Buyer Beware

In September, 2007, the lightning-ignited Moonlight Fire burned 65,000 acres in and around California’s Plumas National Forest. In keeping with the ecology of these forests, the fire burned a mosaic of high-intensity mixed with unburned trees. The Forest Service estimated 549 million board feet were scorched.

In making its salvage logging decision, the Forest Service evaluated 4 alternatives, ranging from a low of 14 mmbf to a high of 120 mmbf. All alternatives appraised negatively. That is, the Forest Service predicted a timber purchaser would lose $600,000 logging the 14 mmbf alternative and almost $12 million if a purchaser bought and logged the 120 mmbf sale.

In July, 2009, the Forest Service decided to move forward with the 120 mmbf sale, citing the jobs and wages that would be generated in the local economy.

Fast forward to the present. Now the purchaser, Pew Forest Products, is pleading his case to the Forest Service and Plumas county supervisors that he will go bankrupt if forced to carry out the timber sale contract he purchased.

Question for readers: What part of “you’ll lose $12 million if you log this timber” do people not understand?

10 thoughts on “Buyer Beware”


    Here is an example of the Moonlight Fire, showing how wildfires can be devastating in different ways, on different ownerships. I walked through these clearcuts to gain access to cutting units on the Plumas NF. They were finishing their cleanup activities on private lands when I worked there in 2008 It never occurred to me that their practices would look so awful from the air. I really doubt there is much value left in the dead trees on the Forest Service side.
    I don’t see how a purchaser could lose that much on a timber sale, especially when sales are usually split up into smaller, more equal portions. I don’t understand how the Forest Service could go with a losing alternative, and offer it, in good faith.

  2. Somewhat shooting from the dark, I would suspect that the local USFS units were under pressure to get some logs available for the local mills. Political pressure, that is.
    The appraisal they did showed negative values, considering the costs associated with this salvage, and yet some bidder thought he could make money on it at that time. This is a pretty normal practice in normal times, when the market for homes and lumber is good.
    I would suspect that this purchaser will be let off the hook, again for political reasons. So the Forest Service loses thousands or millions of dollars of time wasted doing the sale prep. And the dead trees will not be salvaged And the agency will continue to be blasted for being inefficient and wasteful.

  3. Here’s some rationale I found on page 8 of the ROD that Andy supplied the link to, above.

    Alternative A
    The economic analysis is a preliminary value and cost analysis. The total project value is
    approximately -$22.7 million dollars (RFEIS, Table 21, page 35). The economic analysis used to determine the project value of -$22.7 million dollars, includes timber value minus harvest costs, road improvement costs, delivery costs to the mill, and reforestation costs. The economic analysis is a broad scale analysis depicting the economics for typical operations and typical equipment product rates and documented values. Interest by prospective purchasers is nonetheless anticipated because of the variables which may effect production and costs. As an example, many operators/purchasers own their equipment and do not carry the equipment cost portrayed in the analysis.

    Appraisals, which will be completed later, will have a stronger basis for determining value and costs than these estimations. Historically, timber sales have sold, even
    where economic indicators show poor net revenue. As an example, the estimated cost used for ground-based operations for the analysis is the average cost for Plumas County as reported by the Board of Equalization. Final appraised logging costs range from $10 to $47 per mbf less to log in Plumas County than the Board of Equalization projections (E. Vercruysse, pers comm). In addition, alternative A contributes the most employee related income to hard-hit regional economies. Alternative A will generate 2,020 direct and indirect jobs and approximately $86.9 million dollars in employee-related income (direct and indirect jobs in regional rural communities).

  4. Pew Forest Products was the sale’s only bidder (surprise, surprise!), so we can assume the FS sold the timber at base rates. For those unfamiliar with “base rates,” that means the trees were sold for the sum of $0.50/mbf plus the reforestation costs.

    In this case, the Forest Service’s appraisal indicated that the stumpage value (i.e., projected value of lumber net of logging, hauling and milling costs) was substantially less than the cost of reforestation. In other words, paying base rates would prove a big money loser for the purchaser. And, so it has.

    Adjacent private landowners minimized their losses (or perhaps made a bit of money) by logging promptly, before decay set in, inexpensively (ground-based vs. helicopter), and before the housing bubble burst. Perhaps Sierra Pacific Industries didn’t entirely beat the housing collapse — we don’t really know for sure. Just about the time Moonlight fire logs were arriving at SPI mills, lumber/plywood prices were beginning their precipitous descent.

    Plumas County stumpage values:

    2007: $205/mbf (Moonlight Fire burned)
    2008: $152/mbf (private land salvage logged)
    2009: $64/mbf (private land lumber sold)
    2010: $113/mbf

    The stumpage price recovery reported for 2010 is unlikely to help Pew Forest Products much. Why? Log exports. The 2010 increase in harvest values reflects the price effects of increased demand for raw logs from China (that, by the way, is abating as China’s own housing bubble bursts). Forest Service timber cannot be exported. Pew is stuck selling its logs to domestic mills, which continue to battle weak domestic demand, and pay Pew less than it would get at the harbor.

    What can, should, or will the U.S. Forest Service do? If it still had stimulus dollars to spend, you can bet that Pew Forest Products would be getting a boatload of money, just as mills in Colorado did to subsidize their operations. But, those dollars are all gone.

    How about if the Forest Service just cancels its timber sale contract with Pew, as is happening in some Rocky Mountain states? Those purchasers have a U.S. Senator, Mr. Udall, going to bat for them. Reportedly, Pew has had less luck with California Senator Diane Feinstein.

    Meantime, Plumas forest leadership is taking Pew’s side, while leaving the FS contractor officer hanging out to dry:

    “Plumas National Forest Supervisor Earl Ford and Deputy Supervisor Laurence Crabtree each voiced support for Pew during the meeting.

    But they admitted their influence over the Forest Service contracting officer, who denied Pew’s appeal, is limited.”

    • I will bet, Andy, that there are numerous expensove special C provisions within the contract to deal with extra erosion control and slash work. Often times, rates are slashed to base, to continue to pay for treatments that make up the need to even do the project. Sometimes, slash can mandate actual removal of unmerchantable material from the site, at great cost. Winged subsoiler work can also be mandated, with exceedingly-narrow specifications on equipment size and configuration. Depends on each project.

      If I remember correctly, Pew is a single smaller log mill, isolated in the wilds of the northern Sierra Nevada. If SPI didn’t even bid on it, then you know the economics are truly bad.The Plumas hasn’t been known for their timber expertise, over the years but, it looked like fresh leadership was going to reap benefits, when I was “TEAMS”ed there in 2008.

      I could see the projects maybe reconfigured to have less helicopter yarding and drop any cable units, if any. There is a high erosion risk in the loose soils, and recovery is likely to be slow if a reburn is allowed to occur in concentrations. It is a VERY lightning-prone area. In my link, you can clearly see the damages on the private lands. You can also see that the Federal forests are going to continue to supply perfect habitat for bark beetles…. and arsonists *smirk*

    • Andy, political leadership in Colorado recognizes that at the end of the day, having mills would help us reduce the costs (to the taxpayer) of some of our fuels treatment projects, while providing jobs.

      I don’t know why that would be different in California, except perhaps rural counties are a smaller part of the voting population.

      Here is a recent FS grant, also in California,from this link.

      VALLEJO, Calif., Dec. 21, 2011 – A total of 200 rural jobs have been retained recently due to a U.S. Forest Service grant.

      Since 2008 (and expected into 2012), transportation subsidies have allowed Sierra Forest Products (SFP), a small, family-owned sawmill in Terra Bella, Calif., to retain 200 well-paying jobs in an economically depressed area. In addition they have enabled SFP to remove hazardous trees along more than 100 miles of road, reduce hazardous fuels on about 7,700 acres and transport 23.8 million board feet of sawtimber, which would build approximately 1,580 homes.

      The mill is the last remaining industrial mill in the Southern Sierra Nevada to handle critical services for forest health such as fuels reduction work in the Sierra, Stanislaus and Sequoia National Forests.

      “We are very appreciative of this grant,” said Larry Duysen, Logging Superintendant for SFP. “In these tough economic times, it means we’ll be able to reach a further distance and treat a greater number of acres.”

      “Without the mill, costs for land management treatments would increase dramatically and the Forest Service’s ability to treat hazardous fuels and improve ecosystem health would be seriously constrained,” said Randy Moore, Pacific Southwest Regional Forester.

      The mill is a critical partner for the Dinkey Landscape Restoration Project (DLRP) on the Sierra National Forest. Located in a priority landscape, the DLRP collaboratively develops, implements and monitors restoration treatments to achieve multiple benefits across the project area. The restoration treatments are being implemented over a 10-year span and consist mainly of mechanical and manual thinning, prescribed fire, meadow restoration, road improvement and eradication of invasive species.

  5. Smokey makes a good point . . . probably Pew Forest Products never read the EIS. But, I’ll bet Pew read the 2400-17 timber sale appraisal report, which would have shown the sale’s negative value. Here’s what a 2400-17 looks like.

    The Forest Service itself did okay with this white elephant. It got to spend a boatload of tax dollars and employ its staff preparing the EIS. The Plumas line officers exceeded their timber target, which counts only volume prepared and offered, not timber successfully removed or even sold. In other words, even if no sucker had stepped forward to buy this turkey, the Plumas would have met its target.

    The story is far from over. I’ll bet USDA/FS finds the money somewhere to pay Pew to continue logging this sale. Just re-name it a “stewardship project” and the tax subsidies can start flowing!


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