Industrial Forestry and Environmental Quality

William McKillop

Sunday, October 01, 1995

Industrial Forestry and Environmental Quality

William McKillop
Professor of Forest Economics
College of Natural Resources, University of California, Berkeley

Scope of industrial forestry

IN ITS SIMPLEST CHARACTERIZATION, industrial forestry can be defined as the management of industrial private forest land. Various definitions of "industrial forest land" are to be found. The FRRAP report (California Department of Forestry and Fire Protection, 1988) defines industrial forestland owners as "individuals or companies that have 5,000 or more acres nationwide, and either own a wood-using manufacturing plant, or employ a permanent forestry staff and a system of regular timber harvests." U.S.D.A. Forest Service Forest Inventory and Analysis (FIA) reports by Colclasure et al. (1986a & b), Hiserote et al. (1986) and Lloyd et al. (1986a & b), define industrial forest landownerships simply as forest land owned by forest industry (large companies with or without mills). The FIA unit maintains a list of specific companies that it class)fies as industrial forest owners.

However, industrial forestry can also be regarded as the purposeful growing of wood for harvesting and utilization on smaller as well as large private ownerships or even on public lands dedicated for that purpose such as the Oregon and California (O & C) lands managed by the U. S. Bureau of Land Management in

Oregon and school trust lands managed by the Washington Department of Natural Resources. Although the primary focus of the paper is on the management of industrial forest lands, this broader perspective is also appropriate.


Role of industrial forests in the U.S.

IN 1991, FOREST INDUSTRY LANDS were 14 percent of all U.S. timberland but accounted for 37 percent (3.9 billion cubic feet) of the softwood timber harvested in the nation. The percentages for non industrial owners in 1991 were respectively 59 percent and 39 percent. (U.S.D.A. Forest Service, 1994).

The 1993 RPA Timber Assessment Update (U.S.D.A. Forest Service, l995c) estimated that the forest industry softwood harvest in the U. S. in 2040 will be 5.8 billion cubic feet. This is equivalent to 40 percent of the total, even though forest industry will own only 15 percent of the total forest land at that time. Forest industry harvests were only 2.9 billion cubic feet in 1970 and 3.4 billion cubic feet in 1976.

Timber Assessment Update estimates for forest industry harvests in California in 1970 were 0.294 billion cubic feet, 0.321 billion cubic feet in 1976, 0.452 in 1991, and 0.329 in 2040.


Industrial forestry in California

KRUMLAND AND MCKILLOP ( 1990) used the California Timber Supply model to generate estimates of annual average forest industry harvests of 313 million cubic feet for 1978-1985, 358 for 1985-1995, 227 for 2025-2035, 262 for 2035-2045 and 369 for 2045-2055. The FRRAP study (California Department of Forestry and Fire Protection, 1988) used an average annual estimate of 1.730 billion board feet for the 1980-2000 period. This is equivalent to a cubic foot harvest of approximately 303 million cubic feet using a board foot-cubic foot ratio of 5.7.

The TIGH survey of forest industry companies by McKillop and Krumland (1993) provided an estimate of 1368 million board feet for the 1990 timber harvest on approximately 88 percent of the forest industry acreage in the state. Use of a board foot cubic foot ratio of 5.7 indicates that this was equivalent to a cubic foot harvest of approximately 240 million cubic feet. A proportionate expansion to cover all forest industry acreage gives an approximate harvest estimate of 273 million cubic feet for 1990.


Have forest industry lands been overcut?

THE KRUMLAND AND MCKILLOP (1987 and 1990) and the McKillop and Krumland (1993) studies provide some information for addressing the question: "Have forest industry lands in California been overcut?" One must first consider how the pattern of timber harvesting developed in the state and how the term "overcutting" should be defined.

Generally, non industrial forest lands are closer to highways and wood processing plants than industrial forest lands, and industrial lands are closer to them than are National Forest lands. In terms of the use of social capital it is more efficient first to harvest lands that are "closer-in" rather than to develop a widespread transportation net (and have long haul routes for logs) any earlier than necessary. So, in the initial logging of California forests it was appropriate for California sawmills to obtain wood first from non-industrial lands, then from industrial ownerships and then from the National Forests.

In addition, until the late 'seventies, there was a strong anticipation in much of the Western U. S. that National Forest timber would be available to keep sawmills operating at a high percentage of capacity while timber inventories were rebuilding on industrial lands. It was not until the National Forest Management Act went into full operation that it became evident that the National Forests would not provide the sign)ficant share of the nation's wood needs that their potential timber producing ability and substantial volumes of standing timber had suggested earlier.

The term "over-cutting" is sometimes used loosely and pejoratively to indicate that the user thinks the land owner should slow down or stop timber harvesting for whatever reason, political or otherwise, the user chooses to adopt. A more scientific use of the term requires that the user first establish some social goal that could be met by adjusting the rate of timber harvesting.

Most persons would agree that preservation of inherent biological productivity, particularly soil productivity, is a worthy social goal. Forest practice regulations in California assure that this goal is met.

Many would agree that even-flow or non-declining sustained yield of timber, decade-by decade, from a forest area is a desirable goal when the intent is to provide a supply of raw material to a logically-defined economic region within feasible hauling distance of the forest area in question. If this goal can be met by the combined output from a variety of ownerships there is no true need for regulation of harvest levels on individual properties (leaving aside the issue of property rights). As Krumland and McKillop (1987 and 1990) have demonstrated, private forest lands in each major timber region in California are on a non-declining sustained yield basis with cyclical decreases in output from industrial ownerships being balanced, decade-by-decade, by increases from non-industrial ownerships, and vice versa.


Scope of environmental quality

WHEN FOCUSING ON A SPECIFIC, delimited forest area such as a major watershed, the term "environmental quality" is generally thought of in relation to pristine forest ecosystems, endangered, threatened and sensitive species, and water quality and soil productivity especially where clearcutting is practiced. Both the effects of a single timber harvesting operation and the cumulative effects of successive or simultaneous harvests on environmental quality within the area of interest must be considered.

The same considerations are relevant when looking at the broader regional, national and global pictures. However, in addition, other issues are sign)ficant at those levels, such as the desirability of preserving open space, recognition of vicarious benefits, minimizing air and water pollution, protecting threatened ecosystems and restraining energy consumption (both in the extraction and processing of raw materials, and in the use of the final product by consumers).

A central query of the paper is this: on balance, does industrial forestry enhance or harm environmental quality as defined - and to what degree?


Preservation of open-space

IN STATES, SUCH AS CALIFORNIA, where population levels are growing sign)ficantly and urbanization is increasing rapidly, the benefits of retaining land in open space is well appreciated. It has long been recognized that encouraging the growing and harvesting of trees on private lands is a cost-effective way of achieving such retention. Provisions of the California Forest Taxation Reform Act of 1976 that permitted the setting up of Timberland Production Zones (TPZ's) was an important device for resisting the loss of productive forest land to residential uses.

In California, approximately 6 million acres of private forest land are under TPZ contracts. These contracts, which are renewable annually, require that the owner keep the land in forest for the next ten years. In return, the owner pays property taxes on the value of the land for growing and harvesting timber rather than on the value in its so-called "highest and best" use such as rural home subdivisions. If owners wish to terminate the TPZ status of the land at the end of the contract period by not renewing it, they must obtain permission from the county and pay an increasing level of taxes over the remaining nine years of the contract. "Instant" rezoning, without waiting until the contract expires, may also occur by mutual agreement.

Relatively little rezoning of TPZ lands to non-timber uses has taken place in California and, in terms of retaining lands in open space, the program must be judged a success. However, no such assurances are available for forest lands that are not in TPZ's. Market forces will dictate whether land remains as part of the forest base. Policies that assist landowners to obtain a meaningful return on forestry operations, or at least do not impede them doing so, are clearly an effective way of providing open-space benefits with minimal demands on the state's tax base.


Environmental effects of changes in international trade patterns

DECREASES IN TIMBER OUTPUT from the Western U. S., such as have occurred in recent years due to changes in federal forest policy and the Endangered Species Act will have sign)ficant environmental impacts at the national and global levels (McKillop et al., 1993).

Canada, Siberia and, to a lesser extent, Chile and New Zealand are most likely alternate sources of wood to replace the decline in Western U.S. output. Overall (world-wide) exports of logs or lumber from Canada are unlikely to increase sign)ficantly over historical levels, and may even decline (Koch 1991, Reed 1992). Canadian exports to the U.S. will likely increase because of the decrease in Western U.S. output. As a result, Siberia will undoubtedly become an important softwood supplier to China, Japan, Korea, and Taiwan in the relatively near term as decreases in North American exports to those countries force them to look elsewhere for wood. Increased pressure on the forests of Malaysia and Indonesia is also likely as a result of decreases in Western U.S. timber output. There will thus be serious effects on global environmental quality because timber harvesting in those regions is not subject to the stringent forest practice regulations in force on the U.S. Pacific Coast.


Environmental impacts of wood substitutes

To SOME EXTENT, Western U. S. harvest reductions will foster the use of wood substitutes such as steel, aluminum, or concrete. This will result in a different set of adverse environmental aspects (Bowyer, 1991 and 1992).

The CORRIM study (National Academy of Sciences, 1973) established that wood has a substantial advantage relative to other materials in terms of energy consumption per unit of finished product. It was shown, for example, that replacing wood framing with steel studs in an otherwise wooden wall doubles the amount of energy required to build the wall. Construction with concrete increases energy requirements on the order of seven to eight times. Arima (1991), Buchanan (1991), and Marcea and Lau (1992) have confirmed this advantage even when recycling issues are considered. In addition, primarily because of the low energy requirements of wood-based materials, comparatively little carbon dioxide, sulfur dioxide and nitrogen oxides are released in producing them. Furthermore, carbon is stored in more durable wood products such as lumber, plywood and particleboard. This carbon sequestration is an important environmental benefit of using wood.

Use of wood has additional environmental benefits because the insulating properties of wood-framed walls are far better than those of walls with alternate forms of framing such as steel or aluminum. A 1993 report of the National Research Council of Canada noted, for example, that the conductivity of steel is about 400 times that of wood. Evaluation of various exterior wall designs showed that steel studs reduce overall thermal performance by 30 to 50 percent in 4-inch walls. Similar problems were found in walls with concrete or brick facades.

Bowyer (1991 and 1992) discussed world-wide relationships and the global responsibilities of the United States with respect to the environment. He observed that wood substitutes are largely imported and non-renewable, and that the gathering and processing of them will, in general, result in the use of larger quantities of energy and in the release of much greater quantities of carbon dioxide than if the U.S. continued its current level of use of wood products. He noted that by importing substitute raw materials, we are in effect exporting the associated

environmental impacts. He concluded by asking whether a U. S. policy designed to create a pristine domestic environment through continued and increasing reliance for raw materials on other regions of the world is ethically and morally defensible.


Preservation of rare or pristine forest ecosystems

THE HUMANIST VIEW IS that human interests and values are paramount when considering the degree to which rare or pristine forest ecosystems should be preserved. However, a complete and proper humanist view requires that these interests and values include concern for future generations and for the environment at-large.

It is necessary to overlay this humanist view with the economist's perspective in which the concept of diminishing marginal utility plays an important role. It should be noted that diminishing marginal utility is more than a theoretical concept. It is a common sense observation that the more of something that is consumed or enjoyed, the less the last unit will be valued; and if the consumption or enjoyment is without cost, the good or service will be utilized to the point of satiation (where the last unit has zero value). Another way of looking at the issue is to note that, for the last unit preserved or enjoyed to have value, the resource in question must be in scarce supply. Otherwise it will be utilized to the point of satiation.

So when examining the need to preserve rare or pristine forest ecosystems such as old growth forests or wildlife species one must first ask if they are truly in scarce supply. As a practical example one could ask if recent efforts to persuade the California Board of Forestry to require private owners to set aside 10 percent of their remaining old growth forest area were just)fied? Consideration of the facts show that they were not.

In California, 2.9 million acres of timberland are in parks, wilderness or other reserves including 240 thousand acres of the redwood type of which 80 thousand acres are in old growth redwood. Much of this old growth redwood is of

the finest alluvial flat type, unlike the upland mixed redwood and whitewoods found in the Headwaters Forest for example. During the debate over the creation of a Redwood National Park, information provided by Fritz (1967) indicated that the 50 thousand acres of alluvial flat redwood stands that were already in state parks at that time represented 25 percent to 50 percent of the original alluvial flat redwood stands. With the addition of alluvial flat stands in the Redwood National Park, a substantial proportion of the most spectacular redwood ecosystems have now been preserved .

In addition, before recent court rulings relating to the Endangered Species Act and portions of the National Forest Management Act dealing with the preservation of vertebrate species, about 5 million acres of California National Forest timberland (forest capable of producing commercial wood products) was off limits to logging. Addition of this acreage to the 2.9 million acres in parks and reserves gives an "off limits" total of 7.9 million acres out of a California timberland total of 19.652 million acres. In other words, prior to these court rulings, a total of 40 percent of California's timberland was off-limits to logging. In addition, California has 19.7 million acres of non timber forest where wood removal is minimal.

In the light of these facts, one can argue strongly that, before recent court rulings, there was an abundance of natural forests in California in which logging will never take place and that there is no general scarcity of pristine or near-pristine forests in the state.

A related question is: what time frame should be used in judging rarity or pristine character? Do we use pre-1849 when much of our forests were either open stands or in a regeneration phase following fire? If that is the point of reference to be used, timber harvesting on the National Forests should be encouraged rather than discouraged, because logging and related silvicultural activities are the most safe and effective way of simulating the effects of fire and of maintaining forest ecosystems in a pre- 1849 condition.


Endangered, threatened and sensitive species

IF IT WERE SOCIALLY AND ECONOMICALLY costless to be ultra-cautious about potential threats to certain species then all of them should be listed over as wide a range as possible. However, it is not costless to do this, so one must be sure that listings of species, consideration of what constitutes a sign)ficant portion of a species range and development of management plans are based on genuinely valid data, rigorous scientific analysis and thoughtful interpretation of applicable laws.

Unfortunately, rigorous scientific analysis based on genuinely-valid data and thoughtful interpretation of the law seems to be lacking in the case of the Northern Spotted owl (McKillop, 1992). Furthermore, it appears that a similar defect may well occur in the cases of the California Spotted owl and the Marbled Murrelet (U.S.D.A. Forest Service, 1995a and l995b).

Consider, first of all, the designation of a sign)ficant portion of a species range. It appears that thorough and objective consideration has not been given to the fact that as a species nears the end of its natural range it is much more highly sensitive to alteration of its habitat. Federal agencies have tended to require protection of a species throughout its natural range regardless of the costs or necessity of doing so. It seems reasonable to ask, when there are 200 to 300 thousand Marble Murrelets in Alaska and British Columbia, if it is necessary to deprive private landowners in California of the right to harvest old growth redwood? This question is especially relevant in view of the fact that Marbled Murrelets nest on rock ledges in Alaska and British Columbia and it does not appear to be well established that they can utilize only broad tree limbs in old growth forests for that purpose in California.

The cases of the Northern Spotted owl and the California Spotted owl both lead one to question whether rigorous scientific analyses were conducted using genuinely valid data. In both cases, the listing or the suggestion that listing was needed, was based on the assumption that the species required old growth habitat.

The fact that the species does well in young growth or mixed growth habitat suggest that the listing process was flawed.

In summary, if maintenance of environmental quality includes preservation of endangered, threatened and sensitive species, there is substantial doubt that modern timber harvesting activity in the Western U. S. is adverse to this preservation. Furthermore, reduction of Western U. S. timber harvests, because of international trade effects noted earlier, may actually result in a deterioration, in other countries, of ecosystems that are necessary for the preservation of species on a world-wide basis.


Water quality and soil productivity

EARLY LOGGING TREATED THE LAND roughly. Although, by opening up stands and exposing of mineral soil, it often led to very good tree regeneration, early logging frequently resulted in creek sedimentation. However, early logging is not today's forestry especially in California with its strict Forest Practice rules.

Current timber harvesting methods appear to have a minimally adverse effect on water quality and on soil productivity. A Forest Practice Rules Assessment Team report noted that out of the 100 timber harvesting sites that were selected "with possible water quality effects," forest practices "adequately protected natural resources at sixty-one of the sites visited" (California Water Resources Control Board, 1987). At the remaining sites visited, the "majority of (adverse) effects appeared to be minor" and "at some sites the effects were rated as moderate to major, and at very few sites they were rated as severe." The report later states (p. 9-1) that the "majority of adverse effects which were observed by the team appeared to be minor."

Even more stringent regulations have been adopted since 1987. It therefore is reasonable to conclude that current forest practice regulations give good protection to water quality and, by implication, soil productivity also.



ON BALANCE, INDUSTRIAL FORESTRY is clearly beneficial in terms of environmental quality when one considers that wood is the most environmentally benign of all our major materials, that logging in the Western U. S. is strictly regulated, that large areas of forest are off limits to logging, that timber harvesting can be used-to simulate natural disturbances which have been responsible for various types of attractive ecosystems and that harvesting timber in the Western U.S. reduces the pressure to log forests elsewhere in the world that are not protected by our strict forest practice regulations.

Persons or groups that call for further restrictions on logging in the Western U.S. do not appear to be concerned that further regulation may be unproductive with regard to investment in private forestry and in wood processing facilities. Investment in wood processing facilities carries sign)ficant risk because of international competition and the frequent ups and downs of the market for wood products. Commercial forestry is also a high-risk venture when one considers the length of time that it takes to grow trees to merchantable size, the perennial risks of forest destruction from fire, pests and other hazards and the uncertain political climate. In particular, forest practice regulations in California have become very burdensome in terms of the human and monetary cost of adhering to them, and counterproductive to expenditures on long-term forest management because of the uncertainty created by the regulatory process as to whether owners will receive a fair return on their investments. Regulatory reform which gives forest investors a greater degree of security in the ownership of their property will not only provide economic benefits to society, it will also have a positive effect on local, regional, national and global environmental quality.


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Introducing: Homer T. "Bud" McCrary

A NATIVE OF SCOTLAND, Bill McKillop stayed in his home country until he graduated from Aberdeen University in 1954 with a BS degree in forestry. After working as a field forester he moved to Canada and earned a MS degree from the University of New Brunswick in 1959. In 1965 he received his Ph.D. in Agricultural Economics from the University of California at Berkeley.

ON GRADUATION, Bill joined the faculty of the School of Forestry and Conservation, University of California, Berkeley. There he has served over a long and distinguished research and teaching career as a forest economist until his retirement in 1994. Throughout his career Bill focused on the institutions, markets and factors affecting the successful production of timber on private forest ownerships. He has long been a champion of the importance and contributions of a viable forest industry to California.

BILL HAS A PRODUCTIVE career as a scholar with a solid record of extensive publications helping to understand the structure and workings of forest markets at local to global levels. He repeatedly investigated the impacts of existing and proposed tax, regulation and other public policy on the private forest sector and offered constructive ideas for improvement. He guided many graduate students who have gone on to distinguished careers.

PROFESSIONALLY ACTIVE, Bill has held several Officer and Chairmanships in the Society of American Foresters and the Western Forest Economists. Currently he is serving as a staff analyst on forestry matters to the California Legislature and is active as a forestry consultant.