Absentee Ownership

by Kevin Taylor & r & & r & & lt;span class= & quot;dropcap & quot; & P & lt;/span & rivate timberland ownership is changing as dramatically here as it is across the entire West. More than three million acres of Inland Northwest timberland is now being managed for faraway shareholders and investors instead of for 2x4s at local mills. The Boston-based Forest Capital Partners is the largest local player among TIMOs (timber investment management organizations), with two million acres of former Crown Pacific and Boise Cascade timberland in North Idaho and Eastern Washington.


Potlatch recently became one of only five publicly traded "traditional" timber firms to try to catch up with the revenue and tax advantages of the new business model, converting some 667,000 acres to a shareholder-driven model known as REIT (real-estate investment trust). Basically, a REIT "monetizes" the timberland so the timber itself has value and, essentially, can be sold twice.


Mike Sullivan of Potlatch says the REIT model allows the company to sell the timber to independent loggers -- with dividends going to shareholders -- then bid on the timber to run it through the mill and sell it again as lumber or paper.


There's a sharp difference of opinion about whether investor-driven logging is good news or bad news for the landscape. There are fears among loggers as well as environmentalists that this business model will lead to short-term profit-taking by scalping timber parcels.


"I'm afraid they are going to come in and cut all the timber off it," says Larry Yergler, who owns Larry's Saw Shop in Smelterville, Idaho. "The gist I get is they are taking everything that can [that will] make a 2-by-4. Then they will probably try to trade it for a parcel with some timber on it and give it back to the state.


"Plus, it's all East Coast money, so the profits don't stay here," Yergler adds.





& lt;span class= & quot;dropcap & quot; & T & lt;/span & raditional timber firms invested heavily in local communities with infrastructure such as mills and truck fleets, and they provided plenty of small-town jobs.


The new wave of TIMOs are designed to provide a return for investors or shareholders who, by and large, live far away from the Inland Northwest and care little about the economy here.


"This is one of the unintended consequences of beating the traditional timber industry about the head and shoulders for so long," says Chris Wood, formerly the No. 2 man in the U.S. Forest Service in the Mike Dombeck era. "They decided the cost of doing business was too high. What we get in their place is these guys who are thousands of miles away from the land and who are driven by the bottom line -- by liquidation forestry.


"Say what you will about the older timber companies," Wood continues, "but it was in their economic interest to keep their land sustainable. Sure, they wanted rotations as short as possible, but, for all their sins, their intent was generally long-term."


It is not necessarily so with TIMOs.


But outfits like Forest Capital are managing many of their parcels with long-term goals in mind, say forest regulators who inspect the sites.


"What I see is they are obviously planning for the long run because the kind of money they are investing in site preparation is pretty substantial," says Ed Robinson, an Idaho Department of Lands supervisor in Sandpoint. "They are not just trying to meet the hazard law points."


The IDL foresters who inspect Forest Capital operations frankly admit the company "might come in and cut a little heavier" than other timber firms, but they also say the TIMO is following good forestry practices.


"They are doing a fine job," says Forest Practices supervisor Shane O'Shea of the IDL's office in Coeur d'Alene. "You have to bear in mind their objective is a bit different than the Stimsons or the Inland Empire Papers. Forest Capital buys land as an investment for stockholders, so their interest is maximum return."


Forest Capital doesn't have a lot of property in Kootenai County, O'Shea says, but on parcels that are productive, long-term timberlands, the company is reforesting as they cut. On parcels that make more sense to subdivide or sell to developers in the fast-growing county, Forest Capital will log heavily and then sell, O'Shea says.


In the wilder parts of Idaho, the dynamic is driven more by reforesting and long-term management, say IDL foresters Robinson and Bill Love.


But here, too, the company has critics who say Forest Capital is taking a far bigger bite out of the land than previous owners, such as Crown Pacific, did.


"If a person has an environmental leaning, they don't like to hear this stuff," IDL supervisor Robinson says, noting that a near-clear cut certainly looks ugly but is still a sound forest management practice.





& lt;span class= & quot;dropcap & quot; & N & lt;/span & orth Idaho forests tend to be shaped by catastrophic events such as wildfire, Robinson adds. "You find most of the stands here are very evenly aged because all the trees started growing at the same time, probably because a massive fire blew through and left a few seed trees behind."


Forest Capital's approach of "regeneration harvest" mimics the natural conditions, Robinson says, by cutting almost everything but a few seed trees.


The company is doing a good job, he says, marking out well-formed and healthy trees for seed stock instead of leaving pokey ones. "They are not trying to high-grade. They are providing good genetics for the next generation."


Bill Love, a Forest Practices supervisor out of the IDL Sandpoint office, points to another factor -- the age of the former Crown Pacific timber stands. Many of these parcels had been heavily logged between 1900 and 1930, Love says.


During the 30 years or so they were managed by Crown's fabled timber manager, Steig Gabrielsen, the stands were 50 to 80 years old, and it was wise to thin them by taking out dying or diseased trees, Love says.


Now some of these stands are a century old, and it makes sense for a heavier cut, Love says. Mature stands tend to be dominated by shade-tolerant species such as Grand fir or Douglas fir, which are prone to bark beetle infestations.


Reforesting allows white pines, larch and ponderosa pines to regain a foothold, Love says.


Of the heavier logging, he says, "There were economic drivers there, but there were also some silvicultural situations where it was time to encourage regeneration."