Steve Wilent recently asked a question here
The Forest Service is developing a “market based” approach to timber sale appraisals that will aim to improve alignment between local market conditions and appraisal metrics.
I assumed that they’d been doing this all along. Anyone have insights?
I contacted the Forest Products Modernization team, and they responded promptly with much good info. Thank you! Here’s a link to their information. Also, they have newsletters, and you can get them by signing up with them at “email@example.com”. I attached newsletters from July and November FPM_At_A_Glance_November2019
FPM_AtAGlance_July2019_final here. Note to Larry: there is a great deal about the workforce.
Where We Are Going?
• People: We are partnering with Human Resources Management to improve recruitment and retention of employees, developing and expanding training resources including academies and task books for career advancement, addressing qualification disparities in the forester and forestry technician series, and increasing the capacity of existing staff through consolidation and streamlining of certifications.
• Technology: We are modernizing the Timber Information Manager application; deploying new technologies (handheld data recorders, tablets, and lasers); expanding the use of geospatial and remote sensing (e.g., Light Detection and Ranging and unmanned aerial systems) for inventory, monitoring, boundary designation, and volume estimation; and partnering with the Chief Information
Office to expand Wi-Fi and broadband access to forest and district offices to support digital and networking capabilities.
• Business Change: We are simplifying contracts and appraisals to mitigate challenges associated with low-value material and increase timber sale outputs; leveraging employee, partner, and private industry expertise to improve program and project management skills across the agency; establishing a cross-deputy working group focused on forest products markets and utilization to help us better evaluate timber sale viability and mitigate issues with low-value material; and scaling up lessons learned and best practices for use of GNA, stewardship agreements, and designation by prescription.
• Policy: We are updating our timber management directives to reflect new authorities and provide clear direction and technical guidance on new procedures; coordinating with the Environmental Analysis and Decision Making (EADM) team to streamline the integrated resource analysis, proposed action development, and National Environmental Policy Act (NEPA) analysis steps of timber sale planning; and working with the Office of Regulatory Management Services to maintain a searchable, web-based agency policy library.
Now onto the detailed technical appraisal answer:
The Forest Service has been researching a market-based approach as an alternative to using the results of past sales for establishing the Base Period Price (BPP) for the Transaction Evidence Appraisal (TEA) System. The TEA system is used in all Regions of the Forest Service except Region 10 (Alaska). TEA uses a BPP as a starting point for the appraisal that is based on high bids from sales in the recent past. [More precisely, the BPP is the volume weighted average high bid for sales in the base period.] When there are insufficient sales to develop a reliable BPP or when there is a lack of competition for sales, it is reasonable to doubt whether “fair market value” is being established by the normal transaction evidence procedures.
An appraisal is an estimate of fair market value (36 CFR 223.60) and is used to establish the minimum stumpage value for the sale of National Forest timber (36 CFR 223.61). The research led to pursuing alternative methods for establishing that base period price, such as using a market based approach. The approach that was taken was not to develop an entirely new appraisal system, or build a single, national appraisal system. Instead, a process was developed to establish BPP based on the relationship between lumber market indices and stumpage prices. The resulting market-based BPP represents the fair market stumpage value that would otherwise have been established by the high bids the Forest Service received from actual sale transactions. The BPP, however it is established, is further adjusted by sale specific and local market conditions to approximate a fair market value, and establish a rate for advertisement.
The new approach has shown value in test cases where the current TEA approach resulted in no bid sales due to price, and where competition or the number of previous sales was lacking for a reliable appraisal of fair market value.
Now, I am going on the proverbial limb here as to my understanding, so please correct or add if this context is incorrect.
1) There is some requirement to try to sell trees that might be cut for say, fuel treatments or hazard trees. To do that the FS has to jump through required “timber sale” hoops.
2) However, there may be no current history to use and there might only be one potential purchaser.
So they had to figure out some other way to derive fair market value.