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Market - Continued
Economic Value of Intact Forests
National forests, as natural ecosystems, provide an enormous
social and economic contribution to the nation in the form of
non-timber forest products, clean water, hunting and fishing
opportunities, flood control, and recreation. The value of these
ecosystem services dwarfs the value of wood products. And because
national forests are the only forestlands where such services
can be reliably protected, such services will grow more and
more valuable as the nation grows.
Currently, recreation and tourism, commercial and recreational
fisheries, hunting, water and other non-timber uses are more
economically and socially significant than the logging program.
The economic value of recreation alone increases every year
and is currently at $11 billion, according to a recent USFS
study. The value of water on national forests lands is at least
$3.7 billion annually, a figure that does not include the value
of maintaining fish species or the savings to municipalities
who have reduced filtration costs because national forest waters
are so clean. In contrast, the value of timber produced by the
national forest system in 2004 was just $218 million.
In 1999 the Committee of Scientists, an advisory committee formed
to provide scientific and technical advice to the USFS regarding
improvements to the National Forest System Land and Resource
Management planning process, recognized that the national forests
will be increasingly called upon to provide the backbone of
regional conservation strategies for native species. Ironically,
despite the shrinkage of the timber sale program, most sales
are still located in the most sensitive areas – critical
wildlife habitat, old-growth, roadless areas, or maturing native
forests that are recovering from logging. The externalized costs
of lost ecosystem services from these sensitive areas are ignored
in timber sale decisions.
Taken together, these factors – the natural limit on national
forestland share, the cost to bring national forest wood products
to market, and the economic value of ecosystem services –
all contribute to the trend illustrated in Figure 2, which shows
that national forest timber sale volume and timber sale value
have rapidly declined over the past ten years. Not only has
the economic value of national forest wood products greatly
diminished in most cases, but taxpayer expenditures for the
timber program have substantially increased. Given these facts,
one is left to wonder: What keeps the timber sale program alive?
What Keeps the Timber Sale Program Alive? Your Tax Dollars
at Work
In order to better assess the importance of the federal timber
sale program, it is necessary to look at both supply side and
demand side factors that impact the program. And there are supply-side
factors at work that keep the national forest logging program
alive – namely, subsidies.
Most Americans are unaware that the federal timber sale program
remains competitive because of generous subsidies. Subsidies
take the form of taxpayer dollars appropriated from Congress
to plan and administer timber sales, replant and restore clearcuts,
provide credits to the timber companies that build logging roads,
and expenditures designed to enhance the productivity of timberlands,
such as pre-commercial thinning.
According to the report, Ending Timber Sales on National Forests:
The Facts (FY 97), which was published by the John Muir Project
and verified by the Congressional Research Service, the timber
sale program’s receipts and expenditures in 1997 amounted
to a net loss of $1.2 billion to U.S. taxpayers. And it is likely
that this cash loss figure is conservative because several costs
that are associated with logging, such as disaster relief appropriations
for flooding and resulting mudslides, were not included. Typically,
such costs are excluded because the USFS has not devised an
accurate or reliable means of estimating these unforeseen costs.
Profiled in this report as one of NFPA’s most endangered
forests, the Tongass National Forest (TNF) provides the best
case study in subsidies. Over the last 40 years, the TNF’s
timber sale program has consistently lost more money than any
other national forest. According to the USFS, the TNF lost $35
million in 2001 alone. And since 1982, American taxpayers have
spent $1 billion subsidizing the timber industry to clearcut
much of the Tongass. During this period, it cost U.S. taxpayers
$150,000 for each mile of road built in the forest.
The passage of the Healthy Forest Initiative (HFI) has caused
subsidies to significantly increase. The HFI allocated $800
million to directly subsidize small diameter timber sales, ostensibly
designed to improve forest health or reduce fire risk. A significant
portion of this material may simply be given away to logging
companies through stewardship contracting and other mechanisms.
Coupled with the recent deregulation of procedures to prepare
and analyze the environmental impacts of fuel reduction and
salvage timber sales, these subsidies may create enough certainty
over future supplies to induce major new investments in mills
that can use this material throughout the West, such as OSB
facilities.
The Enduring Timber Sale Program: Demand Side Factors at
Work
While the timber sale program has certainly become less significant
to our overall timber supply, it remains a major player in a
handful of national forests, largely due to their ability to
offer some key wood products and specialty woods. Although the
market for national forest wood products will never amount to
a significant share, demand side factors do impact the program
and demonstrate that the program remains important in a few
key areas.
After many years of decline, the timber sale program has grown
slightly over the last few years. Since fiscal year 2002, the
volume of timber removed from national forest lands has increased
from 1.73 to 2.03 billion board feet, driven by a significant
escalation of logging activity in the Pacific Northwest, particularly
in the Siskiyous and east of the Cascade crest, California,
and the South. (For a more detailed description of activities
in Oregon, see Oregon’s National Forests Profile.) There
has also been a jump in timber value from $92 to $107 per thousand
board feet since 2001. What are the possible explanations for
this, and what does this tell us about the future of the market
for national forest timber?
Markets for national forest timber, like any other commodity,
are sensitive to macroeconomic conditions in the U.S. economy.
With the post 9/11 recession over, demand for all types of wood
products continues to rise. For example, a red hot U.S. housing
market has increased new housing starts to their highest levels
since the late 1970s and increased demand for wood products
used in building. With this increase in demand, supply from
all sources, including national forests, is on the increase
as are prices paid for raw logs and other wood products.
Demand for national forest timber is also sensitive to international
demand for U.S. wood products that are best made here. While
imports are making up an increasing share of the U.S. wood products
consumption, we remain a net exporter of many finished and unfinished
products. Black cherry from the Allegheny National Forest and
Alaska yellow and red cedar from the Tongass National Forest
are good examples. And with at least a temporary weakening of
the U.S. dollar and strong economic conditions in principle
export destinations such as Canada, international demand for
many types of U.S. wood products exports is rising. For example,
U.S. exports of hardwood lumber, hardwood veneer, hardwood logs,
builders’ carpentry, and softwood logs to Canada each set
new record highs in 2003.
Unless domestic and international economic conditions substantially
worsen over the next couple of decades, we can expect that there
will be at least some – albeit small – demand for
national forest wood products. If we logically assume that demand
for national forest wood products resembles demand for wood
products nationwide, we can expect that the principle end uses
driving demands for national forest sawtimber will be softwood
and hardwood lumber used in residential upkeep and improvement,
softwood lumber for new housing, and hardwoods used for shipping
pallets. Improving markets for oriented strandboard (OSB), particleboard
and containerboard will drive demand for lower quality wood
products and pulpwood.
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