Forest Service Budget Reform Campaign

FOREST CAMPAIGN: BISCUIT FIRE TIMBER SALE

The 2002 Biscuit Fire was the largest and most expensive fire in Oregon history. The fire burned across nearly 500,000 acres in the Pacific Northwest , the vast majority within the boundaries of the Siskiyou National Forest in Southwestern Oregon. Long after the fire's smoke has cleared, the Biscuit debate continues to rage.

While taxpayers have suffered from money losing timber sales from the national forests in the past, the Biscuit Fire timber sale is poised to be one of the biggest money losers in our nation's history.

The most contentious issue is a post-fire logging project proposed by the U.S. Forest Service to remove burned timber from the forest. In an effort to offset the costs of the fire, "salvageable" burned timber would be sold to neighboring timber mills. Unfortunately, a new economic analysis reveals that current Forest Service proposals will add to - not offset - federal taxpayer costs resulting from the Biscuit fire.

In the Biscuit Fire Recovery Project Draft Environmental Impact Statement (DEIS), the Forest Service predicts incredibly lucrative profits from the sale -- more than $24 million from a sale of 518 million board feet (mmbf) on 27,000 acres of the Siskiyou National Forest. In reality, all proposed Biscuit timber sales would end up money losers for taxpayers:

· A 518 mmbf timber sale would lose $102 million, resulting in a return 500% less than the Forest Service predicted.

· A mid-range, 300 mmbf, timber sale would cost taxpayers more than $34 million.

· The U.S. Environmental Protection Agency suggested a smaller sale of 96.7 mmbf. Even at this level, logging would cost taxpayers more than $3 million.

How did the Forest Service come up with such horribly wrong predictions? The agency assumes hopelessly optimistic sale values for burned timber, low-balls historical administrative costs for sale preparation and clean up, and essentially ignores normal costs associated with regional and national overhead for timber sales.

In developing their DEIS for the Biscuit post-fire logging project , the Forest Service fails to account for several key factors:

Price Effect - The Forest Service ignores the basic economic theory of supply and demand by assuming that timber from the salvage sale would receive a constant market price. In reality, if the market were flooded with 518 mmbf of timber, the price per board foot of timber would drop dramatically. Appendix I to the DEIS recognized this, and using the values in Figure 3 of the appendix reduces the value of the timber from $500 per thousand board feet (mbf) to $445 per mbf - cutting predicted sale receipts by more than $28 million. Even at the reduced levels of 300 and 96.7 mmbf, timber prices are depressed significantly, resulting in sale values of $470 per mbf and $490 per mbf respectively. Further, much of the timber to be harvested is burned, reducing the value of each log, yet the Forest Service assumes the value will be the same as green timber.

Overhead Cost of Logging - All timber sales have overhead costs. However, the Forest Service low-balls the overhead estimates by ignoring any national or regional overhead costs associated with administrative oversight, program management and transfer of funds to states. Timber sale overhead costs for the Washington, DC and the Region 6 offices have averaged $16 per mbf in the ten years preceding the Biscuit Fire. Accounting for these costs will increase overall salvage sale costs by: $1.5 million for 96.7 mmbf; $4.8 million for 300 mmbf; and $8.3 million for 518 mmbf.

Administrative & Clean up Costs - The Forest Service downplays administrative and clean up costs, which are separate from overhead costs, by about 70%. The DEIS assumes the Siskiyou National Forest's administrative costs would be only $27 per mbf, nearly 70% less than their best performance over the previous ten years ($85 per mbf). Similarly, the Forest Service estimates clean-up costs to be the ridiculously low rate of $48 per mbf, another 70% improvement over their best performance over the previous ten years ($164 per mbf). Accounting for these costs increases overall salvage sale costs by: $24.1 million for 96.7 mmbf; $74.7 million for 300 mmbf; and $90 million for 518 mmbf.

As a result, even at the lowest logging level evaluated, 96.7 mmbf, federal taxpayers still end up losers if the Biscuit timber sale is given the green light. After taking into account price effect, overhead, and other administrative costs, the sale would return $4 million. However, the Forest Service must also return 25% of the logging receipts (before overhead and administrative costs are subtracted) to Oregon, resulting in a federal taxpayer loss of nearly $3.5 million.

For more information contact Steve Ellis, Taxpayers for Common Sense, 202-546-8500 ext. 126 or steve@taxpayer.net