Public Timber Sales and Sustainability Who Buys; Who Benefits; and Why CROP is a Vital Key

1. Public Timber Sales and SustainabilityWho Buys; Who Benefits; and Why CROP is a Vital Key • Presented by • Catherine M. Mater • President—Mater Engineering • Senior Fellow – The Pinchot Institute for Conservation • Corvallis, Oregon; Washington, DC • Tel: 541-753-7335 Fx: 541-752-2952 • E-mail: catherine@mater.com • www.mater.com Mater Engineering, Ltd/ Pinchot Institute

2. Since we’re in Denver … Let’s meditate on new protocol to relieve stress regarding supply issues. Mater Engineering, Ltd/ Pinchot Institute

3. NF Management Activities (Pinchot Institute) Who buys; Who benefits “levelized” supply; investor landscape CROP Take you through two pathways: Arizona CROP Project (Mater Engineering) Mater Engineering, Ltd/ Pinchot Institute

4. To explain “investor landscape”,“levelized” and “CROP”, you have to know . . . . . . where and why it all began Mater Engineering, Ltd/ Pinchot Institute

5.  Arizona Grand Canyon Trust Greater Forests Flagstaff Partnership Mater Engineering, Ltd/ Pinchot Institute

6. Foundations of the Partnership • Restore natural ecosystem functions within Flagstaff Urban Interface. • Reducecatastrophic wildfire risk. • Research, test, and demonstrate key ecological, economical (ie wood utilization), and social dimensions of restoration. Mater Engineering, Ltd/ Pinchot Institute

7. For economics – reverse the formula!! • Technology should not drive the wood flow. • Restoration/stewardship practices should define the technology choices for investment Mater Engineering, Ltd/ Pinchot Institute

8. Small logs sold Large logs sold Timber Volume Sold by Diameter and YearA-S, Coconino, Kaibab (Williams RD) Mater Engineering, Ltd/ Pinchot Institute

9. Offered Sold Offered vs. Sold Volume A-S, Coconino, Kaibab NF Mater Engineering, Ltd/ Pinchot Institute

10.  Flagstaff Investor Landscape ~200 miles Mater Engineering, Ltd/ Pinchot Institute

11. Stable Unstable Offered Coconino and Kaibab Timber Offering by Ranger District 1995 - 2002 Sold Mater Engineering, Ltd/ Pinchot Institute

12. Unstable Mater Engineering, Ltd/ Pinchot Institute

13. What we see: • No coordinationbetween NF systems in regions • No coordinationbetween USFS ranger districts • No coordinationwith other agencies in region with harvest activity (BLM, state, DOT, etc) . . . coupled with biomass-to-energy projects provingnot economically viable . . . unless they’re connected withsolid wood manufacturing Mater Engineering, Ltd/ Pinchot Institute

14. What investors see: • Erratic supply at best; no level playing field • Uncertainty where or when supply will come from in an investment landscape (~200 mile radius) • Little information on resource characteristics to be supplied • No investor risk mitigation efforts within the investor landscape (agency coordination targeting risk factors) Mater Engineering, Ltd/ Pinchot Institute

15. Key Questions: What to do withsmall logs(5”-12”) and biomass (< 5”) material. How toinvite new investmentinto the region. Mater Engineering, Ltd/ Pinchot Institute

16. What was clear: • Change the dynamics of resource offering in aninvestor landscape . . . • . . . wherelevel supply andrisk reductionare perhaps more important than increased volume. Mater Engineering, Ltd/ Pinchot Institute

17. Solution • . . .Seed the CROP • (Coordinated ResourceOfferingProtocol) Mater Engineering, Ltd/ Pinchot Institute

18. CROP (coordinated resource offering protocol) • Nation’s first benchmark project in investor landscape coordination of projected resource offering: • Within agencies (ie RD’s within NF system) • Between agencies (USFS, BLM, state, Counties, Indian nations, etc.) Mater Engineering, Ltd/ Pinchot Institute

19. CROP • Focus is on “levelized” supply between key players, not necessarily adding more supply. • Premise: • “Levelized” effort must apply to volume, diameter, and species in locational context. Mater Engineering, Ltd/ Pinchot Institute

20. Why levelized? Mater Engineering, Ltd/ Pinchot Institute

21. New research results soon to be released: • USDA FS Southern Research Station • Mater Engineering, Ltd • University of Oregon Ecosystem Workforce Program • Pinchot Institute for Conservation Assessing Community Benefits from Land Management Activities on the National Forests Mater Engineering, Ltd/ Pinchot Institute

22. Three simple questions? • Who buys Forest Service timber sales? • Who performs service contracts for the Forest Service? 3. Who benefits? Demographics, Consistency, Impacts Mater Engineering, Ltd/ Pinchot Institute

23. Bitterroot Willamette, Deschutes Nantahala Coconino Arapaho-Roosevelt Six National Forests Selected: Mater Engineering, Ltd/ Pinchot Institute

24. Methodology: • 1998 – 2002 FY timber sale and service contract data analyzed. • 71 timber sale purchasers interviewed 71; at least 50% response for each forest. • 131 service contractors interviewed; 74% average response rate . Mater Engineering, Ltd/ Pinchot Institute

25. Service Timber • Contracts typically undertaken with local employees. • 60-70%subcontractwork; 65-70% goes to local companies. • 70-74% primarily purchase supplies from local businesses. • Most work done by distant contractors. • 90% “rarely” or “never” hire locals for contracts. • 61% pay food and lodging; but lodging mostly described as camping. Mater Engineering, Ltd/ Pinchot Institute

26. How do timber purchasers perceive FS programs? Do perceptions match performance? Mater Engineering, Ltd/ Pinchot Institute

27. Performance: Only the Bitterroot & the Nantahalaexhibited continuous declines in sales volume offered between 1998 - 2002. The Arapaho-Roosevelt, Willamette, Deschutes, and Coconino offered sales volumes in 2000 – 2002 which were close to or exceeded sales volumes offered in 1998 – 1999. Supply: total volume 78% of timber purchasers noted a decrease in total volume of timber sales offered by the forest service over the last five years. Mater Engineering, Ltd/ Pinchot Institute

28. Lack of levelized, steady offerings may foster perceptions of diminishing sales volumes and may reduce ability to respond to timber sales offerings in absence of long-term harvest planning protocol. Mater Engineering, Ltd/ Pinchot Institute

29. Timber purchasers: • 54% laid off employees • 32% reduced wages or employee benefits • 23% reduced hiring of outside contractors • 14% reduced work hours or shifts Mater Engineering, Ltd/ Pinchot Institute

30. Meanwhile, back in Arizona, we began to examine how to . . . • Invite investmentto the regions focused on small log processing. • Increase the valueof resource sales. • Reduce the disparitybetween offered and sold. • Increase environmental supportfor long term removal activity. Mater Engineering, Ltd/ Pinchot Institute

31. . . . but examine through a CROP lens • How muchis proposed for removal (5-year period)? • How levelizedis the removal flow over time? • Where and who will the volume come from? Mater Engineering, Ltd/ Pinchot Institute

32. Key players in Arizona investor landscape: • 5 National Forests • AZ Trust Lands • ADOT • Department of Defense (Camp Navajo) • Indian Nations Mater Engineering, Ltd/ Pinchot Institute

33.  6%  11% Williams RD  7% Morman Lake RD 54% stable supply 39% unstable supply  11% Mogollon RD  20% Black Mesa RD  14% Lakeside RD  2% Bradshaw RD  18% Springerville RD  2% Payson RD  6% Alpine RD  2% Pleasant Valley RD ROM #1: 2003-2007: 5” - 12+” 11% 7% 11% 20% 20% 14% 14% 2% 18% 2% 6% 2% Mater Engineering, Ltd/ Pinchot Institute

34. = 2003 (5%) = 2004 (23%) = 2005 (19%) = 2006 (23%) = 2007 (29%) ROM #2 5” – 9”: Where 60% or more of the NF volume will come from 5-year (total: 340,677 ccf) Mater Engineering, Ltd/ Pinchot Institute

35. = 2003 (9%) = 2004 (24%) = 2005 (20%) = 2006 (22%) = 2007 (26%) ROM #3 9” – 12”: Where 60% or more of the NF volume will come from 5-year (total: 188,207 ccf) Mater Engineering, Ltd/ Pinchot Institute

36. = 2003 (28%) = 2004 (19%) = 2005 (17%) = 2006 (17%) = 2007 (20%) ROM #4 12+”:Where 60% or more of the NF volume will come from 5-year (total: 213,020 ccf) Mater Engineering, Ltd/ Pinchot Institute

37. X X  X   X  X ROM #5 Where 60% or more of the NF volume will come from over 5 years = 5” – 9” (340,677 ccf total) = 9” – 12” (188,207 ccf total) = >12” (213,020 ccf total) Mater Engineering, Ltd/ Pinchot Institute

38. None Projected  3% Williams RD 2003-2007: < 5” biomass  2% Morman Lake RD 51% stable supply 39% unstable supply  3% Mogollon RD  28% Black Mesa  19% Lakeside RD  < 1% Bradshaw RD  2% Payson RD  32% Springerville RD None Projected None Projected  11% Alpine RD None Projected ROM # 6 Mater Engineering, Ltd/ Pinchot Institute

39. = 2003 (2%) = 2004 (26%) = 2005 (18%) = 2006 (24%) = 2007 (30%) ROM #7 Biomass (<5): Where 60% or more of the NF volume will come from 5-year (total: 51,440 ccf) Mater Engineering, Ltd/ Pinchot Institute

40. Oregon • Meanwhile, because of NFP mandates and the N. AZ project, similar efforts unfolding in Oregon: • Central Oregon (Bend - Redmond • South Central (Hines)   Mater Engineering, Ltd/ Pinchot Institute

41. Oregon investor landscapes include: • Central Oregon: • 7 National forests • State lands • ODOT • BLM • Indian nations • Counties • South-Central Oregon: • 5 National forests • ODOT • BLM • Counties Mater Engineering, Ltd/ Pinchot Institute

42. Unstable Ochoco NF: Offered vs sold for ’00-’02 Same pictureas Arizona Mater Engineering, Ltd/ Pinchot Institute

43. 39% 03-07 : Juniper • BLM: Juniper 52% OR CROP working circle:100-mile radius 03-07 : Lodgepole Pine 95% • Deschutes NF: L. Pine Mater Engineering, Ltd/ Pinchot Institute

44. Marketing plan for new restoration-based high value-add technologies CROP it . . . And they will come! Mater Engineering, Ltd/ Pinchot Institute

45. Mater Engineering, Ltd/ Pinchot Institute

46. . . . Just may have to view things from a different angle! Potential for CROP as a new supply/investment tool? We think excellent potential . . . Mater Engineering, Ltd/ Pinchot Institute