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Pallet Industry Vet Launches Pellet Mill: O’Malley Lumber Adds Plant in Virginia to Make Premium Hardwood Fuel Pellets

O’Malley Lumber – Pallet Industry Veteran Launches Wood Fuel Pellet Mill

By Tim Cox
Date Posted: 4/1/2009

TAPPAHANNOCK, Virginia – Baltimore-based O’Malley Lumber, a veteran member of the pallet industry, has entered the pellet industry by way of its sawmill facilities in Tappahannock, Va.


            Yes, wood fuel pellets – premium hardwood fuel pellets to be exact. They sort of resemble rabbit food.

            Wood fuel pellets are burned in pellet-burning wood stoves and fireplace appliances, which have been gaining in popularity. Homeowners like them because they don’t have to handle firewood, and pellets are a lot more convenient than building a fire – and keeping it going – in a traditional wood stove or fireplace.

            And the pellet business couldn’t be any better than it is right now for the O’Malley family. Since the pellet mill came on line in August of last year, it has been operating 24 hours a day, seven days a week, producing and bagging pellets.

            The pellets are sold wholesale to businesses that retail them to homeowners with pellet-burning appliances, such as hardware stores and specialty stores that sell wood stoves. The company ships pellets to customers along the East Coast, from South Carolina to Maine.

            O’Malley Lumber has long roots in the pallet industry. The company was founded originally in Gloucester, Va. in the 1940s by Paul O’Malley, who operated a portable sawmill. He moved his family to Baltimore in the early 1950s and became a lumber broker. His business grew. He began making boxes and pallets in the 1960s and expanded into lumber remanufacturing operations. The business eventually transferred to two sons, Mike, 56, and Pat, who retired in the 1990s.

            The company acquired a pallet plant in Dillsburg, Penn., in the mid-1980s as its out-of-state customer base increased, relocating to Gardners, Penn. in 1992. It purchased a sawmill in Tappahannock in 2004.

            In southeast Baltimore, on the outskirts of the city, the company operates a pallet manufacturing plant. The Baltimore facilities also house the company’s main office and corporate staff, including sales personnel. About 100 employees work out of the Baltimore location.

            The Baltimore plant manufactures a variety of industrial lumber products and pallets, focusing strongly on specialty and custom pallets and avoiding the GMA market. It is equipped with three automated nailing machines (two Viking machines and a Rayco machine) and also has a cut-up shop that can remanufacture cants and lumber into pallet parts, although it relies mainly on the Tappahannock facility for cut stock. The Baltimore plant also buys some pine cut stock for softwood pallets.

            The plant in Gardners, about 10 miles north of Gettysburg, is organized as O’Malley Wood Products and manufactures pallets, specialty boxes and crates, and dunnage. All pallets and containers are assembled by hand with pneumatic nailing tools. The plant employs 100 people working in two shifts.

            The Tappahannock facilities consist of a circle sawmill, a scragg mill that was added in 2004 and the new pellet mill. The Virginia operations, which employ about 100 people, are organized as O’Malley Timber Products. Cut stock from the Tappahannock mills is trucked to the company’s other two plants. The plant in Tappahannock, which is located on Virginia’s Middle Peninsula along the Rappahannock River, also assembles pallets.

            Mike has four sons in business with him. His oldest son, Paul, 31, works in sales in the company’s office in Baltimore. Pete, 30, is the operations manager in Baltimore, and Mike Jr., 26, is operation manager of the Gardners plant. The Tappannock facilities are overseen by Matt, 28.

            The idea for a pellet mill evolved as the O’Malleys wrestled with alternatives for their residuals, which they previously sold to farmers for bedding or other businesses to make mulch. As they began to focus on the fuel pallet industry and market, Matt, who earned a bachelor’s degree in forest products from Penn State University, spent the better part of a year researching the possible enterprise. He did research on the Internet, which led to phone calls to various companies that design, build or equip fuel pellet mills, and also interacted with the Pellet Fuels Institute, the trade organization of the fuel pellet industry.

            The company considered other possible uses for its hardwood residual material, too. One was producing charcoal briquettes. “They’re not as costly to make but there’s not as strong demand,” said Matt.

            The O’Malleys also explored the feasibility of developing a bioenergy plant that would use wood fuel to produce electricity. However, “The more and more we talked to people,” it became increasingly clear that fuel pellets would be the best choice, said Matt.

            Another reason they viewed pellets favorably was because the company would have complete control over its raw material supply – its three plants furnish all the raw material required.

            As he researched the industry and began contacting the small group of fuel pellet manufacturers, Matt said he found them to be a “very tight-knit group…There was not a whole lot of openness.” The manufacturers, obviously leery of encouraging a new competitor, were reluctant to open their plants for a visit, and the few that did limited access.

            In visiting their mills, Matt said his impression was that pellet manufacturing was a “very automated process.”

            “It was going to be unlike anything else we’d done,” he said. “It was a big undertaking compared to a normal pallet mill or sawmill operations,” in terms of the cost and the round-the-clock operations. By contrast, when the company added the scragg mill to its Tappahannock facilities, the cost of that project was about $1.5 million, he noted.

            As he interacted with vendors and suppliers, Matt only came into contact with one businessman whom he personally liked, Steve Ross of Equipment Dynamics, who could do a turn-key project pellet mill and had done it before. Steve also had several new ideas that the O’Malley’s incorporated into their project and other companies later wished they had done, according to Matt.

            Steve, an engineer, delivered a turn-key project. He designed the plant layout of the mill, incorporating some ideas from the O’Malleys, contracted to have it built, and was a manufacturer’s representative for the equipment suppliers and sold the equipment.

            Some of the principal equipment suppliers were Bliss Industries, which manufactured the actual pellet mill and also supplied two hammermills, Hamer Automated Packaging Systems, which supplied the bagging equipment, and Kice Industries, which supplied a vacuum air system.

            The pellet mill was scaled to handle all the residual wood material from O’Malley’s three facilities – a combined total of about 55,000 tons annually. That volume will produce about 35-40,000 tons of fuel pellets annually, Matt estimated.

            The mill facility consists of a small yard area and a relatively small building. The building contains an office, the pellet mill machine and automated bagging system. Some other mill equipment is partly enclosed by an attached structure, and some equipment functions outside. Two storage silos are attached to the building.

            Wood material — sawdust and grindings — is trucked from the Maryland and Pennsylvania plants to Tappahannock. A truck may deliver a load of pallets, swing by one of the plants to pick up a load of residuals and haul it to Virginia. Trucks carrying pallet stock from Tappahannock to Maryland and Pennsylvania also can return with a load of residuals on the backhaul.

            The mill yard is equipped with a dump for unloading tractor-trailers. Feedstock is stored on a concrete pad, and there is also space to store some material under roof in a structure with a fabric roof. A front-end wheel loader moves material.

            In the yard, the company’s infeed consists of a modified moving-floor semi-trailer. The trailer roof has been removed as well as a portion of one side to enable the front-end loader to dump feed stock into it. As the feedstock moves to the back of the trailer via the moving-floor mechanism, material falls into a conveyor. It is carried and dumped into a main conveyor, which rises to the top of a three-story structure next to the mill building. In this area the feedstock exits the main conveyor onto a vibrating screen, and particles that are the appropriate size fall into a hammermill. Oversized material is collected and routed to a second hammermill. After going through one of the two hammermills, now all the material is properly sized.

            The next stage is the drying system. A burner uses wood fiber fuel to generate heated air. (For fuel the company uses culled pellets that do not meet quality standards as well as wood flour that is too small for pellet manufacturing; the fuel is fed into the burner automatically via air.) In the rotary drum dryer, which resembles a cylinder, the raw material is moved back and forth three times by vacuum. The wood material now has been dried to the proper moisture content and is routed to the pellet mill, which is powered by two 250-hp motors. Feedstock enters the top of the machine, and rollers push it through a die to form the pellet shape. Finished pellets exit the bottom of the mill and fall into a screw conveyor and eventually are deposited into the storage silos.

            Finished pellets are conveyed out of the storage silos to the Hamer automated bagging system; the pallets are conveyed to the top of the system, about two stories tall, and into a series of two hoppers. The Hamer bagging system makes the plastic bags from rolls of plastic film already printed with the company’s labeling information. The system cuts the plastic and makes a bag by putting two pieces together and heat-sealing the bottom and sides. The machine fills a bag and seals the top and moves it down the production line, where the crew unloads them and stacks them on a pallet. The loaded pallet is moved to a carousel-type shrink-wrapper that wraps the unit load in plastic film to stabilize the bags.

            “We do a few things differently from other people that seem to pay off,” said Matt. “We put in an aspirator that gets about 95 percent of the dust out of the pellets,” he said. They also used additional screening equipment to ensure the quality of raw material entering the mill infeed. Another twist was the way pellets are moved in and out of the storage silo to protect product quality.

            The drying system was the most costly part of the project. “It’s the most critical and the most expensive,” said Matt.

            As far as plant and machine maintenance, the burner for the drying system has to be turned off weekly for cleaning. It is shut down for 24 hours starting on Saturday, the cleaning is done Sunday morning and the operations resume. Besides greasing equipment, there is “very little downtime,” said Matt. The hammers on the hammermills are changed out after six to eight months, and the rollers in the pellet mill machine are replaced after a month or two.

            The pellet mill represents an investment of $4.5 million, according to Matt, and the company expects to recoup its investment in three to four years. The project was financed by a New York-based bank.

            There was a significant shortage of premium hardwood fuel pellets in 2005, according to Matt, although the last two winters were mild, reducing demand.

            “The timing for our plant couldn’t have been better,” he said. “This year there was a shortage and it was a cold winter.” Sales of pellet stoves and other pellet-burning appliances shot up last spring, and pellet demand followed.

            The industry should benefit from a tax credit under the Bush administration and also endorsed by the Obama administration, according to Matt. It allows a 30% credit on purchases of appliances that use biomass fuels—such as pellet stoves.

            They made one miscalculation that Matt shared. They planned on supplementing their feedstock by grinding used scrap pallets and using that material. “That has not worked for us,” said Matt. The wood fiber from used pallets is too dry and contains dirt and would damage the pellet mill. The benefit of using the green feedstock is that it can be dried in the mill’s operations to the precise moisture content needed for pellet production.     To make up for it, the company buys about 5% of the raw material it requires.

            The pellet operations are geared to closely monitor and control the quality of the raw material and the finished product, noted Matt. “Everybody we sell to loves it,” said Matt. “It’s a very consistent premium hardwood pellet.”


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