Patrick Barkey and Todd Morgan of the Bureau of Business and Economic Research at the University of Montana delivered a summary presentation of the results of their study commissioned by the Board of Ravalli County Commissioners examining the history of the timber industry in the Bitterroot Valley.
“First off, it’s pretty clear to anybody that lives here,” said Barkey, “that the whole scale of the wood products industry is very different today than it was in the history of Ravalli County.” He said it was worth looking in to what extent the harvest policy on federally managed land in the national forest had a role in the shrinkage of the wood products industry from the point of view of the logging and manufacturing activities that have always been a part of the economy here.
“The question is to what extent that was a factor and finally to get at the core research question of this project is to ask ‘What if? – What would the economy look like if the harvest levels that had occurred historically had remained at the levels of 25 years ago,” said Barkey.
Morgan, who works in the Forest Industry Research Program of the BBER, said they tracked delivered log prices and production and wage information. He said the timber industry began to decline in the valley in the early 1990s and production on the national forest lands dropped from around 60 million board feet (mbf) to about 13 mbf, leading to the closure of valley’s two large sawmills in 1998.
According to Morgan, 88% of the forested land in the valley is located on the Bitterroot National Forest.
“So, what happens in the Bitterroot is clearly relevant to lots of things, not just timber and wood products, but also to recreation and hunting and other public lands activities. But what we specifically looked at was timber harvest,” he said. He said as prices went up in the late 1980s and early 1990s, it was “a big incentive” to log on private land and at the same time, a large portion of that private land changed ownership and Darby Lumber took over management of Plum Creek lands. Another flurry of work on private land began following the fires of 2000 as salvage work increased on private and state lands again as well as pro-active fuel reduction projects. But basically, the production from the national forest lands plummeted from the 60 mbf annually of the 19080s to about 13 mbf presently.
According to Morgan, 13 mbf is also the current capacity that can be used by what remains of the wood products industry in the valley. He said this array of businesses includes log home manufacturers, three small sawmills, four post and pole operations and two Fuels-in-the-Schools programs in Darby and Victor.
Then comes the snapshot comparison in which the analysts ask the “core research question of ‘What if?’” What would today’s overall economy look like if the harvest levels of the 1980s had been maintained? The short answer, after running the appropriate “models,” is that there would be 514 more jobs bringing in another $33 million annually to the local economy.
Public comment was mostly critical of the study. Russ Lawrence said that the study ignores the costly negative impacts to the environment that such high levels of harvest were wreaking on local forest lands, especially those owned by Darby Lumber. He also noted that the economic conditions leading to the reduced harvest were also ignored. Lawrence also objected to the notion that this was “lost income” to the valley.
“This income wasn’t lost,” he said. “It never actually happened.” He called the report a “work of speculative fiction.” He said the jobs lost in the timber industry may have been replaced by jobs in the recreation industry that came to replace it. He said those jobs may not have materialized if the harvest levels had been maintained at the unsustainable rate of the 1980s.
Carlotta Grandstaff, representing Bitterrooters for Planning, questioned the expenditure of $17,000 on a “backwards looking” analysis. She wondered what the Commissioners would actually do with such a study.
Dave Smith said that in his view it was the industry itself that brought about the decline by years of unsustainable over-harvesting. He said, “The handwriting is in the ridge.” He said the large old growth timber is all gone, the accessible timber has been overcut, the sawmills are gone and they are not coming back. He said those jobs were replaced by other jobs and we have a growing recreation economy.
Commissioner Greg Chilcott said that they were surprised at the cost of the study, but that $10,000 of the $17,000 spent was from a grant and not from local taxpayers. He said the study “demonstrates the magnitude of the reductions in harvest and shows how management decisions can impact the economy.”
Commissioner Doug Schallenberger said that he didn’t think it was all about the economy. He said it was also about the waste of a good resource by letting it burn. “It’s about fires and things burning up,” he said.
Commissioner Chris Hoffman said that he had trouble with the criticism that forest management was not the job of the county commission. He said with 75% of the land in the county being national forest land, it was very important for the county to have a seat at the table when management plans were being designed.
Commissioner Ray Hawk said, “Not only do we want a seat at the table, we are required to be at the table.” He said information from the study would be used in developing the county’s Natural Resource Policy which they will bring to the table.
“It’s about credibility,” said Chilcott. “I don’t know how you get more credible. We are not economists. We are not foresters.” He said they did the right thing in seeking professional help and having this study done.
Hoffman agreed, saying that this study was “just our part of a much bigger plan to produce a comprehensive county document that no one can ignore.”
Hawk said that there was much more to be done. He said in order to produce a good natural resource policy three things needed to be considered: the environment, the culture and customs of the valley, and the economy.
“This study helps tremendously,” he said.
At the request of the Bitterroot Star, Tom Power, the Principal Economist in Power Consulting Inc. and Professor Emeritus in the Economics Department at the University of Montana, who served as chairman of the department for 30 years, provided some qualifying comments concerning the study.
Power notes that even though the timber harvest off national forest land in the valley has plummeted, declining by 80% from the harvest levels of the early 1980s and about 90% from the all-time peak in 1969, “during most of this period,” he says, “Ravalli County was not pushed into economic decline. Both population and employment expanded significantly.”
Power states, “An economic analysis of the decline in timber harvest from public lands should take into account the reasons for that decline in harvest. The economic value of public forested lands is not tied exclusively to the commercial value associated with commercially harvestable trees.” He points to a broad range of valuable environmental services including stable and productive watersheds including moisture storage and release, wildlife habitat, recreational opportunities, climate stabilization through carbon storage, and biodiversity.
“It has been the effort to protect a broad range of forest values, in addition to commercial timber harvests, that has often led to a reduction in the intensity of commercial timber harvests. That is, an economic decision has been made over time about balancing the various values associated with natural forests. As the value of the environmental services that natural forests provide has been increasingly recognized, there has been a shift in emphasis that has modified forest management. This is not necessarily a sign that the economic value being produced by natural forests has declined. It may well be that the rebalancing in the management objectives has significantly increased the overall value being produced,” states Power.
The BBER’s original proposal to the Ravalli County Commissioners explicitly indicated that the report it produced would recognize this broader view to the economic role of natural landscapes.
One indication of the economic importance of the natural and social amenities associated with living in Ravalli County, according to Power, is the significant number of workers who choose to live in Ravalli County and commute to work in the Missoula area. Since 1990, he points out, ten to fifteen percent of personal income received by Ravalli County residents has been the result of the out-commuting to work. Over the last decade, the economic impact of this aspect of the attractiveness of living in Ravalli County has been about $200 million per year.
“To put that in perspective,” said Power, “the BBER estimate of the impact of restoring timber harvest to the peak levels of 1985-1989 would be an increase in net earnings received by Ravalli County residents of $22.6 million per year. That is, the attractiveness of Ravalli County as a place to live is bringing in almost ten times what BBER calculates has been lost due to reduced timber harvests.”
Power also criticizes the “key assumption” in the BBER study that the decline in harvest production between the two snapshot averages 1985-1989 to 2012 to 2016 was due to some policy decision by the U.S. Forest Service that drastically reduced the volume of timber available to Ravalli County wood product manufacturers causing a decline in employment and labor earnings throughout the local economy. Based on that assumption they estimated how harvesting and processing that “block of lost timber” could have boosted the local economy in employment and payroll.
“This assumes that all of the decline in timber harvest in Ravalli County was caused by an artificial constraint on the supply of trees available for commercial use. That is, BBER assumes that only log supply matters. It does not matter, apparently, what the demand for logs and lumber products is in the region, nation, or international economy,” states Power.
Power points to another BBER study done in 2012 that did focus entirely on the demand issue. In that BBER study, there was almost no discussion of problems created by “inadequate log supply.” The primary focus was on lack of demand leading to smaller demand for building materials and therefore smaller demand for the wood fiber raw materials, and a decline in the level of harvest. But it was not the decline in the level of harvest that was driving the decline in employment, payroll, and lumber mill production. It was the other way around: Lack of demand and low prices led mills to cut back production and cut their purchase of logs. There were logs; but there was not demand for them.
In that 2012 BBER article on the impact of the Great Recession, four factors were listed that were “most significant” in determining the level of operations of the local forest products industry including market conditions, technological advances in wood processing, foreign competition, and timber availability.
According to Power, BBER’s own studies have shown that the volatility in the timber harvest is not primarily due to the U.S. Forest Service turning on and off the supply of logs. It has more to do with the fluctuation in the demand for building materials depending on where the national economy is in the housing cycle and the level of housing starts.
Power suggests that choosing a peak level of harvest to represent what the normal level of harvest in Ravalli County should have been, the BBER study implicitly assumes that there will be no housing cycle swings or national recessions in the future, nor will there be significant competition from alternative sources of wood product supplies such as Canada, and technological advances in wood processing will not undercut employment, payroll, and viability of Montana wood products facilities.
“This is an unrealistic set of assumptions that produces a seriously incomplete view of the economic forces supporting Ravalli County’s economic vitality,” states Power.