Western Oregon BLM Federal Public Forestlands:

Projected Federal Payments to O&C Counties Under Various Logging Proposals

Various stakeholders are proposing various levels and kinds of logging for Western Oregon BLM Federal Public Forestlands. How much revenue can the O&C counties reasonably (actually unreasonably—see below) expect under each of the various scenarios if the permanent revenue-sharing formula again goes into effect because Congress failed to extend special county payments?

Stakeholder	Recommended Logging Level (MMBF/Year [Long Logs])		Estimated Annual Revenues to O&C Counties ($million)
O&C Counties*	1,335		$110
Timber Industry*	960		$79
The Three Clearcuteers (3 members of Congress from Oregon)*	518		$43
Aborted 2008 BLM Western Oregon Plan Revision (WOPR)	402		$33
Johnson and Franklin**	LTSY***	First 15 Years	LTSY	First 15 Years
• Matrix**** <80 years	98	174	$8	$14
• Matrix <120 years	111	207	$9	$17
• Matrix <160 years	121	217	$10	$18
• Matrix <200 years	124	220	$10	$18
• Matrix (all ages)	133	229	$11	$19
• Double matrix with stands <120 years	242	338	$20	$28
BLM Northwest Forest Plan (as envisioned)	214		$18
BLM Northwest Forest Plan (as implemented)	161		$13
Conservation Organizations	At least 132		At least $11
201X BLM WOPR II****	?		?
* It should be noted that both the O&C counties and the timber industry support the Three Clearcuteers proposal.
** Not a recommendation per se, but an analysis of options.
*** Long-Term Sustained Yield
**** “Matrix” is the land allocation in the Northwest Forest Plan that is not classified as Late-Successional Reserve, Riparian Reserve, Congressionally Withdrawn, Administratively Withdrawn, etc.
****** Will likely incorporate reduced logging levels on Matrix lands to account for the finalized Recovery Plan and Critical Habitat designation for the Endangered Species Act-protected northern spotted owl.

It All Depends on the Assumptions

All forecasts are based on assumptions. To aid understanding and provide transparency, most of this memorandum focuses on our assumptions. Once the major assumptions are made, running the numbers is easy:

   stumpage price ($/MBF *1,000 [to convert to $/MMBF])
× timber sale level (MMBF/year)
× percentage amount to counties
= annual $ amount to counties

In addition to the first three assumptions (stumpage price, timber sale level and percentage to counties), there is a fourth fundamental assumption: congressional funding. Unless BLM has adequate funds to prepare timber sales, the first three assumptions don’t matter much. Spoiler alert: There is also a fifth assumption.

Assumption 1: Stumpage Price

Stumpage, measured in dollars per thousand board feet ($/MBF), is the price of logs “still on the stump,” meaning the price of timber that has been sold but not yet felled, bucked into logs and hauled away to the mill. The average BLM stumpage prices ($/MBF) in western Oregon between 2006 and 2010 were as follows: 2006 – $147.07; 2007 – $161.47; 2008 – $84.06; 2009 – $64.61; 2010 – $91.69. [1]

The housing boom collapsed in 2008, or about halfway in between. The average for the 2006–2010 period is $109.90/MBF. While the log market has recovered somewhat since the bottom of the housing market, it would be imprudent to assume that housing-boom prices will return, as such would mean another housing boom, which is not likely.

Assumption 2: Timber Sale Level

The various major stakeholder recommendations for logging on western Oregon BLM lands—in terms of million board feet (MMBF) per year are detailed here, which describes the manner and intensity of such logging. The recommended logging levels in the “Results” section below come from that analysis.

Assumption 3: Percentage to Counties

The O&C Lands Act of 1937 provides that the counties receive 75 percent of gross timber receipts, and such is assumed here. Historically (before the northern spotted owl hit the fan, resulting in direct payments from Congress), the O&C counties allowed one-third of their receipts (25 percent of total timber receipts) to be retained by the BLM for management costs, so the counties ended up with 50 percent of timber revenues. Congress now funds the western Oregon BLM directly as well, and we assume the O&C counties are not interested in reinstating the historic arrangement.

However, only 81 percent of BLM lands in western Oregon are O&C lands. Sixteen percent are public domain (PD) and similar lands, and 3 percent are Coos Bay Wagon Road (CBWR) lands. Federal timber receipts county-sharing formulas are 75 percent for O&C, 4 percent for PD, and effectively 12 percent for CBWR lands. [2]  As there are differing acreages in each land classification and differing percentages of timber receipts, the weighted average revenue share to the O&C counties for all federal public forestland types managed by the BLM is 62 percent. Nonetheless, for this exercise we assume that the O&C counties would get 75 percent of all timber revenues from all BLM lands in western Oregon.

Assumption 4: Congressional Funding

Without adequate funding of the BLM’s timber sale program by Congress, whatever other assumptions we make are irrelevant. While the relationship is not exactly linear, it is safe to assume that for any assumed increase in timber output, there will be a similar budget increase. For this exercise, we assume full and continuous congressional funding.

Results

The table above shows the results of running the numbers based on assumptions 1, 2, 3 and 4.

Assumption 5: Social License

The higher the logging levels—and in particular the kinds of logging necessary to achieve such levels—the less the social license. Even if Congress were to fully fund the BLM’s western Oregon timber program (Assumption 4) and even if Congress shielded that program from the Endangered Species Act, the Clean Water Act, the National Environmental Policy Act and all the rest (this would be Assumption 0, as in zero chance) that would be necessary to attain such levels of logging and county funding, the social license to clear-cut (and especially to log older forests) no longer exists. The public will not stand for it, and many will be sitting in trees in cathedral forests. If not occupying an endangered forest, they will be occupying the offices of any U.S. senators and members of Congress who might support such a crime against nature and elimination of due process.

Conclusion

The O&C counties cannot log their way out of their fiscal crisis. The numbers simply will not add up. Go ahead and try it.

The long-term (1995-2010) average BLM timber sale output is 161 million board feet, which—assuming 2006-2010 average timber prices and 75% going to the counties—would give the counties $13 million per year.

Now double the cut (after first doubling congressional funding to BLM to prepare timber sales). You get to $26 million per year.

Now also double log prices. You (assuming the market does what you want) get to $52 million per year.

Now double again the timber sale level you just doubled. You get to $104 million a year, which is 95% of what the O&C counties are demanding.

To reach the O&C counties demand of $110 million per year—and not assuming a doubling of the price of logs—logging levels would have to be 1.3 billion board feet annually. The last time BLM’s cut level was that high (ca. 1980s), two square miles of Oregon ancient forest were being clearcut each week.

Given such a quadrupling in BLM timber supply to the market, we should add an Assumption 6, which is that timber prices are inelastic: as the supply increases several-fold, price does not decrease at all. Any economist, from any where along the political spectrum, would reject such an assumption.

And don’t forget Assumption 5.

[1] Warren, Debra. 2011. Production, Prices, Employment, and Trade in Northwest Forest Industries, All Quarters 2010. USDA Forest Service PNW Research Station Resource Bulletin PNW-RB-260. Table 90. (Original data is in short logs and was converted to long logs for this memorandum.)

[2] The revenue-sharing formula for CBWR lands is the only true payment-in-lieu-of-taxes (PILT) program in the country. The federal government actually pays the amount of money that would be due as taxes as if the lands were still in private ownership and on the tax rolls. The 1960–1993 average percentage of federal timber receipts from CBWR lands to achieve true PILT was 12 percent. Source: _________. 2007. O&C/CBWR Receipts and County Payments 1960–2006. Washington, DC: Bureau of Land Management.