Below Cost Timber Sales

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					          Below Cost Timber Sales
          Robert Bruce Russell, Jr.

Economics 4535: Natural Resources Economics
           Dr. Vijaya R. Sharma
       The issue of Below-Cost Timber sales by the Unites States Forest Service (USFS)
has been a hotly debated issue for over two decades. The timber industry, USFS, and
several environmental groups have lobbed congress and the public to take action on
below-cost timber. The history of below-cost timber sales is as old as the USFS itself,
and is seen as a primary function of the forest service. Below-cost timber sales are
caused by many factors including: Past promises of access to timber, the nature of
national forests and multi-use management.1 Support for below-cost timber sales is
concentrated around the argument that the proper management of public lands incurs an
increased cost due to environmental concerns.2 Critics argue that below-cost timber sales
are economically wasteful, motivated by commercial timber, and destructive to the
       It is important to know the history of the Forest Service and how it relates to
below-cost timber sales. The first head of the Forest Service, Gifford Pinchot, believed
the national forests should be used as an example to the private sector. Pinchot sought to
prove the long-term profitability of proper timber management.4 However, the Forest
Service failed to generate any monetary profit from it timber sales. The idea of a value
added for non monetary benefits allowed the forest service to claim that timber sales were
profitable, was presented by the Forest as early as 1920.5 The Forest Service continues in
this belief that timber management costs are lower than the total net benefits of proper
timber management. In addition to the monetary gains, the Forest Service uses the
concepts of Forest Stewardship and Personal Use to calculate the total benefit of timber
sales. (Graph 1)6 The Multiple-Use-Sustained-Yield Act of 1960, enacted by Congress,
gave the Forest Service a legal basis for continuing below-cost timber sales. “With
consideration being given to the relative values of the various resources, not necessarily
the combination of uses that will give the greatest dollar return or the greatest unit

  Gorte: Below-Cost Timber Sales
  Gorte: Below-Cost Timber Sales
  Berman: Timber Policy
  Wolf: National Forest Timber Sales and the Legacy of Gifford Pinchot
  Wolf: National Forest Timber Sales and the Legacy of Gifford Pinchot

output.”7 Over the next decade the Forest Service was under and intense amount of
criticism for it continued use of below-cost timber sales. In response to this criticism,
Congress enacted the National Forest Management Act of 1974 that required the Forest
Service to report a sample of the below cost timber sales in it annual report. The National
Forest Management Act also included a provision for a special fund for timber salvage
sales that actually led to the expansion of below-cost timber sales, by masking the true
cost timber sales. In 1985, Congress directed the Forest Service to develop a true cost
accounting system for timber sales, “to address the issues of cost allocation and valuation
of benefits.”8 The Timber Sale Program Information Reporting System (TSPIRS) was
created and reported data on the National Forest from FY1989-FY1998, but no report has
been filed since. It is unclear why the Forest Service discontinued the report, but rising
administrative costs seems to be the biggest factor. The TSPIS report revealed the
increasing use of salvage sales as percentage of total harvest, which suggests the Forest
Service was increasing its use of below-cost timber sales for multi-use forest
management. (Graph 2)9 Despite several attempts to eliminate below-cost timber sales,
the practice continues to be employed by the Forest Service.
       The causes of below-cost timber sales include past promises, the nature of the
national forests, and multi-use management. Past promises of access to timber is a
leading cause of below-cost timber sales. It is one of the missions of the Forest Service
to provide a ready supply of timber. According to the Multi-use Sustained Yield Act, “to
furnish a continuous supply of timber for use and necessities of Citizens of the United
States”. The promise of economic development through the exploitation of timber is seen
as a guarantee by the timber industry. This guarantee of timber is used to spur economic
development in certain areas and the denial of timber would result in loss of recourses
devoted to supporting the timber harvest. The nature of national forest lands also causes
below-cost timber sales. National Forests are often concentrated in remote regions with
difficult terrain, which makes them difficult to harvest. The rugged terrain usually
contributed to slow timber growth and decreased harvest yields. The Forest Service

  U.S.C. 528-531
  Gorte: Below-Cost Timber Sales

utilizes below-cost timber sales in these regions in order to make it finically viable for
commercial timber to harvest. The added expense incurred by the Forest Service
includes road construction, reclamation of environmental damage from the harvest, and
reforestation of the harvested stands. National Forest lands were often purchased in a
damaged state, which was a result of poor timber management on private lands. The
Forest Service also employs below-cost timber to correct some of its own mistakes. The
Forest Service planted fast growing timber on eroding agricultural land that in hindsight
was not ecologically sound for the land, and the below cost sales were seen as an
effective tool for manipulating forest composition.10 Multi-use management is defined in
the Multi-use Sustained Yield Act as “ for outdoor recreation, range, timber, watershed,
and wildlife and fish purposes.” It is often difficult to determine the value of al these
amenities and it sets to Forest Service up to be vulnerable to criticism about it inefficient
timber sales. An efficient market might arise if profit motive was the only concern of the
Forest Service. However, the Forest Service must account for the preservation and
enhancement of wildlife, watershed, and recreation activities. It would be a illogical to
determine the success of these programs on a purely profit motivated scale. In fact,
below cost timber sales might be the most cost effective way to accomplish the goals of
multi-use land management.
         The increased cost of land management for multi-use purposes is one of the
biggest reasons for the existence of below cost timber sales. The Forest Service has a
legal duty to insure the proper harvesting and management of public lands. The private
sector has a comparative advantage in the timber market due to the fact that it can ignore
any increased costs due to multi-use land management. Private timber companies are
driven by pure profit motives that the Forest Service cannot and will not compete with.
A study by the National Wild Turkey Federation demonstrates the difficulty of proper
timber management for the protection of wildlife habitat. The study was published as a
guide for private landowners, but it demonstrates the difficulty that the Forest Service has
to face to meet its goal of wildlife habitat protection. Specifically, the study includes
guidelines for timber harvesting that demonstrated the complexity of habit management.

     Gorte: Below-Cost Timber Sales

Of particular interest are the diagrams on suggested clear cutting patterns, and the use of
“wildlife corridors” in clear-cut areas. (Figures 1, 2)11

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Figure 1: Travel Corridors to Enhance Wildlife Movement Through Harvested Areas

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     Mcglincy: Managing for Timber and Wildlife Diversity

The details of the management strategy suggest many techniques that increase the cost of
the harvest operation. The travel corridors are suggested to have 50-100ft of buffer zone
where the timber and undergrowth should be thinned to allow wildlife adequate
protection while traveling across the clear-cut area. These wildlife zones require careful
planning, more roads and increased skill in harvesting the timber.13 This demonstrates
the challenges the Forest Service must face when pricing timber for sale on public lands.
The only outcome is that the Forest Service must expend some of its resources in the
form of below-cost timber sales in order to achieve the desired outcome. This case
makes a good argument for below-cost timber sales to achieve a high level of habitat
      Despite the good intentions of the Forest Service, there have been many failures in
the area of below-cost timber sales to promote multiuse management. A study the
Colorado Wild environmental group highlights a few of the failures. Colorado Wild has
also been successful in blocking some below-cost sales that the group proved were
actually more harmful to ecosystem than forgoing the harvest. Colorado Wild also
presents and argument on the poor location of many of these below cost sales.
       The proposed sales that were blocked included the whole of the San Juan National
Forest. The injunction against timber harvesting stated, “that post-fire logging will only
worsen the risk of landslides, flooding, and erosion bringing even more water quality
impacts. Yet the San Juan National Forest nonetheless approved logging in known high
erosion hazard areas and significant road construction-the single greatest factor
contributing to increased erosion, all within the watershed for three municipalities.”14
This case seems to be a problem with commercial timber companies going after salvage
timber. The Forest is its own worst enemy in this case, because it has a history of
discounting damaged timber sales and recent trends indicate that the Forest Service is
more interested in selling off salvage timber vs. green timber. (Graph 2)
      The use of poor sites for timber sales is also a problem for the Forest Service
management program. In the case of Colorado, the states trees are not big enough to

   Mcglincy: Managing for Timber and Wildlife Diversity
   Mcglincy: Managing for Timber and Wildlife Diversity
   Berman: Timber Policy

make harvesting yields large enough to justify harvesting. Growth rates in the state lag
behind other areas, due to the short growing season in Colorado. The growing season in
Colorado is only about 4 months, while the growing season in the Southeastern part of
the Unites States is over 9 months. Growth rotations in Colorado are between 100-200
years, while the Southeast enjoys 30-50 year growth rotations.15 These facts are used to
advance the argument that below-cost timber sales should be used in areas that make the
best use of the taxpayer dollar. The multi-use management of Southern Forests makes
more economic since than the forests in Colorado. Saying, that the Forest Service should
use the more efficient forests for timber sales that have the primary purpose of feeding
the timber industry, and leaving the less efficient forests to manage themselves can sum
up their argument. It seems that some of the motivation of the Colorado Wild group is
for the halting of timber harvesting on public lands for environmental reasons as opposed
to the economic factors outlined in their study.
         The debate of below-cost timber sales seems to have no end. The historical factors
prevent the Forest Service from cutting out below-cost timber sales, and congress seems
to support this concept through there own inaction. The use of below-cost timber sales
for wildlife habit creation, watershed protection, and recreation will continue to be a
viable tool into the future. Environmental groups will continue to use the existence of
below-cost timber sales to argue for the halting of timber harvesting.

     Berman: Timber Policy

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Graph 1: Proportion of FY 97 Harvest Volume Associated with Different Harvest Objectives.16

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Graph 2: Trend in Green vs. Salvage Timber17

     TSPIRS 97
     TSPIRS 97

                                    Works Cited

Gorte, Ross: “Below Cost Timber Sales”, 21 JULY 2004

Berman, Jeff: “Timber Policy: Most Timber Sales Both Cause
Ecological                Damage and Are Subsidized be Taxpayer
Dollars”, 19 MARCH 2004

Wolf, Robert: “Timber Sale Profitability: National Forest
Timber Sales and the legacy of Gifford Pinchot”, 1989
University of Colorado Law Review, vol. 60


Unites States Code 528-531: Multiple-Use-Sustained-Yield Act of 1960

Mcglincy, Joe: “Managing for Timber and Wildlife Diversity”


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