Challenges and Opportunities in Using Wood to Pay for Fuels Treatments Guy Robertson USDA Forest Service

Main Points: Public-private interface Multiple objectives of utilization may be mutually reinforcing or conflicting Utilization will seldom pay the full cost of treatment No one-size-fits-all solution

Wildland fuels represent a huge challenge for land managers 190 million acres of federal lands at risk (HFRA) Forest Service Cohesive Strategy to treat 3 million acres per year in West Assuming $700/acre treatment cost, yearly FS bill in west would = $2.1 billion (as compared to fuels treatment budget of about $250 million service wide) More Resources are needed!

Public-private interface We can count on the private sector to work to maximize profits through innovation and increased efficiency Challenges for public managers are more complex: –Public benefits are ill-defined –Lack of single objective

Objectives for utilization Reduced costs of fuels treatments –Sales of material into existing markets using existing technology (static) –Increased efficiency, innovation and new products/markets (dynamic) Community economic development Other pubic goods (e.g., pollution abatement, reduction of carbon emissions)

Potential conflicts Temptation to maximize utilization rather than minimize cost Favoring local economic activity can involve higher costs and higher risks Utilization may dictate a different set of priority acres for treatment Ditto for bioenergy benefits Nonetheless, significant “joint production” opportunities undoubtedly exist, but they will entail a balancing act

Utilization is often marginal from a straight profit-loss standpoint Low value material Lack of infrastructure and human capital Extensive resource (not concentrated) Commodity products in competition with other producers in a global setting

Economic feasibility: Net $ Revenue > 0 vs. Cost minimization: Treatment cost w/util < cost w/out util But cost minimization, not economic Feasibility is decision criteria

Need to define non-utilization backstop technology for comparison e.g. Prescribed fire Mastication Chip & spread Stack & burn Haul & burn etc.

No single utilization scheme works everywhere Land ownership patterns Physical Characteristics –Species mix, stem size, and stand density –Slope and operability constraints –Distance to landing, mill, and market Local/regional Infrastructure Local/regional supply of skilled and unskilled labor

But one general rule of thumb Larger trees = better economic potential –Larger piece size means efficiencies in handling and transport –Larger diameters mean better price: Sawtimber perhaps mill Pulp chips perhaps mill Biomass for energy max facility

Where available, sawtimber will Be a crucial component of any Utilization strategy Highest end value Often a substantial proportion of volume Crown bulk density adjustment Public acceptability

Options for supporting utilization 1. Seed money or other support to specific processing facilities –Direct focus on utilization –Control location of activity –Risk of enterprise failure 2.Price offsets for material (up to cost of backstop) –More transparent in regard to cost minimization –Greater market flexibility –No guarantee of utilization –Can’t control location of activity –Stability of supply at given price

Bioenergy Currently used extensively in wood products industry processing stream Currently marginal for production of energy for general power grid State renewable energy requirements will increase demand Carbon credit trading can alter production costs Technological innovations in materials handling, energy generation and new products (e.g. methanol for hydrogen fuel cells)

Conclusions 1. Utilization needs to be assessed in terms of specific projects and in relation to specific backstop technologies 2.We need to explicitly identify the public goods we are supplying and be aware of the ways they may conflict with each other 3.We can count on the private sector to develop and seize evolving opportunities in the area of utilization 4.Public managers need to take advantage of this process while keeping in mind the ultimate objective of “maximizing” public benefits