SEELEY LAKE, MONTANA – Montana’s forest products industry is less than half the size it was a decade ago, and now there is a collective worry that it could get even smaller if something isn’t done soon to reverse the slow motion collapse of the federal timber sale program.

Just what can be done to reverse the collapse remains to be seen, but questions about what must be done to retain the state’s sawmilling infrastructure are attracting an interesting cast of characters, including environmentalists who now recognize that the state’s family-owned sawmills provide the only viable market for diseased and dying trees that need to be removed from federal forests that have become increasingly prone to uncharacteristic wildfire.

“Timber cutting is one-seventh what it was on Forest Service lands 20 or 25 years ago at its height,” Robert Ekey, regional director for the Wilderness Society, recently told New York Times reporter, Kirk Johnson. “Then, the environmental movement rightly had to be about ‘no’ and how to stop it.” But now, Ekey added, “We’re at the level where we can really he a good rational discussion – what does success look like? What does successful forest management look like?”

It is a value-laden question for which there are no pat scientific answers, but for years forest scientists have been warning about the increasing risk of catastrophic wildfire and disease in federal forests that have grown much too dense to be able to sustain their own vibrancy. Although estimates vary, at least 50 million acres of federal timberland in the western United States hold far more trees than can be supported by available sunlight, rainfall and soil nutrients. Environmentalists like Mr. Ekey know this, and have joined a growing chorus of supporters who want to find ways to keep Montana’s surviving sawmills viable – profitable.

“Our fear is that we could lose or infrastructure – the base of knowledge and experience of working in forests,” Mary Sexton, the director of Montana’s Department of Natural Resources and Conservation told the Times Mr. Johnson. “Once it’s gone, it’s gone.” The infrastructure Ms Sexton fears may be lost also includes the most efficient lumber markets in the world – markets the West’s forest industry manufacturing complex spent decades developing. Once those markets disappear – as they have in Arizona, New Mexico and Colorado – there is nothing the federal government can do to bring them back, at least without substantial taxpayer assistance.

The mere fact that environmentalists have joined with state and federal agencies to try to find a sustainable solution to the infrastructure question is welcome new among western Montana’s sawmill owners and logging contractors. Gordy Sanders, resource manager for beleaguered Pyramid Lumber Company, has spent years quietly cultivating relationships with local environmentalists who have helped keep the company alive.

“They are the ones who can make things happen,” Mr. Sanders says of the political clout environmental groups have with both the U.S. Forest Service and members of Congress. “We did not have these relationships 25 years ago, but now we do. I think we’ve come to understand that we need each other to be successful.”

Pyramid Lumber was the first Montana sawmill to embrace stewardship contracting, a Forest Service program that exchanges goods for services in thinning projects that yield small diameter logs of varying qualities. The resulting park-like stands win high public praise, but pose a marketing nightmare for lumbermen who are left to figure out how to wring the most value out of trees that are a far cry from the larger, higher quality timber they were purchasing from the government 20 years ago. The transition has exposed an ugly truth about what remains of Montana’s sawmilling infrastructure. Very simply, it is a house of cards that could collapse at any moment.

“I think the wild card in this deck is Smirfit-Stone,” says Jim Petersen, a long time industry observer and executive director of the non-profit Evergreen Foundation. “Their containerboard plant at Frenchtown has been the primary market for wood residue from western Montana sawmills for more than 40 years. Mills need a place to dispose of their wood waste; otherwise they run afoul of state and federal water quality regulations. Smirfit-Stone has provided the most efficient and reliable disposal service within an affordable hauling distance.”

But in late January, Florida-based Smirfit-Stone, the largest maker of cardboard box material in North America, filed for Chapter 11 bankruptcy protection in a Delaware court. Although the company blamed the globally depressed packaging market for its troubles, it is an open secret that its Montana facility – one of 162 the company operates in the U.S., Canada and Mexico – has had a very difficult time obtaining sufficient fiber to keep the mill operating at peak efficiency. And the fact that federal forests within view of the Frenchtown mill are dying grates on some observers.

“It’s ridiculous,” Mr. Petersen said. “Smirfit has been bringing logs from as far away as Wyoming to keep the mill running. Meanwhile, we have hundreds of thousands of tons of woody biomass within easy reach of the mill that remain off limits because of timber sale appeals and court-ordered work stoppages. I can think of no more urgent problem requiring the attention of environmental groups that are trying to keep Montana’s infrastructure alive.”

Despite very tight credit markets, Smirfit-Stone officials are confident they can find the financing they need to reorganize the company. Even so, the possibility that the Frenchtown facility will not be included in the reorganization is worrisome for sawmills that have relied on the company’s disposal service for decades. At least one mill – Stoltze Lumber Company in Columbia Falls – hopes to construct a small cogeneration plant that would turn it’s sawmill waste into energy.

Whether other family-owned mills in western Montana follow Stoltze’s lead remains to be seen, but many environmentalists see woody biomass-to-energy facilities as part of a larger strategy for reducing the country’s dependence on fossil fuels, including foreign oil. It is a hopeful sign that the Obama Administration has included woody biomass power plants in the portfolio of renewable energy resources it plans to develop. But in an odd twist, federal woody biomass is not included in currently proposed federal energy legislation – a tip of the hat to environmental groups that oppose biomass removal from federal forests, and to pulp and paper producers that see biomass-to-energy facilities as unwelcome competition for fiber.

“It is a very strange situation,” Mr. Petersen observed. “I can understand why our already devastated domestic pulp and paper producers would like to keep the lid on fiber prices, but I personally believe there is more than enough fiber in U.S. forests to support both the pulp and paper market and a quite viable biomass market that I view as central to turning the tide in diseased and dying federal forests that have been pushed to the brink of ecological collapse. But at the end of the day, reliable sources of raw material are the key, and in Montana, where nearly 70 percent of all forestland is federally owned, that means the federal government needs to be a more reliable partner than they have been in recent years.. Private capital is not going to flow to biomass or containerboard or new sawmills if investors cannot earn a respectable return on their investment.”