Governor's Advisory Committee on Chip Mills

Governor's Advisory Committee on Chip Mills
Department of Natural Resources
1738 E Elm – Conference Center
Jefferson City, Missouri
July 12, 1999
Meeting Minutes

Committee Members Present

Earl Cannon, Department of Economic Development
Wayne Goode, Senator
Mark Garnett, Forest Products Representative
David Day, Private Property Owner Representative
Jay R. Law, Citizen Environmental Conservation Group
Steve Mahfood, Department of Natural Resources
Marvin Brown, Department of Conservation
Jon Smith, Forest Products Representative
Doyle Childers, Senator
Emily Firebaugh, Forest Landowner
David Bedan, Citizen Environmental Conservation Group
Bill Foster, State Representative

Interested Parties Present

John Wood, Westvaco
Tom Kruzen, Missouri Coalition for the Environment
John McCannon
John P. Slusher, University of Missouri, Columbia
Tom Lange, Department of Natural Resources
Ken Midkiff, Sierra Club
Cory Ridenhour, Missouri Forest Products Assoc.
Roy C. Hengerson, Missouri Coalition for the Environment
Caroline Pufalt, Sierra Club
Jillian Borchard, Missouri Heartwood
John Powell, Powell Lumber Co.
Dusty Walter, University of Missouri, Columbia
Jim Guldin, USFS, Southern Research Station
Steve Shifley, USFS, North Central Research Station
Mike Smith
Charles Hirt, Canal Wood
Krissy Krulj, Missouri Heartwood
Denise Vaughn, W.P. Daily Quill
Dennis Ballard, CFM
Susan Flader, University of Missouri
Jay Wunderlich, Harness-Gallagher
Scott Brundage, Missouri Consulting Foresters Association
Dan Schuette, Department of Natural Resources
Hank and Katie Dorst, Forest Watchers
Katie Auman, Missouri Coalition for the Environment
Steve Galliher, Willamette Industries
Vince Henry, Missouri-Pacific Lumber Company
Devin M. Scherubel, Missouri Heartwood
Bill Bryan, Missouri Attorney General's Office
Llona Weiss, Department of Natural Resources
Nancy Gilliam
Kirk McFadden
Dr. Bernie Lewis, School of Natural Resources
Dr. Jerry Wade, University of Missouri

Call to Order

The meeting was called to order by Co-Chair Marvin Brown. He said that the first order of business is the public comment. Two people requested to speak. Marvin said that if there is time at the end of the meeting, more people could speak.

Public Comment

The first person to speak was John Powell, a lumberman and horse owner from Rolla. He has been managing timber for 50 years and stated that he has no connection to the chip mill. He presented posters of pictures and articles from newspapers to the committee. These were pictures taken of land in Texas County showing destruction from cutting timber. He stated that none of this timber went to a chip mill. He said that this massive destruction would have taken place regardless of whether or not there are chip mills. Attached is the statement he read to the committee. After reading his statement Jon Smith asked what type of control he would like to see regarding chip mills. Mr. Powell said that he would like to see control go no further than the county court level, he would like to see it as far away from the top bureaucrats as possible. As a landowner, he would much rather pay a tax than have the government tell him what to do or not do with his land of timber. This tax should be used for the specific purpose of educating landowners and giving the landowners the incentive to use best management practices (BMP). He proposed that landowners that use BMP would have an exemption or partial exemption from this tax. David Bedan referred to Mr. Powell's statement that chip mills could be a boon to the landowner by helping them cut culls in the timber stand. He asked if he has seen any evidence that that has actually happened so far and has he seen a dent in the timber resource? Mr. Powell answered that the chip mills haven't been around long enough to see a dent in our timber resource. David Bedan asked to what extent have the chip mills helped landowners with timber stand improvement. Mr. Powell said that he presumed that so far it hasn't helped, because the land owners don't know any better and they need to be taught how to manage this resource. He went on to say that after 50 years of managing land, if some young man came and told him what to do concerning his land, that he would have a difficult time with that. Emily Firebaugh asked if he has any faith in forest banks for landowners.

Mr. Powell said that he never had any experience with them. Representative Bill Foster asked Mr. Powell how many acres of land does he manage. Mr. Powell answered17,000. Mr Powell stated that he would like to see regeneration of timber before the final cut. He said that clear-cut works. David Day then asked if he had any specific thoughts on how to educate the landowners. Mr. Powell suggested a tax relief if the landowner becomes educated. He said that he doesn't know if it will be possible to do, but that it would be the best thing to do. He stated that other programs within the United States do this, but he does not know the success rate. Otherwise the landowner should pay a 6% tax. If the landowner knew that he could get a rebate from that, he might want to learn to manage his timber properly. Senator Wayne Goode asked Mr. Powell if he has talked to any of his colleagues in the industry about his idea and if he has gotten any support to his approach. Mr. Powell said that yes he has, and some of these people are on the committee. He said that he has encountered mixed feelings about the tax. The tax should not be on the producers but on the source of the problem, the timberland owners. Senator Goode stated that he thought this was an interesting proposal. Marvin Brown stated that 6% tax would generate 6 million dollars. Emily Firebaugh stated that this was not a high enough penalty but a good approach. Marvin Brown stated that he did not have a good feel of what the correct amount should be.

Dusty Walter, a student at UMC, made the second statement. He read a letter from John Dwyer, Forest Management Specialist, Forestry Department, University of Missouri (attached). There were no questions.

Jon Smith commented about John Powell's proposed tax. He said that it would be discussed during the board director's meeting the next day. Senator Goode then asked if the tax was a reasonable approach. Jon Smith then commented that more people were coming around to it. Marvin Brown said that the initial reaction to a tax is always negative but the industry people that he has talked to are realizing that it is their turn to make positive initiatives. They want to ensure that there are forests in the future. Senator Goode said that if ear-marked funding goes directly to the problem, he is for it. Marvin Brown then said that if all landowners practice good forestry management, not much revenue is needed; it is a tax that you can get out of. Emily Firebaugh then asked if the tax would be for all landowners. Marvin Brown answered that it would be for anyone who is selling timber. Emily said that this is not done with any other crop. She said that she would have to question this.

Minutes of the April 5 and May 3 Meetings

Marvin Brown then went onto the next item of business, which were the minutes from the April 5 and May 3 meetings. Copies of these minutes had previously been passed out to the committee members. He asked for any comments. It was noted that in the April 5 minutes, that Tom Kruzen was missed as being at the meeting. Llona Weiss then asked people that attend the meetings be sure to sign the attendance sheet. She also stated that she also has two items to enter into the July meeting records, but would wait until the end of the meeting.

David Bedan noted that he was misquoted in the second full paragraph on page 7 last sentence of the May 3 minutes. He said that he didn't make the statement and asked that the statement be stricken. Llona Weiss made note of this.

Revised Schedule for Completion

Marvin Brown asked for any comments concerning this agenda item. Dave Bedan said that since the committee was created for high volume chip mills, he would like for the presentation of the Ozark Wood Fiber Chip Mill dropped and the Satellite Remote Sensing kept on the agenda. He said that if it is a matter of time that the two can't be kept on the August agenda, that he would rather drop the Ozark Wood Fiber Chip Mill presentation, because it's not a high capacity chip mill operation. He felt that the Satellite Remote Sensing would add a whole new dimension. Marvin Brown stated that this change was his suggestion and that hopefully this meeting will mark a shift in the committee's activities from gathering information to start making decisions. Emily Firebaugh said that she agreed with Mr. Bedan on changing the agenda to adding the Satellite Remote Sensing presentation. She would like to be educated on how to track timber cutting in the Ozarks. Jay Law then said that they have not talked to any loggers and the loggers should have a voice in this. People need to be brought forward who might need to be better trained. He said that remote sensing would only tell you how many acres are harvested per year. Co-Chair Steve Mahfood then stated that a time crunch is being felt, and the committee is trying to give time to information given to them and sort through it . Senator Wayne Goode said that the bulk of the remaining time needs to be spent on the report. Dr. Jerry Wade said that the committee needs to hold off making a decision until the framework is put together. Decisions should be based upon what needs to be done to educate the committee further. Specific topics need to be dealt with in the report. Need to hold off on making decisions on further agenda items concerning people providing further information, until there is an analysis of what information is really needed to make a quality report. The committee may be moving too quickly to make those decisions. Marvin Brown then said that it should be safe to remove the Satellite Remote Sensing presentation and leave the Ozark Mill presentation and the committee will wait for further instruction.

Jay Law asked what sort of things other states have done concerning regulation of timber harvesting. Jon Smith answered that severence taxes have been added. Kirk McFadden said that some people don't want taxes to add incentive for activities going on.

Speakers From Arkansas on Issues Relating To Experiences With Chip Mills - Dr. Jim Guldin

Dr. Jim Guldin from the Arkansas Southern Research Forest Service presented to the committed his observations of the wood chip mills in Arkansas.

In 1995 there was a new market for hardwood chip export mills. Exports refer to a minor segment of the Arkansas (AR) economy. Hardwood is shipped primarily to Japan for Asian papermaking. He said that the chip mills are not a big industrial facility. He then explained how logs are shipped and sent to New Orleans along the AR river system. Wood prices in AR are $20 to $22 per ton. Prices paid to landowners are about $4 per ton. They were not able to put a value on the wood chips when they got to Japan, nor were they able to determine how much the AR economy lost by not having the wood processing plant in AR. The primary concern was with the impact of the harvest activity on the hardwood forest of AR. Currently, export mills in AR use about 500,000 tons drawn from a 37 county wood supply area in the state, some of which border Missouri. In 1994 this represented 24% increase of hardwood pulp production and 7% increase of total hardwood harvest and a 15% increase in total hardwood harvest within that 37 county wood supply area. The chip mill harvesting is not targeted in AR to all landbases. Harvests do not generally occur in areas where saw timber is a predominent component of the forest, because the conversion value of saw logs is far beyond that of the pulpwood sources. This harvesting has not occurred on industry lands in AR for several reasons: 1) Hardwood forest industries are primarily pine using industries, and for 30 to 40 years these industries have done everything they can to liquidate hardwoods on their holdings. They failed in that long term effort, and are now harvesting hardwoods on those holdings and adding them into the products that they are using in their mills today. They are not releasing any of those hardwoods to the open market for processing by the chip mills. The non-industrial timberland owners own the majority of timberland owned in the state. National forests are not a focus of chip mill activity. The most mismanaged use of land is in the private sector. There are fewer high quality trees in this ownership sector. They could benefit the most from education about forest management. Dr. Guldin stated that chip mills do not constitute a threat to the AR forests. Chip mills have been present in AR since 1937. Not all landowners will sell timber. Seven percent of forest landowners are unwilling to sell timber. Twenty percent of forest land owners in the Ozarks are unwilling to sell timber nor have they ever sold in the past. Concerning chip mill export, the removals won't exceed growth given the current demand. If the industry demand doubled or tripled then there would be a problem. Chip mills don't contribute much to the economy. The chip mill industry has generated 168 direct new jobs (indirect 119) resulting in 5.3 million dollars worth of jobs yearly, with an additional 2.2 million dollars to land owners for timber purchases. It is impossible to calculate with the given data if the chip mill harvest will harm the tourist industry. It is far more critical to factor in site-specific locations. Most of the current recreation resource impact models that exist today have a special analysis built in to them. This means that the location of the harvest is as important as the total volume of the harvests and it is thought that ten harvests in the wrong location of the state would do more to adversely affect the tourism industry than the total value of the harvest. Dr. Guldin also said the big new chip mills would not drive the sawmills out of business. Trends have shown a 40% turn over of saw mills prior to the start of chip mill operation. This market is a highly volatile market subject to change anyway. Some additional impacts from the chip mills would cause an increase in competition, but it is hard to quantify since this sector of the market has a high rate of turnover. Because of this Dr. Guldin feels that it is inappropriate to blame the chip mills for driving the saw mills out of business, since they have been driven out of business before the chip mill start.

The new mills provide a good market for small hardwoods: The ideal hardwood pulpwood market has these attributes: 1. Open to large rough and rotten trees, that are too hollow, misshapen, defective or otherwise unable to use for saw log profit. 2. No limits on species taken, all hardwood species could be used by this market. 3. Would take pulpwood and tops from saw timbered thinning. 4. Would take pulpwood and tops from hardwood pulpwood thinning. He then said the chip mill market does meet some of these ideal criteria. They do take a certain measure of the rough and rotten material. There is a question of whether you want all of the rough and rotten trees taken from the forest because of the obvious values for wildlife that those trees provide. The hardwood forests in Arkansas are not independent of species taken. The mills in Arkansas do not take hickory nor do they take red cedar. So after a chip mill harvest, and what Dr. Guldin feels is an atrocious future, what was a forest that could have been a predominantly oak dominated forest is now going to become converted into a hickory and red cedar dominated forest. This type of forest has a far lower value on any of the scales that you would like to consider. The chip mill markets do not provide an opportunity to thin the pulpwood from saw timber stands. The smaller trees in these stands are the runts of the litter, by removing them, the crown space of the dominant trees can be expanded, which would increase photosynthetic capacity, increase mass production, and increase log size. The problem is that as a chip mill procurement forester, I am looking at a particular tract of land where I have to take just the little trees, and there is a tract adjacent to it where the owner places no constraint on the trees that can be taken, the procurement forester will always go to the other tract. For market scarcity considerations, thinning the pulpwood from saw timber size hardwood stands never occurs in Arkansas. If it does occur it happens once out of 20 harvests. The chip mill market would not provide an opportunity to thin the hardwoods in a hardwood pulp size stand for the same reasons. It is too easy to find landowners that do not constrain harvests by the need to leave 100 of the nicer trees per acre. It's not easy to find landowners that want you to leave the nice trees. These mills have not provided the market to do the hardwood thinning, which it was hoped they would be able to provide.

Harvestry is good forestry –

Oak needs to be 41/2 feet tall before the stands get cut. You need existing oak sprouts up to three inches in diameter before the first cut. It takes 10 to 20 years to get oak advance growth.

Dr. Guldin then said that in Arkansas there were five possible outcomes:

He said that Items 4 and 5 constitute 90% of the chip mill applications in Arkansas. There is data from New York, West Virginia, showing that on all non-industrial private forest lands, two-thirds to three-fourths of the harvests are conducted without follow up attention from a forester. This is a poor outcome. The future developments of these sites are in the hands of hickory and red cedar. This is the best outcome but only occurs on a minor percentage of stands in AR where pine is planted following a site preparation treatment after a chip mill harvest. The problem is that it is a question of cash flow from the landowner's perspective. AR gets $4 per ton for having chip mill sites harvested, probably 25 to 30 tons per acre that are harvestable in a non-hickory hardwood component on the average acre in AR. That is $120 per acre that landowners receive for a chip mill harvest. The site preparation activities for planting the pine would cost the landowner about $70 - $80 per acre. It would cost more for the landowner to put the forest back into operation than they would get from the profits of the sale.

Dr. Guldin said that the clearcut is the best outcome. He said that the chip mill harvest would not lead to a loss of hardwood forest. There is 7.9 million acres in all ownership. There is a net loss of 1.7% over a ten-year period, given the current trend of timber that is logged. He said that this is overall. In local spots there is no significant effect. The jury is still out on whether or not the soil and water resources are protected. There is a lot of pressure within the state forestry organization to be involved with sustainable forestry initiatives. The state also has BMPs. Sustainable forestry initiatives are very strong on state owned lands. Industry is committing to regenerating their own land within a two-year period. The recommendation for private land that industry harvests on is to recommend regeneration, not to ensure regeneration. There are questions about how strong a stand industry is making to privately held lands.

There is a lot of pressure for industry to protect soil and water. Industry is committed to regenerating timber

Summary:

Recommendations in Arkansas:

Questions followed the presentation:

Jay Law asked if the state legislature has looked at any of this. Dr. Guldin said not at all. There was a provision to have the AR forestry commission be involved as an approver of every timber sale contract in the state. This was denied.

Emily Firebaugh asked if the chip mills are required to use a certain percentage of culls. Dr. Guldin answered no, at this point it is all voluntary. The chip mills will cut and remove what they feel they can utilize.

Emily then asked if urban sprawl was considered since that land could never be reclaimed once it is under a parking lot. Dr. Guldin said that no they did not. AR has been lucky in that the reforestation programs have been effective in rehabilitating agriculture land over the last decade. AR has seen a dramatic rise in forested land over the last decade. Global population is the singular driving force behind the reason for the decline of forests globally. You should not reduce the harvest from temperate forests but need to reduce the harvest from the tropical forests.

Dave Bedan asked why Dr. Guldin did not have any other scenarios that go beyond 2005. That seems like a very short time. Dr. Guldin said that making long term predictions is dangerous. David Bedan then asked about tracking the global market. Dr. Guldin answered that no other nation has the forestry tracking capabilities that the United States has. Dave Bedan said that he was concerned about the "flat no" statement that the forest can't be depleted. That the market demand should be taken into consideration. Dr. Guldin said that there is no reason to be worried about increase market demand unless ten chip mills opened at once. The impacts are so low relative to the standing volumes as they exist today. Demand and supply should be taken into consideration.

Jon Smith asked about the number of exporting chip mills, what happens if ten new chip mills opened at once. Dr. Guldin answered that if in the next two decades we see removals exceeding growth in the hardwood resource component, that would be a critical initial trigger to do some work on.

Earl Cannon asked how many export chip mills are in AR. Dr. Guldin answered that when the study was going on, two were in operation and one was planned. Today, one is in operation. Earl Cannon then asked about the amount of non-exporting chip mills. Dr. Guldin did not have an answer. In their study they did not specifically look at that. Also, he does not know the volume of mills in AR that are being utilized to use chips. He stated that he thinks that the volume in AR is larger than in Missouri. Emily Firebaugh said that she is interested in saving the "Ma and Pa" logger industry. She asked if it would be beneficial for the economic development of the small logger and small mill owner to incorporate their own debarker and their own chippers. Would that help them to recoup? Dr. Guldin answered no, his sense is that the smaller the operation the greater the need to rely on high quality saw logs to get the higher per unit value of a product.

Marvin Brown asked what percent of logging taking place is in relation to sawmill industry which leads to bad forest management. Is the chip mill the only culprit? Dr. Guldin answered no, the chip mill is not the only culprit. About two thirds of forestry is sold without forest management advice. This is not only a problem caused by the chip mill industry; this is a problem of the entire forest industry. You need to look at patterns of harvesting over a time period. Some landowners in AR have the chip mills buy the entire stand.

Senator Goode asked what is being done to shift to better outcomes. Dr. Guldin said that nothing is being legislated. He recommends that if you sell timber, to seek the advice of a professional beforehand.

Jay Law said that we need to look at incentives. We would like to say that good forestry pays, but what we are seeing is supplementing through public funding a lot of timber stand improvement work. We ask the landowner to "fell and left" trees at expense of public funds. He then asked Dr. Guldin if any incentives have been looked at to gain the integrated sale. Dr. Guldin answered no.

Emily Firebaugh said that owners have no problem with selective harvest or clear cutting but landowners need to know how to deal with contracts with the chip mill companies. Dr. Guldin answered that the county foresters have good access to that kind of information. Emily Firebaugh said she got no input from Department of Conservation and the Forestry Department when she called them asking for help to understand the contract. Dr. Guldin answered that there are a handful of draft contracts in the mill that have been prepared by extension foresters in other states. Kentucky has a very good small woodlot owner advisory publication that had draft timber sale contracts and forestry advice. Emily Firebaugh said that she doesn't know how to work with them and that she won't sign a contract with a chip mill company.

Co-Chair Brown then asked if the public had any questions or comments in regard to Dr. Guldin's presentation.

Denise Vaughn asked Dr. Guldin for the scenario of best to worst concerning the economics of harvesting and is there any way to change the economy. Dr. Guldin answered that harvesting activity that requires you to avoid trees, requires a great deal of care, and a great deal of more time. Because of this, harvest wood drops bring lower per acre value. In total, the incentive for the procurement forester that has two areas of similar capacity of harvests, the loggers will go to the land that does not have restraints.

Ms. Vaughn asked if there is a solution to that. Dr. Guldin answered that the constellation of equipment that is available will affect the degree of care that is needed. Ways would need to be developed to utilize smaller harvesting equipment and equipment that is more nimble that will drag smaller sections of the trees out of the woods rather than the whole tree. Some equipment can be found that will harvest trees in that capacity but the question is, will people secure that type of equipment; would it be economic for them to procure that kind of equipment; and would they gain profits from it.

Co-Chair Brown thanked Dr. Guldin for making the presentation. Dr. Guldin told the committee that if anybody would like anymore information, he would be glad to visit with them over the phone.

The committee then went into closed session per advice from Bill Bryan, Attorney General's Office, and broke for lunch.

After lunch the committee went back into open session.

Facilitation – Dr. Jerry Wade , Unresolved Previous Issues, New Issues

During this part of the meeting Dr. Jerry Wade had the committee break into subgroups to discuss concepts, themes and topics as they relate to the committee's work and report.

Public Comment

During this part of the meeting the following people made statements:

Hank Dorst, Forest Watchers (copy of statement is attached)

Roy C. Hengerson, Missouri Coalition for the Environment, stated that no organization is allowing all cutting on public lands. Public forests provide recreation, hunting, fishing and water-shed protection that private forests do not. We need to move away from public lands to the private lands.

In reference to his presentation Dr. Guldin said that pressure needs to be put on the domestic market, if not on the foreign market. His main areas of recommendation are making chip mills practice good forest management practices. He said that Missouri is ill-equipped to deal with large chip mills. A permit should be required. Logger training and forest management practice will involve land owner rights. He recommended that a maximum size limit is set for clear cuts, smaller areas of clear cutting would be more sustainable.

John Wood, Westvaco, stated that hickory is not an issue. He has always used hickory. The issue is saw log vs. pulpwood. The landowner wants a separate price for saw wood and pulpwood. Saw timber is worth more. Land managers get the same price for both. Landowners should be encouraged to bid for the price of lumber. He also said that the corporations are held more accountable for actions than the small businesses. Corporations are perceived as having deep pockets. Corporations will make sure that they don't go to court.

David Day asked John Wood what he does with the hickory. John Wood answered that he makes paper out of the hickory and said that he doesn't think that hickory is a problem to debark.

Krissy Krulj, Missouri Heartwood, then made a statement (copy attached).

Mike Smith, Washington, Missouri, stated that landowners need to be educated. They need to look at the long-term aspect of forestry practice. He would like to see education start in the schools.

Katie Auman, Missouri Coalition for the Environment, stated that she thought the tour was good. It was good to see both the bad and the ugly. She feels that the satellite chip mills were created to exploit Missouri. She asked, do we want to support the local businesses that will stay here or support big corporations that just want to make money on the lumber? She also questioned Dr. Guldin's presentation in regard tourism. She said that more money comes in from tourism than from the chip mill industry. Tourism plays an important part to the economics of a region.

Llona Weiss then presented two statements – one from Lawrence Maurer, Arcadia, Missouri. The other was from Leo Drey, Pioneer Forest, Salem, Missouri. Copies of both statements are attached.

After the public statements were made and submitted to the committee, Marvin Brown said that the next meeting will be held on August 3rd. The Department of Agriculture is the host.

Included in the agenda for the next meeting will be the Satellite Remote Sensing and the Master Woodland Stewart Program and landowner education programs. The Ozark Wood Mill will be taken off of the agenda.

Llona Weiss thanked Chris Leonard of the Columbia Tribune for dropping off the newspapers for the committee that contained an article about the chip mill tour.