Governor's Advisory Committee on Chip Mills

Final Report
August 1, 2000

B. SUSTAINABLY MANAGED FORESTS

The impact of the chip mills on Missouri forestlands will be played out in the kinds of forest practices -- whether or not they qualify under the heading of 'management' -- that are undertaken by the state's nonindustrial private forestland owners who will furnish the bulk of the wood supply to the mills. In effect, the 'chip mill issue' is bigger than the chip mills per se. From a timber perspective, it extends across a continuum of wood flows from privately owned land, through the loggers, and to the mills. While the mills can certainly influence this process -- and if and how they do so is an important concern -- they do not control it entirely. For example, based on the previous discussion, it can be said that if sustainable forest management is practiced by Missouri landowners that there will likely be enough standing timber to supply the existing mills for some time, possibly even with some increases in demand.

It is also widely recognized that Missouri's private forests have been, for the most part, managed poorly and without professional guidance for some time. Thus the 'problem' of sustainable forest management in Missouri precedes the chip mills, although the latter may certainly influence it. In addition to a sustainable forest resource base, another central outcome envisioned by the members of the Governor's Advisory Committee is a situation of sustainably managed forests in the state. In considering this thematic area, a first concern centers around what it is that this kind of management would involve on the part of, in particular, Missouri's nonindustrial private forestland owners. Attention then turns to more practical aspects of how this might be achieved through forest management; the potential that such management could be conducted in a way that is profitable to Missouri landowners; and some possible impacts of the chip mills on such a process.

What is Sustainable Forest Management?

In recent years, the notion of sustainability with respect to forests and natural resources has become a catch phrase to signify a more enlightened approach to understanding and managing forests and other natural resources. Actually, however, the concept has been around for a long time, and its roots may be traced to the profession of forestry. In the 1880's, when resource management in earnest was just getting started in the United States, it was strongly influenced by many European foresters -- especially Germans -- who in coming to this country brought with them well-formed ideas about forestry anchored in the concept of sustained yield and managing forests over the long-term and maintaining productivity. In 1905, Secretary of Agriculture James Wilson declared that the country's National Forests were to be managed for the development and administration of their renewable surface resources for the multiple use and sustainable yield of their various products and services.

In the early days of forestry in this country, the emphasis had focused primarily on sustained productivity of forests for timber. But it was also recognized that sustained timber production was dependent upon, in particular, sustaining the viability of soils and watersheds. Today people are still concerned about these areas, but society's values have expanded to give increased emphasis to sustaining other forest resources as well, including wildlife and plant species, as well as a range of environmental factors. At the national level, the Multiple Use Sustained Yield Act of 1960 established this resource management philosophy as Congressional direction for the National Forests, and that in turn encouraged adoption of that perspective by other federal and state agencies -- including the Missouri Department of Conservation -- and many private forestland owners (Law 1992).

Nevertheless, although it is a socially and politically potent concept, sustainability is frequently not well defined. For much of the past century, forests have been viewed as sustainable if the periodic growth of commercially useable timber was at least equal to timber removals. Over the past several decades, this idea has been expanded to include other uses of the forest such as recreation or other services without a significant decline in either quantity or quality. In the 1990's, moreover, sustainability has come to include the maintenance of well-functioning ecological processes, which in turn are seen as the basis for a variety of ecosystem services important to humans. The ecological perspective has also fostered a vision of humans as not situated above and beyond the ecosystem, but within it. Thus the focus of sustainable ecosystems has come to include not only the traditional biological processes characteristic of forests and other natural systems, but also humans as members of ecological communities (Leopold 1987 [1949] ).

In this light, it is first worthwhile to briefly recognize two contemporary perspectives or visions of the kinds of considerations that are involved in sustainable forest management in Missouri. A first vision of sustainably managed forests has been endorsed by the American Forest and Paper Association through their Sustainable Forestry Initiative (SFI) program. The association has produced a set of guidelines outlining what it considers to be important elements of sustainably managed forests to which their member firms are expected to conform (Table 6a). This reveals how forest industry translates the idea of forest sustainability into a number of concrete on-the-ground management activities. While the monitoring of the SFI Initiative is at this point based on a system of self-reporting by member companies, third-party verification remains a topic of discussion and some firms have adopted it voluntarily.

Another contemporary perspective of sustainably managed forests reflects the principles expressed by the Forest Stewardship Council [FSC] (Table 6b). The principles imply that the idea of sustainable forests and their management encompasses a variety of important goals including an economy that affords opportunities for a meaningful quality of life, equity of opportunity for achieving well-being, and environmentally sustained and protected natural resources for future generations. While the FSC's perspective focuses less directly on the specific kinds of forest practices that together may contribute to sustainability, it highlights many of the broader social and economic concerns that are also vital considerations if sustainably managed forests are to become a reality. It also adds an international flavor to the concept, reminding us that these concerns are not those of Missourians alone, but are shared by peoples around the world as part of a truly global economic, social, and ecological system.

These two perspectives complement one another in defining a framework for sustainable forest

Table 6a. Sustainable forest management as reflected in Sustainable Forestry Initiative guide- lines for member companies of the American Forest and Paper Association (AFandPA). (Source : AFandPA 1998)

1) Broadening the practice of sustainable forestry : Require members to develop specific programs, plans, and policies to achieve sustainability. Support research.

2) Cooperating with private landowners and loggers : AFandPA members will work with the forestry community in each state to inform other woodland owners about the benefits of reforestation; promote the establishment of training programs for loggers; and support and promote other landowner education efforts.

3) Protecting water quality : Implementation of best management practices (BMP's) is key to protecting water quality in streams and lakes -- BMP use required for SFI participants. This may include implement- ing erosion control measures on roads and skid trails and leaving vegetated buffer strips along streams

4) Minimizing the visual impacts of harvesting : Management of clearcut size : On member company lands the average clearcut size is required to be less than 120 acres. Adjacency requirement : For adjacent stands that will be harvested, original clearcut site must have trees that are at least 3 years old or 5 feet tall

5) Promptly reforesting harvested areas : Replanting is required within two years of harvest . For natural regeneration, stands must be established within five years

6) Contributing to biodiversity : Use adaptive management (logic of scientific experimentation) and support research to learn more about how to manage lands for biodiversity and conserve biodiversity

7) Enhancing wildlife habitat : Where appropriate, enroll lands and/or streams in wildlife and fisheries agreements with conservation groups and public agencies that specify on-the-ground management practices

8) Protecting special sites : Identify and appropriately manage sites which have ecological, historical, or geologic significance

9) Continuing the prudent use of chemicals prudently : Prudent use of herbicides and fertilizers to restore health and productivity of lands damaged by insects, disease, or natural disasters; to ensure successful reforestation following harvest; and to improve forest productivity, and enhance wildlife habitat. Meet or exceed all federal, state and local laws and regulations.

10) Continuing to improve forest utilization : Employ the appropriate technology, processes and practices to minimize waste and ensure the efficient use of trees harvested.

11) Providing opportunities for public outreach : Encourage mechanisms to facilitate interaction with the public, government policy makers, and opinion leaders about program goals.

12) Publicly reporting progress : Member companies will report annually on their compliance with guidelines; AFandPA will issue and annual report regarding its memberships' performance; and a panel of independent experts will validate information reported in the annual progress report. Table 6b. Forest Stewardship Council : Principles of Forest Management (FSC 1994)

1. Forest management shall respect all applicable laws of the country in which they occur, and international treaties and agreements to which the country is a signatory, and comply with all FSC principles and criteria.

2. Long-term tenure and use rights to the land and forest resources shall be clearly defined, documented and legally established.

3. The legal and customary rights of indigenous peoples' to own, use and manage their lands, territories, and resources shall be recognized and respected.

4. Forest management operations shall maintain or enhance the long-term social and economic well-being of forest workers and local communities.

5. Forest management operations shall encourage the efficient use of the forest's multiple products and services to ensure economic viability and a wide range of environmental and social benefits.

6. Forest management shall conserve biological diversity and its associated values, water resources, soils, and unique and fragile ecosystems and landscapes, and by so doing, maintain the ecological functions and integrity of the forest.

7. A management plan -- appropriate to the scale and intensity of the operations -- shall be written, implemented, and kept up to date. The long term objectives of management, and the means of achieving them, shall be clearly stated.

8. Monitoring shall be conducted -- appropriate to the scale and intensity of management -- to assess the condition of the forest, yields of forest products, chain of custody, management activities and their social and environmental impacts.

9. Primary forests, well developed secondary forests and sites of major environmental, social or cultural significance shall be conserved. Such areas shall not be replaced by tree plantations or other land uses.

10. Plantations should complement natural forests and the surrounding ecosystem, provide community benefits, and contribute to the world's demand for forest products.

management that goes beyond abstract generalities to outline the kinds of attitudes and concrete technical and social processes that will be required if sustainable forest management is to become a reality.

In light of the above, the Governor's Advisory Committee on Chip Mills, when considering its role in contributing to the formulation and management of public policies for enhancing sustainably managed forests in Missouri, agrees with the National Research Council (1998) that such programs and policies should :

This will require investments in human and natural capital, biological integrity, financial soundness, and institutional strength. Such investments will also depend on broad-based social and political support, including a willingness to recognize and address fundamental issues affecting the future of our forests and other natural resources.

Levels and Intensity of Forest Management

Stand structure and dynamics. Oak has historically been among the dominant overstory vegetation components in this part of the country, and about three-fourths of Missouri's forests are dominated by oaks (Spencer et al. 1992). The oaks usually persist as the dominant members of stands facilitated by a natural regeneration dynamic that favors accumulation of oak seedlings and seedling sprouts beneath the canopies of mature stands. It is the resultant buildup of this reproduction, which can occur in the absence of fire or disturbances, that distinguishes Missouri's oak forests from similar forests in other ecoregions (Walter and Johnson 1999). Many of the resultant seedling sprouts grow rapidly in height after natural or man-caused disturbances to the forest canopy that increase the sunlight near the forest floor. Such disturbances, combined with the oak's ability to sprout from the bases of cut or fire-killed trees, assures the continued dominance by oaks.

The structure of Missouri forests may be described with the aid of two general terms. Even-aged stands are comprised of trees of a single age class. Uneven-aged stands are made up of at least three age classes of trees closely intermingled in the same area (Smith 1986). An even-aged forest goes through a fairly regular progression of development. From establishing the new reproduction if completely utilized as a site, it moves into a stage of self-thinning in which as the trees grow, they thin out due to competition. As they get larger, other gaps are created in the canopy, allowing reproduction to become established under the canopy. Finally, the stand progresses into an old growth phase. In the development of uneven-aged stands, the same sorts of processes occur, but they do so at a different scale. Individual trees may die or be removed, but basically the same principles are at work -- as stands age over time the volume changes and the characteristics of the forest change. Increasing volume yield through management. As described earlier, Missouri forests have an abundant amount of cull material mixed in with the growing stock. Based on assumptions used in the analysis of statewide inventory data for 1972 and 1989, estimates of potential net annual growth resulting directly from better forest management range as high as 650 million cubic feet, although not all of that would be suitable for harvest. 'Better' forest management would involve practices that can increase net growth in Missouri forests, including :

Forest management can increase the total volume yield of a forest stand. This is usually accomplished by thinning and intermediate harvests. These practices increase total yield in two ways. First, they harvest and utilize trees that would otherwise die from inter-tree competition. Second, the amount of growing space is increased for remaining trees. These latter trees grow faster than they would without thinning. In addition, because the trees favored with additional growing space in the thinning process are usually the largest and best-formed trees, the volume growth is concentrated on trees that will have the greatest increase in value. In general, the greatest benefits from thinning are obtained when it is started early in the life of the stand and continued on a regular basis.

The potential effects of thinning on oak stands are depicted in Figures 7 and 8. The earlier the thinning begins in the life of the stand and the better the site quality (as reflected in a higher site index), the greater are the increases that can be realized in total volume yield over time. In the past there have been few markets for cull trees, low quality trees, and trees smaller than 9 inches in diameter that result from thinning. Consequently, thinning (particularly thinning early in the life of a stand) has frequently been a management expense rather than a source of revenue from the harvested trees.

Figure 8 illustrates for thinned stands how the combination of volume from trees harvested during thinning and the increased growth on the remaining trees can substantially exceed the growth of unthinned stands. Thinning removes cull trees and reallocates their growing space to trees of better quality. In this example, the thinned stand was thinned to 60% stocking every 10 years beginning at age 30. Total volume yield for the thinned stand is the sum of two components -- the live trees that

Graph showing site quality and age.

Figure 7. Effect of site quality and age at first thinning on cumulative board foot yields (cut volume + residual stand volume) of central hardwood oak stands. (Gingrich 1971)

Graph showing live trees and harvest levels.

Figure 8. Live trees and harvest levels in thinned and unthinned stands. Based on a stand with site index 65. (Gingrich 1971)

remained after thinning and the volume of material harvested during the thinnings. Yield for thinned stand is nearly identical to the unthinned stand through age 50, but by age 80 the cumulative yield for the thinned stand is nearly double that of the unthinned stand. Given that one-third of the standing cubic foot volume in Missouri is in cull trees -- i.e, some 4.8 out of 13.8 billion cubic feet -- the opportunities to replace cull trees with growing stock trees through management are enormous.

The forest inventory analysis prepared for the Governor's Advisory Committee focused exclusively on cubic foot measures of forest growth and removals, because those are relevant to chip mill wood procurement. However, the changes in board foot volume between 1972 and 1989 provide further evidence of both the need and the opportunity to improve the value of private forestlands through management. Between 1972 and 1989, the total board foot volume of growing stock trees increased from 15 billion to 26 billion board feet (as estimated by the international 1/4" log rule). However, during this period the volume of timber in the highest two log grades actually decreased, while the volume in the lowest log grade increased by almost 10 billion board feet (Shifley 1999b).

This clearly suggests that forest management can be used to increase the volume of timber in the better log grades and, concurrently, the economic value of the forest products. In theory, by starting early in the stand's history and managing intensively, the growth in terms of board feet can be almost doubled by thinning out the lowest quality trees, utilizing them, and increasing the growing space and concentrating that growth on the highest quality trees. Thus increasing the intensity of management by reducing the number of cull can lead to much higher timber volumes and quality. One economic issue associated with this is how to pay to remove cull tree material. If chip mills provide such a market, and if they actually utilize the vast amount of cull material potentially available, then a linkage between the mills and better management of Missouri forests could clearly be established. However, as noted earlier, the mere existence of a potential market does not necessarily imply anything about the kind of harvesting practices utilized to supply that market. Additional information is required to establish such a linkage. In that regard, the Governor's Advisory Committee requested and received an annotated bibliography "Potential Impacts of Chip Mills in Missouri" (Walter and Dwyer 1999) which contained an extensive set of references on economic and environmental impacts of harvesting practices which might be conducted in response to demands for chips and other forest products.

Sustainable Management and Private Forest Profitability

Among the many aspects of sustainably managed forests is the question of whether, even if sound management practices are applied, management of Missouri's private forestlands is an economically viable option for landowners over the long term. Fortunately, an active research project has been underway for some time which, among many other things, has addressed the question of the potential profitability of private forest management in the state.

The Missouri Ozark Forest Ecosystem Project (MOFEP), initiated in 1989 in southeastern Missouri, is a 9,200 acre long-term landscape experiment designed to compare the impacts of even-aged, uneven-aged, and no management on a wide array of ecosystem components. This large research project lies in and around the procurement area for one of the chip mills in question.

One of the components of the MOFEP project involved a complete forest inventory of both pre- and post-harvest forest conditions.. A team of researchers from the Missouri Department of Conservation and the University of Missouri-Columbia used these data to model the long-term economic outcomes of different harvest regimes over a 100-year period following the initial harvest (Dwyer et al. 1998). The growth and yield model used was the Forest Vegetation Simulator (FVS), the Central States variant (Bush, 1989). Data for the model included actual harvest levels and residual inventory.

The results of the economic modeling of the even-aged or clearcutting regime provide information on the potential impacts that clearcutting -- possibly in response to demands generated by the chip mills -- may have on the long-term profitability of private forests in Missouri. The results of the study show that even-aged management can generate net present values ranging from $24 to $40 per acre. According to the model, even-aged management can be economically sustainable over a 100-year period. This implies that long-term timber production can be an economically viable option for landowners.. In contrast, the results for the control (no management) sites ranged in value from $2 to $3 per acre in net present value. These differences in value between management and no management are attributable to management harvests which capture increases in growth and yield as well as mortality which would have been otherwise lost to production.

The above study considered only timber production and did not attempt to analyze other direct and indirect uses of the forest resource base. The economic parameters for the study included a 4% discount rate, an investment period of 100 years, and stumpage price figures published in the Missouri Timber Price Trends market report. Natural regeneration was modeled using the ACORN (A Comprehensive Ozark Regeneration Simulator) model (Dey et. al 1996). The management regimes used were developed based upon current Missouri Department of Conservation forest management guidelines.

The Wurdack Farm, an outlying experiment station of the University of Missouri-Columbia, was the site for another study to develop a management plan for the property which would produce a sustainable yield of merchantable timber (Trammel 1991). The farm is located in the Eastern Ozark region of southern Missouri. The topography is comprised of narrow, stony ridges suitable for growing timber, and valleys suitable for forage crops. This is typical of many of the farms in this region. This study compared the economic returns of even-aged (clearcutting) versus uneven-aged (single-tree) management. Results indicated that either management method can yield suitable returns to the management of the oak-hickory forests found on this property. Furthermore, this study found that either even-age management with provisions for natural regeneration, or uneven-age management using a 20-year harvest cycle with provisions for natural regeneration, will yield the highest returns to management at real discount rates between 2.0 and 7.0 percent and stumpage prices between $80.00 and $100.00 per thousand board feet (mbf).

In view of the extensive discussions concerning even-aged management (i.e., clearcutting) that have accompanied the 'chip mill issue,' it is worthwhile to take note of one of the longest sustained efforts at uneven-aged management that has been occurring in Missouri for several decades. Pioneer Forest is a large and privately-owned forest of nearly 160,000 acres in southeast Missouri that was established in the 1950's to demonstrate the long term benefits of sustainable forest management using a method of uneven-aged silviculture known as single-tree selection harvest.. Ongoing efforts at Pioneer hope to demonstrate the benefits that are possible from a well-managed uneven-aged Ozark forest, including economic returns, restoration of forest landscapes, protecting significant species diversity and natural communities, and providing ongoing recreational opportunities. To help accomplish the above, a continuous periodic forest inventory has been conducted on Pioneer lands since 1952, measuring various components of the forest such as species diversity, as well as tree characteristics such as height, diameter and condition. This has provided a wealth of data for systematic research relating uneven-aged silvicultural techniques to timber yields and potential profitability which began in the mid-1980's and promises to strengthen the knowledge base on this important type of silvicultural approach.

In the Wurdack study noted above (Trammel 1991), market prices for timber were assumed to remain constant over the period of the study, thereby limiting the practical application of its results to some degree. A recent study compared even- and uneven-aged management regimes over a 24-year period (1975-1999), while taking market price changes and inflation into account(Iffrig et al. 1999). The results indicated that substantially greater returns per acre were realized with the uneven-aged regime (two selective harvests over the period) when contrasted with an even-aged regime in which the stand was clearcut at the beginning of the period and the income invested at a 5% rate of return . The results of this study do highlight the fact that uneven-aged management can be profitable for private forestland owners in Missouri. In terms of landowner motivations to adopt such techniques, this will be most valuable for those to whom frequent, periodic returns for timber harvesting and the nontimber values of the forest ecosystem are of primary importance. Moreover, with the turnover rate for an average acre of nonindustrial private forestland (NIPF) in the state recently identified as 28 years, uneven-aged management does not require a land tenure period extending the length of an even-aged rotation in order for the landowner to realize a profit from his or her timber. This could be significant when contrast to the prospects for immediate returns to owners from clearcutting for chip mills, owners who may give little thought to the greater per acre returns that could be realized at the end of a 60-year rotation.

It is evident that much more research is needed in order to better understand the potential profitability of timber harvesting on Missouri forestlands. Nonetheless, on an overall basis, the results of these studies provide some evidence that managing Missouri's private forests for timber can be profitable using either even- or uneven-aged management regimes when conducted in a manner conducive to sustainable forest management.

Chip Mills and Sustainable Private Forest Management

The effects of chip mills on the possibility of enhancing sustainable forest management in Missouri must be assessed in the context of the history and management of private lands in the state. As noted earlier, despite their many virtues, Missourians are not especially renowned for superior forest management. At the same time, it has been mentioned that the chip mills may provide a potential market for an abundant 'cull resource' that reflects a history of poor forest management in the state. Whether such a pattern of management continues in supplying the chip mills themselves, however, is a topic of major concern.

It is worthwhile, therefore, to briefly consider the array of possible outcomes in terms of management practices that could be adopted by landowners in response to the demand for chips. In a study in Arkansas, Guldin (1999) constructed a 'scale' of five possible outcomes of chip mill harvesting (Table 7) -- that is, harvesting conducted in response to demands generated by the mills, and in which the wood harvested was for chip mill consumption. A landowner would be at the 'top' of the scale if he or she selected the 'best possible outcome' when having their land harvested for chips.

The best possible outcome would occur when the harvests were used to thin growing or mature stands, remove the cull material, and open up the stand to allow for accelerated growth of the remaining higher quality trees. The second best outcome would involve clearcutting, removing the

Table 7. Scale of five possible outcomes of chip mill harvesting. (Guldin 1999)

*** Practicing sustainable forestry => Best possible outcome ***.

1) best possible outcome : Harvests used to thin hardwood pole timber or sawtimber stands where the worst trees were cut and the best trees remain

2) second best outcome : Clearcutting the stand with a follow-up treatment to remove the cull material and the undesirable species left behind, with the primary goal of letting the oak component re-sprout with optimal competitive advantage.

3) third best outcome : Clearcut harvest with follow-up treatment, and planting pine.

4 ) fourth outcome: Harvest with no follow-up treatment -- stand reverts to poor quality hardwoods.

5) least desirable outcome : Conversion to pasture; commercial forest area is removed from forest cover.

cull material in the process, and 'cleaning up' the site to allow a healthy oak stand to regenerate from stump sprouts. Very little residual stems would be left here except in the stream-side zones and the wildlife den trees. This represents an instance where clearcutting can be a valuable management tool, especially if the stand is of such low quality overall, with not only cull but poor quality larger trees as well. In cases like this, it can be best from a silvicultural standpoint to 'start over' and actively manage for a healthy stand.

The third best outcome would again involve clearcutting, but in this case re-planting the site with pine. This might be a sound management practice for some Ozark sites on south- and southwest-facing slopes. Here site factors may work against development of a productive hardwood stand. In such cases, 'starting over' and converting to pine, which can accommodate better to such sites, may be the most effective way of enhancing forest sustainability. Planting is important here for stand establishment.

A fourth outcome might be a harvest, most likely a clearcut, with no follow-up treatment. In this minimal management scenario, no effort is made to influence the development of the stand subsequent to harvest. With no effort, little can be expected in terms of the growth that does come back. One variant of this poor outcome would be the case where, despite the fact that there are trees left on the site, the future developmental dynamics of the site are now in the hands of hickory and red cedar. Finally, the least desirable outcome along this scale would occur when the stand is clearcut and the land is converted to pasture. As opposed to 'management,' this outcome is basically forest liquidation. The land is simply cleared and converted to a non-forest use.

In the above study in Arkansas, which focused on two mills that exported all their chips out of the state (and thus a very small segment of the overall chip mill industry in the state), Guldin found that outcomes 4 and 5 in Table 7 constituted 90% of the options selected by landowners in supplying wood to the chip mills. He concluded that the best possible outcome listed above involves the kind of treatment that chip mills, because of their innate economics, generally don't do or encourage in Arkansas. With respect to such kinds of thinning operations, it takes very careful logging supervision to avoid having the more valuable small saw logs not damaged as a result of the logging. As a result, in relating chip mill demand to harvesting practices that occurred on private lands in response to that demand, Guldin concluded that in the large majority of cases the harvesting for the chip mills was not good forestry.

The dearth of other studies directly linking chip mill demand to on-the-ground practices on private lands in response to those demands makes it unwise to generalize from this instance to a broader conclusion encompassing all NIPF lands. It does suggest, however, that with respect to the situation in Missouri, and given the history of poor forest management on most private lands even prior to the arrival of the chip mills, that even having an adequate supply of wood in Missouri forests and concrete evidence that forest management can be profitable for private landowners -- important as these aspects are -- may not be sufficient by themselves to lead to sustainable forest management on the state's private forestlands. Other factors, particularly those linked directly to motivations of landowners to manage their lands, must evidently come into play for this to happen.

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