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Friday, June 09, 2006

Selling the Tree Farms

Traditional timber companies are selling their land to the highest bidder. There's a whole lot to complain about when it comes to the management of forests by timber companies, but I'm not sure we're headed for something better:

Et in Suncadia ego, The Economist: The tiny town of Roslyn, 90 minutes' drive east of Seattle, clings tight to its coal-mining and timber-cutting past. In future, that may be harder. As many as 3,000 expensive houses, interspersed with golf courses and resorts, are planned for the hills surrounding Roslyn, dwarfing the town's few hundred dwellings.

Those hills were once covered in forests owned and managed by the Plum Creek Timber Company... But as development land became increasingly valuable, Plum Creek sold the land around Roslyn to two other companies. These are now busy planning the new community, which is to be called Suncadia.

Across America, vast swathes of land may go the same way. Since 1900, ..., big timber enterprises have held land for decades. They harvested trees for lumber or paper pulp, replanted, and patiently waited for another harvest in 50-60 years. It was a conservative, relatively safe business...

Now all that has changed. New tax rules, demand for building land and the influence of big investors such as pension funds have transformed the ownership of forest land. In recent years most ... lumber companies have sold their land to Timberland Investment Management Organisations (TIMOs), in which private investors pool together to buy timber holdings. Forest-products companies then buy trees from the TIMO-owned land... In early April, for instance, International Paper ... sold its 5.1m acres of American timber land for $6.1 billion to two TIMO investor groups.

Other companies ... have become publicly owned real estate investment trusts (REITs) ... Today only two large publicly traded forest-products companies—Weyerhaeuser ... and Temple-Inland ... still have substantial forest holdings. (Weyerhaeuser owns or leases 6.5m acres in the United States, Temple-Inland owns about 2m.)

Since 1996, 30m acres of private forest lands have changed hands, causing turmoil in the industry. Some of those most disturbed by the trend are the ... greens... They admit that logging in private forests ... often wrecked the landscape. But companies such as International Paper were also diligent about re-planting trees and creating new forests... Moreover, in many parts of the United States, timber companies allowed local people to hike, hunt or fish on their lands, a tradition greens fear may be lost. ...In many ... parts of the country there is fear that new forest owners will quickly log their land, then sell the denuded ground for housing.

Others see opportunity as forest ownership changes. In Wisconsin, for instance, the Nature Conservancy and the Department of Natural Resources negotiated an agreement under which investors bought 101 square miles of land from International Paper... The land will continue to produce maple, oak and cherry lumber—all very valuable—while also remaining open for recreation and wildlife conservation. ...

No doubt, in years to come, some of the forests' new owners will opt for a quick and dirty profit from their lands... But trees ... grow back. Perhaps the natural patience of forests will prevail.

If the public has an economic interest in forest preservation on private lands that the market does not internalize, is "perhaps" good enough, or should additional regulation of these markets be considered? 

My view may not be general since I enjoy far greater than average benefits living in Oregon, and I see the costs of clear-cuts, etc. up close, but I lean strongly toward doing what is needed (taking proper account of opportunity costs of course) to ensure the forests are given the best chance of survival both public and private lands. I'll leave it to the environmental economists to work out the best schemes for making that happen.

    Posted by on Friday, June 9, 2006 at 01:22 AM in Economics | Permalink  TrackBack (0)  Comments (8)

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