Pulpwood prices steady or rising

RISI's September International Woodfiber Report notes that an expected summer drop in South Atlantic pulpwood prices--softwood and hardwood--"never happened," due to a confluence of reasons, not least of which is the severe hurricane season's largely confining itself to the middle of the Atlantic ocean.  Otherwise, "elevated consumption," "nervous" procurement managers, "savvy" stumpage sellers, and "overpriced" second-quarter commitments have kept prices from declining during the third quarter.

The situation in the Lake States, however, is less nuanced:  strong demand for hardwood pulp and fine papers has confronted heavy rains since June throughout that region, although particularly in Wisconsin, and IWR points out that even price increases cannot free up saturated stands in many mills' usual procurement ranges, although longer hauls are becoming the rule.

In August, Wood Resources International reported some macro trends, for the quarter that ended June 30:  following a trend of price increases for the preceding 18 months, says WRI, in this year's second quarter, "wood chip and pulpwood prices fell the most in the US, Sweden, Finland, Australia, and Eastern Canada," for both hardwood and softwood.  WRI cites neither markets nor weather for this trend but, rather, "a strengthening US dollar against most other currencies."

Mississippi legislature encouraging biomass production

Following the Mississippi legislature's "overwhelming" passage, August 27, of a bill authorizing state financial incentives for a Texas-based biofuels producer, KiOR, to build biofuels production facilties in Mississippi, Gov. Haley Barbour stated that KiOR had committed to locating five biofuel production facilities in the state, and had agreed to invest more than $500 million in the first three of them.

The information we've seen does not positively say that KiOR's process uses woody biomass, but that appears to be the implication.  While Gov. Barbour states that "KiOR will use Mississippi's abundant, renewable natural resources to create a high-quality crude oil substitute," KiOR characterizes itself as a "next generation biofuels company" which creates this crude substitute "from biomass by enhancing nature's method of making oil, reducing the process from millions of years to a matter of seconds."

Governor Barbour estimates the projects will create "more than 1,000 jobs for Mississippi workers."

Renewable Energy Grants Available from Dept. of Agriculture

On August 6, the U.S. Department of Agriculture announced the opening of an application period (to conclude October 5) through which "agriculture producers and rural small businesses may apply for a Rural Energy for America Program (REAP) feasibility study grant to help pay for the cost of a comprehensive business-level study that gathers together preliminary data and studies, evaluates the findings, and determines whether the proposed energy project is viable and profitable.  The study must be conducted by an independent third party, and the grant may not be used to pay for facility design work or permitting/licensing costs."  More information at http://www.grants.gov/ (use the term "REAP" for a keyword search).

The Infrastructure Bank Proposal

On September 6, President Obama gave a speech outlining a proposed infrastructure spending project, to be funded with a $50 billion federal investment, channeled into highway construction, railroad track-laying, airport runway building, air traffic control, and various public transit initiatives, by means of a so-called "infrastructure bank," which--according to CNN's paraphrase--"is designed to leverage public money with private funds, creating much more bang for the taxpayer buck.  It's also designed to take politics out of infrastructure spending by moving the decision making away from Congress to an independent panel."

While some observers wondered whether the President was attempting to move the much-delayed Highway Reauthorization Bill out of the blocks before the Election--a large order--the main emphasis in the speech was jobs and economic stimulus, as if to address the reproach that the original stimulus bill, in early 2009, had placed little emphasis on, or funds into, infrastructure spending, and of that small amount only 32% had actually been spent after 18 months.

Although House Transportation & Infrastructure Committee Chairman James Oberstar (D-Minnesota) gave the proposal warm praise, suggesting that it is well aligned with the direction of the (stalled) Highway Reauthorization process he has been trying to move forward since January 2009, most observers doubt that a politically weakened White House will be able to convince House and Senate transportation interests to hand transportation funding allocations--don't say the word "pork"--to an independent panel.  For his part, Rep. John Mica (R-Florida), the House Transportation & Infrastructure Committee's ranking member, dismissed the speech as another tax-and-spend proposal which is ignoring the need for a comprehensive six-year transportation reauthorization bill.

Although the President did not offer any suggestion about how this "infrastructure bank" would be funded, CNN quoted a "transportation expert" with a private think tank, who suggested that the bank would not front the entire cost of infrastructure projects it identifies but would function to guarantee loans on projects funded by the private sector, projects that would have revenue streams from tolls, fees, and fares.  Thus, for this expert, "$4 billion in [federal] guarantees would generate $40 billion in spending."  If the proposal is seriously hinting that cultivating public-private partnerships will do away with the need to raise fuel taxes or other existing fees as a means of funding infrastructure improvements, no commentators have picked up the hint.

Clearly, the concept means different things to different interests, and although we cannot ignore the possibility that the President's speech was merely a political "feel good" speech for the occasion of Labor Day in a tough economy, it may indicate the framework the Administration proposes for renewing Highway Reauthorization discussions in January--leaving aside funding mechanisms.

Section 530 Repeal Proposed - Again

We've learned that Sen. John Kerry (D-Massachusetts) is developing a new legislative proposal to repeal the Section 530 "safe harbor" and return IRS independent contractor status determinations to cumbersome common-law processes governed by Treasury Department guidance.  It seems likely that Sen. Kerry's Fair Playing Field Act of 2010 will be introduced in the next few days.

The forthcoming bill's main feature, apart from repealing Section 530, is to authorize the IRS to issue guidance interpreting the common-law tests governing independence.  Businesses under audit, which IRS deems not to satisfy its guidance and which exhaust their litigative remedies, would have approximately six months to go out of business or to restructure their treatment of contractors providing services to IRS's satisfaction.  The proposal seems to lay weight on businesses' using independent contractors not treating them in a way "substantially similar" to the way businesses in the same industry treat employees.

Sen. Kerry may view this proposal as a compromise from the position of the bill he introduced on December 15, 2009, the Taxpayer Responsibility, Accountability, and Consistency Act of 2009 (S 2882), which now has 15 co-sponsors; we are apprehensive that Sen. Kerry may attempt to offer his new bill as a "compromise" during negotiations over revenue measures in the post-Election "lame duck" session.

It does not appeal to us as a compromise.  It would have the effect of reopening the same vulnerabilities to the independent contractor business model that the passage of Section 530 closed back in 1978.

We'll have more details when they are available.

In view of the growing number of federal initiatives challenging the right to contract freely, FRA's Executive Committee authorized the establishment of a dedicated "FRA Independent Contractor Status Defense Fund," to undertake various actions to educate congress on the issue, in coalition with other affected interests, by funding a study documenting the importance of independent contractors to the economy and tax base, and otherwise working with them to argue our case.  Our first appeal to FRA's Board and other Leadership Members has raised pledges totaling $7,850 towards our $20,000 goal.  Thanks to Fendig & Associates, Glatfelter, International Paper, Interstate Papers, KapStone, LP, The Price Companies, and Rayonier for their contributions.

If your company has not yet donated, and you would like more information, please contact Richard Lewis (rl@forestresources.org) or Neil Ward (nward@forestresources.org) at FRA's National Office (301-838-9385).

9^th Circuit: Logging Roads Are Point-Source Pollutants

On August 17, the U.S. Court of Appeals for the Ninth Circuit--the Western jurisdiction known for off-precedent (and frequently overturned) decisions--ruled that a National Pollution Discharge Elimination System ("NPDES") permit is required for stormwater runoff from logging roads. 

Plaintiffs in Northwest Environmental Defense Center v. Brown No. 07-35266 convinced a panel of three judges that loggers using existing public roads that enter Oregon's Tillamook State Forest should be required to obtain an NPDES permit for stormwater runoff from the roads.  The salient point of the Ninth Circuit's decision seems to lie in its finding that, although the Silviculture Rule holds "harvesting operations, surface drainage, or road construction and maintenance from which there is natural runoff" to be non-point source silvicultural activities--exempt from NPDES permitting-storm water runoff that is collected and channeled in a system of ditches and culverts before being discharged does not meet that standard, and counts as point source discharge.  If not overturned in a challenge, the finding will apply to all logging roads--and apparently some other roads, as well--within the Ninth Circuit's large jurisdiction.  In one legal analyst's opinion, the decision "appears to leave the Silviculture Rule with little potency."

The American Forest & Paper Association and other interested parties have expressed the intention of filing a motion for an en banc review (before a larger Ninth Circuit panel).  There is apprehension, not only that this devastating decision might stand in the West, but that the U.S. Environmental Protection Agency might adopt the decision as its administrative standard in enforcing the Clean Water Act nationwide.

Congressman DeFazio Questions Use of Guest workers on Fed Projects

In early September Rep. Peter DeFazio (D-Oregon) sent a letter to the federal Department of Labor asking DOL to investigate why Oregon tree-thinning projects financed by federal stimulus funds should employ foreign guest workers (under the H-2B visa program) when "rural Oregon [suffers] from long-term unemployment of well over 20 percent.  There is no excuse to not be hiring these hard-working Americans in the current recession.  We cannot allow U.S. companies to abuse immigration laws to undercut American workers."  The account we've read (in the Douglas County, Oregon News Review) makes much of the claim that "four companies that sought permission to employ 300 foreign workers in Oregon received a total of $10 million to thin forests."

DeFazio suggests that these companies' claim that they had exhausted the local job market before turning to H-2B workers, mostly from Mexico, demonstrated that certifications about domestic worker availability were less than transparent.

A recent survey of FRA's Forestry Contractors Task Group members' operations revealed that over 90% of U.S. workers hired for planting or thinning work failed to complete even 20% of the work assignment.

Anti-Forestry Campaign Matrix: New Update

FRA's Public Affairs Committee has again updated its Anti-Forestry Campaign Matrix, which monitors actions by various market campaigns and other opponents of forest management, as shown through updates on their web sites.  The latest update adds the so-called Global Justice Ecology Project's "Stop GE Trees Campaign," which campaigns against genetic engineering in timber stocking improvement, as well as noting recent activity in the other 12 campaigns under observation. 

To review the latest updates, visit http://www.forestresources.org/MEMBERSAREA/anti-forestry.html (User ID "fra" and Password "reform" required for access) and open the linked .pdf file.  Reviewing the information at the top of the "Recent Activity" column for each campaign provides the most current information about it.

Domtar's "Working Woodlands"

On September 13, Domtar Corporation and The Nature Conservancy announced formation of a partnership, now in the pilot stage, called Working Woodlands, "to help private landowners maintain and sustainably manage their forested land."  The program's main features are for the partners to work with enrolled landowners to develop management plans certified to the Forest Stewardship Council Standard; and to work with greenhouse gas offset developer Blue Source to market and sell enrolled landowners' forest carbon credits.  For their part, the landowners agree to manage the forest sustainably for at least 60 years.

Under the pilot program, Domtar will donate $30,000 over the next two years to help enroll a total of 20,000 acres in Working Woodlands, of which at least 4,000 acres are expected to be from owners of small plots near Domtar's Johnsonburg, Pennsylvania paper mill.  The partners indicate that "the pilot program may also expand to areas surrounding Domtar's mills in the Southeast United States."

California: Of Deer and Managed Forests

We made note, recently, of an article in the San Francisco [California] Chronicle's on-line news site, SFGate.com, expressing alarm over dramatically declining deer harvests in the state, with documented kills of bucks having declined from 27,846 in 1989 to 14,895 in 2009.  The Department of Fish & Game is concerned:  "Most likely," states a wildlife biologist, "it's the population that has decreased and the harvest is just tracking that."  The matter is the subject of a current three-year study, "documenting habitat changes, vegetation, predation, land use patterns and other factors that might affect black-tailed deer."  The article summarizes various hypotheses the state is examining:  trophy hunting's removing too many dominant males; a lack of controls on natural predators; suppression of wildfires' altering historical vegetation profiles; and even that the scarcity may be part of a natural cycle.

What the state appears not to be considering--or reporter Peter Fimrite doesn't make note of it--is the possibility that the decline of timber harvesting in the state has reduced the supply of the "edge" or "successional forest" habitat known to foster deer population growth, and hunters' takings, elsewhere.

Arborists Cope with Biomass

The August/September issue of Tree Services magazine, an arborists' trade journal, provides an opportunity to view the woody biomass supply chain from the point of view of a class of entrepreneurs who have not had to think about supply chain logistics--until now.  Patrick White's article, "Breaking into Biomass," provides a glimpse at arborists' endeavors to convert what they had viewed as an expensive liability--disposing of the voluminous tree trimmings they produce--into at least a shaky profit center.  As one utilities right-of-way manager explains, "Chips can cost you money in a number of different ways, with the labor costs to haul chips away from the work site, the vehicle costs, the lost productivity."

White portrays arborists--some of whom produce quite a high volume of troublesome, bulky biomass--figuring out the ropes of product quality, storage space, market access, and delivery logistics, in hopes above all of cutting their losses.  "We get paid by the ton," says one operator, fortunate to work in the vicinity of PCA's Tomahawk, Wisconsin mill, "which covers the cost of sending an employee there and some of the fuel as well.  It's not like we're making a huge profit on it, but at least the chips aren't an expense for us."  He also notes new licensing and insurance requirements, as well as the customer's safety rules.  Another arborist ponders possible new business paradigms, such as "partnering with a specialty chip producer."

In conclusion, White suggests, "there may be new applications that will seek out the individually small, but collectively large, quantities of wood chips that the tree care industry produces every day.  While logistics, such as finances and chip quality, still would need to be factored in, perhaps co-ops or specialized chip supply companies will be formed to collect chips from a variety of sources and then deliver them in bulk to a buyer."