Fallow farmland could heat schools and other buildings in Maine, if a demonstration plant in Aroostook County designed to turn grass into pellet fuel is economically successful.

A joint venture led by the University of Maine has won a $1.6 million grant from the Maine Technology Institute to help build a perennial-grass pellet mill in Easton, near Presque Isle. It initially will supply pellets for industrial boilers at the University of Maine at Presque Isle and other schools. The long-range hope is to scale up the technology and build 25 pellet mills statewide, giving farmers a new crop, displacing 100 million gallons of heating oil each year and creating an overall economic impact estimated at $500 million.

Grass pellets are common in Europe. Interest is growing in the United States, where businesses and agricultural universities see opportunities in an energy crop that doesn’t compete with food production.

But competition is emerging as an issue for Maine’s wood pellet industry, which has been hit hard by the recession and lower oil prices.

Questions are being raised by Matthew Bell, owner of Northeast Pellets LLC in Ashland. Bell invested $3.5 million to rebuild his wood-pellet factory after a fire last year. He was upset to learn recently that a state-backed pellet fuel facility was being proposed in his market area, and that university staff are involved with the project.

“My potential customers also could burn these grass pellets,” Bell said.

In response, the university says grass pellets have too high an ash content for most commercial boilers or home stoves. It also says the aim isn’t to compete with wood pellets, but to keep more Maine cropland in production. The university’s Cooperative Extension, a partner in the venture, estimates grass pellets could create a high-value crop on 400,000 acres of underused farmland.

Northern Maine has thousands of acres of abandoned potato fields. Finding new uses for them was the initial incentive to explore grass pellets, according to Michael Bilodeau, director of UMaine’s Process Development Center. That led UMaine to apply for a Maine Technology Asset Fund matching grant, to help fund both the Easton mill and testing equipment on the Orono campus.

Several area potato farmers have signed on to grow Reed Canarygrass, a tall perennial with an extensive root system. The mill would need more than 30,000 tons a year, a large quantity. Farmers also may qualify for a federal program that offers financial incentives for growing a fuel crop.

The demonstration project is set to last three years. The mill would be operated by Aroostook Starch Co. of Fort Fairfield. Private investors, including Bilodeau, have formed a limited liability corporation called PelletShield Engineered Products and have pledged to kick in $7.7 million.

That arrangement concerns Bell. He considers it a conflict of interest for university employees to profit from a private enterprise, and he complained to the Maine Technology Institute for issuing the $1.6 million grant.

But Bilodeau said the company was formed before it received the grant, and he said similar business partnerships with the university aren’t unusual. Bell also received a letter last month from Betsy Biemann, MTI’s director, who told him that any money from the asset fund must be repaid, if the equipment leads to a new, commercial product.

“I would encourage you to connect directly with the project directors for the MTAF award and its many local collaborators to see how your company might benefit from this important project,” she wrote.

Bell is not satisfied by Biemann’s letter and was drafting a reply last week. He said he may ask Maine’s next attorney general to review the matter.

The way the deal was put together also has disturbed Richard James, the owner of Lucerne Farms in Fort Fairfield. The largest hay grower in New England, James said he provided some of his grass to a county extension official, but didn’t realize the scope of what was being proposed.

“I knew they were doing some research, but the next thing I knew, they were putting up a pellet mill a mile from us,” he said.

James said he supports the idea of a new crop to help the county’s potato farmers. He’s not worried about direct competition — grass for pellets is worth less than the high-quality hay he grows for horse feed. But James said he wonders if it makes sense to produce an alternative pellet fuel in a region that’s so heavily forested.

“I can’t believe we’re going to be making pellets from hay, instead of wood,” he said.

That question also is being pondered by the Maine Pellet Fuels Association, which represents the state’s wood pellet mills and allied businesses. The industry is sensitive about facing more competition. Pellet mills already are operating at reduced capacity, as demand remains slow following the economic downturn.

Despite that, the association purposely omits the word “wood” from its name, according to Bill Bell, the executive director, because it recognizes that pellets can be made from other biomass sources. But Bell, who isn’t related to Matt Bell at Northeast Pellets, also said his board members have reviewed the state-of-the-art in grass fuels and don’t see it as a viable alternative to wood.

“We’re open to innovation,” Bell said. “We just share some skepticism about whether taxpayer money is being spent wisely here.”

Staff Writer Tux Turkel can be contacted at 791-6462 or

tturkel@pressherald.com