Economist: More mills are at risk

Without an increase in timber harvests - specifically from national forest lands - Montana's timber industry can expect to lose one or two more mills in the next year, a prominent wood products economist predicts.

A 15 percent increase in the state's annual timber harvest would sustain the Montana's timber industry, but a 15 percent decline would likely result in the closure of at least four mills, said economist Charles Keegan of the University of Montana's Bureau of Business and Economic Research.

Keegan delivered his projections Friday at the Montana Wood Products Association annual meeting, held on the Big Mountain this year. He said the projections are part of a report, "Sustaining Montana's Forest Products Industry," that was requested by Montana's congressional delegation.

The number of Montana facilities that process at least 10 million board feet of timber annually has shrunk from 38 in 1976 to 19 in 2004. The decline continued this year with the closure of the Owens & Hurst mill in Eureka and Stimson lumber's shutdown of a plywood processing line in Bonner.

Keegan said his research has led him to conclude that a 40 percent decline in milling capacity is directly linked to a corresponding decline in the timber harvests on national forests in Montana.

In April, he calculated that the state's timber processing facilities, operating at 85 percent of capacity, required 800 million board feet of timber annually - about 100 million board feet more than was available in 2004.

With the closure of the Owens & Hurst and curtailed Stimson operations at Bonner, he has calculated that 740 million board is needed annually to sustain the industry.

"The harvest on private has been relatively stable" over the last 20 years, Keegan said, noting that harvests on private lands, particularly on Plum Creek Timber Co. forests, currently account for about 75 percent of the timber supply.

But that trend could change dramatically, Keegan warned.

"There are some real questions about how sustainable that will be over the next 20 to 25 years," he said. "The potential for reductions in harvests on private lands just adds to this gap, or deficit."

A decline in harvests on private timber lands could precipitate a "nightmare" scenario in which the state's wood processing capacity spirals downward to a point where it could resemble the almost nonexistent processing capacity in the Southwest.

One upside, Keegan said, is the fact that "Montana has a lot of timber compared to what the forest products industry is using."

And there is a need on millions of acres for restoration work in timber stands that have excessive densities, he said.

Another reason for some optimism is that the forest products industry still has confidence in its future, Keegan said, citing a recent survey of mill managers.

Sixty percent of those responding said they are still willing to make "major capital investments" for equipment capable of processing timber smaller than 10 inches in diameter.

Several people at the conference said that environmentalist litigation over federal timber sales is the primary cause for the steady decline in sale availability.

"With the Forest Service, there are so many challenges that it's almost unbelievable," said Steve Flynn of Sun Mountain Lumber, a mill in Deer Lodge. "They go through a huge process to put out a project, and they end up in court."

That has occurred time and time again across the state, said Flynn, who believes it is "critically important that we get some legislative fixes" to curb litigation over federal timber sales.

Flynn cited measures to reform the National Environmental Policy Act and the Endangered Species Act that are already in the congressional pipeline. But he also said there need to be significant changes in the Equal Access to Justice Act, which entitles environmental plaintiffs to recover litigation costs from the federal government in cases they win.

That law serves a good purpose in that it was intended to give ordinary citizens access to a legal system in which the government can be formidable, said Doug Crandall, a former Montana mill manager who is now the Republican staff director for the U.S. House Natural Resources Committee.

"Unfortunately, it's become the way large environmental groups get their budgets funded," Crandall said. "It needs to be changed so that it helps citizens and not powerful groups."

But Crandall stressed that it will take changes on multiple fronts to address the timber supply deficit that mills face across the country.

"There's no single silver bullet," he said. "It's going to take a lot of little things."

Reporter Jim Mann may be reached at 758-4407 or by e-mail at jmann@dailyinterlake.com