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Timber market slump: What's a landowner to do?

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Reeling from the housing market collapse and limping economy, Oregon’s timber harvest in 2009 plunged 20 percent from (the already depressed) 2008 levels.

This does not bode well for forestland owners and the industries that depend on them. Changing forestland ownership is a topic of concern in the Northwest. Industry analysts – particularly those with a conservation bent – are worried about too much forestland being sold and converted to housing subdivisions and other uses. Critical ecosystem services – fish and wildlife habitat, carbon and water storage – are lost when forestland gets paved over.

Oregon’s timber harvest in 2009, at 2.7 billion board feet, is the lowest since the Great Depression-era harvest of 2.6 billion board feet.

And while this year’s harvest levels, so far, are on their way back up, Oregon Department of Forestry Economist Gary Lettman said a real recovery isn’t expected until 2011 or beyond. Basically, whenever the housing market starts showing signs of life again. (In the meantime, news just broke that a sawmill in southern Oregon will be shuttered for good in part because of slackening demand.)

Lettman told me it’s too soon to tell whether dismal markets and bleak forecasts have caused a sell-off of forestland. But the pressure to sell is there, he said:

“Lack of markets and lower prices really decrease the propensity for landowners to manage for timber. So, there’s a strong possibility that if they were offered an alternative use they would take it. And for the TIMOs and REITs* and small woodland owners who see the land as an investment, there’s a possibility if they don’t get the return they expect they would sell that land. Their investment might not look so good anymore.”

* Timber Investment Management Organizations and Real Estate Investment Trusts manage large-scale timber tracts for pools of investors, who buy timberland as part of a larger investment portfolio for, say, a pension fund. They’re rapidly becoming the norm in industrial timberland ownership, and we’ll talk more about them later, I’m sure.

The small woodland owners – and their struggles to hold onto their forestland – are the focus of a new partnership that was in the news this week between the Pinchot Institute and Regence Blue Cross/Blue Shield.

The whole idea of the partnership is to help small family forest owners hand onto their land by getting carbon offset market investors to pay for health care costs.

“Nearly three-fifths of U.S. forest lands are owned by families, often for several

generations,” said Al Sample, president of the Pinchot Institute, a Washington-based

conservation think-tank. “But financial pressures on these families in recent years have

resulted in the loss of forest and open space to development at an average of 6,000

acres a day—4 acres a minute.”

Turns out, one of the top reasons family forestland owners say they would sell or actually did sell their land is a major medical expense.

Enter investors in carbon offsets, who are willing to pay forestland owners to keep their land and let the trees grow and sequester carbon from the atmosphere to mitigate climate change. The money they spend on carbon storage can go toward health care for the forestland owners and give them the security they need to keep their land – even if their health care costs suddenly jump.

A pilot project is taking root in Vernonia, the little logging town in northwest Oregon that was devastated in the 2007 windstorms. We’ll check back and see how it goes.

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