The Economics of Logging our National Forests
The following discussion of the federal timber sale program is from the Economic Analysis of the 2006 Wayne National Forest Plan by Greenfire Consulting LLC and commissioned by Heartwood. This study is a valuable resource, and many of the issues pertaining to Ohio's only national forest are relevant to the Daniel Boone National Forest.
The timber sale programs on the national forests, in general, have never been profitable—the programs cost the taxpayers much more to administer than the revenues that come in from the logging companies. Most years, nearly every national forest loses money on timber programs, and collectively the national forest timber sale program loses hundreds of millions of dollars per year. The WNF has been one of the money losers for the years that have been documented.
Starting in the late1980s and up until the late 1990s, the Forest Service released to the public the Timber Sale Information Reporting System (TSPIRS) that helped citizens document how much money the timber sale program was losing. This report was ordered by Congress due to intensive lobbying efforts from citizens.
Before TSPIRS, the Forest Service told the public outright that their mission was to supply trees to private logging companies to help supply wood products to the nation’s building frenzy. At the same time, they denied that the timber sale program was a money loser. However, citizens began to “follow the money” and to investigate Forest Service accounts and found that not only had taxpayers been subsidizing the logging companies and the agency itself, but also that the Forest Service was hiding this fact through creative accounting techniques.
TSPIRS uncovered, for example, that the agency took over 50 percent of the costs of timber roads and never counted them as expenses related to timber sales. Instead, these costs--attributable to the cost of creating the roadbed—were written off completely as “capital improvements” to the forest. In other words, building roads into roadless areas for the sole purpose of taking out timber was deemed a capital improvement that benefited the forest in general, not the timber purchaser. Other creative accounting techniques included reforestation costs amortized over hundreds of years, instead of being shown as a current cost of the timber program, and road maintenance costs and failed reforestation costs not mentioned at all as costs of the timber program. In addition, expenses for restoring watersheds were not treated as costs of timber sales, even though they may involve taking out the very road beds previously constructed for timber sales and accounted for as capital improvements to the forests.
Eventually, the Forest Service had to admit that their system of accounting lacked integrity. In the mid 90s, the agency began to publicly admit the program lost money, even if the amounts they admitted to were far below what the General Accounting Office and citizens were discovering and publishing at the time.
Over the years, the Forest Service has changed publicity tactics. Today, the Forest Service tells citizens that giving away public trees to private logging companies is not a matter of business, but a matter of “ecosystem management.” In other words, the extraction of the trees is just a means to an end, the end being more biodiversity, cleaner water, etc., anything that the agency knows the public wants, and therefore might not question the Forest Service about the means to achieve those goals. The Forest Service also asserts that the agency is not about making money, and that program expenses do not have to cover costs as long as the programs are achieving the goals of ecosystem management.
To make matters worse, the Forest Service has not issued a TSPIRS report since 1997. They have instead gone to a more “modern” Foundation Financial Information System (FFIS), which has eliminated any timber sale program reporting. In fact, it is now impossible to get specific budget data from the Forest Service, even with the use of a Freedom of Information Act (FOIA) request, due to this “streamlining.” Today, entire program budgets are condensed into one line items, making it impossible to see where the money within the logging program has been spent (for example, on roads, timber sale planning, timber sale improvement, reforestation, etc.).
Since budget information on national forests is not publicly available, Heartwood filed a FOIA request to obtain information on Forest Service revenues and expenditures for the WNF. According to the information provided to Heartwood, the Forest Service received $8,500 in timber receipts for the WNF in 2004, $65,052 in 2005, $27,748 in 2006 and $252,894 in 2007.
Since it is now impossible to calculate how much the agency is spending on different aspects of the timber sale program, and the Forest Service refused to give us an explanation of what each line item means, we have had to use our best estimate to give an idea of revenues compared to expenditures for the timber program on the WNF.
According to the Congressional Research Service, the line items “Forest Products” and “Timber Pipeline Sale Preparation” are both costs of the timber sale program. In addition, money spent from the K-V Fund is going towards the costs of the timber sale program. The Knutson-Vandenberg or K-V Fund, created under the Knutson-Vandenberg Act of 1930, receives some money from timber sales, which, instead of going back into the General Fund of the Treasury, can be used by the Forest Service to pay for the costs of the timber program, or for special projects in the area of the timber sale. Total costs from all these line items were $494,697 in 2007, $666,285 in 2006, $602,256 in 2005, and $510,247 in 2004.
Subtracting costs from revenues shows the agency lost at least $241,803 in 2007, $638,537 in 2006, $537,204 in 2005, and $501,737 in 2004. At least six percent of the WNF budget was spent on the timber sale program.
Other line items that the Forest Service might be spending on the timber sale program include cost pools (overhead), vegetative and watershed management, land management planning, and wildlife and fisheries habitat management. Even without adding any of these line items to the cost of the timber sale program, one can see that the program loses money.
Mainly, funding for timber-related budget line items (forest products and timber pipeline sale preparation) comes from Congress through appropriations.
In addition, millions of dollars from timber receipts automatically go back into the Forest Service budget through the K-V fund that was established through the Knutson-Vandenberg Act of 1930. The Forest Service treats all but $0.50 per thousand board feet (mbf) of timber sale receipts as available for K-V expenditure. The K-V Fund gives Forest Service managers a financial incentive to push logging over other uses of the national forest, since this results in money they can rely on coming in automatically as long as timber receipts are flowing.
This incentive, added to an institutional culture that rewards and promotes managers that “get out the cut” has resulted in the nonsensical WNF Plan we see today.
In addition to timber revenues that are available to the Forest Service through the K-V fund, the Forest Service can put money from salvage sales into a special Salvage Sale Fund. The Forest Service can keep 100 percent of these receipts from salvage timber.
Salvage sales are timber sales that the Forest Service justifies on the grounds of “dead or dying trees” from disease, windstorms, snowstorms, or fire. For the WNF these sales do not contribute to the Allowable Sale Quantity (ASQ). In other words, the amount of logging that can take place under the WNF Plan can end up being much larger than what the Forest Service is accounting for with the ASQ. In fact, every management area listed below can be logged under the guise of salvage without any limitations.
Money collected by the Forest Service and put into the Salvage Sale Fund may be spent on:
• Timber inventory (silvicultural examination) costs;
• Timber resource planning costs;
• Timber support costs;
• Sale preparation costs;
• Harvest administration costs;
• Appeals & litigation costs;
• The costs of reworking plans after appeals & litigation;
• Timber road costs, primarily engineering and design;
• Sale overhead (general administration and program management) costs;
• Ecosystem management costs;
• Lands activities (probably land line location) costs;
• Facilities costs;
• Law enforcement costs; and,
• Ecosystem management overhead costs.
Congress created the Salvage Sale Fund in 1976 with a one-time appropriation of $6 million for the purpose of removing dead and damaged national forest trees.
One of the fundamental problems with this fund is that forest managers can deposit all revenues from timber salvage sales back into the Salvage Sale Fund rather than returning the money to the U.S. Treasury. This has created an incentive among forest managers to classify healthy, green trees as part of a salvage sale in order to make the sale more appealing to timber purchasers, thereby generating more revenue. As a result, this fund has ballooned from a mere $25 million in 1987 to more than $150 million today. Now the Salvage Sale Fund is responsible for almost 1/3 of the timber sales on Forest Service lands. On the Hoosier National Forest, almost 100 percent of all timber sales in the past decade have been salvage sales.98
Additionally, forest managers have been diverting a portion of these funds to pay for agency overhead like computers, salaries, and rent. According to a General Accounting Office report, in 1997 more than 27 percent of Salvage Sale Funds were spent on items or project that could not be directly linked to the sale of dead or damaged timber.
The Forest Service is authorized to make expenditures from the Salvage Fund without an annual appropriations request, giving Congress little ability to monitor and control this spending. Presently, the Salvage Fund is financing approximately one third of the logging on national forests completely free from congressional oversight. Many of these sales fail to cover significant portions of their costs.
As long as Congress is willing to fund timber operations through appropriations or through the K-V and Salvage Sale Funds, the Forest Service will continue to apply timber industry practices on national forests, even if these practices increase pollution and damage the capacity of the forest to deliver ecosystem services, which have a much higher value than ecosystem goods like timber.
The Forest Service, as a public agency, responds to the financial incentives provided by Congress. To maintain its existence and continue to employ people, the Forest Service can only do those things for which funding is provided by Congress. And Congress, fuelled by their own incentives resulting from campaign contributions from the timber industry, provides funding to the Forest Service for the timber sale program.
The institutional culture of the Forest Service also drives the emphasis on the timber sale program. This culture is sustained by political appointees who have either been timber industry lobbyists or “proven themselves” in the agency by pushing the timber sale agenda.
For example, the overseer of the Forest Service, the Assistant Secretary of the USDA, Mark Rey, is a veteran timber industry lobbyist, and Abigail Kimbell, the newly appointed Chief of the Forest Service (2007) authored President George Bush’s controversial “Healthy Forest Initiative.” According to Public Employees for Environmental Responsibility (PEER), she was responsible for the largest reprisal action ever undertaken against agency whistleblowers.
In all, Kimbell purged 44 whistleblowers while she was Supervisor of the Bighorn National Forest in Wyoming. Of those 44, eight ultimately won a $200,000 settlement with the agency in 2003, while Ms. Kimbell was promoted to Regional Forester. The concerns raised by the whistleblowers in the late 1990’s where about the Bighorn National Forest and included accusations of illegal timber sales and sweetheart concessions to favored timber companies, failure to meet reforestation commitments to restore habitat, violation of wilderness protections, and road construction through Native American sacred sites.
The Forest Service has an interest in making sure that logging on the National Forests is acceptable to Congress. The efforts of the Forest Service to reframe logging as a tool of ecosystem management is therefore not just an attempt to reduce public opposition, it is also helpful in convincing Congress to keep the timber appropriations going, and to give Congress a reason to continue this program even though it generates a loss. Of course, lobbying by logging interests may also be a factor here, because they benefit from below cost timber sales.
Ultimately, however, responsibility to make sure that Forest Service operations generate more public benefits than costs lies with Congress.