Fred Tebb and Sons, Inc.

Raymond Mill/Kiln Revitalization

July 2021

Fred Tebb & Sons, Inc. Port of Willapa Harbor Pacific County Mike Layton, Jim Sayce Kathy Spoor Development Manager Port Manager Administrator 9014 Peacock Hill Avenue 1725 Ocean Avenue 1216 W. Robert Bush Drive Gig Harbor, WA 98332 Raymond, WA 98577-2813 South Bend, WA 98586 (253) 272-4107 360.942.3422 360.875.9334 [email protected] [email protected] [email protected]

New investment and re-development is proposed for an existing kiln and planer operation in the town of Raymond in Pacific County as part of establishment of an Energy Innovation District for the region. This development is led by the Port of Willapa Harbor (“Port”) and Fred Tebb and Sons (“Tebb”), an existing privately-owned Washington manufacturer of value-added forest products. The proposed manufacturing operation in Raymond will primarily produce material to supply or complement Tebb’s other lumber re-manufacturing operations. The facility will also produce wood fuel pellets and animal bedding (shavings) derived from wood wastes from the operation. These products will be added to Tebb’s existing offerings including its Tacoma Firelog™ -- a carbon neutral cord wood alternative, also based on wood waste. Tebb’s product family emphasizes a commitment to utilize all wood material from the processing of timber resources. The Raymond mill/kiln will be an anchor project for the Port’s “Energy Innovation District” initiative, in which systems of manufacturing by-products and waste streams are leveraged across multiple enterprises to complement and enhance efficiencies and energy conservation. The operation will seek collaboration amongst forest, seafood, and cannabis processers in the area, creating an industrial symbiosis network to drive innovation, production efficiencies, and labor force development. This development will fill an important niche in Southwest Washington’s forest products industry cluster and is expected to create at least 36 full-time new employment opportunities within its first three years of operation. At least half of all jobs created are expected to be filled by individuals from low- to moderate-income (LMI) households. Major financial support is being sought through the Washington State Community Economic Revitalization Board (“CERB”), Washington State Department of Natural Resources (“DNR”), and the federal Community Development Block Grant program (“CDBG”) administered by the Washington State Department of Commerce (“Commerce”). Raymond Pellet Mill and Sawmill Revitalization, continued Page 2

Project Summary The current Raymond site includes three (3) dry kilns, planer, and several buildings. Tebb and the Port propose an upgrade and expansion to the facility to accommodate additional products and materials handling capacity. All property and purchased and equipment purchased using state, local and federal funds will be owned by the Port and leased to Tebb. Tebb will leverage over a half-century of mill operations experience and veteran staff to manage the site upgrade and ensure the facility’s operations are based on lean principles for optimal productivity and economic value. Additional equipment and planned expansion to the site will be considered by Tebb in later phases, potentially adding additional employment opportunities.

Figure 1: Existing facility images and addresses of Raymond site

Financial projections for this development include approximately $3.8M in new equipment and upgrades to the site, including major refurbishment to the existing kiln operation, a new small-log micromill, new log handling equipment, pellet mill, and sawdust shavings collection system. Two additional buildings and improvements to site transportation capacities are also budgeted. Figure 1 shows a labeled Google Earth image of the current Raymond site and Figure 2 presents the re- imagined plan. Key footprint annotations include: 1. Equipment parking and log storage 2. Pellet manufacturing production and storage (~15,000 sq ft) 3. Log Merchandizing System1 (~5,000 sq ft) 4. Micromill (~1,200 sq ft)

1 A “Log Merchandising System” optimizes the cuts for individual logs by sorting and cutting each log into optimal lengths that can be fully processed further down the saw line. How and where to cut the logs is the first decision that most sawmills need to make, hence automated “optimization” to ensure that each particular log is cut to maximize its value relative to the sawmill’s resources.

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5. Stacker (~2,000 sq ft) 6. Sawdust bins 7. Kiln operations 8. Planer operations 9. Three-sided shipping shed (~10,000 sq ft) 10. Truck weigh scale

Revenues from products produced from the Raymond facility are expected to begin in Month 4 (after initiation of construction and initial upgrades) and reach nearly $1M monthly in Month 8. Overall investment in the operation yields positive cash flows within Year 1 and a positive cumulative return (encompassing all capital investment) in Year 3. New jobs created for the facility are projected to reach 28 in Year 1. Total employment at the operation is expected to reach at least 36 within Year 3. At least 24 of the projected jobs will require little to no prior experience and/or entail skills that can be taught on-the-job. This development will fill an important niche in Southwest Washington’s forest products industry cluster. The operation is expected to encourage collaboration amongst regional forest products producers and processers to ensure that all species and grades of timber are efficiently utilized. This industrial symbiosis network will drive innovation, efficiencies in production and energy-conservation techniques, and development of a skilled labor force. Feasibility Tebb has been looking for additional sites in the Northwest to expand or consolidate its operations and chose Raymond based on its proximity to existing Tebb operations, nearby sources of timber and wood

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wastes from other processors, and access to an under-served and available labor base familiar with forest products manufacturing. Tebb brings direct experience in mill operations and kiln rehabilitation, as well as established channels of distribution with known revenue streams. Current Tebb kilns and milling operations are running at maximum (pre-pandemic) capacity. Key factors for the Raymond-sited mill’s success include the availability of sawdust, wood waste, chips (for pellets) and logs (for value-added softwood and hardwood products). The Tebb Tacoma Firelog™ product was developed to reduce the cost and waste of mill sawdust and shavings, turning an expense destined for a landfill into a profit center. Similarly, Tebb expects that timber material for the Raymond mill will be purchased from local sources and up-cycled to its best use with the goal of using the whole tree to manufacture products including lumber, fire logs, heating pellets, and animal bedding material. Wood chip and waste supply (for pellets) and abundant availability of second, third, and fourth growth hardwoods timber in the region is also confirmed.2 Collaboration from area growers and processors offer an opportunity for economic and environmental industrial symbiosis within the local forest products resource cluster: • Supplies of sawdust and wood waste suitable for pellet manufacturing will be produced from the Raymond mill operation and sourced from local mills when required. Recent regulatory changes limiting the amount of on-site storage of chips, sawdust, and wood waste from commercial milling operations now forces existing mills to dispose of these materials more urgently. To the extent that the Raymond facility and Tebb’s Hoquiam operations do not meet material requirements, financially feasible purchases of raw materials from regional mills will supply adequate material volume for pellet manufacturing projections. Tebb has already contacted several area producers who are anxious to be involved in the wood waste program. • Local timberland owners presently transport most of their harvested logs out-of-county for processing given no local alternative, incurring significant trucking costs. Tebb will provide an local, value-added use for hardwoods and softwoods of multiple quality grades, including from thinning activities and forest land management. • The new micromill will be specifically designed to process small logs and extract lumber at economic prices. Currently such small logs are discarded or turned directly into chips, not lumber. Acquiring such otherwise-undesired logs will lower the cost of materials for Tebb as well as provide a local market for this timber, cutting costs to local loggers and ensuring highest value use. About Fred Tebb and Sons Tebb is a fourth generation, family-owned business that has successfully manufactured value-added lumber products since 1965. Primary owners, John and Rick Tebb, have worked in the industry since their teens. They and their staff have run all facets of forest product operations, including construction and operation of sawmills, dry kilns, and byproducts manufacturing to reduce waste streams and generate new revenue. The company’s success is rooted in entrepreneurial investment in new products, niche markets, and efficient manufacturing processes that emphasize utilization of all

2 Columbia-Pacific Resource Conservation & Economic Development District: Comprehensive Economic Development Strategy, both 2010 and 2014-2015 editions.

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materials and byproducts including waste and energy. Their commitment to employees is demonstrated in their ability to retain full employment even during extreme cycles of market demand and fluctuations in materials costs and product revenues. Similarly, Tebb values its supplier relationships and ensures that all business agreements are honored in full. Tebb’s original plant operated in Tacoma from 1965 through 2019 when the property was sold. The company purchased and now operates three (3) mills located in Hoquiam WA, Dallas, OR and Salt Lake City UT. Tebb has experience with an array of wood species including alder, fir, spruce, red cedar, yellow cedar, and woods from the balsam family (primarily hemlock). Finished products include interior and exterior dimensional lumber, moldings, door and window jams, garage door parts, as well as specialty products such as piano parts, guitar boards, military components, small aircraft components, pallets, and wood boat structures. Tebb manufactures Tacoma Firelogs™ from dry sawdust and shavings (wood waste) that is fused together under extreme pressure into fire logs to be burned in wood stoves, fireplaces, and firepits. Its mission with the Firelog product is to promote renewable home heating options based entirely on natural fibers without need for additional wax or binder materials. Tebb believes that it is a fundamental responsibility of forest products manufacturers to utilize all the material. Tebb’s overall revenue was $17 million in 2020. Over 300,000 cases of Tacoma Firelogs were sold during the last 2020-2021 winter season. Margins on wood products average between 20% and 30% and up to 40% for Firelogs. Tebb wages begin at $16.00 per hour for a 90-day training period and $16.50 per hour thereafter. The average wage is $21 per hour for skilled and unskilled positions. The company also offers health and dental care as well as a 401K with company matching. Financing Summary Total capital investment required to install new mill equipment and re-furbish the Raymond kiln facility will require nearly $3.8M in upfront investment, highlighted per the following asset investments: • $700K to repair and upgrade the existing Kilns (including boiler upgrades) • $750K to acquire and install the pellet mill and bagging system • $600K to acquire and install a small log micro-mill • $200K to upgrade the existing planer facilities • $300K for a log merchandising system • $120K to acquire and install a sawdust/chip dryer (needed to dry wood materials used in pellets) • $200K to construct two additional operations sheds (~ 15,000 square feet of warehouse space) • $260K for rolling stock (forklifts and log handling equipment) • $130K for transportation improvements (including roadwork, truck scale, logyard rocking) • $105K for wood shavings collection and bagging system (used to prepare and package animal bedding products) Investment will be led by Tebb’s commitment of $1M for operating capital with support from the following public funds: • CDBG (Community Development Block Grant): County governments are eligible to receive and administer CDBG funds. Block Grants must document how each CDBG-funded activity will benefit

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low- and moderate-income (LMI) persons. An employment plan outlining recruitment and hiring of LMI personnel as well as regular reporting and training compliance obligations are also necessary for CDBG grant awards. $1.085M is expected from this CDBG fund. • CERB (Community Economic Revitalization Board): The total amount available is $1.2M, which is comprised of $960K in grant/loan (to the Port) matched by $240K from the Port. It is expected that the $240K match from the Port would be accounted for as lease forgiveness or lease subsidy. The Port will meet with the CERB Board is July 15 to re-propose this ask. • DNR (Innovation Funds): $1.4M in total is still allocated for this initiative through the Rural Communities Partnership Initiative administered by DNR. DNR leadership will expect to release these funds following the CERB approval process. • The Port of Willapa Harbor owns the Raymond site where the kiln and mill are sited. These facilities will be leased to Tebb along with adjoining lands needed to support expanded operations. At least $240K in lease and operations support will be committed. Public funds from CERB and DNR will be invested in capital assets and infrastructure improvements that will remain public property regardless of Tebb’s continuity. Consistency with County, Port, and Municipal Growth Plans Pacific County’s Overall Economic Development Plan3 recognizes the geographic complexity and rural diversity of the county. The plan notes challenges to local growth of natural resources businesses (timberland management, fishing, shellfish production) not only from global market forces and economic cycles but also from increased regulatory oversight regarding environmental impact of these industries. These plans emphasize the importance of creating new job opportunities through the development or redevelopment of existing commercial, industrial, and mixed-use areas across the county. Zoning constraints and environmental impact concerns significantly limit the ability to development new lands for industrial sites to support business activities of the scale needed to substantially benefit employment growth. The Port of Willapa Harbor identifies this project as a high priority in its Strategic Plan, and the Pacific County Council of Governments (PCOG) tags this as a priority project in its 2018 WA-CERT list. The Pacific County Economic Development Council (PCEDC) considers this mill relaunch as the single strongest near- term driver of community business growth across the county. The Raymond kiln site has operated as a timber milling and processing operation for decades under approved zoning and permitted activities ordinances. The Raymond site is explicitly zoned “Heavy Industrial” and is designed by the Raymond Shoreline Management Plan and Comprehensive Plan as a high intensity/industrial area.

3 The Overall Economic Development Plan (OEDP) is adopted into the County’s 2020-2040 Comprehensive Plan.