Section IV: Results & Conclusions

Summary of Survey Results

An underlying assignment from the Legislature was to develop an understanding of the operating practices and economic characteristics of the Washington log trucking industry, while focusing on costs and safety.  The following tables present summarized results from a survey of log truck company owners conducted during the spring of 2008.  Survey methodology is presented in Section I.  Demographic information taken from response data represents current information. Company performance metrics were reported for 2006.  One hundred twenty nine useable company responses were received, representing individual owners with 3398 cumulative years of truck driving experience and companies with 2667 cumulative years in the business of log hauling.  Respondent companies report operation a total of 336 trucks of which 305 are log trucks.  No such survey had ever been conducted in Washington.  A copy of the Log Truck Survey Questionnaire is in Appendix B. 

General characteristics

Table 4.1.  Firm size and ownership types.

Table 4.2. Driver characteristics.

Table 4.3. Truck makes, quantities, percentages, and average ages.

Table 4.4. Truck age and associated variables.

Table 4.5. Truck age and associated variables (continued).

Table 4.6 Truck configurations.

Table 4.7 Profitability reporting from respondents.

Table 4.8 Future Plans of respondents.

Characteristics by counties

Table 4.9 Log truck company demographics by county.

Table 4.10. Haul distances (landing to dump) and road quality by county.

Table 4.11. Loads per day, workdays per week, maintenance hours per week by county.

Table 4.12.  Pay wait in weeks and gross return metrics by county.

Table 4.13.  Insurance, tires, and utility costs per year and total value of current equipment investment by county.

Table 4.14. Diesel statistics for 2006 by county.

Characteristics from responses to text questions

Table 4.15.  How are you responding to rising fuel prices?

Table 4.16.  How would you rate the business environment in Washington for the log hauling industry?

Table 4.17.  What do you feel could be done at the state level to improve your business competitiveness? 

Characteristics of responses related to roads

Table 4.18.  What do you feel is the most dangerous part of your job as a log truck driver?

Table 4.19. How would compare the traffic on Washington paved roads today as compared to 10 years ago?

Table 4.20.  How would you compare the quality of Washington gravel roads today as compared to 10 years ago?

Characteristics of revenue

Table 4.21.  Log truck survey results for 2006 gross return.

Table 4.22.  Log truck survey results for 2006 net income.
(n = 117)

Application of Economic Findings

First, we present all estimated costs, other than wages, of operating a log truck for a single truck company operating a 1998 tractor and a multiple truck company operating a new tractor, based upon average 2006 fuel prices as reported by trucking survey respondents ($2.74 per gallon).  Second, we present operations costs for both company type examples with a current approximated average fuel price for Washington for June 12, 2008 ($4.91 per gallon).  In the period from 2006 to June 2008 the price of diesel fuel had increased by 79%. Two different operational scenarios were developed to show cost differences relative to company size, equipment age, and increases in fuel prices.  Cost estimates are to be considered as baseline required expenses of log truck operation regardless of company revenues.  Estimates are for average road conditions of 17 percent gravel and 83 percent pavement.

Table 4.23. Non-wage cost of operations for single and multiple truck companies.

A full accounting of the cost of operations would not be complete without consideration of wages and wage-related costs.  Surveyed companies and interviewed truckers were asked about compensation.  Log hauling companies in Washington with employed drivers utilize two primary approaches for compensation; some drivers are paid an hourly wage and others are paid on a percentage of the truck daily gross revenue.  Analysis of survey response data indicates that the experience is that truck drivers receive either an average wage of $16.09 per hour or are paid based upon an average of 32.0% of the gross revenue for the truck.  

In order to offer a representative range of the full cost of operations of a log truck for each company example as developed for non-wage cost estimates presented above, we provided one low-cost scenario (A) in which we use the suggested hourly wage of $16.09 but consider this as a flat rate in lieu of over-time and do not include health insurance benefits.  In the high-cost scenario (B), we model as for more conventional businesses and use the suggested hourly wage for the first 40 hours per week but increase to $24.14 (“time-and-a-half”) for over-time hours in excess of 40 hours per week. For the high-cost scenario, we also include estimated costs of health insurance for driver and spouse.  Employee-related costs such as social security, industrial insurance, and drug test charges are also included.  Employment benefits such as retirement plans and paid vacations were not included in this analysis but, if provided, would increase costs of benefits.

Table 4.24.  Cost of operations for single (1A) and multiple (2A) truck companies with wage-related costs excluding overtime and benefits.

Table 4.25.  Cost of operations for single (1B) and multiple (2B) truck companies with wage-related costs including overtime and health insurance benefits.

The average 2006 gross revenue per truck for a log trucking company in Washington, as reported by 103 survey respondents, was $137,775.  A comparison of this gross return to simulations of cost of operations for 2006 suggests that average revenues for log truck companies were marginally equivalent to our lowest estimate of full cost of operations as modeled for the 2006 owner-operator scenario 1A - without overtime or benefits ($133,722).  Analysis of the distribution of survey-reported gross revenues suggests that about half of respondent companies were operating log trucks with revenues below estimated minimum cost of full-time operations.  In contrast, less than six percent of survey respondents reported gross earnings that exceeded the simulated 2006 high cost of operations (2B) for a new truck with a driver that received $16.09 per hour with over time and health insurance benefits.

Table 4.26.  Log truck survey results for 2006 annual gross truck revenues.

Table 4.27.  Summary comparison of modeled total annual operation costs and fuel costs for 2006 to 2008.  Ranges reflect low (self-employed driver: older truck with no overtime or benefits) to high (employed driver: new truck with overtime and benefits).  Base wage = $16.09/hr.

Figure 4.1.  Annual 2006 gross revenue per truck for respondent log hauling companies

Safety Summary

Analysis of accident data provided by the Washington State Patrol and the Washington Department of Transportation for all collisions involving log trucks for years 2002 through 2007 showed no trend of increasing safety hazards to warrant public concern (Figure 4.2).  This examination of the safety record of the log hauling industry in Washington leads to conclusion that log truck operation is safer today than in years past.  WA accidents involving log trucks declined by 11% from 2004 to 2006 while collisions of all state commercial carriers increased by 15% during the same period.  A review of WA Department of Labor and Industries data for on-the-job injuries and fatalities of log truck drivers also showed no trend indicating increases of incidence.

Figure 4.2. Washington Log Truck Accidents 2002-2007.

While the accident record of the Washington log trucking industry shows no apparent trends to indicate increased collision, injury, or fatality incidence, this investigation identified a number of concerns that could challenge future safety performance and economic viability of log truck operations.  Trucking issues such as deregulation, rising cost of operations, extended hours of service, an aging workforce, poor driver recruitment, and increases in roadway congestion have been linked by prior research to declines in the safety performance of commercial carriers.  The current influx of out-of-state trucks log trucks providing hauling services within Washington is a new issue with uncertain safety and economic implications.  Public health impacts associated with diesel exhaust exposure represent an emerging safety concern with potential to increase cost of operations. 

Conclusions and Recommendations

Conclusions

As reported earlier in Section I (Background) of this report, the Washington forest industry employs 45,000 people and annually generates $2 billion in wages, $16 billion in gross business revenues and over $100 million in tax receipts. Washington produces six billion board feet of lumber per year, one billion square feet of plywood panels, and seven million tons of pulp and paper products.  Washington has the second largest lumber production in the nation and is fourth in production of both plywood and pulp and paper products.  All of this activity is dependent upon the drivers and trucks that move raw logs from the woods to process facilities.

Every year approximately one million loads of logs are hauled by log trucks on Washington’s roadways.  The cumulative annual distance of travel is approximately 140 million miles often under adverse road and weather conditions. 

As noted in Section I of this report concerns about cost of operations are not new.  Brown (1936) provided early analysis of the cost of operations for logging trucks.  He recognized the entrepreneurial benefits of truck logging for low cost to entry into the logging business but offered a precautionary note.  Based upon his observations of the uniquely independent and small-operator-dominated contract hauling industry, he expressed concern that many truckers did not did not know how to accurately determine the cost of operations including depreciation, taxes, interest charges, fuel, oil, repairs, and etc.  Brown suggested more than 70 years ago that some contract log truckers were hauling logs at rates below cost of operations thereby creating instability within the timber industry. 

In the years following Brown’s warning, state regulations limiting company entry into the log hauling industry and setting rates for haul services were put in place.  These regulations provided stability to the log hauling industry for decades.  However, a critical review of the costs and benefits to the timber industry of such state-imposed rates was beyond the scope of this study and, given the federal deregulation of intrastate trucking imposed by the Federal Aviation Administration Act of 1994, could be of little current value.  Since 1995, the state no longer has the authority to regulate intrastate trucking.  Interestingly, survey data suggests that more half of respondent log truck companies are not aware of this jurisdictional reality and hope to see “state rates” re-imposed. 

In absence of state regulation, the competitive market must resolve questions of compensation for log haul contractors.  It is clear from analysis of survey responses that compensation for services may be highly variable with some businesses appearing to be receiving annual gross revenues that are below cost of operations while others appear to be profitable.  Comparison of survey results to modeled cost of operations leads to a conclusion that the industry, as a whole, marginally has costs equal to revenue but only when compared to the lowest cost (lowest wage and benefit) scenario.  One explanation for the profitability of some companies and not others could be associated with the long-term business relationships that some log hauling companies have established with loggers and timber owners local to their areas of operations.  More generally, however, symptoms of economic pressure are apparent and manifest themselves as extended hours of service, an aging workforce, poor driver recruitment, and marginal profitability. Declines in the registrations of log trucks in Washington appear to be accompanied by a gain market share by out-of-state trucks (see prior discussion in Section II and Figure 4.3 below).  The economic and safety implications of this shift are unknown but suggest that trucks from other states must be lowering cost of operations in some manner in order to gain competitive edge.

Figure 4.3.  Log trucks registered for operation in Washington verses log trucks registered in Oregon to operate in Washington (WSDOT,  WSDOL, & ODOT).

Figure 4.4.  Increases to WA population and annual vehicle miles traveled (VMT).

Another important safety consideration, beyond the control of log haulers, is traffic congestion.  From 1981 to 2007, state population increased by 53 percent from 4.23 million to 6.49 million people.  During the same period, vehicle miles traveled (VMT) per year increased by 98 percent from 16.16 billion to 31.97 billion miles.  Average VMT per person per year have increased by 29 percent.  From 1981 to 2007, total road-miles in Washington (principal, minor, collector, and interstate) increased 2 percent from 6,885 to 7,044 miles.  Quantified by VMT per road-mile, there is conceivably a 93 percent increase in traffic and associated congestion on Washington’s roadways.  Increases in traffic congestion have both safety and economic implications for Washington log truck operators.  Sixty-nine percent of survey respondents felt that diving in traffic is the most dangerous challenge of their job. 

Recommendations

While our analysis of accident records reveals that the log hauling industry is comparatively safe relative to the performance of the broader population of commercial carriers, safety does not translate to economic viability.  There is ample evidence to suggest that the future viability of log trucking business is in question and such uncertainty is a legitimate matter for private and public concern.  With an expected 23 percent increase in wood transport, it appears that critical issues of capacity will need to be addressed in the future.  Economic viability comes from the actual relationship between private cost of operation and revenue to the trucking firm. We hope this report will be useful to both buyers and sellers of hauling services by helping to inform contract discussions.  Survey results indicate that many log truckers report difficulty accommodating increasing costs with current levels of compensation and would like to see adjustment through re-imposition of state-regulated haul rates.  A review of the relevant laws leads to a conclusion that federal deregulation of trucking precludes such possibility.  However, our investigation has identified two potential state legislative opportunities to provide relief for log trucking companies that may be worthy of consideration.

Business and Occupation Taxes

The Washington Business and Occupation Tax (B&O Tax) is calculated at 1.926 percent of gross revenues.  An examination of the implications of B&O Taxes relative to increases in fuel costs and worker compensation was conducted using our simulations of log truck operation costs. Depending upon cost simulation scenario, we estimate that B&O Taxes will add $3,072 to $4,012 to cost of operations for log hauling companies in 2008.  B&O Taxes associated with fuel and wages account for 70% to 79% of the total B&O Tax responsibility.  With 2008 fuel price that approaches $5 per gallon, B&O Taxes function as an additional $0.10 per gallon fuel tax except, unlike actual fuel taxes, B&O Taxes are calculated based upon the total price at the pump, which already includes significant state and federal taxes. 

From 2006 to 2008, although loads of logs hauled remained constant, the increase in the price of fuel resulted in an increase in the total B&O Tax of about 20 percent.  Wage-related costs also incurred multiple taxation.  In addition to direct wages and benefits, B&O Taxes are effectively charged against FICA, Labor and Industries, and Unemployment Security expenditures.  B&O Taxes add to cost burdens for companies that struggle to accommodate increasing variable cost of operations such as fuel and wage-related costs.  B&O Taxes, as currently levied, affect employees by lowering company profitability and can serve as a disincentive for employers to provide better wages and benefits.  Relief from B&O Taxes could lower log hauling businesses costs of operation.

Equipment options to reduce costs and increase safety

This study included an evaluation of the pollution health impacts and associated need for emissions equipment upgrades as emerging public/private costs of safe log truck operation.  Comparison of fatalities linked to diesel pollution with collision fatalities illustrates the seriousness of this safety issue. Great strides in emissions reduction equipment development have been made by manufacturers but distribution and investment by the industry lags potential.  Heavy trucks that are 2007 and newer are equipped with exhaust systems that allow very low emissions of fine particulates and other pollutants.  This is not the case for older trucks.  Since diesel engines can provide a million miles or more of service it could take decades to significantly reduce the adverse effects of diesel exhaust in Washington.  Retrofit of diesel particulate filters that are designed to cut soot emissions by 90 percent can be accomplished for trucks 1990 and newer.  However, cost of retrofit is estimated at $7,000 to $10,000 per truck.  Both the Governor and the Legislature have identified pollution reduction as an important state objective to improve human health and to control emissions of green house gas.  The Washington Department of Ecology estimates a public benefit of three to sixteen dollars from every dollar invested in reducing diesel pollution.   It appears that trucking companies, such as log haulers, will not be able to privately afford such investment without assistance. 

Equipment upgrades to heavy trucks for reduced pollution are not limited to exhaust systems.  Central tire inflation systems and “super-single” tires were identified as low-cost opportunities where investments in equipment upgrades could reduce fuel consumption by upwards of five percent on any age of truck. Achievement of reductions in fuel consumption automatically results in avoided emissions and can also provide economic relief to trucking companies.  States such as California have recognized that public investments through grants and tax incentives in “green” equipment upgrades for heavy trucks can be prudent public investment for climate change mitigation.  State programs for public investments to support equipment upgrades that reduce pollution could help trucking companies to reduce fuel costs and provide significant public environmental benefit, thus a win-win situation.

Future research    

Remarkably, after almost 100 years of truck logging in Washington, we found no record of a prior state study to examine the costs of operation and the safety performance of this important industry.  We also found that while the industry appears to contracting, the demand for services is expected to expand. 

Figure 4.5.  1940 Mack log truck (Spoestra).

A significant change for the log truck industry occurred when intrastate trucking was deregulated by the United States Congress.  There is broad disagreement within the trucking literature as to the costs and benefits of deregulation.  Other regulatory discussions, as yet unresolved, that could affect log trucking relate to increases to gross weight limits and whether current disparate state rules should be replaced with uniform federal standards.  As state and federal regulatory authorities evolve through time, the implications for a safe and sustainable log truck industry will merit periodic evaluation. 

Little data were found available with which to develop trend analysis for the log hauling industry.  Lack of data challenges scientific research and hinders informed policy-making.  Many factors uncovered by this investigation suggest that the log trucking industry could experience dramatic changes in the future. Issues such as revenue shortfalls, rising costs of operation, extended hours of service, an aging workforce, poor driver recruitment, increasingly congested roadways, shifting regulations, and growing public concern about pollution have been highlighted by this investigation. The interconnectivity of these issues should be a research focus as policy solutions are crafted for the future.