HTML _ 95-15 - Below-Cost Timber Sales
20-Dec-1994; Ross Gorte; 17 p.

Abstract: The Forest Service sells some timber at prices that are less than the agency costs to administer the timber program. These ¨below-cost¨ timber sales have been debated by Congress for more than a decade, but no policy to address the issue has been adopted legislatively or administratively. Part of the debate over below-cost timber sales has been over their relative frequency. Various interests have included different costs and revenues, resulting in widely varying estimates of the magnitude of the losses. The Forest Service, at the direction of Congress, developed the Timber Sale Program Information Reporting System (TSPIRS), in part, to attempt to estimate the profits or losses annually for each national forest in a manner consistent with income reporting for private landowners. Another common measure is cash flow, used because it shows the consequences of timber sales for the U.S. Treasury. However, other measures may also be relevant for other purposes, and none provides the ¨right¨ answer. Below-cost sales are most common in certain regions -- Alaska, the Rocky Mountains, the rugged Southeast (the Appalachians to the Ozarks), the Lake States, and New England. The rough terrain often raises agency costs to prepare and administer sales and raises purchaser costs to harvest the timber (thus reducing sale prices). High costs and modest timber values also result from low timber productivity and dispersed stands in the arid, mountainous West. Some timber stands have been degraded, by natural disasters and/or by past management activities (including prior to Federal acquisition), and thus have low timber prices. Timber sales are made for a variety of reasons. In some cases, the purpose may be to provide timber for a local mill, and mills (and communities) have been built on the at least implicit promise of timber availability. Timber sales may also be used to modify existing conditions -- to reduce fuel loadings, to alter the mix of tree species, to provide habitat for specific animal species, to restore forests to more natural conditions, etc. While alternative means of modifying vegetation exist, timber sales may be more efficient (have a lower net cost to the Treasury and to society) than the alternatives, even though the sales may lose money according to strict financial criteria. The issue is what, if anything, Congress should do about below-cost timber sales. Some argue that no action is warranted, because the fiscal concern is merely a tool being used to reduce timber sales. However, others are concerned about taxpayer support for the environmental damages that sometimes result from timber sales and/or about reducing the Federal budget deficit. While the debate is often characterized as do nothing or eliminate all below-cost sales, policy choices between these extremes exist. Choices for a below-cost policy include how to measure fiscal results, over what geographic and temporal scales, with what opportunities to demonstrate improvement, and with how much discretion to grant the agency over the final decision. [read report]

Topics: Forests

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