Forest Devastation Fuel
David Zalubowski  /  AP
The bough of a pine tree destroyed by pine beetles is shown amid the fall colors of trees near Keystone, Colo., last Oct. 1. The infestation has sparked a boom in pellets made from dead trees.
updated 1/22/2009 4:41:49 PM ET 2009-01-22T21:41:49

A tiny middle school tucked in a snow-covered mountain valley ditched its decades-old coal-fired boilers for a wood pellet furnace, partly due to a beetle not much bigger than an eyelash.

Mountain pine beetles have ravaged wide swaths of trees in Colorado, leaving the surviving forest more susceptible to fire from decaying trees.

A handful of businesses are trying to capitalize on a bad situation, and may incidentally prevent it from getting worse.

Sorocco Middle School contacted one of the two wood-pellet plants in Colorado that have opened since the beetles began attacking trees a number of years ago, and now draws heat from pellets.

"It's a disturbing situation to watch all of our trees die and we know this is going to dramatically impact our landscape," said Mark Mathis, president and chief executive of Confluence Energy, a pellet producer about 100 miles northwest of Denver.

In Colorado, beetles had infected at least 1.5 million acres of forest as of 2007, creating vast tracts of dying red and gray forest.

The beetles that have scarred breathtaking vistas from Alaska and British Columbia to the Southwest have spread because warmer winters allow more to survive, according to the U.S. Forest Service.

Most lodgepole pine dead by 2013?
Forest Service officials believe most lodgepole pine — the predominant pine tree at higher elevations — will be killed by 2013 and it could take decades before they return.

The predominant use for beetle-killed trees is still housing lumber, but the downturn in real estate has piqued interest in harvesting more dead trees for fuel, said John Swaan, executive director of the Wood Pellet Association of Canada.

Producers have relied on sawdust from mills that cut lumber for housing. If they are forced to collect dead trees and process them, the cost could be three to four times greater, Swaan said.

That could make the business less competitive when oil is cheap.

Crude has given up two thirds of its value since peaking near $150 over the summer, which led to sharp increase in sales for wood pellet producers, particularly in the Northeast where heating oil is used widely.

Despite its cyclical nature, investors believe the business model is workable.

Neighbors start pellet company
At Grand Lake on the outskirts of Rocky Mountain National Park, Joe Kostelac and his neighbors began talking about dealing with the dead trees and created the Rocky Mountain Pellet Co. in nearby Walden. The 20,000-square-foot mill began producing pellets last fall and has sold as much product as could be manufactured through April.

"We really believe the growth is in the industrial side and commercial application of this product because of gas and oil and all the other energy products," said Kostelac, who came out of retirement to run the company.

In the Yampa Valley, the South Routt School District installed Sorocco's wood pellet heating system as part of a $4.1 million renewable energy project that also includes a geothermal heat pipes. It was financed by state grants and a bond issue.

"I think it's definitely a conscious effort to make a green impact on the community. By using products that are close to home, it multiplies that effect drastically," Sorocco Principal Dennis Alt says.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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