomass. 

Mill residues aside, even those users that consumed material we define 
as woody biomass often used the tops and limbs from trees harvested for 
merchantable timber or other uses rather than small-diameter trees 
contributing to the problem of overstocked forests. Logging slash can 
be cheaper to obtain than small-diameter trees when it has been removed 
from the forest by commercial logging projects--which often leave slash 
piles at roadside "landings," where trees are delimbed before being 
loaded onto trucks. Unless woody biomass users specifically need small- 
diameter logs--for use in sawing lumber, for example--they may find it 
cheaper to collect slash piled in roadside areas than to enter the 
forest to cut and remove small-diameter trees. 

The Effectiveness of Efforts to Encourage Woody Biomass Use May Depend 
on the Presence of Other Wood-Related Industries: 

Government activities may be more effective in stimulating woody 
biomass use if they take into account the extent to which a logging and 
milling infrastructure is in place in potential users' locations. The 
availability of an affordable supply of woody biomass depends to a 
significant degree on the presence of a local logging and milling 
infrastructure to collect and process forest materials. Without a 
milling infrastructure, there may be little demand for forest 
materials, and without a logging infrastructure, there may be no way to 
obtain them. For example, an official with the Nebraska college in our 
review told us that the lack of a local logging infrastructure could 
jeopardize the college's future woody biomass use. The college relied 
on slash from commercial loggers working nearby, but this official told 
us that the loggers were based in another state and the timber they 
were harvesting was hauled to sawmills over 100 miles away. According 
to the official, if more timber-harvesting projects were offered closer 
to the sawmills, these loggers would move their operations in order to 
reduce transportation costs--eliminating the nearby source of woody 
biomass available to the college. 

In contrast, users located near a milling and logging infrastructure 
are likely to have more readily available sources of woody biomass. One 
Montana official told us that woody biomass in the form of logging 
slash is plentiful in the Missoula area, which is home to numerous 
milling and logging activities, and that about 90 percent of this slash 
is burned because it has no market. The presence of such an 
infrastructure, however, may increase the availability of mill residues 
or other materials, potentially complicating efforts to promote woody 
biomass use by offering more attractive alternatives. 

Efforts to Encourage Woody Biomass Use May Be More Effective If They 
Are Tailored to the Scale and Nature of Recipients' Use: 

Government activities may be more effective in stimulating woody 
biomass use if their efforts are tailored to the scale and nature of 
the users being targeted. Most of the large wood users we reviewed were 
primarily concerned about supply, and thus might benefit most from 
federal efforts to provide a predictable and stable supply of woody 
biomass. Such stability might come, for example, from long-term 
contracts signed under stewardship contracting authority, which allows 
contracts of up to 10 years.[Footnote 10] In fact, one company 
currently plans to build a $23 million woody biomass power plant in 
eastern Arizona, largely in response to a nearby stewardship project 
that is expected to treat 50,000 to 250,000 acres over 10 years. 
Similarly, officials of a South Carolina utility told us that the 
utility was planning to invest several million dollars in equipment 
that would allow a coal-fired power plant to burn woody biomass from 
thinning efforts in a nearby national forest. In both cases, the 
assurance of a long-term supply of woody biomass was a key factor in 
the companies' willingness to invest in these efforts. 

In contrast, small users we reviewed did not express concerns about the 
availability of supply, in part because their consumption was 
relatively small. However, three of these users relied on external 
financing for their up-front costs to convert to woody biomass use. 
Such users--particularly small, rural school districts or other public 
facilities that may face difficulties raising the capital to pay needed 
conversion costs--might benefit most from financial assistance such as 
grants or loan guarantees to fund their initial conversion efforts. And 
as we noted in our previous report on woody biomass, several federal 
agencies, particularly the Forest Service, provide grants for woody 
biomass use. 

However, federal agencies must take care that their efforts to assist 
users are appropriately aligned with the agencies' own interests and do 
not create unintended consequences. For example, while individual grant 
recipients might benefit from using woody biomass--through fuel cost 
savings, for example--benefits to the government, such as reduced 
thinning costs, are uncertain. Without such benefits, agency grants may 
simply increase outlays but not produce comparable savings in thinning 
costs. The agencies also risk adverse ecological consequences if their 
efforts to develop markets for woody biomass result in these markets 
inappropriately influencing land management decisions. As noted in our 
prior report on woody biomass, agency and nonagency officials cautioned 
that efforts to supply woody biomass in response to market demand 
rather than ecological necessity might result in inappropriate or 
excessive thinning. 

Concluding Observations: 

Drawing long-term conclusions from the experiences of users in our 
review must be done with care because (1) our review represents only a 
snapshot in time and a small number of woody biomass users and (2) 
changes in market conditions could have substantial effects on the 
options available to users and the materials they choose to consume. 
Even so, the variety of factors influencing woody biomass use among 
users in our review--including regulatory, geographic, market-based, 
and other factors--suggests that the federal government may be able to 
take many different approaches as it seeks to stimulate additional use 
of the material. Because these approaches have different costs, and 
likely will provide different returns in terms of defraying thinning 
expenses, it will be important to identify what kinds of mechanisms are 
most cost-effective in different circumstances. In doing so, it also 
will be important for the agencies to take into account the variation 
in different users' needs and available resources, differences in 
regional markets and forest types, and the multitude of available 
alternatives to woody biomass. If federal agencies are to maximize the 
long-term impact of the millions of dollars being spent to stimulate 
woody biomass use, they will need to design approaches that take these 
elements into account rather than using boilerplate solutions. 

Mr. Chairman, this concludes my prepared statement. I would be pleased 
to answer any questions that you or other Members of the Subcommittee 
may have at this time. 

GAO Contact and Staff Acknowledgments: 

For further information about this testimony, please contact me at 
(202) 512-3841 or nazzaror@gao.gov. David P. Bixler, Lee Carroll, Steve 
Gaty, and Richard Johnson made key contributions to this statement. 

FOOTNOTES 

[1] Although biomass can be considered any sort of organic material-- 
including trees, grasses, agricultural crops, and animal wastes--the 
term woody biomass in this testimony refers to small-diameter trees and 
other traditionally noncommercial material cut as part of thinning, 
harvesting, or other activities in forests or on rangelands. For the 
purposes of this testimony, we distinguish woody biomass from other 
wood residues such as sawmill residues or urban wood waste. 

[2] See GAO, Natural Resources: Federal Agencies Are Engaged in Various 
Efforts to Promote the Utilization of Woody Biomass, but Significant 
Obstacles to Its Use Remain, GAO-05-373 (Washington, D.C.: May 13, 
2005). 

[3] GAO, Natural Resources: Woody Biomass Users' Experiences Offer 
Insights for Government Efforts Aimed at Promoting Its Use, GAO-06-336 
(Washington, D.C.: Mar. 22, 2006). 

[4] Pub. L. No. 108-447, 118 Stat. 3076 (2004). 

[5] Dollars are unadjusted for inflation. 

[6] Pub. L. No. 95-617, 92 Stat. 3117 (1978). 

[7] States set rates, pursuant to general regulations issued by the 
Federal Energy Regulatory Commission, based on the buyer's "avoided 
cost"--this is, the energy and facilities costs that would have been 
incurred by the purchasing utility if it had to provide its own 
generating capacity. According to the commission, while it provides 
general avoided cost regulations, states set rates that often are above 
market rates. 

[8] Renewable energy certificates represent the environmental benefits 
of renewable energy generation--that is, the benefits of displacing 
electricity generated from nonrenewable sources, such as fossil fuels, 
from the electric grid. The certificates are sold separately from the 
electricity with which they are associated, and their sale can serve as 
an additional source of revenue to power plants using such sources. 

[9] The district has since obtained about 550 tons of woody biomass 
(about 75 percent of its annual consumption) from a nearby thinning 
project. 

[10] Stewardship contracting involves the use of any of several 
contracting authorities on the part of the Forest Service and 
Interior's Bureau of Land Management. See GAO, Federal Land Management: 
Additional Guidance on Community Involvement Could Enhance 
Effectiveness of Stewardship Contracting, GAO-04-652 (Washington, D.C.: 
June 14, 2004). 

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