A Plague Upon Thee

Now that we have the termites, take this steel reinforced barrel to the Northridge Lumber Mill south of Hearthglen--you'll find it to the west of the road that leads you up to the town.

Once there, place the barrel in the center of the lumber mill; find someplace suitable, like on a crate and then open it. The termites should do their work from there and make the mill useless to the Crusade.

The termites are obviously getting restless as you place the barrel on top of the crate.