PNWPrivate: A Nested System of Regional Private Timber Supply Models for Oregon and Washington with Extensive Mill and Resource Detail Greg Latta and Darius Adams Department of Forest Resources Oregon State University

Outline Overview of OSU Forest Sector Models Regional Models Model Components Applying the Models Lessons Learned Work in Progress

Forest Sector Modeling System at OSU: Linking Subregional to International Markets ½ STATE MODELS WITH EXOGENOUS PNW LOG FLOWS PNW REGIONAL MODEL WITH ENDOGENOUS LOG FLOWS NATIONAL MODELS STUMP TO MILL LEVEL INCLUDE CANADA DYNAMIC INTERTEMPORAL & EVEN-FLOW MODELS DYNAMIC INTERTEMPORAL, MYOPIC MARKET & EVEN-FLOW MODELS Price and capacity (feedbacks) Harvest, inventory, capacity, management investment

Linking Regional Timber Supply Developments to National and International Markets WESTERN WASHINGTON MODEL EASTERN OREGON MODEL NORTH AMERICA AND OFF-SHORE MARKET MODEL PRODUCT OUTPUT HARVEST LOG PRICES MANAGEMENT INVESTMENT INVENTORY & GROWTH PRODUCT CONSUMPTION TRADE PRODUCT PRICES INTER-REGIONAL SUBSTITUTION MANAGEMENT INVESTMENT TIMBER INVENTORIES LOG FLOWS PRODUCT PRICES WESTERN OREGON MODEL EASTERN WASHINGTON MODEL

Regional Models Elements of Harvest Projection Process INVENTORYYIELDS MANAGEMENT REGIMES LAND BASE TRENDS HARVEST SIMULATOR

Elements Of Harvest Projection Process Use USFS FIA inventories 1997 WOR / 1999 EOR Updated 1990 WWA/EWA Build model at Condition Class level INVENTORY YIELDS MANAGEMENT REGIMES LAND BASE TRENDS HARVEST SIMULATOR

Elements Of Harvest Projection Process INVENTORYYIELDS Identify 7-8 regimes for WOR and WWA 6 regimes for EOR and EWA MANAGEMENT REGIMES LAND BASE TRENDS HARVEST SIMULATOR

Elements Of Harvest Projection Process INVENTORY Project tree lists of each existing condition class under regimes Develop projected tree lists for regenerated stands under regimes FVS / ORGANON YIELDS MANAGEMENT REGIMES LAND BASE TRENDS HARVEST SIMULATOR

Elements Of Harvest Projection ProcessINVENTORYYIELDS MANAGEMENT REGIMES LAND BASE TRENDS Project loss of timberland acres to non-forest uses HARVEST SIMULATOR

Elements Of Harvest Projection Process HARVEST SIMULATOR 1) Even-flow 2) Market model: > demand for logs at milling centers > supply of logs from timberland locations INVENTORYYIELDS MANAGEMENT REGIMES LAND BASE TRENDS

Model of Log Market at Milling Center x DEMAND FOR LOGS AT MILLING CENTER x SHIFTS WITH PRODUCT PRICE, CAPACITY, TECHNOLOGY AND NON- WOOD COSTS SUPPLY OF LOGS FROM TIMBERLAND LOCATIONS SHIFTS WITH COSTS OF MANAGEMENT, LOGGING, HAULING, INTEREST RATE PRICE HARVEST

Model of Regional Log Market MARKET BALANCE MUST BE FOUND ACROSS ALL MILLING CENTERS AND LOG SOURCES LOG BUYERS TRADE-OFF SOURCES TO MINIMIZE COSTS LOG SELLERS TRADE-OFF DESTINATIONS TO MAXIMIZE NET RETURNS TIMBERLAND A TIMBERLAND B MILLING CENTER X MILLING CENTER Y

Fixed Model Structure With Preset Options Original Regional Models Fixed Model Structure With Preset Options

Applying the Models New Riparian Rules Eastside Mill Closures USFS Restoration Thinning Older Forest Structure Carbon Markets Public Forestlands and Carbon Future Harvest and Inventory by Log Quality

New Riparian Rules Oregon Department of Forestry wanted to analyze the market impacts of two potential riparian policy changes –Increasing the leave tree basal area requirements –Changing some stream designations from non-fish to fish bearing INVENTORY More detail on riparian plots YIELDSRerun the yield tables with more detail in riparian What: How: Original PlotsMore Detailed Riparian Plots

New Riparian Rules

Eastside Mill Closures Initial eastern Oregon log market runs showed up to 50% reduction in harvest volumes which caused log prices to rise too high HARVEST SIMULATOR Endogenous mill capacity via a binary capacity utilization scheme with shutdown point What How LOG QUANTITY LOG PRICE CAPACITY SHUT DOWN LOG QUANTITY LOG PRICE Original Linear Demand Curve New Demand Curve

USFS Restoration Thinning Eastern Oregon public forests contain over a million acres of forestland in need of fuel reduction / forest health thinning INVENTORY Public forestlands added to model YIELDS Volumes calculated for potential thinning HARVEST SIMULATOR Harvest, haul, disposal and subsidy What How

Eastside Mill Closures with USFS Restoration Thinning Number of Mills in Operation Year

Creating Older Forest Structure Incentives and opportunity cost of producing older forest structure (OFS) on private forestland MANAGEMENT REGIMES Heuristic optimization of NPV and OFS silvicultural regimes HARVEST SIMULATOR Management incentives added as well as targets for OFS creation What How Net Present Value (NPV) maximization ReserveOlder Forest Structure (NPV) generation

Creating Older Forest Structure Time limit, to meet OFS target <=60% <=40% <=20% Net Surplus Reduction (Cost) <= 20%, <=40%, and <=60% requires more than 20%, 40% and 60%, respectively, of the private timberland base to have older forest characteristics by the time limit

Carbon Markets Estimate impacts of carbon tax/subsidy system on private timber harvest and management in western Oregon Add forest carbon accounting to market model What How Carbon Price/Subsidy Effects of Carbon Price / Subsidy on Carbon and Harvest Levels

Changes in Federal Timber Harvest Options for offsetting forest carbon flux reductions due to increments in timber harvest from federal lands INVENTORYAdd Federal forest land plots to model YIELDSGenerate yields under alternative silvicultural regimes HARVEST SCHEDULERFind market solutions with alternative federal harvest levels subject to regional carbon flux constraints What How INDEPENDENT MANAGEMENT Rising Carbon Targets Coordinated Management To Limit Carbon Flux Impacts Federal Land Only All Owners

Future Harvest and Inventory by Log Quality Project future private timber harvest by log size and species YIELDSStore and retrieve individual tree projection detail for post- solution processing What How

Future Harvest and Inventory by Log Quality Individual Milling Center Detail

Lessons Learned Fixed structure models with preset options always lag current “hot” policy topics—policy analysts seldom revisit a topic, or if they do it’s with a different focus Develop a set of market and harvest scheduling model components that can be readily modified and grouped to meet changing analytical needs Maintain inventory database at most disaggregated level to allow maximum flexibility in aggregation Develop modules to automate aggregation of plots and generation of yields under alternative silviculture regimes

Future Work Satellite imagery to reduce effective plot size through “nearest neighbor” methods—analysis below the county level Explicit links to land-use models with sensitivity to returns to forestry (log prices) so land base is endogenous Expansion to regions beyond the PNW

LONG-RANGE POTENTIAL TIMBER SUPPLY IN OREGON BY REGION

EASTERN OREGON SOUTH WEST WEST CENTRAL NORTH WEST

WESTERN OREGON PRIVATE HARVEST BY OWNER FOREST INDUSTRY OTHER PRIVATE

WESTERN OREGON TOTAL PRIVATE HARVEST AND INVENTORY INVENTORY HARVEST INVENTORY HARVEST

NORTH WEST OREGON PRIVATE HARVEST AND INVENTORY HARVEST INVENTORY ADJUSTMENT TO DECLINING INVENTORY, RISING COSTS AND SHIFTING CAPACITY

WEST CENTRAL OREGON PRIVATE HARVEST AND INVENTORY HARVEST INVENTORY

SOUTH WEST OREGON PRIVATE HARVEST AND INVENTORY HARVEST INVENTORY

EASTERN OREGON HARVEST AND INVENTORY BY OWNER HARVEST INVENTORY INDUSTRY INDUSTRY OTHER PRIVATE

SUMMARY OF LONG-TERM TRENDS Clear demographic basis for resurgence of US housing activity PNW will continue to play a major role in US softwood lumber supply Aggregate private harvest in western Oregon may drop slightly over next 15 years but rise thereafter—much regional variation Aggregate WOR inventory roughly stable NW Oregon source of near-term harvest decline—inventory and capacity shifts Eastern Oregon faces declining inventory and declining harvest on private lands

For More Information Adams, D.M. and G.S Latta. Future Prospects for Private Timber Harvest in Eastern Oregon. Western Journal of Applied Forestry 22(3): Im, E., D.M. Adams and G.S. Latta Potential impacts of carbon taxes on carbon flux in western Oregon private forests. Forest Policy and Economics 9(8): Potential impacts of carbon taxes on carbon flux in western Oregon private forests. Busby, G.M., C.A. Montgomery and G. Latta The opportunity cost of forest certification on private land in western Oregon. Western Journal of Applied Forestry 22(1): The opportunity cost of forest certification on private land in western Oregon. Adams, D.M. and G.S Latta Timber Trends on Private Lands in Western Oregon and Washington: a New Look. Western Journal of Applied Forestry 22(1): Timber Trends on Private Lands in Western Oregon and Washington: a New Look. Montgomery, C.A., G.S. Latta and D.M. Adams The cost of achieving old-growth forest structure. Land Economics 82(2): The cost of achieving old-growth forest structure. Adams, D.M. and G.S Latta Costs and regional impacts of restoration thinning programs on the national forests in eastern Oregon. Canadian Journal of Forest Research 35(6): Costs and regional impacts of restoration thinning programs on the national forests in eastern Oregon. Adams, D.M. and G.S Latta Timber harvest potential from private lands in the Pacific Northwest: biological, investment, and policy issues. P in Understanding key issues of sustainable wood production in the Pacific Northwest, Deal, Robert L.; White, Seth M (eds). USDA For. Serv. Gen. Tech. Rep. PNW-GTR-626. Understanding key issues of sustainable wood production in the Pacific Northwest Latta, G., and Adams, D Analysis of an extensive thinning program on eastern Oregon national forests using a dynamic spatial equilibrium market model with endogenous industry capacity. In Systems Analysis in Forest Resources: Proceedings of the 2003 Symposium, 7–9 October 2003, Stevenson, Wash. Compiled by M. Bevers and T. Barrett. USDA For. Serv. Gen. Tech. Rep. PNW-GTR-656.Systems Analysis in Forest Resources: Proceedings of the 2003 Symposium Adams, D.M. and G.S Latta Effects of a Forest Health Thinning Program on Land and Timber Values in Eastern Oregon. Journal of Forestry 102(8):9-13. Effects of a Forest Health Thinning Program on Land and Timber Values in Eastern Oregon. Latta, G. and C.A. Montgomery Minimizing the cost of stand level management for older forest structure in western Oregon. Western Journal of Applied Forestry 19(4): Minimizing the cost of stand level management for older forest structure in western Oregon. Adams, D.M. and G. Latta Private Timber Harvest Potential in Eastern Oregon. Research Contribution 42, Forest Research Laboratory, Oregon State University. Corvallis. 42p.Private Timber Harvest Potential in Eastern Oregon. Schillinger, R. R., D. M. Adams, G. S. Latta, and A. K. Van Nalts An Analysis of Future Private Timber Supply Potential in Western Oregon. Western Journal of Applied Forestry 18(3):1-9.An Analysis of Future Private Timber Supply Potential in Western Oregon. Adams, D.M., R.R. Schillinger, G. Latta, and A. Van Nalts Timber Harvest Projections for Private Land in Western Oregon. Research Contribution 37, Forest Research Laboratory, Oregon State University, Corvallis. 44p.Timber Harvest Projections for Private Land in Western Oregon. Visit our website at: us at: Publications: