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ECON Extension to FVS: What it Does and How it Works

Evaluate economically efficient timber harvest timing and forestland value using the ECON extension to FVS. Determine optimal harvest strategies and estimate the value of forestland and trees.

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ECON Extension to FVS: What it Does and How it Works

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  1. ECON Extension to FVS: What it Does and How it Works Fred C. Martin WA Dept. Natural Resources Olympia, WA

  2. History • FVS Post-Processor • CHEAPO I(Horn et al., 1986 ) • CHEAPOII(Medema and Hatch 1982) • FVS Integration • SCOPING(Crookston, Wiitala, Barber, Hotvedt, and Martin) • ECON 0.5(Renner, 2001) • ECON 1.0(Martin and Lu, 2005)

  3. Motivating Questions • Given an existing stand, when is the economically efficient harvest time? • What is the value of forestland for timber production? • Given an existing stand and its forestland value, when is the economically efficient harvest time? • Given harvest deferral of an existing stand until a target condition is achieved, what is the forestland value for timber production that maintains the target condition? • Given an existing immature stand having a known land value, what is the value of the immature trees (“reprod” value)?

  4. Example 1A – when to harvest? • Assume 400 pole-sized trees per acre. • Harvest simulated each cycle with PRETEND keyword. • Harvest all trees >= 7” DBH, except 16 reserve TPA distributed across diameter distribution. • Influence of future stands not considered.

  5. Table 1A – FVS Measures

  6. Table 1A – ECON Measures

  7. Example 1B – when to harvest? • Objective - maintain continuous tree cover. • Stand conditions as in Example 1A. • Harvest 90% of the basal area between diameter limits that vary over time, e.g.: • In 2004 harvest 90% of the basal area in trees 6-16” DBH. • In 2054, harvest 90% of the basal area in trees 6-22” DBH.

  8. Table 1B – FVS Measures

  9. Table 1B – ECON Measures

  10. Example 2 - forestland value? • What is the soil expectation value (SEV) of a perpetually repeating prescription? • Initial conditions: residual 16 TPA, 5-21” DBH. • Prescription: plant & natural regeneration, commercial thinning 2034, & final harvest to replicate initial stand conditions. • “Pretend” final harvests simulated each cycle beginning in 2044. • Each “pretend” cycle is a mutually exclusive prescription, e.g., a repeating 80-year rotation, or a repeating 90-year rotation, but not both.

  11. Table 2 – FVS Measures

  12. Example 2 – ECON Measures

  13. Example 3 – future prescription? • When to replace a current stand with a perpetual prescription? • Stand conditions as in Example 1A and SEV from Example 2 ($154). • Influence of future stands is considered. • "Value of forest" measures the economically efficient time to convert the existing stand. • “Value of forest” equals PNV plus the discounted SEV (value of trees plus value of land).

  14. Example 3 – FVS Measures

  15. Example 3 – ECON Measures

  16. Example 4 – maintain a future forest? • Defer harvest until stand target; what is SEV that maintains target condition? • Stand conditions as in Example 1A. • Prescription: harvest all but 16 sixteen largest trees when 10% of trees >= 21” DBH, and regenerate stand. • Event Monitor tracks target condition to determine time of harvest, and “triggers” ECON keywords (SEVSTART and PRETEND). • “Pretend” harvest at each cycle is mutually exclusive perpetual management alternative of different harvest age.

  17. Example 4 – FVS Measures

  18. Table 4 – ECON Measures

  19. Example 5 – “reprod” value • Value of immature trees ( “reprod” value) when bare land value (SEV) is known? • Well-stocked pole-size stand with little merchantable volume & SEV of $154. • Value has two components, NPV of existing timber & discounted SEV of future stand. • Value depends on date harvested or destroyed & hence delay of future prescription (SEV).

  20. Table 5 – “reprod” value

  21. Integration Example – FVS, FFE, ECON • Examine economic and biological effects of alternative fuel strategies. • Young, mixed-species stand. • “No Fuel Treatment” thinned at 10, 30, 50 and 80 years, with wildfire in year 60. • Fuel Treatment same thinning & wildfire, but pile/burning treatments following 10 & 30-year thinning.

  22. FFE Example - PNV

  23. FFE Example – standing inventory

  24. FFE Example – surface fuels

  25. ECON Functionality • Ability to evaluate multiple harvest scenarios within a single simulation. • Ability to dynamically initiate and value future management prescriptions. • Ability to schedule management activities with the Event Monitor based on economic measures. • Ability to compute special costs and revenues in response to simulated events.

  26. Economic Measures • Undiscounted Costs • Undiscounted Revenues • Present Value Costs • Present Value Revenues • Present Net Value (PNV) • Benefit Cost Ratio (B/C) • Internal Rate of Return (IRR) • Soil Expectation Value (SEV or Bare Land Value) • Value of Forest • Value of Trees

  27. ECONOMIC ANALYSIS SUMMARY TABLE • STAND ID: Example_2 Calculate SEV ECONOMIC ANALYSIS SUMMARY TABLE (DISCOUNT RATE: 4.0%) • -------------------------------------------------------- • INVEST- PRETEND UNDISCNTED VALUES PRESENT VALUES • MENT MODE IS ----------------- --------------- • YEAR PERIOD ACTIVE COSTS REVENUES COSTS REVENUES • -------------------------------------------------------- • 2004 10 NO 72 0 68 0 • 2014 20 NO 87 0 76 0 • 2024 30 NO 97 0 80 0 • 2034 40 NO 253 222 126 66 • 2044 50 YES 654 1506 206 323 • 2054 60 YES 842 2170 206 329 • 2064 70 YES 1070 3191 201 337 • 2074 80 YES 1319 4670 193 341 • 2084 90 YES 1643 6655 186 334 • 2094 100 YES 1965 8726 177 306

  28. ECONOMIC ANALYSIS SUMMARY TABLE • STAND ID: Example_2 Calculate SEV for a perpetual management regime. • ECONOMIC ANALYSIS SUMMARY TABLE (DISCOUNT RATE: 4.0%) • --------------------------------------------------------------------------- • INVEST- PRETEND INTERNAL REALIZABLE • MENT MODE IS RATE OF B/C RATE OF VALUE OF VALUE OF • YEAR PERIOD ACTIVE PNV RETURN % RATIO RETURN % SEV FOREST TREES • --------------------------------------------------------------------------- • 2004 10 NO -68 0.00 -209 • 2014 20 NO -76 0.00 -141 • 2024 30 NO -80 0.00 -116 • 2034 40 NO -60 < 0.0 0.52 2.3 -76 • 2044 50 YES 117 6.6 1.57 4.9 136 • 2054 60 YES 124 6.2 1.60 4.8 137 • 2064 70 YES 136 5.9 1.67 4.8 145 • 2074 80 YES 147 5.7 1.76 4.7 154 • 2084 90 YES 148 5.5 1.79 4.7 152 • 2094 100 YES 128 5.3 1.72 4.6 131

  29. Program Features • Pretend Harvests • Commercial vs. Pre-commercial Thinning • Multiple Types of Costs & Revenues • Value Rate Changes And Durations • Specifying ECON Start Times & Re-initialization • Volume Calculation And Valuation

  30. Pretend Harvests • Only harvested timber is valued, i.e., standing inventory is not valued. • FVS thinning keywords schedule hypothetical harvests identifying cut trees without changing the inventory. • Allows mutually exclusive harvest prescriptions to be analyzed in a single simulation. • Under PRETEND keyword control, harvest costs & revenues are not accumulated across cycles, but are reported only for the cycle in which the harvest occurs.

  31. Commercial vs. PCT • Commercial versus PCT distinguished by minimum average harvested QMD and/or total per-acre harvested board-foot or cubic-foot volume. • PCT based on totality of all harvests in a cycle, i.e., from any number of thinning keywords. • PCT always incurs costs while commercial thinning may accrue costs & revenues.

  32. Costs & Revenues • Annual costs & revenues • Burning & mechanical site prep costs* • Fixed & variable harvest costs* • Variable harvest revenues* • PCT fixed and variable costs* • Planting costs* • Special costs & revenues* • *Applied as result of FVS activity

  33. Value Rate Changes And Durations • Costs and prices change over time - these changes are called “value rate changes.” • Value rate changes can be positive or negative and the amount of change can vary over time. • A cost or price can be depreciated to zero, terminating a periodic series of costs or revenues. • Can be applied to all cost & revenue keywords, except special costs and revenues

  34. Specifying ECON Start Times & Re-initialization • ECON start year can be varied & reinitialized. • ECON can be started in response to an activity. • ECON can be reinitialized multiple times during a simulation in response to activities. • Re-initializing ECON resets the investment period and initiates new calculation of economic measures.

  35. Volume Calculation And Valuation • Harvest units-of-measure depend on FVS BFVOLUME & VOLUME keywords. • Volumes computed by species by whole tree or individual logs, not both, & by board-feet and cubic-feet. • ECON permits valuing both by tree and by log and by cubic & board-feet. • Values displayed by harvested tree & log diameter, for harvested TPA, tons/ac., cubic and board-feet.

  36. HARVEST VOLUME & GROSS VALUE TABLE • YEAR = 2084 - PRETEND HARVEST OCCURRED: YES • SMALL-END DIB TREE DBH TPA TPA TONS/ • SPECIES MIN MAX MIN MAX REMOVED VALUE $ ACRE • ------- ------------- --------------------------------- • WP 0.0 999.9 45 0 • WP 4.0 10.0 • WP 0.0 999.9 • L 0.0 999.9 3 0 • DF 0.0 999.9 208 0 • DF 4.0 10.0 • DF 10.0 16.0 • DF 0.0 999.9 • GF 0.0 999.9 230 0 • WH 0.0 999.9 72 0 • WH 6.0 10.0 • WH 0.0 999.9 • C 0.0 999.9 534 0 • LP 0.0 999.9 2 0 • Totals 1147 0

  37. HARVEST VOLUME & GROSS VALUE TABLE • YEAR = 2084 - PRETEND HARVEST OCCURRED: YES • SMALL-END DIB TREE DBH CU FT CU FT BD FT BD FT TOTAL • SPECIES MIN MAX MIN MAX REMOVED VALUE $ REMOVED VALUE $ VALUE $ • ------- ------------- --------------------------- ----------------------- • WP 0.0 999.9 0 • WP 4.0 10.0 509 61 61 • WP 0.0 999.9 106 0 0 • L 0.0 999.9 0 • DF 0.0 999.9 0 • DF 4.0 10.0 4257 639 639 • DF 10.0 16.0 868 260 260 • DF 0.0 999.9 1060 0 0 • GF 0.0 999.9 0 • WH 0.0 999.9 0 • WH 6.0 10.0 62 3 3 • WH 0.0 999.9 27 0 0 • C 0.0 999.9 0 • LP 0.0 999.9 0 • Totals 1969 0 9445 1622 1622

  38. Keywords • ANNUCST (Annual Cost) • ANNURVN (Annual Revenue) • BURNCST (Burn Site Prep Cost) • DISCOUNT (Discount Rate) • ECON (Economic Extension Model)* • END (End of ECON Keywords) • HRVFXCST (Harvest Fixed Cost) • HRVVRCST (Harvest Variable Cost) • HRVRVN (Harvest Revenue) • LBSCFV (Pounds per Harvested Cubic-Foot Volume) • MECHCST (Mechanical Site Prep Cost)

  39. Keywords – cont. • NOTABLE (Suppress ECON Table Output) • PCTFXCST (Pre-Commercial Thinning Fixed Cost) • PCTSPEC (Pre-Commercial Thinning Specification) • PCTVRCST (Pre-Commercial Thinning Variable Cost) • PLANTCST (Planting Cost) • PRETEND (Pretend to Simulate a Harvest)* • SEVKNOWN (Soil Expectation Value) • SEVSTART (Start-year for SEV Calculation)* • SPECCST (Special Cost)* • SPECRVN (Special Revenue)* • *Can be scheduled via Event Monitor

  40. FVS-ECON Integration MAIN Begin stand loop INITRE ECINIT ECIN ECSETP VOLS ECVOL Begin cycle loop TREEGRO GRINCR EVMON—1st time ECSTATUS CUTS getIsPretendActive Process thinning; begin tree loop ECHARV End tree loop Possibly set some event monitor variables EVMON—2nd time ECSTATUS GRADD UPDATE VOLS Begin tree loop ECVOL End tree loop ECON subroutine ECCALC Other subroutine End cycle loop End stand loop

  41. Help • to ftp://198.187.3.44/lm/FvsEconDrafts/ • FVS extensions including ECON • Test keyword files • Suppose 1.20 parameter file: suppose.prm • ECON User’s Manual

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