For 116 years, trees have been making the trip from forests to a sawmill tucked into a bend on the St. Louis River at Cloquet. For 115 of those years, they were debarked, chipped, and dissolved into pulp for paper.

Then, last year, the mill—owned by international pulp and paper company Sappi Ltd.—retooled in response to changing markets. Instead of paper-grade pulp, it's now rolling out thick, white sheets of a similar but more refined product called dissolving wood pulp. Packaged into hay-bale-size bundles, the product—some 1,000 tons per day—is shipped to Asia, where it's used to make textiles for clothing.

Sappi's shift from paper to textile feedstock is just one of many transitions underway in the world of Minnesota forest products. Historically, the wood products industry has been a strong contributor to the state's economy, with pulp, paper, and construction wood the mainstays. But demand for conventional wood products has dropped in recent years, and harvest of Minnesota trees, which topped 3.7 million cords in 2005, is now closer to 2.5 million cords—less than half the amount of timber that can be sustainably harvested each year, according to a 1994 statewide assessment that balanced the natural, recreational, and economic benefits of harvest.

The slowdown in timber harvest has been tough on Minnesota's economy: Direct industry jobs dropped 35 percent between 2000 and 2012, from 45,630 to 29,700. It's also been tough on Minnesota's forest resource.

"Logging and a healthy forest products industry has been the only large-scale tool available to maintain and enhance forests and forest health statewide," says Craig Schmid, deputy director of Forestry for the Department of Natural Resources.

"Where markets for timber are limited, we see this trend toward forests too old to utilize and too old to regenerate," Schmid says. Although the DNR is boosting its marketing efforts to try to build up demand for Minnesota trees, what's needed as the world of forest products shifts, he says, are additional markets for wood.

Well-Managed Woods

Think of a forest that has touched your life. Perhaps it's a sun-dappled southeastern Minnesota hardwood stand where you stroll on a crisp autumn day. It might be a magnificent conifer grove you pass through as you bike along the North Shore, or the mixed aspen forest where you hunt deer, or a spruce bog where you snowmobile. Chances are that forest you visit is the result of careful planning and forest management.

Foresters know what trees grow best where, how thick and how tall they should be to stay healthy, and what mix of tree species and ages provides the best habitat for native animals and plants. Foresters also help ensure that forests meet human needs for recreation, beauty, and economic benefit. Sometimes these differing needs call for different types of management, and foresters make choices about which ones to emphasize.

"We manage for things we want from the forest, but we try to do so in a way that maintains the ecological integrity of the forests and allows for a variety of future options," says DNR forest ecologist John Almendinger, referring to the 4.5 million acres of state forest lands managed by the agency. "This is all tied to people and what people want. Ultimately, that's why we have those lands."

Minnesota has a strong track record of environmentally responsible tree harvest. It's the first state in the nation to develop biomass-harvesting guidelines. More than 5.6 million acres of forests in the state have achieved third-party certification for sustainable management from both the Forest Stewardship Council and the Sustainable Forestry Initiative. And the Minnesota Logger Education Program encourages and rewards harvest practices that protect ecosystems.

But, because of decreased demand for conventional forest products, timber harvest has slowed markedly in some forests, in particular along the North Shore and in northwestern Minnesota. A lack of harvest or other management can deplete a forest's diversity of tree species, making the stand more susceptible to pests such as spruce budworm. Without management, wood debris can build up and increase the danger of fire.

By the same token, managing for a dominant use can be constraining. The vast bulk of Minnesota-grown timber that's harvested today is still used for pulp or fuel. "One thing that's hurting us is the industry needs to be as diverse as our forests," Almendinger says.

The good news? Innovation is alive and well in Minnesota's forest products industry. Rather than dwell on declining demand for certain conventional products, entrepreneurs and enterprising government agencies are exploring new markets from fuel production to pharmaceutical development.

"The possibilities are endless," says Kathryn Fernholz, executive director of Dovetail Partners, a Twin Cities nonprofit environmental consulting firm. "Scientists are really starting to explore and embrace the unique characteristics of wood's cell-based structure. …When you understand [wood's] natural properties, it can deliver some incredible benefits."

Paul Bunyan's Biscotti

The fortunes of the changing forest industry are not equally distributed around the state. As the housing market rebounds from the most recent recession, purveyors of the oak, maple, and other hardwoods that dominate southeastern Minnesota forests are finding a welcome uptick in demand. And spruce, pine, and fir still support a strong lumber industry. However, landowners who sell—and loggers who harvest—northern Minnesota aspen for pulp and paper are not so lucky, since this wood type tends to be less suited for building furniture, window frames, and other durable products.

Enter John Bieganek, president and CEO of Superior Thermowood of Minnesota in Palisade. Bieganek runs one of the nation's first commercial producers of thermally modified wood. The instructions for making this value-added forest product read like a recipe for Paul Bunyan's biscotti: Fill a garage-sized, pressurized kiln with wood and bake at 350 degrees for 60 hours. As it bakes, the wood darkens into a rich brown tone. It also becomes more durable, decay resistant, and less prone to expand and contract with changes in humidity. Fresh from the oven, the wood goes nationwide to manufacturers, who use it for guitar parts, flooring, and other applications. Current production is modest—80,000 to 90,000 board feet (roughly 190 to 210 cords) per year.

Scientist Matthew Aro and other research staff at the University of Minnesota Duluth's Natural Resources Research Institute helped Bieganek get his business up and running. Aro and his colleagues are working to customize technology for various tree species and applications, from aspen for siding to super-durable oriented strand board for general construction. The goal is to increase use of thermally modified wood to at least the 25,000-cord range in the next three to five years, according to Brian Brashaw, NRRI wood materials and manufacturing program director. He expects the thermally modified wood, once it's perfected, to catch the eye of window and furniture manufacturers, cutting-edge interior designers, and others who use wood products.

"Thermally modified wood has got a good future to it," Bieganek says. "It's totally chemical free. It's 100 percent natural. It can replace a lot of exotic hardwoods."

Biobased Potential

Wood is a natural, renewable, carbon-storing raw material that can perform many of the tasks currently assigned to fossil fuels and other less sustainable substances.

"Anything we make from oil now could be made from biological materials," says Brendan Jordan, vice president of the Great Plains Institute, a Minneapolis-based energy think tank. "This can be a source of new demand that we believe can help to sustainably manage forests."

More than two dozen Minnesota companies are producing or developing biobased products—non-food products made from plants, animals, or other living things. Wayne Brandt, executive vice president for the trade group Minnesota Forest Industries, sees "significant potential" in biobased products for providing a big boost for wood use in Minnesota. A 2012 report from LifeScience Alley and the BioBusiness Alliance of Minnesota estimated that by 2025, some 1,400 to 2,300 jobs could be added in northern Minnesota through the development of wood-based biorefineries, which convert biological materials to products such as fuels and plastics.

"I can see a day that the plastic covering over our bumpers on our cars and such, instead of being petroleum based, is cellulose based," Brandt says.

That potential moved a little closer to reality last April when Golden Valley–based Segetis announced its choice of Hoyt Lakes as a site for a new facility to manufacture a sugar-based substitute for phthalate plasticizers, which are widely used in consumer products. A substitute has appeal because phthalates have been implicated as endocrine-disrupting chemicals. Because the technology for turning cellulose into sugar is not yet ready for prime time, Segetis initially plans to use corn as the source of sugar. But the goal for the plant, says vice president for operations Andrew Skinner, is to eventually switch to wood as a source of the sugar feedstock.

In University of Minnesota laboratories, materials scientists and engineers are working to further dissect wood into constituent chemicals that can be reassembled into other novel and needed compounds. Two of wood's major components—cellulose and lignin—are among the most abundant organic chemicals in the world. William Tze, an associate professor of bioproducts and biosystems engineering, is exploring how to use nanotechnology to create functional materials from cellulose that could lead to high-value products such as biobased sensors. A colleague, Simo Sarkanen, is on a quest to convert lignin into biodegradable polystyrene-like plastics with as little chemical modification as possible. He's also working to refine fuels from wood more efficiently to make them profitable. Such products could create new uses for branches and other tree harvesting leave-behinds. "We're right at the cusp" of a lignin breakthrough, he says.

Extracting Value

In addition to lignin and cellulose, trees manufacture a variety of specialized molecules. Since 1996 a small operation in Cohasset has built its business on tapping trees' ability to make natural chemicals beneficial to people. Now owned by the international biopharmaceutical company Lonza Inc., the operation uses heat, pressure, and water to extract a complex sugar molecule known as arabinogalactan from tamarack. The firm then concentrates and sells the sticky liquid and a derivative powder for formulating into animal and human dietary supplements and personal-care products such as skin cream.

Lonza's Cohasset facility employs 14 people and processes some 10,000 cords of tamarack each year. (After extracting the arabinogalactan, the company sells much of the remaining wood for other purposes such as landscape mulch.)

At Two Harbors a more recent start-up, the Actives Factory, is extracting marketable chemicals from waste bark stripped from birch trees harvested to make paper. After purifying the chemicals, the Actives Factory sells them to companies for cosmetic and pharmaceutical applications. Though current demand is moderate, CEO Brian Garhofer sees opportunity for "explosive growth" in demand once word gets around and new formulations are developed.

"There have been some big strides made in the last three to four years on these compounds," Garhofer says. "We're getting requests from all over the world for these products."

Hot Stuff

One growing use for wood is one of the oldest: burning wood for energy. More than 50 Minnesota factories, utilities, and communities already use wood to produce heat. Both Grand Marais and Ely plan to add wood-fueled facilities to heat clusters of buildings.

Last year a team of wood-energy aficionados led by DNR biomass consultant Anna Dirkswager captured a three-year, $250,000 U.S. Department of Agriculture grant to select and help public and commercial buildings gear up to burn wood. With the goal of demonstrating the value of using wood fuel, the team will identify up to 20 Minnesota facilities currently using propane or fuel oil, run the engineering and financial numbers on the most promising ones, and help design wood-fueled heating systems for a handful of them.

Building specialized combustion facilities and getting the fuel to them are some of the main challenges of heating with wood. But research is underway at the University of Minnesota and elsewhere to advance technologies such as pelletization and torrefaction (essentially, roasting wood into a coal-like substance) that reduce logistical and economic barriers to wood fuel. Dirkswager calls the pellet market "our best near-term opportunity" for boosting renewable energy use and forest management at the same time.

Obstacles and Opportunity

A number of technical, logistical, financial, and other obstacles need to be overcome before various innovative uses for forest products can get Minnesota's forest-based industry back on a boom track. But advances such as Sappi's retool sound notes of hope for novel forest products. And that in turn brings hope for boosting the ability to manage forests to stay healthy and support a broad range of wildlife, outdoor recreation, and economic activity.

"I've been [with the DNR] six years," says Dirkswager, "and it feels like this is the most exciting time in terms of renewable development since I've been here."

According to Lee Frelich, director of the University of Minnesota Center for Forest Ecology, well-planned harvest can also help forests make transitions to a future that will include invasive species and a changing climate. Strategic reforestation can nurture a range of tree species that can withstand new stresses and provide diverse habitat for wildlife.

Almendinger also draws attention to the big picture. "Using forests allows us to have a big land base, to form a biodiversity base," he says. "Having that big base is a huge benefit."