Rural Technology Initiative
College of Forest Resources, University of Washington
August 22, 2001 (review draft)
There have been substantial changes in forest management practices
and ownership over the last decade driven largely by the economic
impacts resulting from changing regulations and social pressures.
Many of the impacts like land conversion, accelerated harvests,
shorter rotations, and liquidation of older forests, are counterproductive
to the intent of the regulations and the publics concerns. A better
understanding of what causes these consequences and what might be
done to sustain working forests and rural communities is needed.
A review of many studies suggests there are a number of gaps that
should be filled for an effective program to motivate sustained
management practices that will produce desired future conditions
in rural communities.
- Small owner case studies are being used to characterize the
many economic problems created by regulations as well as how alternative
forest management and road plans can better serve both small owner
and public interests. More such studies are needed in order to
learn how to avoid unintended consequences across diverse site
conditions. (see 2.1-2.6 &
- Habitat suitability and in-stream functionality models need
to be developed and calibrated with local data in order to identify
best management practices that can be sustained. These efforts
are just beginning and will need continued support for some time
including periodic re-sampling of populations in upland and riparian
monitoring areas. (see 2.7 &
- The complexity of determining how to meet regulatory requirements
prohibits many owners from achieving best practices, suggesting
the development of more programmatic approaches such as pre-approved
county level multi-owner Habitat Conservation Plans (HCPs) that
are designed to produce desired future conditions. (see 2.1-2.3
- Regulating practices that increase costs to owners while enhancing
public values will produce unintended consequences until we learn
how to provide incentives with the cash flow to motivate and sustain
best management practices. (see 2.7-2.8
- Training and technical assistance are essential elements in
developing better management practices but are unlikely to receive
adequate support given budget curtailments. (see 2.1
& 3.3-3.5 )
- For a more detailed list of gaps and needs see 4.0.
Management of forestland in the Pacific Northwest has changed substantially
over the last decade as a consequence of public pressures and regulations
to manage for non-timber objectives. New technologies are also emerging
that take advantage of our evolving understanding of the science
of forest growth and habitat management. There are concerns that
small owners will not be able to adjust to these changes with out
negative economic and environmental consequences. This summary will
identify a number of issues impacting family forest ownership and
management. It will then review some of studies that have been completed
to help understand these issues and their impacts. Finally, important
gaps in the analyses will be identified.
The magnitude of the problem is evident in even macro-economic
data. The ratio of personal income between Washington's urban and
rural timber communities has increased from 1.4 to 2.4, a 66% increase
in less than two decades. The number of lumber mills has declined
substantially and the unemployment difference between timber dependent
and urban counties remains high. Current harvest levels are more
than 30% below those believed to be sustainable a decade ago (Lippke
et al 2000b). These are but symptoms of the accumulating problems
in the forest sector that put at risk family forest ownership and
management. The impact of regulations has been a large contributor
resulting in substantially increased costs by landowners at little
or no cost to the public for the benefits they have received.
2.0 Issues Impacting Sustainability
2.1 Regulatory Costs and Revenue Losses:
- Revenue losses from regulatory constraints on harvest and thinning
- Increased reporting costs
- Increased planning requirements and related costs
- Increased administrative costs
- Increased harvest costs associated with changing regulations
higher costs from fragmented sites
higher costs from reduced volume per site
- Reduced interest in owning forestland for other values (habitat,
aesthetics, family legacy, privacy) given the increased complexity
- Cost of road planning requirements
- Cost of road upgrades
- Cost and risk of developing alternative plans that are allowed
under the regulations
2.2 Regulatory risks:
- Changing regulations have decreased the asset values anticipated
from investments made as much as 50 years earlier increasing the
risk premium required by prudent investors (decreasing rather
than increasing the value of sustainable management).
- Absence of any protection from additional regulatory changes
and asset takings (with the possible exception of a costly and
uncertain negotiation to obtain a habitat conservation plan (HCP)).
2.3 Reduction in conservation easement values:
- The affect of current regulations on land and timber value is
to reduce the "basis value" of land and timber substantially
thereby reducing the value potential for conservation easement
alternatives, i.e. the regulatory approach devalues land and timber
rather than raising the value to reflect societies increased demand.
- Investing in timber management with no return for many decades
inherently results in a higher effective tax rate paid on capitalized
investments (i.e. private timber investments pay a higher effective
tax rate than agriculture or other shorter term investment alternatives).
- The yield tax can eliminate this tax bias at the state level
when substituted for property taxes but is otherwise a double
tax (i.e. paying a tax on the value of the crop, i.e. the inventory,
as well as on the lands ability to produce revenue based on its
profit potential taxes the revenue stream twice).
- Property taxes are not being reduced as a result of increased
regulatory costs and asset takings producing much lower and sometimes
negative "bare land values" for many cases (negative
motivation to continue managing the land in forests).
2.5 Cash flow management constraints:
- Small owners experience long periods of negative cash flow
with few opportunities for inflows. Constraints affecting harvesting
and thinning magnify this problem. The long lag from investment
in regeneration to cash inflow can be many decades.
- New road and other planning costs increase the cash flow requirements
even though inflow opportunities have been reduced.
- Small owners express a desire to keep their land forever yet
the turnover is substantial often driven by the need for cash.
Any number of sources of cash flow (carbon credits, development
rights, habitat incentives, or reduced estate taxes), could provide
the motivation for sustained management.
2.6 Fire protection:
- Cost of fires and fire protection are increasing yet the priority
for protecting small owners assets would appear to be very low,
a disparity in costs and benefits
- State, federal, and private cooperation on fire protection
has eroded along with the increasing levels of distrust
2.7 Increasing social pressures and values
expected by the public from forestland:
- In spite of the publics increasing interest in forest values
for recreation, habitat, clean water and air, aesthetics and wood
products in conjunction with the value of sustaining rural jobs,
the publics actions have reduced timberland values with no compensation
for any of the new values desired by the public (the Forest and
Fish agreement's riparian easement program to partially compensate
owners for lost assets reduces but does not reverse the negative
- Public media mis-information on who produces these benefits,
who benefits and who pays is a major disincentive for managing
land in forests
- While the public demands for social benefits (social values)
has been increasing, the publics accountability in preventing
trespass, dumping, etc appears to be declining resulting in increasing
2.8 Increasing attractiveness of alternative investments:
- Rates of return on other securities have increased
- Rates of return from other wood supply regions have increased
- Rates of return from land conversions have increased
- Urban encroachment is increasing with development subsidized
by not paying the full cost of roads, schools, utilities, other
needed infrastructure, and habitat protection /restoration
3.0 Recent studies on these issues and their impacts
It is difficult to rank these issues by their impact and may even
be difficult to understand the complex nature of the impacts. However,
many impact studies have been completed and at least some are reviewed
here. This is not the product of a literature search so many useful
studies may have been omitted.
3.1 Economic Impact Assessments:
- UW faculties have conducted a number of economic impact studies
in response to requests from state regulators, non-industrial
owners and trust beneficiaries. These studies have demonstrated
the economic impacts and environmental tradeoffs from regulations
affecting management at the state level (Adams et al 1992, Conway
1994, Bare et al 1995, Lippke et al 1999, Perez-Garcia et al 2000),
at the regional and county level (Lippke and Conway 1994, Lippke
et al 2000a), for the state managed lands (Bare et al 1996, Bare
et al 1997) and for a number of case studies covering individual
landowners (Zobrist and Lippke 2001). These studies demonstrate
a wide range of economic impacts across owners, and for small
owners the potential for substantial mitigation of the regulatory
costs under the state's riparian easement program albeit still
with a high cost impact and loss of flexibility in meeting ownership
objectives. The studies also demonstrate that alternative management
strategies exist that could lower the cost for the same economic
benefit but that these strategies require different incentives
than possible under current regulations.
- Estimates of road upgrade and stream crossing costs for small
owners as required by new regulations are also substantial suggesting
additional costs of as much as $375 million may be required over
the next few years (Perez-Garcia et al 2000, Lippke and Edelson
2001). These upgrade requirements cover a broad spectrum of situations,
some important and some with minimal environmental impact, suggesting
that the cost could be much lower if site specific criteria were
- The cost of developing HCP's for small owners to incorporate
more site specific information is generally prohibitive based
on the substantial planning and analysis and negotiating efforts
required in prior HCP's. The potential for a family farm programmatic
HCP approach provides a major opportunity, if the funds for the
planning effort can be arranged. Federal funding has been made
available for a pilot project in Lewis County.
- Much of the declining competitiveness of small owners can be
traced to regulatory changes. Lippke and Bare (1997) characterized
the economic impact of regulatory costs on small owner economics
and looked at small owner survey information to identify the most
important factors. They also characterized changes in the motivation
to harvest early rather than later. Other studies have shown how
the changing regulatory impacts are an important element in the
regions declining competitiveness in world markets (Lippke et
al. 2000b). The closure of many mills partially related to the
decline in federal harvest has also reduced the number of mills
competing for larger diameter higher quality wood thereby lowering
the price and reducing the motivation to manage for longer rotations
and higher quality wood. Imports have increased while production
in and exports from the Northwest have declined.
- There are many situations in which the increased regulatory
costs drive the bare land value negative, a high incentive to
convert to other uses of the land (Zobrist and Lippke 2001, Lippke
and Bare 1997). The fact that small owners are motivated by more
objectives than timber revenue has generally resulted in management
practices more supportive of biodiversity than large-owner commercial
practices. But, owners are still known to be very sensitive to
their ability to derive cash when needed with a reasonable rate
of return on their investments, and their motivation to sustain
their lands in timber will changing rates of return. Zobrist and
Lippke (2001) analyzed the economic impacts of the Forest and
Fish Rules using a number of small owner case studies. These case
studies show that while the process is very complex, most owners
can mitigate much of their timber losses using Washington State's
riparian easement program. However their bare land values are
substantially lower and in many cases negative suggesting increasing
land sales and conversions. Costs are so variable that many more
case studies are needed to fully understand the impacts of changing
regulations and new management practices.
3.2 Development trends:
Urbanizing forested areas is a continuing trend and the rate of
urbanization appears to be accelerating. Lester DeCoster described
the process under which less land is maintained as forestland at
the Forest Fragmentation Conference (2000). Development and fragmentation
of forests are increasing faster than population. The extent to
which development costs are not paid by developers yet habitat protection
costs are paid by forestowners, increases the attractiveness of
conversions. Washington State has been losing at least 100 acres
a day (56 square miles a year) of forestland to non-forest use for
the last ten years (WA DNR 1998).
3.3 Sustaining habitat (and endangered species)
across the landscape:
As a consequence of the listing of the northern spotted owl, the
Washington Forest Landscape Management Project (Carey et al 1996),
a federally funded project carried out by a large multidisciplinary
team of scientists, focused on how to manage forests to restore
more old-forest functionality. With recognition that forests are
dynamic and that reserve areas (with no-management) are not by themselves
sustainable given the natural risks such as fire, windstorms, disease,
and geological changes, the emphasis was on a broader mix of management
treatments that could restore more old forest functionality at lower
cost. The study summarized in Carey et al. (1999) developed management
treatments that produced and sustained more old forest functionality,
thereby restoring some of the biodiversity loss resulting from commercial
practices, but at a substantial revenue loss to the landowner (20-30%
or more). The more effective strategies involved periodic thinning
with longer rotations while producing higher quality wood. The greater
labor intensity associated with the treatments and the production
of higher quality wood contributed to a more stable long-term job
base. The study set new benchmarks for quantifying forest diversity
and habitat as well as economic impacts. Many subsequent studies
have been modeled after this study including the impact of Habitat
Conservation Plans and changing regulations.
3.4 Habitat impacts from intensive management:
The WFLMP study unfortunately focused largely on old-growth functionality
and did not look at the contributions to habitat that might be achieved
by treatments designed to improve habitat in younger intensively
managed forests. Studies commissioned by TFW/CMER have shown fairly
stable wildlife populations under various treatment options (Aubry
et al 1997, Hallet et al 1997, O'Connell et al 2000) suggesting
the potential to sustain many habitats in working forests with shorter
rotations on much of the land thereby substantially lowering overall
costs. Habitat linkages are currently being developing for managed
younger forests similarly to that developed for the Washington Forest
Landscape Management project based on the most recent wildlife population
studies, most of which were funded by CMER. The objective is to
be able to project habitat and economic impacts over time to support
better management strategies.
3.5 Instream impacts of management:
Neither the WFLMP study or TFW/CMER studies produced an adequate
set of instream functionality measures for the protection of salmon
although the theoretical foundations for such were developed (Reeves
et al 1996). CMER is in the process of funding a number of basic
science studies that are focused on better understanding instream
functionality. Impact models are being developed for shade, particulate
matter and other instream functions that are sensitive to management
alternatives so that the impact of management alternatives on both
instream functions and economics can be analyzed.
3.6 Cumulative impacts:
The Forest Inventory and Analysis (FIA data) collected by USFS once
every ten years and analyzed for future timber supply and forest
conditions has over the last several decades provided the basis
for a cumulative assessment of timber and habitat conditions across
owner groups (Adams et al 1992, Bare et al, 1994, Lippke et al.
1999). There is however no plan to provide such an analysis using
the FIA data now being collected, the first new data in ten years.
The environmental constraints imposed since the last analyses provide
a constraint overlay to the inventory information as it impacts
both timber available for harvest and habitat. The technology now
exists to use GIS data calibrated with the FIA data for an improved
measure of the forest inventory, stand conditions and habitat. By
associating each stand with the most appropriate stand management
plan and growth model, much more credible projections of timber
availability and habitat are possible. Without such an analysis,
assessments of timber availability and changing habitat conditions
are likely to remain local and incomplete. Without developing a
comprehensive analysis of future forest conditions related to current
inventories and management plans, there can be no comprehensive
assessment as to the ultimate impact of current policies.
3.7 Valuation of Benefits vs. Costs
- Much of the pressure to manage forests for non-timber outputs
derives from the desires of urban interests. Contingent Valuation
(CV) methods make use of carefully designed and administered surveys
to elicit non-market values from individuals. This method produces
information useful in the calculation of benefits that forest
landowners produced which other publics enjoy but for which no
market has been developed to directly determine what people would
be willing to pay for those benefits. The contingent valuation
technique constructs an experiment in which an opportunity is
created to pay for environmental goods. The good in question may
be the maintenance of aesthetics, community jobs, biodiversity,
and or fish bearing habitat for which no market transaction data
exists. While there have been many objections to contingent valuation
methods, the method has been employed for the past 30 years with
much improvement over the last ten years, many of which deal with
early objections. A panel of economic experts was assembled in
1992 to determine whether the methods could produce legally valid
estimates of non-market values for environmental goods related
to the Valdez oil spill. Their recommendations produced guidelines
for survey development to assure reliability and usefulness of
the information that is obtained.
- A UW thesis project using CV methods developed statistically
significant monetary values (willingness to pay) that urban and
rural populations place on aesthetics, job losses, and biodiversity,
each being directly and measurably impacted by forest management
(Xu 1997). Comparing these values showed that increasing the active
management to partially restore old forest habitat with better
aesthetics and biodiversity produced a greater increase in public
values than private costs, offering the potential to compensate
landowners for their costs while producing a higher overall net
social benefit. Current regulatory approaches appear to increase
costs more than benefits since they do not offer any incentive
compensation as motivation to manage for social objectives. Urban
publics place much higher value on aesthetics than on biodiversity
or habitat. Incentive methods such as compensating landowners
to produce non-timber values have long been favored by economists
to achieve social goals since they have the potential to provide
greater efficiency with fewer inequities. Adopting incentive methods
to motivate forest management holds promise where they can achieve
the same objective as environmental regulations.
- As a part of the Small Business Economic Impact Statement an
attempt was made to determine the public's willingness to pay
for restoring fish populations (Perez-Garcia 2001, Layton et al
1999). Fish populations are being affected by many factors including
hatcheries, fishing, ocean conditions, climate change, dams, urbanization,
and agriculture, with the impact of forests likely being less
than the impact of other sources (USEPA 1990). These studies are
not sufficient to allocate a portion of any one of these sources
to a measurable impact on fish populations as was made clear by
Perez-Garcia (2001). It is not currently possible to assess whether
managing forest or agriculture riparian zones will so directly
affect fish populations that one can use the publics willingness
to pay for fish recovery to demonstrate the magnitude of the benefits
from forest management over costs. Nevertheless, the regulatory
agency's need to determine if benefits are greater than costs
resulted in their presumption that cause and effect exists in
order to demonstrate a positive benefit to cost relationship for
new regulations. More analysis is needed to validate such a conjecture.
However, establishing the public's willingness to pay for forest
habitat restoration, aesthetics and job losses can and has been
assessed directly, providing a direct tradeoff between cost and
the production of a number of amenities that are directly controlled
by forest management (Lippke et all 1999b). Inherently this procedure
already includes the public's estimate of the value they place
on the contribution of forest management to fish habitat and aesthetics.
It produces estimates that the public should be paying for the
values they receive from management alternatives that induce substantial
costs on small owners. More studies along this line would be useful
to determine the robustness of these findings.
- The state's riparian easement program might be more effective
if converted to an incentive program to manage for multiple values,
i.e. more public values including species protection could be
purchased for the same cost as the easement.
3.8 Carbon credit markets:
Carbon credit markets are developing slowly under voluntary systems
and offer the potential for increased compensation to landowners.
Management alternatives that store more carbon in the forest can
be complementary to other habitat objectives. However, alternatives
that reduce harvest to create habitat will likely induce product
substitution by fossil intensive products thereby causing more carbon
emissions than sequestration. The Consortium for Research on Renewable
Industrial Materials (CORRIM - a national consortium of research
institutions) is working to develop valid carbon accounting systems
that could support a carbon credit market system. CORRIM developed
a thorough research protocol for environmental performance accounting
(CORRIM 1998) and will soon publish and interim report on their
first phase of research.
3.9 Certification systems:
The requirement to certify management to the same third party standards
as are being used for larger owners will be cost prohibitive for
small owners. Certification, HCPs regulatory minimums and conservation
easements all seek to address similar social concerns. Small owners
will be penalized for not being able to respond to theses options
until these system come together such that meeting the regulation
is equivalent to an HCP and certification. Small owners should not
have to respond to multiple regulators and special interest reviewers.
Meeting the regulations should offer the protection of an HCP and
the marketing benefits of certification. Developing the subtle differences
between these labeling systems and bringing them to a common denominator
could substantially level the playing field for small landowners.
4.0 Summary of what's still needed:
Increased costs have been most pronounced on a subset of small
owners, especially those with a high percentage of their land in
riparian zones. Increased costs encourage land conversions and discourage
investments in management contrary to the intent of the regulations.
The public beneficiaries are willing to pay for many of the benefits
they are receiving but under the current regulatory structure are
not contributing, producing significant inequities (Lippke et. al,
1999b). Some of the areas needing further work are identified below.
- The wide disparity of regulatory impacts across small owners
requires a large sample of case in order to comprehend the full
impact of the regulations and potential alternative plans on habitat
and landowner economics. The interpretation of the rules is just
now stabilizing making this practical.
- Road upgrade costs are large and procedures to avoid spending
enormous sums on situations of low priority improvements are needed.
There may also need to be compensation to support road upgrades,
as there will be insufficient cash flow to support these improvements.
A number of road upgrade case studies are probably required in
order to determine how to develop priority sensitive procedures
and justification for compensation.
- Other regulations including the Growth Management Act, County
and Municipal regulations and covenants also need to be quantified
and analyzed with respect to their impact on NIPF sustainability.
- Upland habitat suitability models have been linked to the Landscape
Management System (LMS) and other GIS and stand structure growth
projection systems to project future habitat conditions. As updated
habitat suitability models based on more recent data become available,
they can easily be included to demonstrate the impact of management
on habitat. Regulators should become familiar with such projection
oriented systems so that site specific plans can be developed
providing better habitat protection at lower cost. Improvements
over current regulations should be sufficient justification for
alternative plans. Alternatively, if current regulations offer
more habitats than historic conditions, the base for comparison
should be relaxed to historic conditions.
- Riparian zone habitat models need to be completed based on
the recent CMER population studies and reviewed in order to provide
the same capability as has been developed for upland habitat suitability
- In-stream function models need to be completed based on a range
of available sources to provide a similar capability.
- Completion of habitat suitability for uplands, the riparian
zone and instream functions should become the basis for adaptive
management changes to and under the regulations hence validating
habitat modeling should become an integral part of the evaluation
- The complexity of alternative planning will inhibit many owners
from taking on the task. Family farm programmatic HCPs may offer
a better planning model with lower costs. The Lewis County programmatic
HCP will provide a pilot test for such a capability if supported
by a thorough analysis.
- While the desired future condition (DFC) in the Forest and
Fish Rules has been defined as a simple average, in reality the
sample had a larger variance across all parameters used to describe
the stand conditions. So long as alternative plans are not statistically
different from the historic distribution there is no basis to
consider the plans inferior, offering landowners greater ability
to customize their plans. A procedure should be developed to allow
leaving more of some amenities of importance and less of others
since no one site can ever provide everything. Similarly, developing
the historic range for parameters of importance and their correlation
would make it possible to develop better alternative plans. Protecting
more where it is more important and protecting less where it is
less important can provide better overall protection at lower
cost. A modeling framework to make such a determination is needed.
- Even under the best alternative plans, the costs to a substantial
portion of landowners operating under new regulations will be
high enough that many will by necessity consider conversions and
limit their investment in management. Developing better compensation
programs, i.e. incentive programs for producing non-timber public
benefits holds the greatest promise. Additional contingent valuation
modeling would likely support a broader incentive compensation
system. Developing institutional structures to provide incentives
as an alternative to uniform standards should be an objective.
The riparian easement program does offer substantial mitigation
in costs but may not be sufficient.
- Given the very uneven and at best periodic income small owners
receive from there property, devising ways to provide a more stable
income stream would almost certainly contribute to more sustained
ownership and management. Incentive programs or easement compensation
with ongoing rather than lump sum payments should be considered.
Providing compensation in the form of tax benefits may not be
effective as few owners may be in a position to benefit. Developing
institutional approaches to support cash payments as incentives,
easements and compensation for foregone development rights could
be more effective than tax benefits.
- Cost sharing assistance such as the Stewardship Incentive Program,
SIP, could be effective but have generally been funded by Congress
at such low levels that the Washington State share is far below
- Carbon credit systems offer another compensation possibility
to improve the motivation to sustain land in forestry rather than
conversion. Carbon accounting models for alternative management
are being developed. Determining how to make carbon credits more
complementary to habitat and instream protection could substantially
improve the conditions that would support sustained forest management
by small forest owners. Any carbon credit system must deal with
carbon stored in product form as well as the carbon stored on
the ground in order to avoid potential counter productive substitution
by fossil fuel intensive steel, aluminum, brick, plastic and concrete
products. The Consortium for Research on Renewable Industrial
Materials (CORRIM - an national consortium of research institutions)
is developing carbon accounting models from forest regeneration,
through processing, construction, building use and disposal. Their
models are being integrated into LMS to facilitate the projection
and analysis of carbon sequestration under various management
- The impact of roads and culverts on sediment delivery needs
to become more quantitative to avoid poor decisions on road upgrading
- Training of regulators and consultants will be critical to
the implementation of the most effective and efficient management
and road upgrading plans.
- Compiling and monitoring GIS based statistics in test site
areas at one level of detail, and at a regional and statewide
basis at another level is needed to track changing trends and
the effectiveness of the programs in place.
- Case studies of how certification systems, HCP criteria and
regulatory requirements differ are needed in conjunction with
an analysis on how to bring these disparate labeling systems into
a common framework that is not biased against small ownership.
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