Both O&C bills are a bad deal for Western Oregon counties
Legislation proposed in Congress does not guarantee any specific amount of funding for O&C counties, which have requested $110 million annually. Both House and Senate bills only direct federal agencies to increase timber harvest on O&C lands by a certain number of million board feet (mmbf) annually. Adequate funding for O&C counties would materialize only in the unlikely convergence of high timber prices, increased construction activity, a generous finance industry, stable log exports from private lands, significant increases for federal agency funding and other unpredictable factors. Each of these factors represents a risk to O&C counties that jeopardizes their adequate funding.
Timber prices have spiked, especially for public timber, because of private timber industry log exports to Asia. Oregons export of raw logs to China in 2010 (664.2 mmbf) was over 40 times what it was in 2005. Should China decide that Siberian or other Asian logs are cheaper, they would purchase those logs, and timber prices in the western United States would plummet.
Sen. Ron Wyden's Senate O&C bill would double timber harvest on O&C lands; the House bill would triple the cut. Both bills would flood the market with cheap logs, depressing timber prices. In any of these scenarios, more acres would need to be cut to provide the same amount of county funding, eventually leading to a shortfall.
Timber prices also fluctuate according to demand, which depends on construction activity, which depends on a stable financial industry providing financing for construction. Both industries have failed to regain the level and stability of pre-recession activity. According to my financial planner, both industries remain too risky for investment. With county funding increasingly tied to federal logging through these bills, O&C counties would bear the risks of a timid timber industry, with sawmills unlikely to purchase more timber while sitting on unsold lumber inventory in a flat market.
Another risk for the counties occurs when the timber sales offered at auctions do not draw bids, going unsold. In the last decade, during the pre-recession construction boom from 2002-2007, 27 Medford Bureau of Land Management timber sales over 1 mmbf in volume failed to sell, a total of 78.4 mmbf. Timber procurement officers for local mills indicated these complex sales did not draw bids because they contained too many risky components.
These sales were designed to be larger and more complex than usual in an attempt to produce increased timber volume per BLM staff time invested. Without an unlikely and extraordinary increase in funding for the BLM, more of these huge complex timber sales would be the only option where the BLM's current staff could double or triple the volume offered. If a significant number of BLM timber sales fail to draw bids, all that unsold timber generates no income for the counties. Since the timber industry can choose to bid only on timber sales with lower risks, industry goals of higher profits will become increasingly at odds with the goals of reliable and sustainable funding for the counties.
One difference between the House and Senate bills relates to which agency should manage the O&C lands. The House bill takes all O&C lands not included in an unrealistic timber trust and places them under U.S. Forest Service jurisdiction. Expanding this concept to placing all O&C lands under USFS management could work better for the O&C counties. The BLM spends over four times more to manage a given acre of forest than does the USFS while producing a comparable amount of timber. About $113 million annual savings would accrue to the government annually from transferring BLM lands in Western Oregon to the USFS and USFWS. All or part of these savings could be returned to the O&C counties, effectively de-coupling county funding from the risks of selling public O&C logs to the timber industry.
Transfer of BLM forests to USFS constitutes the kernel of possible solutions to O&C county funding where county, state, and federal governments share responsibility. A modest increase in the Oregon Forest Products Harvest tax could raise about $37 million annually for the state's share, while exempting the first 25 mmbf to protect small-forest landowners. O&C counties could use an underutilized taxing authority to levy additional taxes to make up specific shortfalls. An average 0.02-percent property-tax rate increase could raise the county share of $37 million.
While big timber has long been an ally, O&C counties should now avoid risks of increasingly unreliable funding through federal timber sales, and focus on collaborating with federal and state governments to craft a sustainable solution. New realities require new approaches.
C.B. Thomas of Jacksonville has worked in various capacities in the forests of southwest Oregon for 40 years.