PUBLIC DOCUMENT TRADE SECRET DATA HAS BEEN EXCISED STATE OF MINNESOTA DEPARTMENT OF COMMERCE

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1 STATE OF MINNESOTA DEPARTMENT OF COMMERCE EXEMPTED LARGE ELECTRIC CUSTOMER FACILITY PURSUANT TO MINNESOTA STATUTES 216B.241, Subd. 1a.(b) REPORT TO COMMISSIONER 1. Date of Report April 29, Original Name of Exempt Facility (at last filing) Boise Cascade s pulp and paper manufacturing facility located in International Falls, Minnesota 3. Current Name, Mailing Address and Physical Address or Location of Exempt Facility Boise White Paper, L.L.C nd Street International Falls, MN Docket No. E015/M Contact Person for Exempt Facility Contact: Organization: Address: Phone: Ken Krueger Energy Engineer Boise White Paper LLC nd Street International Falls, MN kenkrueger@boisepaper.com 6. Electric and Gas Utility Providers Electric Utility: Contact: Phone: Gas Utility: Contact: Phone: Minnesota Power Steve Betzler sbetzler@mnpower.com self-supplied 1

2 7. Please report any ownership changes regarding the exempt facility since the last compliance filing. On February 22, 2008, Boise Cascade, L.L.C. sold all of its paper and packaging assets, including the facility at International Falls, Minnesota, to Aldabra 2 Acquisition Corp, which became Boise Inc. in conjunction with the transaction. Boise White Paper, L.L.C. is a wholly owned subsidiary of Boise Inc. 8. Please provide the maximum monthly demand levels (in kw) from the grant year to the current period. Grant Year Please calculate the change in kwh per unit of production from the grant year to the current period. Change in kwh/unit of production between years kwh/net ton (ton, barrel, etc) Percent change Explain any material change (if any) in kwh per unit of production from the grant year to the current period. The above chart shows a total net change in kwh per unit of production over the past five years. While the change figures fluctuated over the period of time since the exemption grant year, this overall reduction demonstrates the effectiveness of the Mill s energy conservation and efficiency strategies. 2

3 11. (a) Please calculate the total estimated percentage of electric savings from projects completed during the reporting period. Note: Table 11.(b) should be completed in order to calculate the percentages for Table 11.(a). Table 11.(a) is presented to show the total estimated percentage of electric savings from projects completed from year to year during the reporting period. These percentages show the reduction in electric usage from what would have been used to produce the same output had these projects not been implemented. Unlike average kwh per unit of production, these percentages are not affected by changes in the variables that impact the kwh/unit of product averages. Table 11.(a): Total estimated savings from projects divided by the total amount of electricity used by the facility Year Percent saved Base year (b) Please fill in the data used to derive the savings percentages above in the following table: Table 11.(b) Metric Production (P) in net tons (tons, barrels, etc.) Estimated Incremental Savings from tables (EIS) Total kwh Energy Usage (EU) Estimated kwh savings per ton of production (EIS/P) Extra energy-free tons produced (EIS/EU)*P % savings (EIS/EU) 3

4 12. (a) For each year since the last report, please compare the amount of electric energy efficiency investment at the facility as compared to what would have been allocable to the facility under the electric utility s CIP programs (1.5% or 2.0% of billings as applicable). Note: Table 12.(b) should be completed in order to calculate the percentages for Table 12.(a). Table 12.(a) Amount spent as % of proforma Year electricity ICP Allocation % % % % % % Average 315% (b) Please fill in the data used to derive the percentages above in the following table: Table 12b Year Prior year electric billings for facilities CIP adjustment at 1.5% 2% Total project costs electric * * * conservation Project costs as % of CIP adjustment Average = 315% * Some projects have both electrical and thermal benefits. 4

5 13. Please calculate the change in MMBtu per unit of production from the grant year to the current period. Mcf used/year Year Mcf Change in Mcf/unit of production between years MMBtu/ net ton (Ton, barrel, etc.) Percent change Please explain the change (if any) in MMBtu per unit of production from grant year to current period. The overall reduction of 1.39 Mcf/unit of production over the period of time since the grant of the CIP exemption demonstrates the impact of the Mill s continuing investments in energy efficiency measures over this time frame. 15. (a) Calculate the total estimated percentage natural gas savings from projects completed during the reporting period. Note: Table 15.(b) should be completed in order to calculate the percentages for Table 15.(a). Table 15.(a) is presented to show the total estimated percentage of natural gas savings from projects completed from year to year during the reporting period. These percentages show the reduction in natural gas usage from what would have been used to produce the same output had these projects not been implemented. Unlike average Mcf per unit of production, these percentages are not affected by changes in the variables that impact the Mcf/unit of product averages. Table 15.(a): Total estimated savings from projects divided by the total amount of natural gas used by the facility Year Percent saved Base year 5

6 (b) Please fill in the data used to derive the savings percentages above in the following table. Table 15.(b) Metric Production (P) net tons (tons, barrels, etc.) Estimated Incremental Savings from tables (EIS) Total MMBtu Energy Usage (EU) Estimated MMBtu savings per ton of production (EIS/P) Extra energy-free tons produced (EIS/EU)*P % savings (EIS/EU) 16. Is the facility also exempted from a natural gas utility s CIP? Yes No If Yes, please complete Question 17 and explain what programs were applicable to the facility prior to exemption. If No, please skip to Question 18. The Mill self-supplies its natural gas through a direct connection to an interstate pipeline. We provide responses to both questions 17 and 18, below. 6

7 17. (a) For each year since the last report, compare the amount of natural gas energy efficiency investment at the facility as compared to what would have been allocable to the facility under the natural gas utility s CIP programs (.5% of billings). Note: Table 17.(b) should be completed in order to calculate the percentages for Table 17.(a). Table 17.(a) Amount spent as % of proforma Year NG CIP Allocation ,861% ,823% % % ,549% ,631% Average 1,825% (b) Please fill in the data used to derive the percentages above in the following table: Table 17.(b) Year Prior year natural gas billings for facilities CIP adjustment at.5% Total project costs -natural gas * conservation Project costs as % of CIP 3,861 1, ,549 2,631 adjustment Average = 1825 * Project also had production benefits. 7

8 18. (a) Please describe the current status of competitive or economic pressures on exempted entity. In your answer, please explain in particular how the current economic pressures compare to that which existed when the exemption was originally granted. At one time, Boise operated eleven papermaking facilities, with six of those now either sold or shut down, and one at St. Helens, Oregon, now operating at a significantly reduced rate. While Boise has made significant investment in the International Falls, Minnesota Mill, it continues to face severe competitive and economic challenges, including the rising cost and diminished availability of wood fiber, significant increases in the cost of energy, particularly related to the cost of purchased electricity, the costs and challenges of moving its smaller paper machines from commodity grades to higher priced specialty grades and the continued and growing threat posed by international competition. The products manufactured at the Mill are commodities that are widely available and can be readily produced by our competitors, including those with domestic operations and others operating in low cost regions. Because commodity products have few distinguishing qualities from producer to producer, competition for these products is based primarily on price, which is determined by supply relative to demand. Generally, market conditions that are beyond Boise s control determine the price for the commodity products we manufacture, and the price for any one of these products may fall below our cash costs. Making the Mill s business even more challenging, demand for pulp and paper products have been in decline in recent years, particularly since our last CIP exemption in 2005 with the impacts from the current economic recession. In a declining demand environment, the Mill s profitability and ability to compete depend on managing our manufacturing efficiency and cost structure, particularly fiber and energy costs. Therefore, any increases in the Mill s cost structure seriously impacts the economics of the Mill. The cost of energy is a growing threat to the Mill. Electricity and fuel for vehicles have all increased dramatically in recent years despite some relief in natural gas prices from highs set in The Mill was recently hit with a significant 16% increase in the cost of its purchased electricity, resulting from the Minnesota Power general rate case and subsequent ruling by the Minnesota Public Utilities Commission. These increases, coupled with the inability to pass these increased costs on to customers, places the Mill in a potentially precarious position. These issues have caused Mill management and employees to work to be more efficient through the use of technology and working smarter. All of these efforts only help to keep pace with the rising costs the plant faces. 8

9 (b) Please fill in the following table to show the significance of total cost of energy as a percentage of total cost of production at the facility. Total cost of energy as a percentage of total cost of production Year (est.) Electricity Natural Gas Diesel Other Total % 19. Please describe any changes the company has made to the criteria used to identify, evaluate or implement energy efficiency projects. We evaluate projects based on cost, risk, and ROI. While precise criteria may vary from time to time depending on the current market pressures, typically those energy projects which have less than a two year simple payback and are not deemed risky are approved. We identify projects in house, from employee suggestions, via audits, and from vendor suggestions. We also hold energy round tables to share best practices. 20. For each conservation project undertaken or planned since the last compliance filing, please provide a brief description of the kwh saved, Mcf saved, the project cost, and the status (i.e., completed, underway, planned for future year). See Tables 20.(a) and 20.(b). Projects that were required to meet environmental regulation may be listed in Table 20.(c). 21. Please use the discussion points below to explain the methodology used for estimating energy savings for projects reported in Question 20. Past projects that have been implemented at the facility and are similar to the current project; Laboratory test results for new process and/or technologies that are planned for full scale plant implementation (this might include research at the Natural Resources Research Institute of University of Minnesota Duluth, the Coleraine Research Lab, the Department of Energy, or one of the other public and private research facilities); 9

10 Vendor test results based on other similar applications; Actual past project results for a similar process in another application or industry that will be adapted to the current facility; Actual results for a similar project implemented at another facility owned by a parent company; Other (please specify). Table 20.(a): Boise White Paper LLC Completed Projects Project Cost Year Complete Savings MMBtu/yr Savings MWh/yr #5 Turbine Heat Recovery. This project installed piping which allowed us to recover 170 F hot water created by the #5 steam turbine leak off condenser. This water was being sewered; it is now collected and used as shower water in the bleach plant. The existing heat exchanger was replaced as well #3 Turbine Back Pressure Conversion. Convert #3 turbine from a condensing turbine to a back pressure turbine by blinding off the grid valve. Also installed modern controls, live loaded packing, and a static exciter This project increased the line size of the 4th and 5th effect evaporator down comer pump supply piping and increased the casing size of the 5th effect transfer pump. Completing this reduced steam usage and also allowed for improvements in steam flow control and reduced the surging effect and stability problems currently causing swings thru the complete evaporator train This project replaced the quaternary screen in the pulp mill. The existing screen did not perform well and as a consequence we were putting cold and weak liquor into our digesters. We were also re-cooking good stock that was rejected by the existing screen

11 Lighting Upgrade. In 2010 we replaced ~1600 Metal Halide light fixtures (400 and 250 watt) with fluorescent lights. This was done throughout the Mill, with the highest concentration in our sheeting and warehouse area th Effect Evaporator Vapor Duct. This project will install a 30 duct from the 5th effect vapor dome to the bottom of the surface condenser to bypass some of the baffles and reduce the pressure drop they cause. Higher vacuum in the surface condenser increases evaporation in evaporators which will reduce steam usage and gas costs I-1 Pulper Dilution Pump. The purpose of this project is to permanently install a VFD (variable frequency drive) on the I hp pulper Dilution Pump. Installing this VFD will reduce the hp 86% of the time while this pump is recirculating This project will replace the existing 1955 vintage General Electric governor control on #5 Turbine with a state-of-the-art Woodward governor and replace the existing rotating generator exciter with a state-of-theart static exciter. This project allows for an additional 1.1 MW of co-generation #1 and 2 Boiler DA Pressure Reduction. The purpose of this project is to reduce thermal energy usage and to allow the Mill to capture more of the heat energy carried in the No.1 & No.2 boiler flue gas. This will be accomplished by lowering the No.1 & No.2 Boiler De-aerator operating pressure and therefore the boiler feed water temperature. This project installed a new pressure control valve and de-super heater The purpose of this project is to reduce steam usage by installing a vacuum pump and associated equipment to remove NCG's (Non- Condensable Gases) from the Pre-evaporator Surface Condenser. This vacuum pump removes NCGs more efficiently than the existing steam ejectors Recovery Boiler Feed Water Air Heater. This project replaced the 35# and 170# steam coil air heaters with a water coil air heater. This recovers waste heat from the Recovery Boiler exhaust stack

12 9038 Recovery Boiler De-super heater. This project installed a de-super heater in the soot blower header for the Recovery Boiler. The steam in the soot blowers has less energy and cleans better after this project was completed #4 Turbine Back Pressure Conversion. This project took #4 turbine, which had been out of service for over 4 years, and converted it from a condensing turbine to a back pressure turbine. We also installed modern controls, live loaded packing, and a static exciter. Refurbishing this turbine allows us to generate up to 7.6 MW I-1 Steam Box Replacement. The project installed a new ABB SteamPlus profiler on I-1 Paper Machine. A steam box raises the wet paper temperature so it requires less steam to dry on the paper machine. We also installed a condensate separator, de-super heater, and controls I-4 White Water Heat Recovery. This project installed a control valve and logic to recover warm white water that was overflowing from the I-4 white water chest. This project reduced effluent volume and saved chemicals and energy #3 Boiler De-aerator Pressure Reduction. This project installed valves and controls to reduce the operating pressure of #3 Boiler de-aerator. This allows us to capture more waste heat from the flue gas Raw Water to Filter Plant VFD. This project installed a VFD (variable frequency drive) on one of the raw water pumps feeding the filter plant. VFDs save energy by running pumps at lower speeds instead of throttling across a valve or recirculating Digester 5-8 Blow Line Steam Purge Reduction. This project installed valves and controls to reduce purge steam flow to the digester blow line. The purge steam used to run wide open with manual valves NCG Cooler Water. This project recovered cooling water from the NCG (noncondensable gas) cooler which was put into service in The ~190 F water was piped to the Hot Raw Water Tank in the Pulp Mill

13 8058 Chiller Heat Exchanger. This project installed a plate and frame heat exchanger to cool filtered water in winter instead of using a mechanical chiller East Stores Heating. This project installed a large de-stratification fan and programmable thermostats in our East stores building to save on heating costs in winter Non-contact sewer Re-route. This project re-routed a large portion of our noncontact sewer to from the filter plant precipitators to the inlet of the raw water pumps. This was necessary to allow us to run our Lamella filters due to a failure of #5 filter Filter Plant Heat Recovery. This project installed a VFD on the filtered water header which allowed us to run our filtered water header at lower pressure and save pumping horsepower. In addition, we re-routed the non-contact sewer to the filter plant precipitators in order to save warm water used for back flushing. Part of the original intent of this project was to send colder water to the Fort Frances paper mill Recovery Boiler De-aerator Pressure Reduction. This project installed valves and controls which allowed us to reduce the pressure on the Recovery Boiler de-aerator. This allowed us to capture more waste heat from the flue gas I-1 Excess White Water Pump. The purpose of this project is to manage I-1 s Excess White Water (WW) Pump (which currently runs continuously) to only run when it is needed. The project will include installing a new pipeline that will tie-in to the cold filtered water header and will supply filtered water directly to the Clear White Water Chest, bypassing the existing Excess WW Chest Recovery Boiler Advanced Controls. This project installed RecoveryMaxx consumed air controls on the Recovery Boiler. In addition, we installed new oxygen sensors and bed cameras along with tertiary air nozzles. This project allowed us to generate more steam from black liquor

14 7062 I-1 #4 Refiner Upgrade. The purpose of this project is to upgrade the existing No. 4 Softwood refiner on the I-1 PM to a smaller rotor size and a splined rotor and hub. The splined rotor and hub reduces axial loads and improves refining efficiency. A new refiner plate adjustment motor will improve refiner control I-1 #1 Hardwood Refiner Upgrade. The purpose of this project is to upgrade the existing No. 1 Hardwood refiner on the I-1 PM to a smaller rotor size and a splined rotor and hub. The splined rotor and hub reduces axial loads and improves refining efficiency. A new refiner plate adjustment motor will improve refiner control Compressed Air Optimization. The purpose of this project is to improve the efficiency of the compressed air systems. This project will utilize the excess compressed air being vented by the I-1 compressors. This wasted air can be used in the base mill by tying I-1 into the base mill air system Steam Header Controls. This project will optimize boiler performance, which will reduce purchased fuel costs and allow greater utilization of turbine capacity while giving us better steam header control. This will be achieved through the implementation of advanced controls, correcting control hardware deficiencies and reducing steam piping bottlenecks to allow the steam and power generation equipment to be operated closer to the economic optimum Bleach Plant Heat Exchanger Instrumentation. This project installed temperature and pressure transmitter on 3 key heat exchangers in the mill which allows for continuous performance monitoring White Water Heat Recovery Phase 3. This project installed a plate and frame heat exchanger, piping, and controls to allow us to recover waste heat from effluent. Paper machine excess white water is cooled and non-contact cooling water is heated and sent to our filter plant inlet

15 6007 The purpose of this project is to upgrade the existing I-1 softwood refiner to a smaller rotor size and a splined rotor and hub. The splined rotor and hub reduces axial loads and improves refining efficiency. A new refiner plate adjustment motor will improve refiner control This project installed piping and controls to allow recycle of #3 paper machine white water and reduce the use of cold, fresh water Total Table 20.(c): Boise White Paper LLC Proposed Projects Planned Projects Cost Year Complete Savings MMBtu/yr Savings MWh/yr Effluent Heat Recovery. This project proposes to install a heat exchanger, piping, valves, and controls to heat incoming raw water in winter. The Heat sink will be Estimate in primary effluent. Progress 2011 Recovery Bleach Plant Condensate. This project will install piping and valves needed to recovery bleach plant condensate which is Estimate in currently being sewered. Progress 2011 Thick Stock Screen Rotors. This project will replace up to 7 rotors in existing thick stock screens. The new rotors are more energy efficient #3 and #4 Will Sheeter Heating. This project will install new controls and a new coil in the Air Make Up Unit for #3 and #4 Will Sheeter. This will allow us to run fewer exhaust fans in winter and make up less fresh air I-3 Warm Up Dryers. This project will install valves, transmitters, and controls to allow for differential pressure control the warm up dryers for #3 paper machine I-2 Warm Up Dryers. This project will install valves, transmitters, and controls to allow for differential pressure control the warm up dryers for #2 paper machine

16 Increase capacity of White Water Heat Exchanger B. This project will install additional plates in white water heat exchanger B to allow for more waste heat recovery and effluent cooling. TBD 2011 Sum v1 16