LignoTech Florida responds to citizens' questions

February 15, 2016 1:00 a.m.

Editor's Note: The following letter was sent to Mayor Miller and commissioners to answer questions posed during public comments at a February 2, 2016 city commission meeting following a skype presentation by Borregaard's Anders Sjode, corporate business development representative. Borregaard is a Norwegian company that would be the majority owner of a proposed joint venture between Rayonier A.M. and LignoTech Florida, LLC.

LignoTech Florida

6 Gum Street

Fernandina Beach FL, 32035, USA

Dear Mayor Miller,

As requested by the City Commission, please find below written responses to questions raised by members of the public during LignoTech's (LTF) presentation on February 2. Questions, as provided by Ms. Tammi Bach, are in italics with answers following each individual question.

l. Dr. Chip Ross commented that questions he had raised in writing on January 31, 2016 had not been answered in the public presentation. Concerns that should be addressed are whether this proposed project is consistent with the City's Comprehensive Plan, specifically whether hazardous materials will be stored in the floodplain, are there potentially harmful impacts generated by the new plant, whether this is a prohibited chemical or petroleum manufacturing or refining plant, and how will the new plant meet NFJP and City flood plain protection regulations.

This new facility will be a wood products manufacturing facility. The comprehensive plan expressly allows for manufacturing within the city and RYAM is currently producing lignosulfonates on a small scale. Likewise, the project is consistent with specific goals set forth in the comprehensive plan. The products produced by this project will result in a tremendous reduction in global greenhouse gas emissions, which is consistent with the city's goals.

This is not a chemical plant. No synthetic chemicals are manufactured for sale. Lignin is a natural polymer found in all plant material. Pulp mills separate the various components of trees to produce pulp for a variety of different uses. Lignin is a natural polymer present in southern pine that, as a byproduct, is currently utilized as a fuel by the Rayonier Advanced Materials (RYAM) plant. The processes involved in the lignin plant will simply improve product properties and dry the lignin product to be used in a number of different end uses.

Cellulose specialty pulps and lignin are sometimes referred to as wood-based chemicals because they are high­ purity materials that are used by other manufacturers for both their chemical and physical properties, unlike paper pulps of lesser purity that are used only for their mechanical/physical properties. The facilities, however, do not manufacture synthetic chemicals. They simply separate the natural components of wood.

No new hazardous materials are utilized in lignin processing and the resulting product is non-hazardous.

The new facility is being designed to meet all state and local codes and regulations. The LTF project team is currently working with the City staff on these requirements.

2. Mr. Frank Santry suggested that the City should do a cost/benefit analysis and specifically show the projected tax revenue from the proposed project over the next 20 years with and without the requested tax refunds.

Until the engineering studies have been completed and the facility is constructed, it will not be possible to calculate, with certainty, what the tax revenue will be. The charts presented did not provide specific numbers because they were constructed using conservative estimates. In those calculations, we determined that it is safe to assume that the city would see an annual tax revenue benefit (from property taxes only) of more than $100,000. These figures and the chart provided did not contemplate revenues the city would receive from utilities supplied to LTF. Likewise, the chart did not contemplate revenues related to employees' property taxes, economic activity, or potential impact fees. Those would all be additive to what was displayed on the chart.

We're happy to assist the city in any estimates they'd like to produce to calculate potential revenues. However, until the engineering studies are complete, it will be difficult to confirm the exact numbers.

3. Mr. Phillip Chapman suggested that NCEDB work with TDC (AICVB) to analyze the impact of this proposed industrial project on tourism.

We have spoken to Gil Langley, Executive Director of the Amelia Island Convention and Visitors Bureau, and asked him to speak on this topic at the hearing on February 16. Most residents are unaware that the industrial properties on the island actually drive a significant amount of commerce into the tourism industry. The capital construction projects at each mill bring hundreds of contractors to the island for extended periods of time each year. While these projects are underway (mostly in the tourist off-season) the contractors populate local hotels and patronize local businesses. Likewise, business visitors throughout the year populate local hotels and the local industrial sites utilize catering services from local restaurants on a nearly daily basis.

4. Mr. Sam Lane would like to see what the potential impacts of the proposed project are on wetlands, method and quantity of chemical (s) storage, and air quality and emissions projections.

The project is being constructed on dry upland. The site is currently used for storage of material and equipment. One resident cited an incentive application that stated the project would be constructed on marshland. That reference lacked the surrounding context. The entire RYAM plant was constructed in the 1930s on a filled marsh. At that time, this was a common practice in Florida. The incentive application contained this information because it is a key fact that affects design constraints and investments. The fill soil on the site lacks the compaction that is typically found on naturally deposited soils and, as such, additional measures (pilings to bedrock) must be utilized to ensure the stability of structures created on the soil.

No new hazardous chemicals will be introduced to the LTF site. Chemicals on the RYAM site are stored in elevated storage and portable rail cars. The dispositions of these chemicals are addressed in the facility Hurricane Preparedness Plans. Information on hazardous material storage, quantity, and location is sent to the Fernandina Beach Fire Department annually per the Emergency Response and Community Right-to-know Act (EPCRA). All materials are stored in accordance with federal and state regulations. RYAM performs drills regularly with the Fire Department and the plant has a strong working relationship with these first responders.

Emissions projections will be public during the air permitting process. However, it's worth noting that by substituting natural gas for lignin in the Rayonier Advanced Materials boiler will have a large reduction in air emissions from this location including LTF. The permit will recognize these reductions.

Beyond local environmental benefits, the LTF plant will supply a product to the construction industry with tremendous global environmental benefits. Cement kilns represent 6-8% of greenhouse gas emissions globally. Small doses of lignin as a concrete admixture dramatically reduce the use of cement and water in concrete production. The volume of lignin admixture produced by this facility will displace enough production of cement to reduce greenhouse gas emissions by an amount equivalent to removing more than 500,000 cars off of the road.

5. Mr. Lynn Williams spoke about the increased truck traffic that the proposed project will generate and that LignoTech Florida should work closely with Rayonier Advanced Materials and the City to develop plans to reduce truck traffic such as transporting wood chips and lumber by barge, consider what the effects of saltwater intrusion will be on the site and how it affects operations, and all work together with a look to the future by considering such things as a desalination plant on the island.

The LTF project will utilize raw material that already exists at the RYAM site. No change in log truck traffic will occur as a result of the project. Likewise, as the facility is primarily focused on drying and processing the lignin product, the plant will not have a material impact on water use. The LTF daily water usage is estimated to be less than 1% increase over current RYAM usage. This is consistent with the plant Consumptive Use Permit issued by the St. Johns Water Management District that ensures the health of the local aquifer from excessive withdrawals and chloride (saltwater) intrusion. It should be noted that the RYAM plant has reduced its groundwater withdrawal by approximately 50% since 1970.

Finished products will be shipped by rail and truck. The preferred method of shipment for liquid lignin products is rail, but some destinations will require truck shipments. Even if all products were shipped by truck at the highest projected volume in 2023 (which will not be the case), the resulting impact on local truck traffic would be an increase of about one truck per hour.

6. Mr. Medardo Monzon thinks the proposed project is an excellent idea for the island but wants to insure that it will be a transparent process with data being available to citizens and public officials. Mr. Monzan is opposed to tax incentives for the proposed project because the City needs the tax money to provide services and take care of infrastructure. Mr. Monzan also expressed concerns about materials being trucked in from Rayonier's mill in Jesup, GA. Mr. Sjode from Borregaard answered Mr. Monzan's concern by stating that the lignin from the Jesup mill is the wrong type of lignin and cannot be used in LignoTech Florida's manufacturing process.

Incentives are being sought to offset some inherent challenges with construction at the proposed site that do not exist at competing sites. To be considered for state incentives, local support is required. They were designed to minimize fiscal impacts to the city and to ensure that the city sees a rapid return on their investment.

The facility will never import lignin from Jesup. RYAM's Jesup plant uses a kraft process to digest wood chips, as opposed to the sulfite process utilized in Fernandina. The kraft process alters the molecular structure of the lignin byproduct making it unusable in the LTF process. Therefore LTF will never import kraft lignin from the Jesup facility or any other kraft pulping facility.

7. Dr. Michael Harrison expressed concerns about supply and demand for cellulose and lignin. Could the Rayonier mill become obsolete and convert the entire property to a lignin manufacturing facility?

Typical pulp and paper mills produce a very limited number of products; however, RYAM's facility produces more than 20 different specialty and commodity products that are used in a wide array of consumer products.

Historically, this diversity of markets for the company's end products has prevented large swings in demand. It's also worth noting that the manufacture of cellulose specialties is more costly than commodity products such as paper and traditional pulps. Because of these costs, it would not make economic sense to produce these products just to have access to a byproduct stream of lesser value.

8. Julie Ferreira wants to know about the water usage by LignoTech Florida and whether it is sustainable for this community. What about sound emissions? Mr. Sjode explained that there would be no additional noise generated outside of the property boundaries by this proposed project. Ms. Ferreira also asked about Phase II of the proposed project, is this project going to produce ethanol?

The project will not produce ethanol and the technology being installed is not designed to do so in either phase of the project.

The project will operate within the constraints of RYAM's existing water permit as described above. Please refer to the answer on question No. 5 for further detail.

The facility will not produce a discernable noise level from neighboring areas.

Phase II is simply an expansion of the processing capacity of the lignin. The project is done in phases so that the lignin market can absorb the capacity over time without shocking market prices.

Thank you for the opportunity to present the project to you on February 2. We look forward to presenting to the city again on February 16.

[An invitation to attend a February 12 an open house at the Rayonier A.M. facility on Gum Street was extended to the community. Rayonier A.M. Experts were available to answer questions.]

Regards,

Anders Sjode

Mark Homans