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Sprawling suburbs, public environmental expectations, regulations, market conditions, and global competition have put immense pressure on forest landowners in Washington. Working forests – including large industrial holdings, non-industrial tree farms, and tribal, state and federal forestlands – have long been critical economic drivers for Washington, the Pacific Northwest, and suppliers of products for the world. As Washington grows, forests along the urban fringes are increasingly viewed as important buffers to sprawling growth, and, by many members of the public, as recreational, wildlife, and watershed havens. These “fringe forests” are a relatively small component of timber output, but forest landowners have found that public expectations about forests near peoples’ homes become extended to expectations about all forests. Despite aggressive adherence to state forest practices regulations, forest landowners are constantly subjected to scrutiny and acrimony, generally centered on unwillingness to have trees cut down or land cleared.
Commercial industrial forest owners have had to make drastic changes in management and lower their economic expectations as the cost of management increases. Many industrial forest landowners have sold land and reinvested in other regions in the United States and in other countries. Some companies have reorganized into real estate investment trusts. All forest landowners, regardless of size or organizational structure, have had to recognize the reality of rising real estate development values and the desire for housing in large lots in exurban areas. These values are often in sharp contrast with uncertain revenue from forest investments. Structural and cultural impediments to forestry profitability, including global competition, costly regulations, diminished processing infrastructure, ecosystem protection needs, and social expectations for non-market amenities, help to drive accelerated conversion and development of forest lands in Washington and many areas of the rest of the country.
Changes in ownerships and practices are indicating that traditional views of Washington’s commercial forests as wood factories may be figments of the past. National forests in Washington produce only about 10% of the timber that was harvested during their heydays in the 1970’s. Industrial and state lands that have not been unduly constrained by regulations are still highly productive, and small private, non-industrial forest lands have immense potential for wood production, although they are typically not managed as aggressively as industrial lands. Non-industrial woodlots, about 25% of the forest base of Washington, are typically closer to cities and under the greatest pressure to develop. These lands are also often important habitat, especially in lowland riparian areas.
If it is correct, as some believe, that Pacific Northwest tree farms are increasingly less competitive in the global wood market, forest ownership could become less attractive. As forest production becomes more uncertain, investments in processing infrastructure will diminish and the relative value of Washington wood will decline. Obviously, not all forest lands in Washington are going to be developed in the next 20 or 30 years.
But every landowner of a forest woodlot must determine the likely rate of return from holding the land over time, including how much one must spend during the holding period. This is an increasingly difficult set of choices, given other financial options, for a smaller forest land holder and especially for a publicly-traded company or a state or private trust manager. Some large forest investors are changing to less intensive management regimes consistent with holding the land for intrinsic market rather than timber value. The costs of managing a growing tree farm are extensive, and the publicly-imposed costs add significantly. State forest practices regulations may require investment in the land, to protect water and habitat, regardless of income potential and as taxes remain unabated.
While some will argue that forests are best left alone and “unmanaged,” reality argues otherwise. An unmanaged forest in the high production Northwest may become an unhealthy forest, and, in some areas especially east of the Cascades, a forest that is rife with disease and beset by fire. Invasive species, pests, and pathogens all make forests more vulnerable to adverse weather, fire, and human foibles. Such vulnerability is higher in forests near suburbs. Government forest lands, especially federal lands, are conceivably even more threatened than private lands, as commercial uses decline and finances for management work forces diminish. State trust lands, with a strong constitutional mandate to be managed for income for schools, face increasing pressure from many quarters to change this focus and manage for other public values. Such public values vary, depending on the location of the lands and the desires – if not whims – of the adjoining public. Any decline of forest conditions through inactivity could pervade private lands as well, if returns on investment don’t warrant active management and landowners simply wait for developmental prices to rise.
This brew of conditions has prompted various approaches to address the management of working forests. A growing sophistication among non-profit organizations, tribal nations, and government agencies is creating new alliances with timber landowners in support of a common goal – maintaining forested landscapes in an urbanizing world. Some organizations, most prominently land acquisition non-profits, have been working on strategies for long-term ownership investment to discourage fragmentation from development of forestlands.
Land trusts and other local organizations have banded together to purchase lands or development rights in the face of forest development threats. Insurance companies and other long-term investors have acquired land portfolios from industrial forest owners and allowed them in turn to monetize forest assets and either reduce debt or invest elsewhere. The landscape of forest owners is changing rapidly, and the income expectations of the new owners are quite diverse. But this is not to say that these owners have no revenue needs. Even the non-profits have philanthropist-lenders to pay back and staff to maintain, and all seek some income certainty.
Great amounts of energy and funds are being devoted to green corridor acquisitions, development value buy-outs, and preferential zoning for forestry and agriculture practices. Some foundations have begun to direct funds for these purposes. Government agencies have made conservation acquisitions (although money for these purchases has dwindled in recent years), and enacted policies to protect the “right to practice” both forestry and agriculture. Yet all recognize that productivity cannot be assured by governmental action any more than markets and market prices can.
There is increasing interest in private-public partnerships to craft strategies for minimizing disaggregation of productive land. Much debate centers on how forest “stewardship,” that protects water supplies, wildlife values, and other desirable conditions, can persist if there is not a sufficient price for timber cutting. These discussions are examining market and non-market factors that influence land use changes. Ecosystem services economic values (e.g., watershed protection or carbon storage) are huge, yet are generally not priced or exchanged in markets, so landowners are given few incentives to provide them. Pricing and compensating landowners for non-market values could help counteract other market factors and raise forest revenues. Financing innovations are needed for existing and potential landowners, and to attract a diversity of investors.
The University of Washington College of Forest Resources sponsored a two-day forum on November 22-23, 2004, to examine these issues. Prominent leaders in Pacific Northwest forestry and agriculture resources management, finance, land trust management, environmental policy, academe, science, government, and indigenous tribes participated. In April 2005, a second planning Forum was held to set the stage for another two-day Forum on November 21-22, 2005. The proceedings of both meetings are available on our website: www.nwenvironmentalforum.org.
The College of Forest Resources believes our environmental and natural resource systems must be managed sustainably by seeking the appropriate balance between ecological, economic, and social factors. Achieving this balance is a complex task, involving the analysis of tradeoffs across this “triple bottom line.” Given the frustration with classic governmental processes and the stalemates of mediation and courts, innovative approaches are needed that focus the intellectual energies of the region’s best institutions to help leaders achieve this balance.
The Forum provides a collaborative environment in which regional leaders have access to high-quality science, technology, and social information so they can address sustainable initiatives and policies for Washington’s working forests. The College of Forest Resources believes that a neutral and trusted problem-solving environment can be created and institute a long-term opportunity for both the University and the public to address complex economic and environmental expectations.
We have begun to address such questions as:
- How can we ensure a viable working forest land base in Washington in 2035?
- Who can profit from working fringe forests, and what are the options for new ownerships?
- Are there incentives that can be established for landowners, to capture non-timber forest values?
- What financing and purchasing options might be developed for non-timber values and for other ownership rights?
- How we can improve the current regulatory structure to better sustain forest investment?
- Are there technological innovations that need special State attention for investment and for infrastructure development that capitalize on productive working forests (e.g., future mills or bio-energy plants)?
In the Forum, we focus on trends, economics, research into non-market and land protection values, and innovations in financing. The participants spend the first day in a mutually “educative” environment, recognizing that each participant comes with certain knowledge and no one comes with the knowledge of all. This sets the stage for the second day, where participants endeavor to develop focused strategies that might guide state policies and set some directions for actions that benefit those who endeavor to invest in, hold, and manage Washington’s forest lands in the future.
After the November 2004 Forum, the Washington state legislature appropriated $1million for research into timber supply, industry competitiveness, and the impacts of and solutions to the losses of forest lands to development pressures in the Washington Cascade foothills. These studies and findings will be developed in 2006-2007, but some results will be derived from the Forum discussions in November 2005. The combination of factual analysis and collaborative evaluations is powerful. There is great potential from the cohesiveness of forest owners, environmental and tribal leaders, government decision-makers, and university researchers when they collaborate to address critical problems. We think we have created the catalyst for such collaboration and certainly we have a great issue on which to collaborate – the future of the great private and public forests of the State of Washington.
Brian J. Boyle, Forum Leader
November 14, 2005 |
