After the fires, timber industry faces ‘generational’ losses and longer-term supply questions

23 November 2020

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USA – Rick McKay’s logging crew was off for Labor Day weekend when the Lionshead fire blew through its job site just above Breitenbush Hot Springs.

When crew members cut their way back in two weeks later, what they found was a scorched-earth patch of the fire that had consumed or damaged most of the equipment on site.

A grader purchased in January. Toast. Two log processors and a log loader. An excavator. A roller. Two trailers. A pickup/fire engine and a water tanker.

Some is insured, McKay said, but like most loggers, a bunch isn’t. He’s still trying to figure what’s salvageable.

“It was a big hit,” he said, estimating the value at $1 million. “Replacing that equipment isn’t easy either…I’m almost 60.”

Oregon’s timber industry, made up of companies small and large, is still counting its losses. Nobody has a credible number yet. It’s huge. And equipment losses are the least of it.

One industry estimate is that the fires burned or damaged trees that might have produced 15 billion board feet of timber. Only a portion of that was in areas open to logging, but it’s nearly four times what Oregon’s industry harvests each year.

The fires burned through an unusually high concentration of private land, most of it industrial forestland, and hit a subset of companies particularly hard based on where they own land and operate. They also scorched federal forests, including big sections being managed for timber production.

Logging and hauling contractors, many of them family run outfits built over generations, took a heavy hit, not only in burned equipment, but idled operations, lost payroll and other costs.

The ripple effects will spread through the sector. Pressure will increase to boost logging on public lands to make up for the lost supply. And controversy will follow.

Meanwhile, companies are scrambling to salvage what they can in the two- to three-year window when the dead wood is still merchantable. Then comes rehabbing the land. When the labor and seedlings are available, that will be a multi-year process involving major outlays.

Freres Lumber, which operates five mills in the Santiam Canyon, saw about 40% of its land holdings in the basin burned.

“We’ve lost time, we’ve lost 30 years of growth and we’ll never be able to get that back again,” said Tyler Freres, vice president of sales. “And all those lands need to be rehabbed to start growing trees for future generations of our company. It’s a big hit for generations.”

Heavy private losses

More than 1 million acres were within the perimeter of the fires that blew up over Labor Day, an area equivalent to 3% of Oregon’s forestland. Almost all of it was on the west side, where the industry is clustered, and nearly 40% were industrial or other private forestlands.

That’s unusual. The U.S. Forest Service and Bureau of Land Management own 60% of Oregon’s forestland, and over the last decade, some 86% of acres burned in Oregon’s seasonal wildfires were on federal land.

Experts say that’s a function of fire suppression tactics, as fires are sometimes left to burn if they don’t threaten lives and structures, as well as conditions on the land. The industry’s mantra has long been that those forests – with a buildup of highly flammable downed limbs and dead vegetation — should be more heavily managed and logged to reduce fire risk and generate more supply.

Among private landowners, Weyerhaeuser took the biggest hit. As a publicly traded company, it reported its losses in securities filings for the third quarter. It estimated the fires touched 125,000 acres of its land, and it booked an $80 million loss for timber that will not be able to be salvaged. It’s a big number, but not material for a company that owns 11 million acres of timber in the United States alone and recorded $2.1 billion in sales that quarter.

Most of the companies that lost timber in the fires are much smaller, private, and reluctant to share specific figures. The Oregon Forest Resources Institute is undertaking a study of the industry losses from the fire, but that won’t be out until May.

Freres Lumber’s operations are heavily concentrated in the Santiam Canyon, where it owns some 19,000 acres of industrial forest land and operates five mills that employ about 400.

The company typically gets about 15% of its log supply off its own lands. Tyler Freres says the company’s initial estimate is that about 7,500 acres of its land was impacted, including timber with a value of about $50 million at current delivered prices. The company anticipates it will cost between $7 million and $9 million to replant over a period of time.

Casey Roscoe, a senior vice president at Seneca Sawmill, said the company had 640 acres within the Holiday Farm fire and 10,000 acres within the Archie Creek fire and is still assessing damages. The losses will be in the tens of millions, she estimated.

Wood products companies say they have two or perhaps three years to salvage trees impacted by the fires before rot, insect infestation and blowdown render them unusable. During that period, mills are likely to have a surplus of wood coming in, albeit black logs. That timber is generally worth 25% less than unburned logs and is more difficult to process.

Longer term, say four to 10 years out, the question of supply looms larger.

Federal losses

Some 60% of the acreage burned in the fires was on federal lands, including areas of the Mt. Hood, Willamette, Siuslaw, Fremont-Winema, Umpqua and Rogue-Siskiyou national forests. A significant chunk was in areas the Forest Service manages for timber supply.

According to a preliminary Forest Service analysis, the fires in Oregon burned through stands covered by some 28 federal logging contracts that had already been awarded. Those contracts, which included 172 million board feet of timber, typically run from three to seven years, and were in various stages of completion.

Another 15 planned sales totaling some 90 million board feet also were burned to varying degrees and put on hold. And the fires burned in “planning areas” slated for future contracts that hold more than 175 million board feet of potential harvest.

Those figures only count contracts on Forest Service land – not the other large federal player, the Bureau of Land Management.

Matt Hill, executive director of the Douglas Timber Operators trade association, said the BLM initially said about 22 million board feet of the Roseburg District’s planned 2021 timber program were affected, though the total land base impacted is much larger.

In general, the Forest Service and BLM designate about 80% of the forests they manage as reserves set aside for old growth habitat, and about 20% is made available for potential logging. Though the federal harvest has declined precipitously from decades ago, is still an important component of many timber companies’ supply.

According to Andy Geissler, federal timber program manager at the American Forest Resource Council, the footprint of the fires on the Mt. Hood National Forest and the Detroit district of the Willamette National Forest was particularly concentrated in areas designated for timber production.

“Their future timber program is very uncertain,” he said. “If the timber program for any particular forest is reduced by 40% to 50% annually, there are ripple effects beyond those regular purchasers off those forests and it will be felt around the region.”

It’s unclear how much post-fire logging will be allowed in existing contract areas and whether the Forest Service and BLM will provide replacement contracts. Over the next decade, that debate will expand to cover the Forest Service and BLM’s unburned, green timber programs.

Given the size of the federal land base, experts say pressure will mount on federal managers to replace the lost harvest base and even make up the volume from industry losses on private land. And that will tee up opposition from conservation groups.

“The bottom-line takeaway is that we’re moving a lot of wood that wasn’t ready to get moved very quickly, and we lost private inventory that would have been spaced out over the next few decades,” said Hill of the timber trade group.

“When that is gone and it’s not available five or ten years from now, who fills that gap?”

Logger losses

Rick McKay lost nine pieces of his logging equipment in the Lionhead fire, including his fire truck.

The Associated Oregon Loggers estimates that the fires’ costs to logging contractors will ultimately exceed $100 million.

It’s a big number. Another guesstimate. But logging equipment doesn’t go home at night, and that figure includes $43 million in burned equipment owned by about 30 separate companies, including 112 pieces of logging, hauling and road building machinery.

As with McKay, who says he lost about $1 million worth of equipment, much of what was lost was uninsured or underinsured.

The association says idled operations cost another $22 million in lost payroll payments as the industry was shut down anywhere from two to six weeks, and still hasn’t resumed operations in many burned areas. Other costs included the debt payments on their idled machinery, the cost to move it to other jobs and replacement premiums on lost equipment due to supply shortages.

“A few companies will close their doors, while others will operate at reduced capacity as they gradually replace what they lost,” said Rex Storm, executive vice president of the trade association. “It’ll rebuild and rebound, but it will take some time, and it comes at a high cost to their businesses, to their productivity and to their workforce.”

Chuck Goode, a logging and hauling contractor based in Silverton, counts himself lucky. He moved his logging equipment off a job north of Detroit Lake two weeks before the fires, so nothing burned.

For now, he has put all of the jobs he had lined up for winter on hold while he helps Freres salvage log on their burned land — until rain and snow put a stop to that.

It’s dirtier, costlier and more dangerous work than normal. Charred bark dulls blades faster. Yields are lower. And with burned out roots, no needles, and brittle wood, trees fall faster and break apart, occasionally ricocheting back on the harvester, as happened three times in Goode’s first week on the job.

“My destiny is I’m going to be logging burnt timber,” Goode said. “At some point it’s a loss to log it, then I don’t know what’s going to happen.”

Rehab and replanting

After salvaging what burned timber they can, landowners will be left with major outlays for cleanup and replanting on their lands.

Rehabilitating and replanting private forestlands will be a years-long undertaking, one initially limited by the supply of seedlings and labor to complete the work.

Mike Cloughesy, director of forestry at the Oregon Forest Resources Institute, says rehab costs on a very young stand — clearing the ground, rehabbing soil and planting seedlings — might be $400 to $500 an acre. Getting into stands over 20 years, it might be as high as $1,500 an acre as most of the biomass is still there, and needs to be cut, piled, chipped or burned. In older stands, the higher salvage value of the trees may turn a profit.

Kathy LeCompte, the co-owner of Brooks Tree Farm in Salem, said the seedlings needed to replant are grown for specific elevation zones so they are genetically acclimated. She says it’s typically a two- to three-year process to grow a seedling that timber companies would plant, and that the nursery industry was already experiencing a seed shortage before the fires.

“Of course, no one knew to go collect seed in those areas two years ago and grow 50 million seedlings,” she said. “If we didn’t have the seed planted in 2019, the people who got burned out don’t have anything to work from.”

Timber companies maintain their own seed banks, and many rushed into the seedling market as the fires were burning to secure supplies.

“If we had several million seedlings, that would be great, but we don’t have the labor to put them in the ground,” said Peter Sikora, chief executive of Springfield-based Giustina Resources.

Sikora said Giustina lost several generations of trees on its land in the Holiday Farm fire. At this point the company is concentrating on salvaging trees at higher elevations and working its way down. The company had extra seed in cold storage, and while it doesn’t typically replant using seed, it’s trying this year.

“We hope we get some viable growth,” he said. “I don’t know how that’s going to work at some of our higher elevations. It’s an experiment.”

— Ted Sickinger;; 503-221—8505; @tedsickinger

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