Economic Implications ofEconomic Implications of Renewed ... · Economic Implications ofEconomic Implications of Renewed Timber Harvesting on a Federal FtiWt OForest in Western Oregon

Economic Implications ofEconomic Implications ofEconomic Implications of Economic Implications of Renewed Timber Renewed Timber

Harvesting on a Federal Harvesting on a Federal F t i W t OF t i W t OForest in Western OregonForest in Western Oregon

Ted L. HelvoigtTed L. HelvoigtggECONorthwestECONorthwestMay 8, 2007May 8, 2007

Components of the Economic Components of the Economic AnalysisAnalysis

Harvest Scheduling ModelHarvest Scheduling ModelHarvest Scheduling ModelHarvest Scheduling ModelLinear Program, Model II FormulationLinear Program, Model II Formulation

Regional Timber Market ModelRegional Timber Market ModelDynamic spatial equilibrium, nonlinear Dynamic spatial equilibrium, nonlinear y p q ,y p q ,programming model developed at OSU by programming model developed at OSU by Adams & LattaAdams & Latta

IMPLANIMPLANImpacts on employment & incomesImpacts on employment & incomesImpacts on employment & incomesImpacts on employment & incomes

Cottage Grove Ranger DistrictCottage Grove Ranger DistrictCottage Grove Ranger DistrictCottage Grove Ranger DistrictLocated in Lane County on the UmpquaLocated in Lane County on the UmpquaLocated in Lane County on the Umpqua Located in Lane County on the Umpqua National ForestNational Forest

Total acres: Total acres: 83,16883,168,,Matrix Lands: Matrix Lands: 70,07170,071Late Successional Reserve (LSR) acres: Late Successional Reserve (LSR) acres: 9,3139,313C i ll R d Ad i Wi hdC i ll R d Ad i Wi hdCongressionally Reserved, Admin. Withdrawn: Congressionally Reserved, Admin. Withdrawn: 3,7843,784

O&C acres:O&C acres: 29,10629,106O&C acres: O&C acres: 29,10629,106Current timber inventory: 2.9 BBF Current timber inventory: 2.9 BBF (based on FIA (based on FIA plot data collected from 1994plot data collected from 1994--1997)1997)

Umpqua National forest & Cottage Grove District

Lane

Cottage Grove District

DouglasCurry

Josephine Jackson

Klamath

Coos

Josephine

Cottage Grove District: Current Cottage Grove District: Current Volume & Tree CountVolume & Tree CountVolume & Tree CountVolume & Tree Count

350.0 12.0

300.010.0

Volume (MBF)

Trees (Thousands)

200.0

250.0

MM

BF)

8.0

f Tre

es

100 0

150.0

Volu

me

(M

4.0

6.0

Mill

ions

o

50.0

100.0

2.0

0.02.0 6.0 10.0 14.0 18.0 22.0 26.0 30.0 34.0 38.0 42.0 46.0 49+

DBH (Midpoint)

0.0

Incremental & Cumulative Incremental & Cumulative VolumeVolumeVolumeVolume

300.0 3.0

250.0 2.5Volume (MBF)Cumulative Volume (MBF)

150.0

200.0

Volu

me

(MM

BF)

1.5

2.0

Volu

me

(BB

F)

100.0

Incr

emen

tal V

1.0 Cum

ulat

ive

50.0 0.5

0.02.0 6.0 10.0 14.0 18.0 22.0 26.0 30.0 34.0 38.0 42.0 46.0 49+

DBH

0.0

HarvestHarvestHarvest Harvest S h d liS h d liScheduling Scheduling

ModelModel

Model II Linear Program, 100Model II Linear Program, 100--Year HorizonYear Horizong ,g ,

Objective: Maximize Net RevenueObjective: Maximize Net RevenueObjective: Maximize Net RevenueObjective: Maximize Net RevenueConstraintsConstraints

Even flow of volume & revenue (+/Even flow of volume & revenue (+/-- 10%)10%)Minimum harvest age of 40 & 80 yearsMinimum harvest age of 40 & 80 yearsg yg yAW lands, stream buffers, owl circles off AW lands, stream buffers, owl circles off limits to harvestinglimits to harvestingMinimum average volume per acre: Minimum average volume per acre: Matrix=20/LSR=30Matrix=20/LSR=30

Model II Linear Program, 100Model II Linear Program, 100--Year HorizonYear Horizong ,g ,

AssumptionsAssumptionsAssumptionsAssumptions10% of volume lost to breakage & rot10% of volume lost to breakage & rotZero growth in real log price or realZero growth in real log price or realZero growth in real log price or real Zero growth in real log price or real harvesting costsharvesting costsDiscount rate = 6%Discount rate = 6%Discount rate = 6%Discount rate = 6%Softwood Sawlog prices vary from $400 Softwood Sawlog prices vary from $400 --$625 / MBF$625 / MBF$625 / MBF$625 / MBFHarvest costs average $165/mbf, but vary Harvest costs average $165/mbf, but vary by harvest method & volume per acreby harvest method & volume per acreby harvest method & volume per acreby harvest method & volume per acre

ResultsResults

ParameterParameter BaselineBaseline4040--Year Year

Minimum Minimum Harvest AgeHarvest Age

8080--Year Year Minimum Minimum

Harvest AgeHarvest AgeHarvest AgeHarvest Age Harvest AgeHarvest Age

Avg. Annual Harvest Avg. Annual Harvest (MMBF)(MMBF) 55 3838 3737

Avg. Annual Net Rev. Avg. Annual Net Rev. (Millions 2006 $)(Millions 2006 $) ?????? $15.6$15.6 $15.3$15.3

A P A B iA P A B iAvg. Per Acre Begin Avg. Per Acre Begin Inventory (MBF)Inventory (MBF) 3131 3131 3131

Avg. Per Acre Ending Avg. Per Acre Ending ?????? 2525 2727g gg gInventory (MBF)Inventory (MBF) ?????? 2525 2727

Total Forest Value (Millions Total Forest Value (Millions $)$) ?????? $287.8$287.8 $282.0$282.0$)$) $$ $$Per Acre Land valuePer Acre Land value ?????? $3,625$3,625 $3,553$3,553

4040--Year Minimum Harvest Age:Year Minimum Harvest Age:Softwood InventorySoftwood InventorySoftwood InventorySoftwood Inventory

3,000

2,000

2,500

mbf

)

1 000

1,500

Volu

me

(mm

500

1,000V

02007 2017 2027 2037 2047 2057 2067 2077 2087 2097

Year

Matrix Stand Inventory LSR Stand Inventory Total Softwood Inventory

4040--Year Minimum Harvest Age:Year Minimum Harvest Age:Softwood Harvest VolumeSoftwood Harvest VolumeSoftwood Harvest Volume Softwood Harvest Volume

50

40

BF)

20

30

olum

e (M

MB

10

V

02007 2017 2027 2037 2047 2057 2067 2077 2087 2097

Year

Existing Stand Harvest Regenerated Stand Harvest Total Softwood Harvest

4040--Year Minimum Harvest Age:Year Minimum Harvest Age:Annual Revenue & CostAnnual Revenue & CostAnnual Revenue & Cost Annual Revenue & Cost

$25

$15

$20

Dol

lars

$10

$15

ns o

f 200

6 D

$5

Mill

ion

$02007 2017 2027 2037 2047 2057 2067 2077 2087 2097

YearYear

Annual Costs Annual Revenues Net Revenue

Log FlowLog FlowLog FlowLog FlowM d lM d lModelModel

ResultsResults

ImpactsImpacts——Only Western Oregon ConsideredOnly Western Oregon Considered

Harvest impacts:Harvest impacts:Harvest impacts observed in all western OregonHarvest impacts observed in all western OregonHarvest impacts observed in all western Oregon Harvest impacts observed in all western Oregon countiescountiesShortShort--run decrease in private harvestrun decrease in private harvest

Sawmill Impacts:Sawmill Impacts:ShortShort--run production increase greatest in Linn, run production increase greatest in Linn, C l bi C d L tiC l bi C d L tiColumbia, Coos, and Lane countiesColumbia, Coos, and Lane countiesLongLong--run shift in sawmill capacity {run shift in sawmill capacity {Lane, Douglas, Lane, Douglas, Clackamas, Yamhill, Columbia, and Linn countiesClackamas, Yamhill, Columbia, and Linn counties}}Clackamas, Yamhill, Columbia, and Linn countiesClackamas, Yamhill, Columbia, and Linn counties}}

Plywood Impacts:Plywood Impacts:Effectively no change in log consumptionEffectively no change in log consumptiony g g py g g p

Private Harvest ProjectionsPrivate Harvest ProjectionsPrivate Harvest ProjectionsPrivate Harvest Projections

3,600

4,000

History

B

3,200

,

scal

e)

Base

40-Yr or 80-Yr

2,800

MM

BF

(Log

2,400

2,0001970 1980 1990 2000 2010 2020 2030 2040 2050 2060

Year

Deviation of Harvest Levels from Deviation of Harvest Levels from BaseBaseBaseBase

100 0

120.0

80.0

100.0

Public Harvest Private Harvest

40.0

60.0

Scrib

ner

20.0

40.0

MB

F S

-20.0

0.02007 2009 2014 2019 2024 2029 2034 2039 2044 2049 2054 2059

-40.0

Lumber Production Lumber Production P j tiP j tiProjectionsProjections

9,000

8,000

History

Base

40-Yr or 80-Yr

6,000

7,000

mbe

r sca

le)

5,000

6,000

MM

BF

(Lum

4,000

3,0001970 1980 1990 2000 2010 2020 2030 2040 2050 2060

Year

Plywood Production ProjectionsPlywood Production Projectionsy jy j

9,000

7 000

8,000 History

Base

40 Y 80 Y

6,000

7,000

3/8"

)

40-Yr or 80-Yr

4,000

5,000

MM

SF (3

2,000

3,000

1,0001970 1980 1990 2000 2010 2020 2030 2040 2050 2060

IMPLAN IMPLAN ResultsResultsResultsResults

Logging ImpactsLogging ImpactsLogging Impacts Logging Impacts

DirectDirect IndirectIndirect InducedInducedDirect Direct ImpactsImpacts

Indirect Indirect ImpactsImpacts

Induced Induced ImpactsImpacts

Economic Economic OutputOutput

$16,000,00$16,000,0000

$5,900,000$5,900,000 $4,400,000$4,400,000

Personal Personal IncomeIncome

$3,400,000$3,400,000 $2,000,000$2,000,000 $1,600,000$1,600,000IncomeIncome

JobsJobs 4646 5858 5050

Lumber ProductionLumber Production——Value Value Add d IAdd d IAdded Impacts Added Impacts





$4,000,000$4,000,000 $2,400,000$2,400,000 $1,100,000$1,100,000


$,770,000$,770,000 $630,000$630,000 $430,000$430,000IncomeIncome

JobsJobs 1212 1313 1212

Total ImpactsTotal ImpactsTotal ImpactsTotal Impacts





$20,000,00$20,000,0000

$8,400,000$8,400,000 $5,500,000$5,500,000


$4,181,000$4,181,000 $2,600,000$2,600,000 $2,100,000$2,100,000IncomeIncome

JobsJobs 5959 7070 6262

ConclusionsConclusionsConclusionsConclusions

Important FindingsImportant Findingsp gp gSmall Small locallocal increase in log production can increase in log production can have regional impactshave regional impactshave regional impactshave regional impacts

When evenWhen even--flow constraint is included, only flow constraint is included, only yyslight difference in the annual volume and slight difference in the annual volume and value of harvest of the forest under a 40value of harvest of the forest under a 40--year year or 80or 80--year rotationyear rotation

Westside federal forests can produce aWestside federal forests can produce aWestside federal forests can produce a Westside federal forests can produce a significant flow of logs and value under longsignificant flow of logs and value under long--rotation managementrotation managementrotation management rotation management

Important Findings (cont.)Important Findings (cont.)Important Findings (cont.)Important Findings (cont.)In the shortIn the short--run increased public harvestrun increased public harvestIn the shortIn the short run, increased public harvest run, increased public harvest would be partially offset by lower private would be partially offset by lower private harvestharvest

Increase in local log supply would lead to Increase in local log supply would lead to i i i l ill iti i i l ill itincrease in regional sawmill capacityincrease in regional sawmill capacity

Increase in harvest has no real impact on logIncrease in harvest has no real impact on logIncrease in harvest has no real impact on log Increase in harvest has no real impact on log consumption by plywood millsconsumption by plywood mills

Important Findings (cont.)Important Findings (cont.)Important Findings (cont.)Important Findings (cont.)Economic impacts would accrue to entireEconomic impacts would accrue to entireEconomic impacts would accrue to entire Economic impacts would accrue to entire region, but would be greatest in local arearegion, but would be greatest in local area

The net 25 MMBF in annual log harvestThe net 25 MMBF in annual log harvestThe net 25 MMBF in annual log harvest The net 25 MMBF in annual log harvest would result in direct employment impacts of would result in direct employment impacts of 46 logging and 12 sawmill jobs; 190 total46 logging and 12 sawmill jobs; 190 total46 logging and 12 sawmill jobs; 190 total 46 logging and 12 sawmill jobs; 190 total jobs*jobs*

Approximately $34 million in annualApproximately $34 million in annualApproximately $34 million in annual Approximately $34 million in annual economic value*economic value*

*Estimates of employment and economic value are for short-run only

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Economic Implications ofEconomic Implications of Renewed ... · Economic Implications ofEconomic Implications of Renewed Timber Harvesting on a Federal FtiWt OForest in Western Oregon