Land ownership changes and Their Influences On Management and Future Needs (2014)

A Speech by James D. Petersen, Founder and President

The Evergreen Foundation

Annual Meeting of the Inland Empire Chapter

Society of American Foresters

Palouse Divide Lodge

Emida, Idaho

October 27, 2014

My wife, Julia, and I are in the process of moving into our new home in Coeur d’Alene. We are still waist-deep in boxes and misplaced furniture, so if we look a lot like deer in headlights, it’s not you.

I was born in Kellogg and raised between there and my grandparents ranch on Pack River, north of Sandpoint. “Coming home” has been a goal of mine for a long time. It took 52 years, but we are finally here, better late than never.

Before I get rolling, a curiosity question: how many of you work for a federal agency; a state agency; an Indian tribe; a private landowner?

I understandably want to avoid offending as many of you as I can in my candid assessment of land ownership changes that have occurred over the last 25 years.

For the record, I am not a forester. I am a writer. My degrees are in Journalism and Broadcasting. So one could rightly ask what the hell I am doing up here or, more to the point, what qualifies me to address a topic as vital to your interests as land ownership changes. The one-word answer to this question is “nothing.”

To make matters worse – much worse in my estimation – when Phil Aune asked me if I would be willing to be your speaker tonight, I made some vague reference to not knowing what I should say to you, he cheerfully replied, as only Phil can, “Oh, just come and be yourself!”

And then, after a short pause, he eyeballed me suspiciously and added, “Maybe you could start by explaining why you think the national forests should be given back to the Indians.”

My only saving grace here tonight probably rests in the fact that I am an SAF member and, secondarily, that I have a lot of admiration for what all of you add to our nation’s economic and environmental balance sheets.

I am an SAF member because my old Forest Service friend, Marlin Johnson, insisted that I join. When I expressed some doubt about my qualifications for membership, Marlin stoically filled out the paperwork and emailed it to me with a terse two-word note: “Send it.”

I sent it – and have proudly maintained my Platinum membership ever since. No one was more pleased than the late Bill Hagenstein, who was my friend and inspiration for 42 years. So far as I know, Bill is the only person in SAF’s long and storied history to have been its President twice.

Many seem to have known that Bill and I were friends, because the Journal of Forestry asked me to write his obituary. It probably helped that, at his request, I also wrote the foreword to Corks and Suspenders Bill’s fine autobiography.

But I don’t know how Bill would feel about me writing his obit for the Journal. He wasn’t much for talking about dying, though I was able to sneak up on the topic one time, over Old Bushmills in his living room overlooking Portland’s spectacular night lights. It was near midnight and he’d been rattling on about how he could never bring himself to sell any stock in the handful of publicly traded forest products companies that dominated his investment portfolio.

When he blessedly stopped long enough to catch his breath, I said, “Bill, I have a question for you.”

“What’s is it,” he said.

“How do you want to be remembered,” I asked.

I guess my question took him by surprise because he paused for a moment to consider his answer, which was something I’d never seen him do before. And I must admit that I was as startled by the clarity of his answer as he apparently was by the directness of my question.

“I was a worker in the vineyard,” he finally replied.

And then, after listening for a moment for the echo of his own words, he said, “Yes, that’s it. I was a worker in the vineyard.”

At Bill’s request, there was no funeral, but there will be a memorial service – a wake - at the World Forestry Center in Portland November 2. He did not want this either – and he just hated it when the name of the Center was changed from the Western Forestry Center to the World Forestry Center. Bill would want me to tell you this for the simple reason that he cannot.

The name change drove him crazy because the Center’s original mission was to promote all things associated with Douglas-fir. Apart from David Douglas himself, Douglas-fir’s two great champions were Leo Isaac and Bill Hagenstein. Isaac was dubbed “Mr. Douglas-fir” after he assembled a literature review in the 1950s that pretty well settled the Forest Service’s argument with itself about clearcutting in Douglas-fir, at least from a scientific perspective.

Bill Hagenstein was the Douglas-fir region’s champion from 1941 – the year Bill Greeley hired him – until his retirement from the Industrial Forestry Association in 1980. IFA was founded by the membership of the old West Coast Lumbermen’s Association, which Greeley ran for some 25 years after he abruptly quit the U.S. Forest Service in 1928.

In my opinion, Greeley was the greatest Chief in Forest Service history. No one did more to advance the cause of forestry on federal lands than Greeley. And after he left the Forest Service in 1928, no one did more to strengthen the very foundation on which private lands forestry stands: the big idea being the retention and reforestation of timberland following harvest.

Until Greeley pushed the Clarke-McNary Act through Congress in 1924, western lumbermen were pretty much dead set against retention and reforestation. Virgin timber was cheap and abundant, and the risk of wildfire in forest plantations was too high, so they let their cutover lands go back to the counties for taxes.

Clarke-McNary changed everything. Putting the Forest Service – the U.S. Government’s principal land management agency – in the forest fire fighting business was huge. Landowning lumbermen had organized the first fire cooperative right here in this area in, I believe, 1903, the year after the Yacolt Burn swept over southwest Washington and northwest Oregon, destroying some 239,000 acres of virgin timber.

George S. Long, who organized the Weyerhaeuser Timber Company in the West in 1900, led the way. At his side was E.T. Allen, a charismatic writer and public speaker, who, like Greeley, had been handpicked by Long to help western lumbermen get their act together where the privately funded fire cooperatives were concerned. Allen subsequently ran the Western Forestry and Conservation Association for many years.

What I bring you tonight on the subject of land ownership changes is the perspective of a scribbler who loves woods, wildlife, birds and wildflowers, but mostly trout waters.

I have been pitching flies since I was 10 years old. My first lessons came from a great aunt who cooked in logging camps in the upper reaches of the North Fork of the Coeur d’Alene River. She was a big time artist with a fly rod, which was quite a feat in the bygone era of split bamboo rods that came mostly from local hardware stores and were nothing like the high tech rods most of us use today.

Of late, I have been busy teaching my wife how to fish with flies. She will be happy to regale you with stories about how she out-fished me on the Kootenai River last month. She is a quick study, and I have long since gotten over the two rods we broke the first time I took her up the North Fork.

You have asked me to offer my views on land ownership changes and their influences of management and future needs. To be brutally honest, I don’t think much of these changes.

I understand the federal income tax advantages that go with passing corporate Real Estate Investment Trust profits along to individual investors, who are taxed at a lower rate.

Likewise, I appreciate the fact that institutional investors who don’t know the first damned thing about forestry would want to hire a Timber Investment Management Organization to handle things.

In my opinion, the presence of REIT’s and TIMO’s is nothing more than a symptom of a much more troubling set of problems on the nation’s forestry front.

These problems – which will be the focal point of my remarks – are the reason why I have advocated for returning national forests and rangelands to tribes from whom our government stole them more than a century ago. Frankly, this is never going to happen - but having publicly said what I’ve said has helped shine truth’s light on tribal forestry.

Tribes are the only landowners I see who are actually trying to tell their story. There is never a bad time to be “out there” with a good story, but I think this is a very good time to be communicating because restless publics that don’t know anything about forestry don’t know who or what to believe, and therein lies a major source of the public angst about what forestry is and isn’t, and what impacts its practice is having on forest intangibles that are not measured in board feet or diameter breast high.

In the interest of full disclosure, I need to tell you that the Intertribal Timber Council has been a client for nearly 20 years. ITC represents the legislative and administrative interests of U.S. tribes that own and manage timberland. My role – the Evergreen role – has been to translate Indian Forest Management Assessment Team tribal forestry assessments into plain English. We have done this three times over the last 15 years, most recently three months ago.

I’m a big fan of the way tribes manage their timberlands. I like their approach, I admire the philosophy behind it, and I especially like the visually pleasing result. It is very easy to photograph and explain tribal forestry to public’s that don’t know the first thing about forestry, but still fret about the results they see in forests.

Likewise, it is very easy to explain the management objectives pursued by most non-industrial private timberland owners. For years, the Forest Service’s State and Private folks surveyed non-industrial landowners at 10 year intervals to find out how they were doing and what they needed to be more successful.

I have several of these reports and find it fascinating that these landowners provide the largest share of the nation’s timber supply, but frequently cite forest management objectives that have almost nothing to do with producing logs for sawmills. Their No. 1 objective is to create or protect wildlife habitat. No. 2 is to protect the aesthetic quality of their land.

Cutting timber for profit is No. 4 or 5 on the list. But it turns out that meeting Objectives 1 and 2 yields an enormous amount of quality timber for local wood processors. This is a great story and – again – it is easily photographed and easily told. Let me assure you, journalists and broadcasters are into doing what’s easy.

Explaining industrial forestry is not as easy, though I continue to try because I think industrial timberland owners get a bad rap from a press that dismisses them out of hand. Most reporters have bought into all the anti-forestry nonsense about monocultures and genetic mutants. Hell will freeze over before they accept the fact that there is more biological diversity in an early seral forest plantation than there is in an old growth forest.

As a sidelight, I will tell you that my father-in-law, Wes Rickard, is probably the guy who invented what we today call “industrial forestry.” I have all of his growth and yield models and several studies he completed while working for the PNW Research Station in Portland.

Wes was the first forest economist that the old Weyerhaeuser Timber Company hired. He remembers with some fondness the day George Weyerhaeuser called him into his office in Tacoma and said, “Wes, pretend that everything we’ve ever done on our land was wrong. Now tell us how to do it right.”

Wes and his team spent three years feeding IBM punch cards into a mainframe computer in Tacoma before the answer fell out, but the result was what Weyerhaeuser’s public relations folks later named “High Yield Forestry.”

Some of you may remember – as I do – when Bill Lawrence, Weyerhaeuser’s affable elk biologist, was the star of several well done Monday Night Football television commercials in which he explained how high yield forestry was creating thousands of acres of elk habitat. How unfortunate that the nation’s industrial timberland owners have gone into hiding, and no longer have the gumption to explain the benefits of what they do to suspicious publics that increasingly hold them in low regard.

Their silence dumbfounded Bill Hagenstein, who was easily their finest spokesman following World War II. He blamed the downfall on “the green eyeshade boys,” the army of accountants and bean counters that now run the REITS that were once vertically integrated forest products manufacturers.

“Never trust the green eyeshade boys,” Bill cautioned me. “They don’t give a damn about people or the communities that the old vertically integrated companies supported.”

I tend to agree with Bill’s angry assessment, though for me trust was never the issue. The issue was the formulation of a federal tax code that made it impossible for the old vertically integrated companies – those that owned timberland and manufacturing plants – to generate a return on investment that was commensurate with their long term deployment of capital; on what the green eyeshade boys call the “time cost of money.”

We have Plum Creek to thank for the fact that the REIT structure has been imported into the timber business. It was originally designed by tax code writers to provide incentives for investors in shopping malls. Plum Creek simply asked the Internal Revenue Service for a private ruling as to whether the REIT structure might be used in the timber business, and the IRS said “Yes, it could.”

The rest is pretty much history. The old vertically integrated and publicly traded forest products manufacturers are gone. To its great credit, Weyerhaeuser was the last to surrender to a tax code that has nothing to do with the honorable art of growing trees, and everything to do with the almighty dollar.

You can’t blame Plum Creek for doing what they did. I certainly don’t. They were simply acting in the best fiduciary interests of their shareholders. But I do blame Congress for not recognizing and correcting its disastrous tax writing mistakes. Of these, none are more egregious than these two:

The inexcusable failure to monetarily compensate private timberland owners for taking land out of production in order to protect publicly-owned fish and wildlife habitat…

And the promulgation of tax policies that discourage longer rotation forestry that the public seems to favor. The result of this is that we are moving swiftly in the direction of 30-year rotations in Douglas-fir in western Oregon and Washington.

I understand why landowners favor shorter rotations, but my friend Mike Newton, who is a PhD botanist and a fabulous forester, tells me that he has seen an impressive and financially rewarding flush of growth in stands he held for about 50 years on his Tree Farm near Eddyville, west of Corvallis, Oregon.

I know this to be the case because Mike sits on our Evergreen Board of Directors and Julia and I have toured and photographed his impressive timber stands. There are trees he planted in the 1960s that are so large that they look like old growth Douglas-fir.

You don’t need to know much about managing forests or lumber manufacturing to see that these trees have a great deal more intrinsic and monetary value than a 20-inch diameter tree.

Of course, sawmill log buyers favor the more or less standardized 20-inch diameter tree because wood quality is predictably high – certainly higher than it is in old growth trees that can hide a lot of defects. But Mike’s big trees aren’t old and aren’t hiding any defect.

This is just a personal opinion, but I think private timberland owners could score a lot of brownie points with skeptical publics if they made a point of holding their timber longer. But to do this, they need help from tax writers who seem not to understand that they cannot legislate what Mother Nature cannot do, despite their best efforts to do so.

The green-eye shade boys, whose gaze is firmly fixed on the time cost of money, will be quick to point out that longer rotations won’t work because we only have so much land on which to grow the nation’s timber supply, and if we grow our wood more slowly, the price of lumber will skyrocket and foreign competitors will eat our lunch. All true, which brings me to my final unhappiness: the collapse of the federal timber sale program that once provided about 15 percent of the nation’s timber, not a lot but enough to keep imports in check.

Armageddon was predicted when the federal government listed the northern spotted owl as a threatened species in June of 1990. It never happened, unless you count the 70,000 or so loggers and mill workers who lost their jobs, and the rural timber counties that are still reeling from the loss of their share of federal harvest receipts. I count them all, and think what is happening now is criminal.

Surprisingly, stumpage prices did not skyrocket after the listing – as nearly everyone suspected, probably because, minus a chaotic and unpredictable federal timber supply, and minus so much competition, it got easier for surviving mills to gauge or estimate how much volume would be in the market and at what price. .

It also got easier for homebuilders to estimate the cost of their building materials, that is until Congress bludgeoned mortgage lenders into accepting “liar loans,” which caused the nation’s economy to come as close to collapsing as it has any time since the Great Depression.

The point I want to make here is that the litigation-driven collapse of the federal timber sale program has not had a negligible impact on the national economy or regional economies beyond the politically disenfranchised rural West. But it has had a disastrous environmental impact on our national forests and the biological, cultural, historic and recreational assets they hold.

There isn’t time for me to dig deeply into this mess this evening, but it is important for you to know that counties that are pounding the table for transferring federal timberlands to state ownership are the ones who are bearing the brunt of irrecoverable financial losses driven by forest policy changes that have no basis in peer-reviewed science.

Minus the means to levy a property tax on federal timberlands that now produce next to nothing of monetary value for their counties, many county commissioners see no alternative but to advocate for transferring ownership. It isn’t going to happen, but I sure as hell understand why they hope it will.

Faced with such a bleak future, one might rightly ask where hope lies. I think it is hiding in plain sight. You would know it as the Clearwater Basin Collaborative. The basic idea is to bring stakeholders of various persuasions to the table and give them a shot at resolving differences that neither Congress nor the Courts have been able to resolve to anyone’s satisfaction.

I like this idea a lot, and think it holds great promise for returning control of national forest management to the local level, where citizens from all walks of life can come together and begin to build the level of mutual trust that comes only from having some skin in the game; from defining differences of opinion and then plowing deep in the common ground.

This is a time consuming process that demands complete cooperation from the Forest Service, but it beats the daylights out of where we are today. When Phil Aune and my wife and I spoke at a conference in Wallace, Idaho in September, I described the situation here in Idaho in these words:

“There is not a sound bite on earth that can erase the fact that Idaho’s federally-owed forests are flat-lining.

Picture the white line on a heart monitor peaking and falling, peaking and falling, then laying itself out flat in a horizontal line that stretches across the entire face of the monitor. The patient has died. You grab the paddles in hopes of jump starting his heart. If your patient is lucky, it works. But if the heart is a forest and the trees in the forest are dying faster than they are growing - as is already the case in many areas in western Montana - the patient will probably die as soon as life support is removed.”

When we still had vertically integrated companies, Bill Hagenstein fought like hell for adequate funding for the West’s federal timber sale program, not just because his IFA member mills needed the timber, but also because they wanted to make damned sure that the wildfire genie the fire cooperatives and the Forest Service had finally captured in the 1960s did not escape her bottle again.

But now she has escaped, and we are chasing her all over the West in a thus far futile attempt to again capture her. We could, but it has thus far been easier to believe a made up story about all of the wonderful things that wildfires do that humans cannot do. But having seen and photographed several large forest restoration projects, I don’t believe this story for a moment.

Yes, I know that so called “prescribed fire” can be a useful management tool in dry site mixed conifer forests, but purposefully lighting fires in large stands of dead and dying timber in hopes of doing what only chain saws and mechanical harvesters can safely do is akin to arson.

Why are we doing this in the face of so much scientific evidence to the contrary? The answer would seem to reside in society’s felt necessities, those invisible urgings that cause us to periodically pull progress up by the roots.

This has certainly been the case where federal forestry is concerned. Not many years ago, there was strong public support for harvesting timber from federally owned forest lands. But now there is almost none, save for what can be found in rural enclaves that have been laid low by social changes over which rural westerners have no say at all. No wonder they are angry.

Where does all this leave us in terms of the myriad questions that swirl about land ownership changes?

The promotional piece for this event speaks to the plain as day fact that, in the timber business, as in nature, the only constant is change. Gone from the Idaho scene are Idaho Forest Industries, Diamond International, DAW, Pack River, Humbird, and a host of smaller companies, including the old Linfor Lumber Company, which my uncle ran for the Morbeck family for years.

Also gone: the St. Regis Paper Company; Crown Zellerbach, Scott Paper, Champion International, Pope and Talbot, the storied St. Paul and Tacoma Lumber Company, all of the Evergreen Foundation’s original sponsors and the old Rutledge Timber Company, which at one time operated the largest sawmill in the world at water’s edge on Lake Coeur d’Alene. Its log yard is now Duane Hagadone’s golf course. When I was a boy, we drove past this mill regularly on our way from Kellogg to Sandpoint. It ran 24/7 during the war years and for a long while afterward.

Look at the evolution of REITs; Forest Capital for example. This is a much different organization than the one that bought the Boise Cascade lands a decade ago. And I thought Boise would go on forever. They were huge Evergreen supporters.

If there was any justice in Boise’s demise it was that Madison Dearborn got stuck with the iron. I’m pretty sure they thought they could flip it, but an ugly recession killed that idea. I know the true story of what went on behind the scenes between Madison Dearborn and Goldman Sachs, and it wasn’t pretty. Boise’s shareholders got screwed. Where the hell was the Securities and Exchange Commission?

I would not be a bit surprised to see Congress revisit the tax advantages that REITs enjoy today. The billions of dollars in corporate profits that could again be taxed at a higher rate make REiTs a tempting target

We are not going to give our national forests back to the Indians, but tribes are going to be given increasing latitude in the management of national forest lands that border tribal forests. If you stretch this border out into a single straight line, it is 3,000 miles long, two-thirds the length of the U.S.-Canadian border!

Many tribes have rightly complained that mismanagement of federal lands poses a serious risk to their ancestral lands. Hence, “Anchor Forests,” areas in which tribal forestry methods will be implemented to reduce the risk of catastrophic insect and disease infestations and inevitable wildfire.

Your SAF colleague, Vinnie Corrao, who also sits on our Evergreen board, is up to his armpits in Anchor Forests, as am I.

Non-industrial timberlands will continue to be prime targets for real estate developers because the parcels are usually small and the owners often live elsewhere and have no idea how many college educations their trees will buy if they manage them for long term revenue.

Land conversion is more of a problem in the Midwest – Indiana for example - than it is in the West because, again, the parcels are usually smaller and hold “higher and better use” potential for developers.

REITS have already disposed of their higher and better use lands. These are usually parcels around small lakes than cannot be easily managed because of water quality restrictions. They fetch handsome sums of money from people who want a home in a forest with a lake at the edge of their well-manicured lawn. It is as close to wilderness as they will ever get.

Land exchanges will continue. Despite the fact that they are controversial and difficult to value, consolidating ownerships in larger, more easily managed blocks makes sense economically and environmentally.

I think conservation easements will grow in popularity because it is a good way to conserve land while still protecting the right to periodically harvest timber. The black helicopter gang does not think much of these easements, which they see as a risk to property rights, but if you have willing parties and good lawyers involved, not much can go wrong.

I have no idea where we are headed in our national forests, though I sense a groundswell of unhappiness with the status quo. We may have a felt necessity in the making, in which case we can expect big and perhaps swift changes in what the public demands from its forests.

Opinion surveys reveal what the public favors in clear and unambiguous terms: clean air, clean water, abundant fish and wildlife habitat and a wealth of year round recreation opportunity. These are not attributes found amid black sticks, and the public knows it, which is why their aversion to wildfires is as strong as it’s ever been. The “don’t worry, its natural” crowd is not going to win this argument.

In my opinion, the eventual success of the collaborative process is going to lead society in the direction of a new felt necessity. NEPA will be modernized to fit the realities of today’s dreadful forest health problem and federal forests will again be managed for multiple benefits.

The tattered relationship between the Forest Service and rural communities it helped build will also be knit back together again. We won’t see a rebirth of the old federal timber sale program, but a lot of wood is going to get harvested in the name for forest conservation and restoration.

Over the next decade, litigation is going to fall out of fashion because it is a dead end street and because conservationists are not going to allow lawyers to halt progress in the direction of conserving – not preserving but conserving – habitats that are vitally important to all species, including humans.

No one is going to be denied access to the courtroom, but nuisance lawsuits designed to demoralize the Forest Service are going to become so publicly unpopular that those who engage in the activity will become public pariahs. Eventually, Congress will cut off their funding. When that happens, there won’t be a lawyer in sight.

I would like to think that the day is coming when industrial timberland owners will again be the fabulous communicators they were back in the vertically integrated era. I have a boxful of old brochures at home that tell me that the industry did a wonderful job of telling its story for at least 25 years after World War II.

I know this to be true because I personally knew three of the best: Bill Hagenstein, who I have already mentioned; Dave James, who was the old Simpson Timber Company’s vice president of government relations; and John Benneth, who was the old American Paper Association’s man on the scene in Portland.

I met all of them – Bill, Dave and John – when I was still a working journalist. There was nothing they would not do to help me tell a good story. Accuracy was everything. The thought of exaggerating the truth, or telling an outright lie, was unthinkable. And I was never once asked to embellish a story for the benefit of a company or the industry.

Looking back on that time in my life, and the influence Bill, Dave and John had on me professionally – Bill especially – I guess it is not all that surprising that I still do what I do today, or hold the beliefs that I hold where forestry and forest products manufacturing are concerned. Although I am 70 now, I am blessed with great health and a strong desire to continue speaking out as I have tonight.

I am additionally blessed to have a beautiful wife who shares my desire to tell the forestry story in the dignified and truthful way it deserves to be told. We thank you for inviting us to be with you this evening.