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Morgan Lumber gets $900,000, tentatively

SoVaNow.com / May 05, 2010
Pending final approval of an amended application, the Virginia Tobacco Commission will help Morgan Lumber Company of Red Oak acquire a $900,000 piece of emission-reducing equipment to be installed as part of a $4.2 million expansion project.

Phase 1 of the three-phase project, a $3 million expansion of the sawmill, has been completed using company funds.

Phase 2, installing a new dry kiln technology known as the Continuous Dry Kiln is about to begin. The new technology is expected to increase production 100 percent and create 25 new jobs.

Don Bright, general manager of Morgan Lumber, said the continuous dry kiln, one of only four in the country, will produce a more uniform dry lumber while reducing energy use by 33-35 percent.

There are only four continuous dry kilns in the U.S., he said.

The advanced technology continuous flow-through kiln uses heat from dry lumber to preheat green lumber while at the same time using moisture from the green lumber to condition the dry lumber.

Previously announced funding for this phase includes a $100,000 grant from the Governor’s Opportunity Fund and $125,000 in Tobacco Region Opportunity Funds. The funds were awarded to Charlotte County in support of the project.

The $900,000 tobacco commission grant would be used to buy and install a gasifier for the new kiln. It would burn green sawdust, a biofuel, to produce the heat needed by the kiln.

Because it achieves temperatures of 2,100 degrees, like an after-burner, it is very clean and fuel-efficient, Bright said.

The gasifier will produce “virtually no emission,” he said.

“Because our area is in great need of jobs, we were asked ‘How quick can you get started?’” Bright said. “With the gasifier, we can be up and running by the end of this year.”

Without the funding from the tobacco commission, the continuous dry kiln would not be operational for several years, he said.

Tim Pfohl, grants program director, said the commission Thursday granted a verbal request from Charlotte County for funds for the gasifier. The county would turn over the money to its IDA. The IDA would lease the equipment to the lumber company.

He said the commission asked the county to submit a revised request that would clarify how the public would benefit from the project, the terms of the contract with the company, and how lease payments would be made.

“We need to determine whether, as the county administrator suggested, the lease payments be returned to the county economic development authority or to the tobacco commission for reinvestment,” Pfohl said.

He said the tobacco commission’s executive director, Neal E. Noyes, with the advice of legal counsel, is expected to make the final decision on funding for the gasifier.

Noyes also has the option to bring the matter back to the Tobacco Commission’s Southside Economic Development Committee if he’s not comfortable making the call.

Pfohl said that underwriting a project undertaken by a private company rather than a public agency is unusual but not unheard of for the commission. He said the commission typically works with lease-purchase arrangements of this kind a few times each year.

The tobacco commission has financed lease-purchase projects for equipment used to convert bio-mass to energy as will as projects by private companies at publicly owned industrial parks.

Companies seeking help must show that they will create jobs and tax revenue, he said.

Pfohl said the current funding application was “a kind of moving target.”

He said Charlotte County on Apr. 14 had submitted an application for $500,000 for improvements and equipment related to Phase 2 of the Morgan Lumber Company expansion.

Since a new request was submitted and conditionally approved Thursday, the previous one will be considered a withdrawn proposal, Pfohl said.

Susan Adams, Charlotte County deputy administrator and economic development associate, said the county changed its request because officials had decided to “to focus on equipment rather than infrastructure.”

She said that the company intends to create 25 new jobs in its three-phase expansion and is contemplating a fourth phase that would boost the number to 40 as well as providing advancement opportunities for current employees.

She said Morgan’s expansion also would have a huge indirect impact on the economy, creating a need for more loggers and truck drivers.

She noted that Charlotte County’s unemployment rate is 10.4 percent.

The expansion will increase the lumber company’s drying capacity, which will make it possible for some drivers who now must take their lumber to North Carolina for drying to return their business to Virginia, Pfohl said.

“The effect of the project can ripple throughout the economy,” Pfohl said.

In addition to creating jobs, the project will benefit timber owners. Morgan Lumber buys from 48 timber suppliers, he said.

Bright said Morgan Lumber believes that wood has a strong place in the market going forward because it is a natural, renewable resource.

He said the company is moving forward with expansion plans with the expectation that the economy is “over the hump.”

It is time to position the company to grow and add jobs, he said.

He added that in addition to creating jobs, the lumber business produces additional benefits.

“Having it in the supply chain produces intangible benefits for water quality and air quality. Trees are a big part of cleaning up what we’ve destroyed,” he said.

“Out here in rural American, we’re proud of what we’re doing,” he said. “It’s nice when you can do something good for your business. It’s especially nice when you can do something good for your community.”

Bright said forest-related industries contribute $27.5 billion to Virginia’s economy each year. The industry employs 144,000 Virginians.







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