Revised May, 2003
By Kevin Zobrist
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Fact Sheet #02
|In July 2001, Washington State adopted the
final version of a comprehensive update to its forest practices
rules. The updated rules, known as the "Forests and Fish
Rules" (FFR), are intended to protect and restore forested
salmon habitat and other aquatic resources. The rules include
significant restrictions on timber harvest in riparian areas.
There is concern that the new rules will be particularly burdensome
for small, non-industrial private forest (NIPF) landowners,
diminishing their economic viability. This can cause unintended
consequences counter to the intent of the rules, such as increased
conversion of NIPF lands to non-forest uses. To better understand
the economic impacts of the new rules on small landowners and
the implications of these impacts, RTI has completed case studies
on ten NIPF ownerships in Western Washington.
||In Western Washington, the riparian
harvest restrictions under the FFR include a three-zone buffer
along both sides of fish-bearing streams (Figure 1).
No harvest is allowed in the zone adjacent to the stream, which
is known as the core zone. Beyond the core zone is the inner
zone, where partial harvest is allowed if the stand meets minimum
density and basal area requirements. The outer zone is the least
restrictive, allowing harvest subject only to minimum leave
tree requirements. The total buffer width on each side of the
stream extends to one site potential tree height (SPTH), which
is 170 to 200 feet on productive sites.
The economic impacts of these buffers can be particularly burdensome
for small forest landowners. Larger landowners can average their
impacts over a large area (Figure 2a), but with small ownerships
the impacts of buffers are concentrated on smaller areas (Figure
2b). This suggests that the impacts to small landowners are
likely to be highly variable, as those with streams on their property
may experience high impacts while those without streams may not
be impacted at all.
The purpose of doing case studies is to better understand these
issues of variability and disparity and to see how individual landowners
are impacted by the rules. Cases studies also offer opportunities
to compare impacts between different management options. We looked
at the extent to which the economic impacts would be reduced by
doing the maximum allowable partial harvest in the riparian zone
compared to treating all three zones as a no harvest area, which
is the strategy chosen by most small landowners who have harvested
under the FFR.
|Figure 2a: With large ownerships, buffer
impacts can be averaged over a large area.
||Figure 2b: With small ownerships, buffer
impacts are concentrated on some owners.
We also looked at the extent to which economic impacts would be
mitigated by participating in the Forestry Riparian Easement Program
(FREP). The FREP was established along with the FFR to help offset
the cost of the new riparian buffers to small landowners. Landowners
who participate in the program are given cash compensation at the
time of harvest for a portion of timber value that must be left
in riparian buffers. If the value of the required riparian leave
trees amounts to 19.1% or less of the total harvest value, then
compensation is given at 50%. If the value of required leave trees
exceeds a high impact threshold of 19.1% of the total harvest, 50%
compensation is given for the first 19.1%, while full compensation
is given for the remaining value in excess of 19.1%. Participation
in the FREP places a 50-year easement on the required leave trees.
To demonstrate the use of technology in addressing complex forestry
issues, the latest computer software tools were employed to do the
case studies. Spatial data for each case study was compiled using
Geographic Information Systems (GIS). This data was then combined
with forest inventory data in the Landscape Management System (LMS),
a program developed at the University of Washington that integrates
a suite of tools such as growth models and forest visualization
programs. Using LMS, management simulations were done under the
previous rules and then under the new rules. The harvest outputs
from LMS were then put into spreadsheets for economic analysis.
Several criteria were used to evaluate the economic performance
of the new rules relative to the old rules for each case study.
The first criterion is forest value, which represents the total
value of a forest as an economic asset. This includes the economic
value of both the currently standing timber and the land on which
it stands given a target rate of return, which was a real 5% for
Land value (also called land expectation or soil expectation value)
was then separated from forest value and used as an additional criterion.
Land value is the residual value that remains after the existing
timber is harvested, and it is based on the economic potential for
producing timber rotations in perpetuity when starting from bare
land. Land value is of particular interest because it demonstrates
the economic performance of beginning a new rotation once the existing
rotation is complete. Thus, it represents the economic potential
for sustainable forest management.
The results of the case studies are plotted in Figure 3
as a percent change in value relative to the previous rules (the
permanent rules that were in place before the FFR). The forest value
losses are most severe if no riparian harvest is done, treating
all three zones as no-cut areas. The impacts from that scenario
range from a best case 23% loss to a worst case 54% loss. If the
maximum allowable harvest is done in the inner and outer zones for
each case study, impacts range from a 17% loss to a 35% loss in
forest value. If the maximum allowable riparian harvest is done
and each landowner participates in the FREP, impacts range from
a 1% loss to a 12% loss.
|Figure 3: Percent change in
forest value and land value under the FFR relative to the previous
rules for ten Western Washington case studies.
The impacts on land value are more severe than impacts to total
forest value. If no riparian harvest is done, impacts range from
a best case 29% loss to a worst case 115% loss. If the maximum allowable
riparian harvest is done, impacts range from a 21% loss to a 92%
loss. Losses greater than 100% indicate that the target rate of
return can no longer be achieved.
The results of these case studies support the idea
that the economic impacts to small landowners from the FFR are
highly variable and that the impacts will be severe for some landowners.
The impacts are most severe if no harvest is done in the riparian
zone. The results suggest that landowners can reduce their losses
by doing the maximum allowable riparian harvest. However, even
with maximum riparian harvest the losses are still substantial
in some cases. Part of the reason that maximizing riparian harvest
does not do more to minimize impacts is that calculating the allowable
riparian harvest requires additional cruising and layout costs
that offset any value recovery.
Land value appears to be particularly diminished
by the new rules, with some case studies losing most or all of
their land value. Land value is lost in no-cut areas such as the
core zone and parts of the inner zone, as the permanent retention
of these trees precludes the use of the land for growing future
timber rotations. If a significant portion of a given property
is taken out of production because of buffer restrictions, it
makes the entire property unprofitable in some cases, as there
is now a much smaller production base to cover fixed overhead
costs. Fragmentation may also make management unfeasible for the
entire property in some cases. Significant decreases in land value
imply that continued forest management will no longer be economically
viable for some small landowners under the FFR. This will likely
result in unintended consequences such as increased land use conversion.
The results show that the FREP can be very effective
at mitigating impacts. If each case study participated in the
FREP, the magnitude and disparity of forest value losses would
be significantly reduced. Part of the reason the FREP is so effective
is that the 19.1% high impact threshold limits losses to a maximum
of 9.55% of the total sale (50% of 19.1%). Since the timber qualifying
for compensation under the FREP includes timber that had to be
left under the previous rules, landowners can actually have a
gain in forest value relative to the previous rules in some cases.
The FREP also compensates for the extra layout costs associated
with harvesting in the riparian zone, making it more economical
to do the maximum riparian harvest.
Unfortunately, current funding levels for the FREP
fall well below the level required for large-scale participation,
and future funding is uncertain. Consequently, the majority of
small landowners will not be able to benefit from this program.
Also, the FREP only compensates for standing timber; it does not
compensate for the land on which that timber stands. Thus, it
does not mitigate for losses in land value or address the associated
long-term sustainability issues.
Additional work is in progress to examine potential
alternate plans that would provide equivalent protection of aquatic
resources while minimizing economic impacts to landowners (RTI
Fact Sheet #23). Case studies
for Eastern Washington have also been analyzed (RTI Fact