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Governor wants to help Ore. timber industry by sharing wildfire costs with industry, state

Governor wants to help Ore. timber industry by sharing wildfire costs with industry, state

By JEFF BARNARD  AP Environmental Writer

January 19, 2013

GRANTS PASS, Oregon — For years, Oregon’s major timberland owners have felt they were paying too much of the cost of fighting wildfires, especially in years when blazes stayed relatively small.

A bill in Gov. John Kitzhaber’s budget would allocate $3.6 million over the next two years to change the payment formula, so the state picks up a bigger share of the costs in years when fires don’t rage out of control. The proposal also would pay up to $6 million to keep two air tankers on call and other resources to keep minor wildfires from getting big and expensive.

“Landowners since 1993 have paid 82 percent of the cost” of putting out large fires, said Kristin McNitt, executive director of the Oregon Forest Industry Council, which represents the timber industry. “And it’s killing us.”

The governor also wants to use $4 million in lottery-backed bonds to help the U.S. Forest Service turn out more timber sales from federal lands in the dry forests east of the Cascades.

Natural Resources adviser Richard Whitman said the governor sees the two proposals as vital to maintaining the struggling timber industry in central and eastern Oregon, both as a source of jobs and as a necessary part of the infrastructure for logging that will improve forest health and reduce wildfire danger.

The region almost lost one of the half-dozen surviving mills last year, for lack of timber from national forests, Whitman said.

“If there is any further decline, it will be very hard to get back,” he said.

A wildfire policy watchdog group, however, sees the funding change as a “scam” on taxpayers that benefits the timber industry — but not the public.

Andy Stahl, director of Forest Service Employees for Environmental Ethics said any money spent on air tankers and helicopters is a waste, because there is no data to show that they are effective tools for keeping fires from getting out of control.

“At a time when we are struggling to fund schools and fund health care, why we would want to divert those dollars to some of Oregon’s largest corporations is a bit mystifying,” said Stahl. “Historic data shows no correlation between the amount of retardant dumped on a (forest) and the success rate of keeping fires small.”

The timber industry has been trying for years to change the wildfire funding formula, and last year the state Board of Forestry appointed a committee representing forest landowners, government agencies and the governor’s office, which came up with the Wildfire Protection Act.

Under the current funding formula, private landowners, whether large timber companies or homeowners with a few acres of trees, pay a tax to cover the costs of the Oregon Department of Forestry’s firefighting efforts. The tax ranges from 80 cents per acre on the wetter west side of the state, to $1.70 on the drier east side.

The first $10 million of the cost of fighting large fires is covered by private landowners. The next $15 million comes from the state general fund. After that, a special insurance policy kicks in $25 million up to a total of $50 million. In recent years, the cost of fighting large fires has averaged $8 million, so landowners have covered it alone.

The bill calls for sharing the costs evenly from the start, up to a total of $20 million. The amount the state pays would increase gradually over six years, so that at the end the cost would be split 50-50, up to $20 million. Despite the lower deductible, the cost of the insurance policy would remain at $1 million, due to increased firefighting resources, said Travis Medema, deputy chief of fire protection for the Oregon Department of Forestry.

The idea behind the state taking a greater share is that the public benefits from keeping forests green, so they provide recreation, fish and wildlife habitat, and clean water, said Whitman, of the Natural Resources Department.

As for the bottleneck in turning out more timber from national forests in eastern and central Oregon, Whitman said the problem has been a lack of funding for the Forest Service.

Sales developed collaboratively by groups that include representatives of the timber industry and conservation groups typically are not held up by court challenge. The $4 million would go to planning and laying out timber sales.

“We put money into economic development projects all the time,” Whitman said. “In terms of bang for the buck for job creation” and helping mills and logging outfits stay in business, “it looks like a pretty good investment.”

The state is still in negotiations with the Forest Service, but wants to receive payment from the sale of timber in return for the investment in preparing sales, Whitman said.

Stahl said a similar arrangement had been worked out in Arizona to promote thinning to reduce fire danger. He said it was ironic for the state to pay the federal government to log, when federal payments to timber counties to make up for reduced logging revenues have expired.

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North American lumber prices forecast to soar in 2013 and reach record highs in 2014

December 10, 2012 – Vancouver, B.C.

www.woodmarkets.comLumber Yard

With the return of a demand-driven wood products market in 2012 – due to rapidly increasing housing starts in the U.S. – it is now forecast that lumber and panel prices will move to new highs in 2013 and record highs for lumber in 2014. A North American “super-cycle” has been predicted by WOOD MARKETS since 2008 as a result of emerging supply-side constraints (mainly on forests and logs) as well as changing demand dynamics, but the global financial crisis that started in late 2008 and an unusually slow U.S. housing market recovery have delayed this event until 2012. With the expectation of strong growth in U.S. housing starts over the next five years, combined with a better balance in the housing inventory and a recovering economy, the U.S. supply chain is expected to become overwhelmed at times during the next five years, allowing wood products prices to soar. While there are a number of assumptions that are required to maintain steady economic growth, a strong wood products recovery amidst a tightening timber and mill supply base is still expected.

These and other findings on U.S. and Canadian lumber markets as well as forecasts for all engineered panels were released today by WOOD MARKETS in its 8th edition report: WOOD Markets 2013 • The Solid Wood Products Outlook • 2013 to 2017. The report examines an overall tightening of the global timber supply base, but forecasts that it is mainly in North America where scarcities will be felt. With China now importing more and more logs and lumber from North America and with U.S. demand now rebounding, some key structural constraints are expected to keep log and lumber supplies tight relative to demand growth, including:

• A collapse of the Russian logging sector in 2009 from the global financial crisis where log exports are now less than 40% of their 2007 level as they continue to decline in 2012.

• Changes to the Russian log export tax that continues to leave Russian log exports less available and expensive.

• After a “cooling-off” period in 2012, China’s requirement to feed its growing wood deficit will see a return to steady demand growth for imported logs and lumber from North America and other sources.

• The mountain pine beetle epidemic in the B.C. Interior will, by the end of the decade, kill about 60% of all the pine trees in the BC Interior. This will permanently reduce Western SPF lumber production starting in about 2014 or 2015.

• The Quebec government (which controls 90% of the forests in the province) will have reduced the timber harvest by at least 30% between 2004 and 2013, permanently reducing lumber production.

• Consequently, Canada’s lumber production will plateau by about 2015, allowing for essentially no increases in exports to the U.S. and will, therefore, see its’ U.S. lumber import market share plummet to two-thirds of its historical level. By the end of the decade, B.C. and Quebec lumber shipments will collectively be lower by some 10 billion bf as compared to peak shipments in 2004.

• The role of Timber Investment Management Organizations (TIMOs) will play out as log markets strengthen. As many large U.S. corporate forest companies with sawmills have sold their private timberlands to TIMOs, timber prices are eventually forecast to rise and be sold more on the margin, tightening the economics of sawmilling in the U.S. and potentially limiting incremental lumber production.

A key question that the report addresses is: “Where will the U.S. get its lumber after mid-decade?” This is almost the same question that WOOD MARKETS asked and addressed in its recent China Book: Outlook to 2017 but in that report, the question was: “Where will China get its logs and lumber after mid-decade?” “Both countries will need to import increasing volumes of lumber and logs that will be tied more and more to international market forces as global timber and lumber supplies tighten,” explains Russell Taylor, President of WOOD MARKETS. “U.S. housing starts are expected to rebound from 550,000 units in 2009 to the long-term sustainable level of 1.5-1.6 million starts by 2017 and Chinese housing and wood demand is expected to grow further after the new government’s economic policies are unveiled in Q2/2013. The net result is that log and lumber demand in these countries are expected to grow steadily and drive global supply and prices.”

The outcome will be rising and even record-high U.S. lumber prices. In fact, WOOD Markets 2013 is forecasting that export duties on Canadian lumber to the U.S. will essentially be at a ‘zero-rate’ for all five years of the forecast as compared to maximum duties of 5% or 15% (depending on the Canadian province) for most of the last five years. “Increasing prices will see the return of European lumber to the U.S. market – and lots of it – to fill the widening gap as Canadian lumber production and exports slow,” said Gerry Van Leeuwen, Vice President, “and, as a matter of fact, some European supplies are already starting to arrive at current prices, which are already at six-year highs!” Nevertheless, as European log costs are more than double those of North American logs, much higher lumber prices are required to attract significant volumes from Europe. So, higher prices are inevitable as the supply chain struggles to secure and move rising volumes!

Five-year forecasts on OSB and plywood also see strong prices, but not as high as what are in store for lumber. By comparison, the particleboard and MDF sector will see more limited growth, but higher demand and prices are also forecast in the report.

However, the entire “super-cycle thesis” requires strong and growing demand in the U.S. market as well as stable to increasing demand in other global markets (no global economic recession), especially in Asia. Without these conditions and the other key ingredient, increasing lumber demand, it is possible that the super-cycle could stall early or the timing may be pushed out further. In any event, the prospects of a tightening of the global timber and lumber supply are a reality and are expected to play out over the next five years!

Full details on the five-year outlook for the U.S and Canada’s consumption, imports, exports, production and price trends, etc., are available in WOOD Markets 2013 • The Solid Wood Products Outlook • 2013 to 2017. Visit http://www.woodmarkets.com/pressreleases.html

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