More incentives should be offered, forester says

DONEGAN

Despite the struggles of the eastern Oregon timber industry to survive, there are new ways to make it more profitable, industry experts told a recent seminar held by Wallowa Resources.

Among the options offered is compensating working forest owners to reward them for committing their properties to remain forestland, rather than parceling them off for development.

Another idea is to offer tax relief to owners who permit public access to their land for recreation, such as hunting and fishing.

Speaking to the crowd of 41 people at the Toma's Building in Enterprise were Matt Donegan, Co-President of Forest Capital Partners LLC, Oregon's second largest private forest landowner, and Diane Snyder, Vice President of the U. S. Endowment for Forestry and Communities, Inc. Snyder was the founding Director of Wallowa Resources and is a former board member of the Oregon Department of Forestry.

There are a variety of reasons it is in the public's interest to keep working forests intact, besides providing jobs, the speakers said: clean water, clean air, green space, wildlife habitat, recreation and quality of life. The Oregon business community values these features as part of what might attract the next Intel or Nike to choose Oregon as a home, Donegan said. "Preserving our rural pastoral landscape is a real competitive advantage."

But working forests' profitability has diminished over time, as the prices for forest products keep going lower, while costs continue to rise, he added.

Globalization of the marketplace means Oregon timber is competing with products made in countries with fewer regulations and a cheaper workforce. Additionally, new technologies have allowed other areas to increase productivity, turning out more timber per acre. New technologies in the mills have meant fewer pieces of timber are needed now to create the same amount of lumber, reducing demand for timber even further.

Even though some of the new technologies have meant problems for Oregon timber producers, there are other new technologies that are seen as possible ways to improve profitability, Donegan said. The nation's top-rated forestry school, Oregon State University should get increased funding to help create new technologies that would create new markets for wood products, he said.

Conservation proponents in Oregon have been slow to find they have much in common with owners of working forests, Donegan said, whereas in much of the rest of the country, the two sides have begun to work together.

For instance, the state of Minnesota approached Donegan's firm to make a deal to keep some forestland intact as a working forest. An agreement was reached for a one-time payment. In another Minnesota case, the company had its property tax bill eliminated plus got back 50 percent by allowing public access for recreation.

"That provides an enormous financial incentive for us," he said. Donegan hopes to see this approach used in Oregon, but so far, he said, all the conservation efforts for preserves have excluded working forests. "We need money for conservation easements. We need money for the purchase of conservation sensitive lands. These are tried and true structures we use all across the country," he said.

Global warming is another area that could provide extra income to working forest owners for offsetting green house gases. "If there's any one true sense of urgency here in Oregon, it's to protect trees that sequester atmospheric carbon," Donegan said.

While these new ideas may help working forests survive, Donegan believes Eastern Oregon could also use some help from the federal government.

By allowing larger harvests of its timber, it would help keep existing mills working and, hopefully, attract new mills. "How do you get new mills to come into the area if there's a lot of uncertainty about supply?" he said. Donegan showed a chart indicating the steady decline of harvests from federal land while the private sector and state property remained steady.

Donegan's company, Forest Capital Partners, is an investment firm that owns over 300,000 acres of forestland in Northeast Oregon and another 300,000 statewide. Nationwide, it owns 2.1 million acres of forestland.

According to its website, the company says it's focused on long-term investments, and as a private company, is not pressured by fluctuating stock prices. The firm "is a pure timber operator, a forest-only investment firm without mills or other manufacturing facilities."

Yet, Donegan admits his firm finds it hard to ignore the fact the land is worth more in the real estate development market than if it were kept as a timber producer. With the increased demand for real estate by the growing population of Oregon, those pressures will only escalate, he said.

Snyder said land use regulations formed in the 1970s were meant to protect both the timber and farming industries, but over time, views have changed. "The predominance of people aren't necessarily saying it is about economic returns from these sectors. I think, if you listen today, what you hear are people talking about conservation, open space. I don't think those are mutually exclusive," she said, adding, "At the end of the day, if we don't find ways to increase the economic returns to stewards who are managing their lands sustainably over time, these lands will potentially convert," she said. It's this scenario that worries Donegan. "Once the land is gone, you can't change it back."

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