Oregon Board of Forestry ’ s Federal Forestlands Advisory Committee, November 5, 2007

1. Oregon Board of Forestry’s Federal Forestlands Advisory Committee, November 5, 2007 Ted L. Helvoigt ECONorthwest

2. Changes in Oregon’s Forest Industry Infrastructure • Mill Closures Job Losses • Impacts on Communities & Workers • Results from a Case Study: Renewed Harvesting on Federal Forests • Social, Economic, & Political Reality

3. 1. Mill Closures and Job Losses

4. Mill Closures & Job LossThe Well Known History: • In the 1970s through the late 1980s, about 50% of Oregon’s timber harvest was from federal forests • Beginning in the late 1980s, federal harvest levels fell substantially • Many Northwest sawmills shutdown • Logging and sawmill employment dropped

5. Mill Closures and Job Losses in the Northwest Sawmilling Industry Were Due to More Than Reduced Federal Harvests

6. Productivity Growth:The Not So Well Known History • 1970s: TFP = 0.55% — 1.6% per year • 1980s: TFP = 0.44% — 1.9% per year • 1990s: TFP = 1.31% — 2.1% per year Sources: A Stochastic Frontier Analysis of Technical Progress, Efficiency Change and Productivity Growth in the Pacific Northwest Sawmill Industry, Ted L. Helvoigt & Darius M. Adams (submitted to Journal of Forest Policy & Economics Data Envelopment Analysis of Technical Efficiency and Productivity Growth in the U.S. Pacific Northwest Sawmill Industry, Ted L. Helvoigt & Darius M. Adams (submitted to Canadian Journal of Forest Research)

7. Decomposing Northwest Sawmilling Job Losses* • 1988 Employment Level ≈ 40,000 • 1994 Employment Level ≈ 30,500 • Total Job Losses over this period = 9,500 • Of these… • Between 2,100 and 3,600 (23% — 38%) jobs were lost due tolabor-saving productivity change • Between 5,900 and 7,400 (62% —77%) jobs were lost due to reduced log harvest Source: Helvoigt & Adams, manuscripts under review by CJFR & JFPE

8. Despite Declines in Federal Harvest Levels… • Oregon is still the largest lumber producing state in the U.S. • Washington produces more lumber today than at any other time in the post-WWII period • Some Northwest lumber mills are among the lowest cost producers in North America

9. The Northwest Sawmilling Industry Today While relying almost entirely on private timber harvests, strong productivity growth over the last three decades has helped Northwest lumber producers remain competitive in an ever-increasing global marketplace

10. 2. Impacts on Local Communities & Workers

11. Community Impacts • Prior to the 1990s, sawmills and logging were important components of many Oregon communities across the state • Changes in Federal land management and increased competition from other forest products producing regions has led to spatial consolidation of Oregon’s forest products industry • Strong investment in mills in Willamette Valley & Douglas County • The industry contracted substantially in the eastern and southern parts of the state

12. There Are Few Sawmills Currently Operating in Eastern Oregon

13. Worker Impacts* • Prior to the 1990s, sawmills and logging crews were viable employment options for many Oregonians • Displacement of forest products workers in the late 1980s and 1990s disproportionately affected the least skilled workers and workers in southern and eastern Oregon • Average incomes for those who remained in the industry grew faster than those dislocated from the industry, but not as fast as Oregon workers as a whole • Many workers in southern & eastern Oregon who left the industry moved to the Willamette Valley for work Helvoigt, Adams, & Ayres, 2004, Employment Transitions in Oregon’s Wood Products Sector During the 1990s, Journal of Forestry.

14. 3. Case Study Results: Renewed Harvesting on Federal Forests

15. The following slides provide a brief summary of the results of an analysis of the economic impacts of renewed harvesting on the Cottage Grove District of the Umpqua National Forest.

16. Case Study:Harvesting on Cottage Grove Ranger District* • Constraints included: even flow of volume & revenue, AW lands, stream buffers, & owl circles off limits to harvesting • Harvest volumes under 40-year & 80-year minimum age scenario are approximately equal • About 38 MMBF annual harvest • About $15 million annual net revenue (2006 $) *Analysis & results presented at Western Forest Economist Meeting, May 2007

17. Case Study:Log Flows Off of Cottage Grove Ranger District* • Harvest impacts: Short-run drop in private harvest in all western Oregon counties • Sawmill Impacts: Short-run production increase (greatest in Linn, Columbia, Coos, Lane) • Sawmill Impacts: Long-run shift in sawmill capacity (Lane, Douglas, Clackamas, Yamhill, Columbia, Linn) • Plywood Impacts: None *Analysis & results presented at Western Forest Economist Meeting, May 2007

18. Case Study:Employment Impact of Harvests off Cottage Grove Ranger District* • Direct Employment: 44 logging & 47 sawmill jobs created • Indirect Employment: 180 additional indirect & induced jobs would be created *Analysis & results presented at Western Forest Economist Meeting, May 2007

19. 3. Today’s Social, Economic, & Political Landscape

20. Social Landscape • Far smaller proportion of Oregonians today are directly connected to the forest products industry • Many Oregonians perceive clearcut logging to (always) be environmentally “bad” • To many, logging on federal lands should be done only for forest health reasons

21. Economic Landscape • Technical change has allowed forest industries to produce more lumber and other wood products with fewer workers • Greater societal focus on other economic values provided by forests (e.g. wildlife habitat, clean water, aesthetics, …) • Strong economic pressures to move productive (private) forests into housing & other development

22. Political Landscape • The courts are the de facto managers of federal lands • Eight years of an “industry friendly” administration has not resulted in increased harvesting on federal lands • Fire & carbon sequestration are issues that will likely drive future legislation and administrative policy

23. Thank you Questions or comments? Ted L. Helvoigt ECONorthwest 541-687-0051 Helvoigt@eugene.econw.com