Below Cost Timber SalesBy:Robert Bruce Russell, Jr.Economics 4535: Natural Resources EconomicsDr. Vijaya R. SharmaThe issue of Below-Cost Timber sales by the Unites States Forest Service (USFS)has been a hotly debated issue for over two decades. The timber industry, USFS, and several environmental groups have lobbed congress and the public to take action on below-cost timber. The history of below-cost timber sales is as old as the USFS itself, and is seen as a primary function of the forest service. Below-cost timber sales are caused by many factors including: Past promises of access to timber, the nature of national forests and multi-use management.1 Support for below-cost timber sales is concentrated around the argument that the proper management of public lands incurs an increased cost due to environmental concerns.2 Critics argue that below-cost timber salesare economically wasteful, motivated by commercial timber, and destructive to the ecosystem.3It is important to know the history of the Forest Service and how it relates to below-cost timber sales. The first head of the Forest Service, Gifford Pinchot, believed the national forests should be used as an example to the private sector. Pinchot sought to prove the long-term profitability of proper timber management.4 However, the Forest Service failed to generate any monetary profit from it timber sales. The idea of a value added for non monetary benefits allowed the forest service to claim that timber sales wereprofitable, was presented by the Forest as early as 1920.5 The Forest Service continues inthis belief that timber management costs are lower than the total net benefits of proper timber management. In addition to the monetary gains, the Forest Service uses the concepts of Forest Stewardship and Personal Use to calculate the total benefit of timber sales. (Graph 1)6 The Multiple-Use-Sustained-Yield Act of 1960, enacted by Congress, gave the Forest Service a legal basis for continuing below-cost timber sales. “With consideration being given to the relative values of the various resources, not necessarily the combination of uses that will give the greatest dollar return or the greatest unit output.”7 Over the next decade the Forest Service was under and intense amount of 1 Gorte: Below-Cost Timber Sales2 Gorte: Below-Cost Timber Sales3 Berman: Timber Policy4 Wolf: National Forest Timber Sales and the Legacy of Gifford Pinchot 5 Wolf: National Forest Timber Sales and the Legacy of Gifford Pinchot6 TSPIRS 977 U.S.C. 528-5312criticism for it continued use of below-cost timber sales. In response to this criticism, Congress enacted the National Forest Management Act of 1974 that required the Forest Service to report a sample of the below cost timber sales in it annual report. The NationalForest Management Act also included a provision for a special fund for timber salvage sales that actually led to the expansion of below-cost timber sales, by masking the true cost timber sales. In 1985, Congress directed the Forest Service to develop a true cost accounting system for timber sales, “to address the issues of cost allocation and valuationof benefits.”8 The Timber Sale Program Information Reporting System (TSPIRS) was created and reported data on the National Forest from FY1989-FY1998, but no report hasbeen filed since. It is unclear why the Forest Service discontinued the report, but rising administrative costs seems to be the biggest factor. The TSPIS report revealed the increasing use of salvage sales as percentage of total harvest, which suggests the Forest Service was increasing its use of below-cost timber sales for multi-use forest management. (Graph 2)9 Despite several attempts to eliminate below-cost timber sales, the practice continues to be employed by the Forest Service.The causes of below-cost timber sales include past promises, the nature of the national forests, and multi-use management. Past promises of access to timber is a leading cause of below-cost timber sales. It is one of the missions of the Forest Service to provide a ready supply of timber. According to the Multi-use Sustained Yield Act, “to furnish a continuous supply of timber for use and necessities of Citizens of the United States”. The promise of economic development through the exploitation of timber is seenas a guarantee by the timber industry. This guarantee of timber is used to spur economic development in certain areas and the denial of timber would result in loss of recourses devoted to supporting the timber harvest. The nature of national forest lands also causes below-cost timber sales. National Forests are often concentrated in remote regions with difficult terrain, which makes them difficult to harvest. The rugged terrain usually contributed to slow timber growth and decreased harvest yields. The Forest Service utilizes below-cost timber sales in these regions in order to make it finically viable for commercial timber to harvest. The added expense incurred by the Forest Service includes road construction, reclamation of environmental damage from the harvest, and 8 Gorte: Below-Cost Timber Sales9 TSPIRS 973reforestation of the harvested stands. National Forest lands were often purchased in a damaged state, which was a result of poor timber management on private lands. The Forest Service also employs below-cost timber to correct some of its own mistakes. The Forest Service planted fast growing timber on eroding agricultural land that in hindsight was not ecologically sound for the land, and the below cost sales were seen as an effective tool for manipulating forest composition.10 Multi-use management is defined in the Multi-use Sustained Yield Act as “ for outdoor recreation, range, timber, watershed, and wildlife and fish purposes.” It is often difficult to determine the value of al these amenities and it sets to Forest Service up to be vulnerable to criticism about it inefficient timber sales. An efficient market might arise if profit motive was the only concern of the Forest Service. However, the Forest Service must account for the preservation and enhancement of wildlife, watershed, and recreation activities. It would be a illogical to determine the success of these programs on a purely profit motivated scale. In fact, below cost timber sales might be the most cost effective way to accomplish the goals of multi-use land management.The increased cost of land management for multi-use