Federal Timber Policy and Private Timber Prospects
George A. Craig
California has a rich timber resource, the development of which will depend in large part on federal policies. Federal action notwithstanding, most privately-owned timberland in this state can be committed to timber production with economic justification.
RICH RESOURCE WITH GREAT POTENTIAL
Recent assessments by both the federal and state governments provide data that can serve as the beginning of a review of prospects for private timber in California. A comparison of California and United States data is appropriate, because markets for wood products are national and, to some extent, international.
Better Land More Trees
Nearly a fourth of the United States' land area is commercial forest land - land that is not withdrawn from timber use by law or administrative regulation and capable of producing 20 cubic feet per acre per year when full stocked with natural stands. Only 16 percent of California qualifies, to some extent because of land withdrawals. The timberland in California, however, for a number of reasons produces more valuable stands.
Because of its latitude and other factors, U.S. forest land has a high potential for producing commercial softwood timber now in great demand. California is even more fortunate. The average biological potential for commercial forest lands in the U.S. is 75 cubic feet per acre per year, compared with 97 for California (15). Seventy-five percent of the commercial forest land stocked with softwoods in the U.S. can grow more than 50 cubic feet per acre per year. In California, the share is 82 percent.
A greater percentage of California's timber production is softwoods, and more of its softwood forest has sawtimber. Nationally, 71 percent of the 1976 harvest of sawtimber and poletimber was softwoods, compared with 98 percent in California. Nationwide, only 43 percent of lands stocked with softwoods had sawtimber. In California, the figure was 73 percent.
Trees in California are larger and grow more densely than the national average. Twenty-seven percent of U.S. softwood sawtimber is in trees 29 inches or more in diameter; in California, 54 percent is in that size class. California has about 60 million softwood trees of that size on commercial forest land - 14 percent of those in the U.S. - on 6 percent of the commercial forest land stocked with softwoods in the U.S. (21).
California's softwood comprises 13 percent of the nation's inventory on 6 percent of land stocked with commercial softwoods in the U.S. In 1976, California is reported to have had 11 percent of the softwood removals, 9 percent of the mortality and 8 percent of the net growth in the U.S. I doubt the accuracy of the last two figures.
Nationwide, nearly three fourths of commercial forest land is privately held; the forest industry holding 14 percent, other private owners holding 58 percent. In California, less than half of commercial forest land is privately held - 16 percent forest industry and 30 percent other private owners. Half of the commercial forest land in California is in the national forests.
More than 60 percent of California's commercial forest land stocked with softwoods and capable of growing more than 50 cubic feet per acre per year is in national forests. They include 44 percent of softwood-stocked commercial forest lands able to grow more than 120 cubic feet per acre per year. There are nearly 3 million acres of these most productive lands in California, shared one-fourth each by the forest industry and other private owners. Nationally, there is a similar private sharing of the most productive lands, but the national forests have a third and other government agencies a greater percentage than in California. California has a much greater part of its commercial forest on such high productivity lands - 23 percent as compared with 13 percent nationally.
National forests in California also have a substantial majority of the softwood sawtimber inventory (62 percent) and are reported to have had 62 percent of the mortality and nearly half of the net growth in 1976. That was a year of heavy loss due to drought, and other reports show the mortality on the national forests was double the mortality reported for all ownerships in California (24).
The forest industry has softwood sawtimber inventory proportionate to its land holdings - 16 percent. Other private owners, however, have only 20 percent of the inventory, while owning 30 percent of the land. The share of total mortality in each case is reported to be close to the share of inventory owned. The share of net growth of softwood sawtimber, however, is proportionally higher - 20 percent for the forest industry and 29 percent for other private ownerships. The Forest Service reported in 1979 that the net growth of softwoods on commercial forest land in California was 46 percent of potential in 1975. The public unreserved lands were shown to have the best record (51 percent), followed by the industry (47 percent) (15). Again, the national forest figure should be re-examined.
Different Turnover Rates
The national harvest of softwood sawtimber was nearly 51 1/2 billion board feet in 1976 with less than a fourth coming from national forests. Although, the national forests have 62 percent of California's softwood timber inventory the national forests supplied only 35 percent of the nearly 6 billion feet harvested (International 1/4-inch log rule).
Inventory turnover rates are a good indicator of productivity and management. With nearly all of its forest land farther north than Anchorage, Alaska, Finland has a short growing season. Its annual harvest, however, is more than 4 percent of inventory. The softwood sawtimber inventory turnover rate for the U.S. in 1976 was 2.6 percent. The rate on forest industry lands was 6.5 percent and on the national forest 1.1 percent. For California, the figures are about 6.2 percent and 1.3 percent, respectively.
Forest Service data and projections show that annual growth has increased with increased rates of inventory turnover, as might be expected in well-stocked forests. The forest is permitted to use the potential of the site to produce more net growth when old stands are converted to young-growth stands. With a turnover rate of a half percent per year, there were 6.8 billion feet of softwood sawtimber grown on the national forests in 1952. The agency's predicted growth of 15.2 billion board feet on the national forests would mean a 1.6 percent turnover rate in the year 2030.
Although, only 18 percent of the nation's commercial forest land is in national forests, they have a third of the 27.3 million acres of most productive sites stocked with softwoods. The forest industry and other private owner classes each have substantially less. The industry, however, grew more softwood sawtimber in 1976 than the national forests while harvesting nearly twice the national forest cut of softwood sawtimber.
Inventory management gets little attention by national forest administration, even though the forest Service has acknowledged:
There are large areas of overcrowded stands of merchantable size. Numerous research studies have indicated that cutting of some merchantable trees to improve spacing and stimulate growth (commercial thinning) can provide early returns, utilize material otherwise lost as mortality, and con-centrate growth oil more valuable trees (26).
The President's 1976 RPA Statement of Policy said more attention should be given to "evaluating timber inventory management to determine whether changes in present practices would yield greater net benefits to the Nation"(6). Since then, there has been no specific response.
The excess timber on commercial forest land in the California national forests is vast. As of last October, the Forest Service reports there are 148 billion board feet of regulated timber in such forests, with a potential yield listed as 2,240 million board feet per year. If management were to achieve an inventory turnover rate of only 3 percent per year, the potential yield could be achieved with an inventory of about 75 billion feet. Thus there appears to be more than 73 billion feet of excess inventory. Part of that, however, is in streamside zones, roadsides and other areas where cutting is limited for aesthetic and other reasons. Timber production on another 28.4 billion feet situated on areas classified as "marginal" is constrained for various reasons (25). When these factors were taken into account, the excess was calculated only for the standard component - the less than one-fourth of the California national forests that the Forest Service found to have no practical problems with timber growth and harvest. The excess of this portion is nearly 44 billion board feet (more than 43 percent of the inventory on the area).
The Standard Component excess timber volume represents 220,000 man-years of employment and nearly 4 million housing units. If half of it were scheduled for sale over a 20-year period, its present worth would exceed 1.8 billion dollars, using a 6 percent discount rate and FY1979 bid rates (road costs not included) for national forest timber in California. The counties' share could exceed a half-billion dollars.
Timber Consumption Growing
Softwood timber demand is large and growing. In 1976, U.S. consumption of softwood was reported as 10.3 billion cubic feet, including net imports of 1.1 billion cubic feet. The Forest Service suggests the total softwood sawtimber demand in 2030 could be 19.9 billion cubic feet, including 3.9 billion in imports. Using Forest Service assumptions, the 2030 supply would be short 3.5 billion cubic feet (26).
Californians consumed about 1.6 billion cubic feet in 1976 with half that volume coming from outside the state. Professor John Zivnuska has estimated the 2030 California consumption at 3.4 billion cubic feet with nearly three fourths imported (29).
Based on a projected 74 percent increase in California's population over the next 50 years, Professor Bill McKillop has projected a 42 percent increase in softwood lumber consumption despite prices more than doubling (in constant dollar terms), a 31 percent increase in softwood plywood consumption with real prices doubling, and an increase of more than 250 percent in paper and paperboard consumption with less of an increase in real prices (29).
The Forest Service's draft, 1980 Assessment, projects softwood sawtimber "supplies" nationally in 1990 will be 2 1/2 percent less than in 1976, even though the inventory will be nearly the same (26). The draft assessment also shows California's 1976 stumpage prices, in constant dollars, are expected to increase 156 percent by 1990 (26). The actual increase by 1979 in constant dollars was 100 percent from 1976. Such results largely reflect the constraints of federal timber policy.
POLICIES LIMIT FEDERAL TIMBER USE
With more than half the softwood sawtimber an half of California's commercial forest land in national forests, federal timber policies affect us all. Such policies have been established by law, regulation and administrative action. They are critical in the allocation of national forest land and resources to various uses.
According to Law
Concerned about possible future shortages of resources, particularly timber, Congress decided in 1891 to establish forest reserves (16 U.S.C. 471), which became the national forests. Their purpose was established by law in 1897: To improve and protect the forests and to meet future needs for water and timber (16 U.S.C. 475).
In 1960, Congress mandated the national forests be administered for additional purposes: outdoor recreation, range and wildlife "but not in derogation of" the purposes set forth in the 1897 Act (16 U.S.C. 528). The 1960 act found the establishment and maintenance of wilderness consistent with these objectives but neither defined wilderness nor listed it as one of the purposes of administration. The law requires "due consideration" of the relative values of the various resources (16 U.S.C. 529).
The Wilderness Act of 1964 intended the National Wilderness Preservation System to include national forest lands only to the extent they were part of or adjacent to areas already designated as wild areas, wilderness areas, canoe areas and primitive areas (16 U.S.C. 1132; 107 Cong. Rec. p. 18374; 109 Cong. Rec. p. 11930). Since that time, Congress has added many other areas to the system. To provide opportunities for primitive recreation is the only reason for designating areas as part of the National Wilderness Preservation System, according to the statutory definition of wilderness (16 U.S.C. 1131).
The 1960 act established the nonspecific "multiple-use" concept and specified that all the resources were to be managed for "sustained yield". The latter was defined as the achievement and maintenance in perpetuity of a high-level annual or regular periodic output without impairment of the productivity of the land (16 U.S.C. 531).
The National Environmental Policy Act of 1969 (NEPA) declared "...that it is the continuing policy of the Federal Government...to use all practicable means and measures...in a manner calculated to foster and promote the general welfare, to create and maintain conditions under which man and nature can exist in productive harmony, and fulfill the social, economic and other requirements of present and future generations of Americans" (42 U.S.C. 4331). [Italics added.]
The Forest and Rangeland Renewable Resources Planning Act of 1974 as amended by the National Forest Management Act of 1976 (RPA) (16 U.S.C. 1600-1614) and regulations of the Secretary of Agriculture (36 CFR Part 219), provide for the development of integrated land-use and resource-management plans formulated periodically with public participation. Bases for the plans are the Forest Service's assessment of demands, supplies, price trends, opportunities, costs, direct and indirect returns to the federal government, policy considerations, and so on. Along with a statement of policy from the President, the program and assessment go to the Congress for consideration in framing budgets.
RPA provides a policy of flexibility for timber harvest scheduling on the national forests (16 U.S.C. 1611; Cong. Rec. 9/30/76, p. H11845). (See next section.) However, the 1980-draft RPA documents prepared by the Forest Service include assessment data and alternative program directions based entirely on even-flow nondeclining yield for national forest timber.
Wasteful Nondeclining Yield
Forest Service management of timber inventories on the national forests in the next 10 years will be of major significance to our nation and its prospects of meeting its greatest housing demand ever - that caused by the World War II baby boom.
The Forest Service has arbitrarily, if not capriciously, imposed an additional constraint on timber harvest scheduling. If reasonable resource allocations are to be made, there must be abandonment of the agency's wasteful policy of even-flow nondeclining timber yield. Whereas this is possible under current laws and regulations, the agency has resisted. In response to a directive from the President received in June 1979, the Forest Service is preparing to consider departures from its policy in new plans to be made by the end of 1981. The Sierra, Six Rivers, Klamath and Shasta-Trinity will be included.
The Multiple-Use Sustained-Yield Act's definition of sustained yield was interpreted in regulation by the Secretary of Agriculture (guided by the Forest Service) to require "so fat as feasible, an even flow of National Forest Timber" (36 CFR 221.3 ). In 1973, the Chief of the Forest Service further refined the idea with a requirement for "nondeclining yield". That was a significant federal action taken without filing an environmental impact statement - a violation of NEPA (942 U.S.C. 4332).
The nondeclining yield policy would prohibit timber scheduling that reduced output from one period to the next. Ironically, in practice there have been many reductions, planned or otherwise, since 1973. The Forest Service in California sold 12 percent less timber in the past five years than was sold in the same period 10 years earlier. A part of this mismanagement has been planned reductions at the beginning of plan periods to avoid the possible need for a reduction in the distant future.
The Forest Service has described the consequences of its nondeclining yield policy as follows:
Old-growth timber is often held for 100 or 150 years beyond maturity with resultant loss in growth and increased mortality.... This constraint spreads the harvest of existing old-growth stands over a long period. It also reduces the net annual growth because overmature stands have a near zero growth rate, and losses from death and decay are large (20).
Forest Service data show that billions of board feet of excess inventory on the national forests could be harvested without ever reducing future harvests below the long-term sustained-yield level. Further argument for increased harvests is illustrated by the loss of billions of national forest board feet in California alone during the recent drought.
Even greater waste is evident when economic considerations are taken into account. Generally, the Forest Service has ignored current values and holding costs. The conclusions of many economists were summarized by a Federal Reserve Bank economist:
They argue that the current non-declining even-flow policy places unnecessarily severe constraints on annual harvests from national forest lands, and fails to accomplish its stated objective of fostering local community stability. Moreover, that policy leads to an inefficient allocation of available capital and labor for forest management. A more flexible harvest strategy, better tailored to meet the requirements of the market, is needed to alleviate upward pressures on timber and forest products prices. The solution, in the view of these economists, lies in the use of economic criteria to determine appropriate harvest rates and invest-ments on National Forests. Through this approach society should be able to obtain both a greater eco-nomic return on timber production and a greater set-aside of land for recreation and other uses (10).
The RPA regulations stipulate calculation of a base harvest schedule and departures therefrom under the following circumstances (36 CFR 219.12 [d]):
- high Mortality losses Can be significantly reduced or prevented
- forest age-class distribution can be improved;
- use of the base harvest schedule would cause a substantial adverse impact upon a community, or;
- none of the other alternatives considered would achieve Program goals.
The federal timberland base has diminished substantially in recent years. Further reduction is expected. The Forest Service reported that at the beginning of 1977 there were nationally 13,865,200 acres - 6.8 percent of commercial forest land in the U.S. - of productive forest lands stocked with softwoods and withdrawn from timber use through statute or administrative regulations. About a tenth of the area (and 10.7 percent of the state's commercial forest land) was in California. This is expressed in the past tense, because changes have been and are being made.
When the Wilderness Act was passed in 1964, 14.6 million acres of national forest land were designated wilderness or primitive areas. In July 1979, 15.3 million acres of national forest were designated wilderness and the administration recommended adding another 18.6 million acres from the national forest to the system. The total - 33.8 million acres - amounts to more than 18 percent of the national forest area, compared with an 8 percent limit promised by the sponsors of the 1964 Wilderness Act (9). There is a 30-million-acre maximum long-term goal in the RPA 1976 Program now in effect. That increase came when the Forest Service reported: "The public preference tended strongly toward the high goals in all resource systems, except wilderness" (20).
The government plans to include as wilderness lands proposed as a result of the second roadless area review and evaluation (RARE II) conducted by the Forest Service. Included as new wilderness would be 6.4 million acres of potential commercial forest land and a potential annual yield of 1,290 million board feet from the national forests. Another 10.6 million acres designated "further planning" has an uncertain future. If designated for wilderness, it would raise the loss of productive forest land to 8.8 million acres and another 608 million board feet of national potential yield would be gone each year.
California had 2.4 million acres of national forest in the National Wilderness Preservation System or in Primitive Areas under Congressional consideration (298,250 acres) before the RARE II decision. More than a half-million acres of this area (23 percent) is productive forest land. RARE II recommendation would immediately add just under a million acres to wilderness in California, including productive forest land with a potential annual yield of more than 46 million board feet. The further planning category in this state included nearly 2.8 million acres with productive forest land having an annual potential yield of 113 million board feet.
This may not be all the timberland lost to wilderness. The Forest Service's draft 1980 Program document includes an alternative that would increase by 1995 the national forest wilderness to 49 1/2 million acres - more than a fourth of the National Forest System and about double the 1976 Program goal for the same date. In contrast, the highest timber goal in the five alternatives was 14.6 billion feet for 1995, far below the 1976 Program goal for 1995 (3). In light of the statute to administer the national forests for other purposes, including enhancement of the human environment through production that fulfills the requirements of Americans under NEPA, the Forest Service proposal suggests a contrary attitude not likely to increase harvests of national forest timber.
Allocation of more of California's national forest land to wilderness than was recommended after RARE II seems particularly inappropriate when prospective wilderness, administered by other agencies, is considered. The most populous state, and third largest state geographically will have nearly 14 percent of its total area designated wilderness if classifications are made as expected. Included will be 13.8 million acres (21,500 square miles), administered as follows: USDA Forest Service, 3.4 million acres; National Park Service and Fish and Wildlife Service, 4.0 million acres; Bureau of Land Management, 6.3 million acres; and State of California, 0.1 million acres. The area is more than double the size of Massachusetts.
Environmental concerns have also affected the size of the timberland base in California, 2 million acres of commercial forest land are now classed as "marginal component" in the national forests. This means the Forest Service has decided that in such areas timber cannot be grown and harvested economically either when there are no environmental problems or when environmental problems are met appropriately. I doubt that inclusion of such a great area in this category reflects modern timber harvesting technology or the anticipated demands for timber, let alone recent price rises. In the past five years, the average bid rate for national forest timber in California has nearly tripled, going from $67.75 to $200.71 per MBF.
There must, of course, be controls to prevent unjustified irreversible damage to the environment; but the Forest Service appears to adopt controls that limit land use simply because that use is opposed by a few anti-development activists. Further, there are those who favor a no-risk approach to resource development and use. Most valuable endeavors require taking some risks. Fortunately, a land and resource use plan can be changed readily if there is good reason. The law and regulations require careful and regular monitoring of practices on the national forests, and new national forest plans are required to be prepared every 10 years. Whereas, timber sale contracts have many precautionary requirements, they also authorize unilateral government changes to meet unanticipated environmental problems. Practices expected to be beneficial should be implemented, until they are demonstrated to be undesirable.
Because so much national-forest commercial forest land has been designated wilderness and more constraints in the use of the remainder have been adopted, the land base available for high-level timber production has been greatly reduced in California. In 1972, the acreage of land and the volume of timber in the standard component were respectively 48 percent and 29 percent higher than they are today.
Federal timber policy decisions include the Forest Service's selection of methods to protect water quality, maintain and enhance species diversity, determine rotation ages, justify investments in reforestation and stand improvement, establish utilization standards, fix the size of planning units, control unwanted vegetation, set dispersion constraints for regeneration cutting units, apply integrated pest management, and so on. Such decisions have consequences for private owners, because they influence state regulatory programs as well as affect the availability of federal timber sold in their markets. I will illustrate some of the questionable decisions and their potential consequences.
In the 1979 timber harvest study for the Six Rivers National Forest (22), the Forest Service established streamside zones of 100 to 500 feet not to be managed for timber production but which must be retained intact "to maintain batik stability and shade canopy" to protect the fish habitat. Professor Don Erman has found that a stream buffer strip of approximately 30 meters is sufficient to protect aquatic life and that logging has been done closer to streams without adverse effects, when special techniques are used (5). The areas in question cover thousands of acres of the more productive forest land.
As amended, the RPA requires that land management plans provide for diversity of plant and animal communities to meet multiple-use objectives. The Six Rivers report proposed that landscape architects meet established landscape management objectives by helping design areas to be cut for regeneration. The planners would by edict attempt to reduce aesthetic impacts further by limiting the average size of such areas to 20 acres and necessitate their dispersion by limiting cutting for regeneration on each of a large number of compartments to about 20 percent of the suitable acreage per decade. This was also considered to be an appropriate way to provide habitats that would assure diverse wildlife. By attempting to exercise such controls on small areas of the forest, the agency was ignoring habitats provided in the large area of the forest (40 percent or more) not Planned for timber production and the statutory direction to use the national forest as the planning unit (16 U.S.C. 1604). Further, the dispersion constraint made a number of proposed harvest schedules infeasible and reduced the present net worth of the forest by approximately $25 million because of increased opportunity costs under several other harvest proposals (22).
The Forest Service generally has shunned the aid of economic analysts and has in some instances taken economically indefensible positions - such as its adoption of the "allowable cut effect" (ACE). Depending on the continuance of the nondeclining yield policy, ACE would permit the increase in the harvest of old-growth timber and credit the income therefrom to offset planting or stand improvement costs elsewhere in the forest. Professor Dennis E. Teeguarden was an early critic of this policy (18).
Six years ago, the Chief of the Forest Service made a small gesture toward considering economic criteria in timber planning - a position he largely avoided thereafter. He concluded that on the national forests the desired diameter of sawtimber crop trees for many species and types is between 17 and 20 inches. This would result from a "standard sawtimber rotation" - something between rotation based on culmination of mean annual increment and a direct financial rotation (11). Three years later, 46 percent of the softwood sawtimber in the U.S. was 21 inches or larger in diameter and most of this large timber is on the national forests. The best opportunity for the Forest Service to improve timber utilization in the U.S. is in the conversion of this excess inventory of over-aged timber to useful products and healthy young stands of growing timber.
Management by Pests
Professor R.W. Stark and others have noted the interrelationships of forest pests and the conditions of host stands. They advocate integrated pest management involving both elements. Using insect problems as an example, Stark reported that outbreaks probably occur most commonly in relatively unproductive forest ecosystems already under stress by natural factors (17).
The health of the commercial timber stands in the national forests can usually be improved through timber harvesting. The saw must replace fire and pests as the reducer of moisture stress. Scheduled harvest levels, however, are much too low to be fully effective. For example, the current management plan for the Trinity National Forest provides inadequate host management. Prior to RARE II, the Standard Component there had 61,000 acres of commercial forest land supporting stands 200 to 300 years old or older and not planned for cutting for at least 50 years - 27,000 acres riot being planned for cutting for at least 70 years.
During the recent drought, timber mortality was much greater in California national forests than outside them. The Forest Service reported that 6.6 billion board feet (Scribner) on 6.3 million acres of commercial forest land in 12 national forests were killed in the 24 months ending with June 1979. In the same period, the mortality on 6.3 million acres of such land outside the national forests in California was only 400 million feet or 6 percent of the loss on the national forests. During the 48 months that ended June 1979, the mortality on the 6.3 million acres of commercial forest in California's national forests totaled 9.6 billion board feet. In about the same period, the Forest Service sold 6.7 billion feet on all national forests in California for a total bid price of nearly $800 million. Less than 2 billion feet of the timber sold was salvage timber, and nearly a third of that was fire salvage. The Forest Service said they salvaged half of the timber that justified salvage because of size, concentration and accessibility.
Dr. Ralph Hall, a consulting forest entomologist and others have protested the Forest Service's limited removal of insect-infested trees before the insects have left them to infest other trees. He declares the losses would have been less if a more aggressive salvage program had reduced insect populations (8). Instead of being managed, the pests appear to be managing the national forests.
Budget actions affect timber supply from the national forests. The administration's proposed budget for the current fiscal year would have reduced the national forest timber sale target to 11.7 billion board feet, 70O million below the previous year and 2.3 billion feet below the RPA Program goal for 1980.
The foregone benefits are substantial. The sale of the full 14 billion board feet specified in the RPA Program at the 1978 stumpage rates would have provided 57,000 man-years of employment, wood for construction of 200,000 homes, federal receipts totaling more than $250 million and local government income of about $70 million. The additional cost of sale preparation and administration, timber-road engineering and maintenance was estimated to be less than $40 million in December 1978 dollars. Congress ultimately increased the FY1980 sales program to 12.2 billion board feet.
Based on the FY1979 budget, the cost of sales preparation and administration was about $10 per MBF, more than a fifth of which would have come from timber receipts as salvage deposits. Another approximate $4 per MBF would be taken from timber receipts for stand improvement for timber, wildlife recreation and so on under the Knutson-Vandenberg Act as amended in 1976 (KV). Less than $2 per MBF go for timber management plans and inventories, and a small amount comes from the budget for other resources, such as recreation, watershed, range and wildlife, and lands. Inadequate funding in these areas can constrain timber sales.
Roads should be acknowledged as a major capital investment to provide a transportation system to serve all resources and forest administration for at least 20 years. The cost of purchaser road construction comes out of the value of the timber. Appropriated funds for engineering amount to about $11 per MBF (2).
Thus, less than $25 per MBF was the projected appropriated cash needed for the timber sale program in California. Another $25 per MBF, approximately, is budgeted, but it comes from timber value to go for roads, stand improvement deposits, etc. Because all of these costs are compared directly with anticipated receipts for the budget year, there will be problems. In any event, the average bid rate for national forest timber in California last year was just over $200 after reduction for road costs. The net income to the U.S. Treasury and the counties was eight times cash outlays per MBF for timber sales.
Whereas, there may be justification to question some of the Forest Service's costs, it is false economy to limit the timber sale program so greatly. Besides the loss of direct cash returns, other foregone benefits include needed employment, construction materials, general contribution to the economy, some reduction in inflation.
On May 14, 1931, President Hoover curtailed national forest timber sales "as an aid both to the commercial situation and to forest conservation." This was done on the advice of his Timber Conservation Board, which had been appointed to study "the economic problems and consequences of overproduction in the forest industries"(4).
Certainly, there has been no such concern or recommendation in recent years. In response to homebuilder's concerns about the cost of lumber, the Congress held hearings in 1969, 1973, and 1977. The results were the same in each case, and are well expressed in a 1969 report of the Senate Subcommittee on Housing and Urban Affairs, which said of the 1969 crisis in the price of lumber and plywood:
The underlying cause, which has both temporary and long-term significance, is an artificial shortage of available timber from our Nation's forests.... About one-half of the Nation's inventory of mature softwood timber, estimated at 2 trillion board feet, is under Government ownership in the National Forests.... Considering that the National Forests are contributing only 11 billion board feet annually out of this huge inventory, the problem can be seen to be one of management and adequate funding...with the necessary financial input, the solution of our long-range problem could be resolved without impairing the use of the forest to meet conservation and recreation needs of the American people (27).
Other governmental groups have drawn attention to the deficiencies of national forest timber management. The Public Land Law Review Commission noted in 1970 the emphasis on biologic as opposed to economic factors. The commission made this "major recommendation":
Major timber management decisions, including allowable cut determinations, should include specific consideration of economic factors (14).
In 1973, the President's Advisory Panel on Timber and the Environment found:
The annual harvest on lands available for commercial timber can be increased substantially. Analysis based on nationwide forest inventory data indicate possibilities of increasing the old growth cutting late in the range of 50 to 100 percent. The Panel recommends that the Forest Service promptly review and revise...old growth management policies for the western national forests (13).
Dr. Marion Clawson of Resources for the Future and a member of the President's Panel, wrote in 1976:
The national forests are a great national asset but they are poorly managed. There are great possibilities to make them the source of much greater outputs of all kinds, and to make their operations economically far more efficient at the same time (1).
The Forest Service has publicly recognized the opportunity to increase timber harvests on the national forests. In 1961, President Kennedy, on the advice of the Forest Service, offered a program that would ultimately yield 21.1 billion board feet annually (19). The 1976 RPA Program, now in effect establishes national forest timber sale goals ranging in billions of board feet (local scale) as follows: 1978, 12.4-13.3; 1980, 13.4-14.6; and 1991 to 2000, 15.5-17.9 (20).
The results of all this good advice and good intentions are that 11.0 billion board feet were sold nationally in 1978. In the five-year period ending with 1978, the average annual sale of sawtimber on the national forests was less than 83 percent of sales in the mid 1960s In California, sales were reduced by 15 percent in about the same period. A comparison of output and allowable cut in any one year is not fully representative of poor performance. Cut is regulated in 10-year periods, and there is a substantial accrued undercut both nationally and in California. By 1979, the potential yield for the national forests had been reduced to 15,051 million board feet. It should be noted that various administrative-appeal, court and political actions have contributed to the poor performance. However, good procedures, appropriately administered would have reduced such problems as the Supreme Court established in 1978 (Vermont Yankee Nuclear Power Corp. v. NRDC. 435 US 519).
GOOD PROSPECTS FOR PRIVATE TIMBER
One would think that an owner of a small tree farm might welcome such an inefficient competitor as the federal government and be inclined to hope such manage merit does not improve. Instead, there are reasons for private timber growers to find acceptable over the long term a substantial increase now in sales of national forest timber. In the short term, private timber values are expected to increase regardless; but it is difficult to determine how much.
Benefits from Increased Sales
The advantages of increased sale of national forest timber in the Pacific Northwest were described 10 years ago by Professor Henry J. Vaux. He argued then for harvest levels that would check the rising trend of stumpage prices in the Douglas-fir region for at least the following 20 years. He concluded:
...the historic trend or rising stumpage prices would be significantly checked; such a curtailment of the rising price trend would help to stabilize for the next 20 years the cost sit structure of dependent industries; it would at least curtail the rising trend of wood product costs and the consequent displacement of wood in many major markets - a displacement that is socially undesirable to tile extent that it requires nonrenewable resources where renewable wood could serve as well; it would sustain continuing growth of the wood economy in the Pacific Northwest and of the structure dependent on it rat least another 20 years, without sacrificing ultimate sustained-yield potentials; and it would significantly increase the efficiency of use of surplus forest capital.
Professor Vaux asked what would be gained by holding the surplus timber over a prolonged period if the future markets such a surplus might serve have been lost as a result of unchecked long-run price increases? Because stopping the rising trend of timber values could drastically reduce or eliminate existing incentives to private investment in timber growing in the region, he recommended release of surplus growing stock at a rate designed to limit the long-run rise in stumpage prices to not more than 1 percent per year (28).
There is much evidence of the social cost of the government's failure to heed such advice. Reduced sales of national forest timber have resulted in closed mills in California. The constriction of the wood processing industry could affect the local demand for timber when more young growth becomes available from private lands 2 or 3 decades from now. New mills require much more capital for construction than was needed to build those now being starved out of operation. An idle or dismantled mill is a social loss when there are both timber that could be made available and markets to be served.
The artificial shortage of timber has made costs to the consumer soar. The Bureau of Labor Statistics' index of wholesale softwood lumber prices increased 65 percent more than the index for all commodities between the base year of 1967 and 1978; therefore, fewer families can afford new houses.
The National Association of Home Builders testified early in 1979 that wood products account for 25 to 30 percent of home-construction costs and 15 percent of the sales price of a house. Nationally, a 2-billion-foot reduction in timber supply would have the effect of increasing the cost of a $50,000 house enough to price 130,000 families out of that market. Lumber and plywood are the backbone of the single-family home (12). Over the past five years, The Forest Service's average annual sales of sawtimber were nearly 2 billion board feet under the 1963-65 average (Table VIII).
Stumpage rates have increased at a much higher rate than the 1 percent Vaux proposed. The average annual increase in California has been 15 percent since 1970 and 19 percent per year since 1976 in constant dollars (Table IX). The latter is a much faster rate than government analysts have projected for the period to 1990 (26). Only time will tell the extent to which timber growers may be injured by loss of processing facilities and reduced consumer demand for wood due to federal timber policies.
At the request of those conducting the California Forest Resources Assessment Program (FRAP), the Adams-Haynes econometric model was used to project the effects of changing the amount of national forest timber sold in California. With the Forest Service's nondeclining yield policy and other current expectations, 1980 stumpage prices are expected to double in constant dollars over the next 20 years - 3.6 percent per year rate. If further reductions in commercial timber land and other factors cause a 9 percent reduction in national forest cut over the next 20 years, a 2 percent increase in output is expected from private lands; but the average annual rate of price increase in constant dollars would be up only slightly.
If, on the other hand, the Forest Service increased its harvest over the next 50 years by 64 percent from excess inventory, the average annual increase in stumpage rates for all California timber over the next 20 years is projected to be about 2.4 percent per year. The FRAP reports the cut on private lands would decline 13 percent between 1980 and 2000, and the decreased need for young timber from private lands would provide an opportunity for building growing stocks and enhancing subsequent productivity. Stumpage prices would be 40 percent lower in 2000 and almost 20 percent lower in 2030. Lumber prices are projected to decrease about 2 percent under the increased harvest alternative and increase by 1 percent under the reduced cut (15).
After analyzing timber harvest opportunities in the northern interior region of California, the FRAP staff found that national forest timber (including excess inventory) could be combined with other timber to provide a revised total even-flow of timber that would be higher than that resulting where the national forest harvest is calculated without consideration of timber in other ownerships. Further, they found that government control of private lands would not be necessary because of the large commercial forest area in public ownership.
Thus consideration of private inventories in the national forest harvest determination process appears to be not only a reasonable option, but also an opportunity for realizing increased harvest and growth. Furthermore, this change in policy would avert the projected decline in timber production and the associated decline in jobs and increases in lumber imports (15).
Returns from Forest Improvement
With the increased value in timber has come increased investments in Forestry in California. The Forest Service reports that in FY1978 out of a total of 106,142 acres planted in California, nearly 70 percent (74,103 acres) was restocked by private owners; forest industry, 46 percent; other private owners, 24 percent. Nearly 28 percent of the reforested acres were on the national forests. Of the 45.2 million trees grown in California tree nurseries, the industry and the Forestry Service each produced 20.5 million and the state nearly 4 million trees (23). In 1964, only 9,000 acres of private lands were reforested, one-eighth as much as in 1978. However, reforestation has barely kept pace with logging and wild fires (7).
The California Forest Productivity Committee determined that 10 million acres in California, 61 percent of the state's commercial forest land base, could grow additional softwood timber. The national forests have 45 percent of the opportunities; forest industry lands, 18 percent; other private, 33 percent; and other government lands 4 percent. Compared with their share of total commercial forest land owned, other private owners have the greatest opportunity for stand regeneration, if economics are not considered.
An economic analysis was made of these opportunities by the committee, which found that 98 percent of the acreage of treatments described would return at least 8 percent on the capital required for the treatments. There would be at least a 10 percent return for 6.2 million acres of such treatments. The national forests have 43 percent of qualifying acreage at 10 percent return, compared with 22 percent for the forest industry and 32 percent for other private owners.
For such an analysis, a number of assumptions had to be made. One critical assumption, based on long-term trends, was the stumpage values would increase in constant dollars at the rate of 2 percent compounded annually. As already discussed, the appreciation rate in recent years far exceeded 2 percent per year and is expected to continue to do so for decades. The assumed inflation rate was 4 percent per year compounded. The returns were after allowance for income taxes except for the national forests and other government lands. Estimated treatment costs are substantial; stand regeneration, including site preparation, from $63 to $465 per acre; precommercial thinning costs, from $60 to $200 per acre, depending on site quality and timber type. The analysis did not consider the potential benefits of fertilization and planting genetically superior seedlings because of insufficient data on yield response (7).
Such investments are not without risk. Fire, insects, disease, windthrow, drought, and new government policies can all reduce profits. Stand improvement, as part of integrated pest management, can however, reduce the risk from some of these agents. Acceptance of the nation's growing need for wood and implementation of good practices that increase production may moderate future government-caused problems.
Although national forests would benefit most from improved forest management, more governmental attention has been given recently to private lands in California.
The California Forest Improvement Act of 1978 added a new Part 2.5 to Division 4 of the Public Resources Code, including a long chapter on forest resource improvement and timber productivity of forest lands. It declares:
Forest resource improvements made pursuant to the provisions of this chapter serve a public purpose and promote the health, welfare, and economic security of the citizens of the state.
The 1978 Act authorizes the Department of Forestry to:
- Enter into agreements and make loans.
- Encourage forest resource improvements, and otherwise facilitate good forest land management, through a program of technical assistance, advice and applied research.
- Work cooperatively with private landowners, particularly smaller nonindustrial landowners, to upgrade the management of their lands, and therefore, improve both the productivity of the land and the degree of protection and enhancement of the forest resource system as a whole.
- Encourage and cooperate with efforts by the forest industry and federal government to improve the management of forest lands within the state, particularly lands owned by nonindustrial owners, through advisory services and other action.
Agreements and loans may be made by the Department of Forestry for all of the following:
- Preparation of management plans for forest land.
- Site preparation.
- Planting and cost of seed and seedlings.
- Young growth stand improvement.
- Forest land conservation measures.
- Fish and wildlife habitat improvement.
- Follow-up work.
The California Forest Improvement Program will be funded from the major portion of the net receipts from the sale of forest products from the State Forests beginning July 1, 1980. Under this program, a landowner having less than 5,000 acres of forest land may receive from the state 80 percent of the cost of the approved project. The state's cost share may be increased to 90 percent if either;
- The landowner owns less than 500 acres of forest land;
- Ten percent or more of the total costs will be devoted to land conservation measures and/or fish and wildlife habitat improvement;
- Public recreational opportunities will be increased; or
- Local labor source will be used (16).
Two federal cost share programs and the state-federal Cooperative Insect and Disease Control Program are reported to have had limited accomplishments because of inadequate funding, cost-share limits, hold-down rates, high project costs, landowners' perceptions and lack of knowledge, and shortages of technicians, contractors and planting stock. During recent years, the Agricultural Conservation Program and the Forestry Incentives Program had resulted in the treatment of about 2,300 acres per year in California with planting and timber stand improvement. Only two insect control projects totaling 990 acres have been cost-shared through the cooperative program in the past five years (16).
The Forest Improvement Committee, chaired by the chairman of the State Board of Forestry and appointed under the 1978 act, is to report June 30, 1980, on, among other things, the effectiveness of federally or privately-funded forest-improvement activities in complying with recommendations.
Taxes are always a concern. California timber production has been encouraged by the shift in 1976 from ad valorum tax on timber to a yield tax and the zoning of commercial timber lands where uses are limited and land taxes are to reflect such restrictions. The yield tax is now 3 percent of harvested-timber value as determined by the state. Under the California Forest Improvement Act of 1978, for state tax purposes, investments in forest improvements can be amortized over a 5-year period instead of being capitalized for the life of the stand. The 1978 act also authorized a delay in payment of inheritance taxes where undue hardship would result from payment before disposition of the estate. Federal tax law recognition of timber income as largely capital gain also encourages timber production, as does similar state law limited to noncorporate ownerships.
IF WE KEEP THEM GROWING
Private timber owners in California have reasons to be optimistic about the future.
Unfortunately, timber processors and consumers have less reason for optimism. Whereas, federal policies are manmade and, therefore, subject to change, the federal government does not respond to the need for change quickly, if at all. We cannot expect soon to see an appropriate level of timber harvest on the national forests. The government is an inefficient monopolist.
Certainly, there are risks for timber growers. As noted, the government's failure in timber management can ultimately result in reduced or dislocated markets for timber. In addition, there are all the natural and governmental threats, such as fire, insects, taxes and regulations.
Our growing population, however, assures a continuing high demand for wood. State law reflects the demand and state funds have been committed to doing something about it.
We have a good share of the potentially most productive softwood timber sites in the world. They are located near the greatest wood market in the world. We need only to convert them to a high level of continuous production to achieve a significant contribution to our society. It is a challenge worthy of California foresters.
1. Clawson, M. 1976. The economics of national forest management. Resources For the Future. Working Paper EN-6. p. 117.
2. Craig, G. 1979. Statement on forest service budget. WTA Mimeo #8742.
3. _____ 1979. Forest service opts for waste. Wood Review. Vol. 2, No. 17 WT A Mimeo #878 1.
4. Dana, S. 1956. Forest and range policy. McGraw-Hill. p. 241.
5. Erman, D., Newbold, J. and Roby, K. 1977. Evaluation of streamside bufferstrips in protecting aquatic organisms. Contribution No. 165 Calif. Water Resources Center, University of California, Davis.
6. Ford, G. 1976. Statement of policy. White House. March 2.
7. Forest Industry Council. Committee on forest productivity report in Process. S. Hall, R. 1979. Bark beetle damage in California WTA Mimeo #8679.
9. Keane, J. 1971. The wilderness act as congress intended. American Forests. Feb.: p. 43.
10. Levy, Y. 1978. An economic alternative to current public forest policy. Reprint from Economic Review. Federal Reserve Bank of San Francisco. Winter issue. p. 18.
11. McGuire, J. 1974. Timber policy issues in the United States. Talk to British Columbia Timber Policy Conference, Vancouver, B.C. April 5.
12. National Association of Home Builders. 1979. March 8 statement on RARE II wilderness areas to Subcommittee on Public Lands, House Committee on Interior and Insular Affairs.
13. President's Advisory Panel on Timber and The Environment. 1973. Report of. U.S. Government Printing Office. p. 4.
14. Public Land Law Review Commission. 1970. One-third of the nation's land. U.S. Government Printing Office. p. 97.
15. State of California. 1979. California's Forest Re-source, preliminary assessments. pp. 244,238 263.
16. _____ Forest Improvement Committee. 1980. Task Force No. 6 report. pp. 10- 11.
17. Stark, R. 1977. Integrated pest management in forest practice. Journal of Forestry. Vol. 75, No. 5. pp. 251-54.
18. Teeguarden D. 1973. The allowable cut effect: a comment. April Journal of Forestry pp. 224-26.
19. USDA, Forest Service. Development program for the national forests. Misc. Pub. No. 896. p. 6.
20. _____ 1976. Program. pp. 307, 305, 602.
21. _____ 1978. Forest statistics for U.S., 1977.
22. _____ 1979. Timber harvest scheduling study, six rivers national forest. pp. D-17, C-38 to C-40, D-14.
23. _____ 1979. Forest planting, seeding, and silvical treatments in the United States. 1978 report.
24. _____ 1979. R-5 11/27 report from regional forester. NVTA Mimeo #9161.
25. _____ 1979. R-5 12/79 supplement 2415.41 forest service manual.
26. _____ 1979. Draft 1980 assessment. pp. 346, 286, 328, 334.
27. U.S. Senate, Committee on Banking and Currency. 1969. Document No. 91-27. 91st Congress, 1st Session. p.4
28. Vaux, H. 1969. Public Timber supply alternatives in the douglas-fir region. School of Forestry. Oregon State University.
29. Zivnuska, J. 1979. A socio-economic perspective on forest resource assessment in California. Northern Calif. Section, SAF winter meeting. WTA Mimeo #9156.
Table I: Ownership of Commercial Forest Land and Share Stocked with Softwoods in the United States and California, 1976.
|Total CFL In Softwoods||In Softwoods|
|MM Acres||Percent in||MM Acres||As%
NF = National Forest; FI = Forest Industry; OP = Other Private; OG = Other Government; CFL = Commercial Forest Land
(Source: USDA, Forest Service, Forest Statistics of the U.S., 1977.)
|50 + CF/Acre/Year||120 + CF/Acre/Year|
|MM Acres||Percent Area in||MM Acres||Percent Area in|
CF = Cubic Feet
(Source: USDA, Forest Service, Forest Statistics of the U.S., 1977.)
|Percent of Area In
|Percent of Area In
|Percent of Area In
|Percent of Area
(Source: USDA, Forest Service, Forest Statistics of the U.S., 1977.)
|Billion||Percent in||Billion||Percent in||Billion||Percent in|
(Source: USDA, Forest Set vice, Forest Statistics of the U.S., 1977.)
Inv = Inventory; Har = Harvest; TR = A Turnover rate in percent; Gro. = Growth.
(Source: USDA, Forest Service, 1980 Assessment, p.328.)
|Effective Date||CFL Area, M acres||CFL Sawtimber MMBF||Potential Yield, MMBF/yr|
* Programmed Allowable Harvest
(Source: USDA Forest Service, R-5 Manual.)
|12 Months in June
||On 6.3 MM Acres in N.F.||On 6.3 MM Acres Outside N.F.|
|MM Trees Killed||Bil. BF Killed||MM Trees Killed||Bil. BF Killed|
Source: USDA Forest Service, R-5, 11/27/79 (WTA Mimeo #9161).
|Fiscal Year||Sawtimber||Total*||Fiscal Year||Sawtimber||Total*||Allowable Cut|
* Sawtimber and convertible products (pulpwood).
# After deducting 8.75 billion board feet that was in Alaskan sale and was cancelled.
** "Potential Yield"
Source: USDA, Forest Service, W.O.
|Calendar Year||National Forest Timber||Indexes With 1967 = 100|
* Bid rates and BLS index of softwood lumber wholesale prices, each converted to 1967 dollars by dividing by wholesale commodity price index for all commodities for each year.
Source: USDA Forest Service, R-5 Cut & Sold Reports; U.S. Bureau of Labor Statistics
|Improvement Opportunities||10 Percent Return|
|Total in M Acres||Percent in||Total in M Acres||Percent in|
|Harvest and Regenerate||4,545||60||17||19||2,891||52||22||22|
(Source: Forest Productivity Committee Report in process. 1979.)