Can Kangaroo Island bounce back with biochar?

Can Kangaroo Island bounce back with biochar?

Some 12 million trees on Kangaroo Island, burnt in a devastating bushfire that began in late 2019, will be cut down and turned into a charcoal-like fertiliser in one of the country’s largest carbon projects to date.

It is a $400 million project, producing what is known as biochar, that management hopes will turn the ASX-listed group once known as Kangaroo Island Plantation Timbers into a major player in Australia’s green economy.

“It’s a common-sense solution. We’re supportive of it, and we hope it works,” said Michael Pengilly, the mayor of the tourism mecca off the South Australian coast. “The only other alternative is to burn it.”

Executive chairman of ASX-listed Kiland and its 87 per cent owned entity Nobrac, James Davies, in front of some of the fire-damaged trees on Kangaroo Island. Arlow Houchin

The trees, some of which have already been felled and stacked up, are placed in a pyrolysis machine – about the size of a shipping container – which superheats the timber to break it down without the use of oxygen. If successful, the company will bring on larger pyrolysis machines.

The process results in biochar, a material used to improve soil quality that traces its origins back to the ancient Amazonians. It also acts as a carbon sink, locking in emissions that would otherwise have been released into the atmosphere for hundreds of years.

Once the biochar comes out of the pyrolysis machine, it is classified as a carbon-reducing material. Being able to touch and feel the product, which can be sold in 25kg bags or in larger quantities for industrial customers, gives it extra clout in a carbon-reduction market that can be clouded with sometimes esoteric forward hedging mechanisms.

Kiland executive chairman James Davies said the company – which has specialised in forestry and lost much of its market value after the bushfires – had been working on what to do with its burnt plantations for 18 months.

The first commercial production of biochar is set for September.

“It’s a rebirth of the company, it’s a rebirth of the island in some ways,” Mr Davies said. “Our timing is somewhat remarkably fortuitous. In a strange way, it’s been facilitated by the circumstances we found ourselves in.”

Mr Davies was referring to the explosion of interest in carbon credits in the three and a half years since the Kangaroo Island fire.

The bushfires began on December 20, 2019 when about 100 lightning strikes hit native scrub in a national park in the island’s isolated north-west region.

The fires spread, with two people killed and 87 homes destroyed and about half the island burnt out. The island wasn’t declared safe until early February, 2020.

About 210,000 hectares of land were burnt by the fires, including most of the 14,500 hectares of plantation timber holdings owned by the then Kangaroo Island Plantation Timbers, the previous iteration of Kiland.

Kangaroo Island is Australia’s third largest island, stretching about 150km across from east to west. Most people take a 45-minute car ferry ride to reach the island from the terminal on the mainland at Cape Jervis, about 110km south of Adelaide.

The biochar exercise is expected to yield around two million carbon removal credits.

While it fluctuates rapidly, the spot price of a CO₂ Removal Certificate was, in April, the most recent date available, €126 ($205) per tonne.

Mr Davies said biochar was an ideal solution for the burnt plantations. Otherwise, the company would have to burn the trees, which would release substantial carbon emissions into the atmosphere.

Kiland owns 87 per cent of a separate entity called Nobrac, which is the operating company of the biochar project. Mr Davies is also executive chairman of Nobrac, which takes it name from carbon spelt backwards.

Kiland received $65 million in an insurance payout after the fires and Nobrac raised $7.1 million in December, accelerating its biochar plans.

Mr Davies said only 5 per cent of the 14,500 hectares of timber plantations were spared from the fires. It will take about four years to harvest all the burnt trees, with the biochar project on Kangaroo Island to run for about 10 years. There are 4.5 million tonnes of fire-damaged timber.

Kiland hopes to be able to replicate the process to other burnt-out forestry areas in other countries. “We’re designing a flexible and modular system,” Mr Davies said.

Samuel Terry Asset Management, a Sydney investment house better known for campaigning for change at AMP, has emerged as the major shareholder at Kiland with a 42 per cent stake.

Mitch Taylor, a partner at Samuel Terry, sits on the Kiland board. “We are optimistic about the agricultural and carbon removal opportunity,” he said on Monday.

The Nobrac project will apply for registration for carbon removal certificates through platforms such as Puro and Verra, which operate voluntary markets for projects that remove emissions from the atmosphere.

Mr Davies said more companies were paying up for carbon removal certificates to reduce emissions in their own businesses.

Last week computing giant Microsoft said it would purchase 2.76 million tonnes of carbon removal via an offtake agreement with a Danish company. “I think that’s a strong signal where the market is going,” Mr Davies said.