ECONOMIC ANALYSIS OF PAYMENTS REQUIRED TO ESTABLISH LONGLEAF PINE HABITAT ON PRIVATE LANDS FOR OFF BASE MITIGATION

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1 ECONOMIC ANALYSIS OF PAYMENTS REQUIRED TO ESTABLISH LONGLEAF PINE HABITAT ON PRIVATE LANDS FOR OFF BASE MITIGATION & THE MARKET BASED CONSERVATION INITIATIVE (MBCI) V I O L A G L E N N, F R E D C U B B A G E, N I L S P E T E R S O N, R O N M Y E R S N C S T A T E U N I V E R S I T Y & N O R T H C A R O L I N A F O R E S T S E R V I C E Presented at ACES - Ecosystem Management Conference; December 2012; Fort Lauderdale, FL

2 RED-COCKADED WOODPECKER RCW listed as endangered under ESA Mandates that public lands use all methods and procedures necessary to aid in protection Voluntary participation from non-industrial private landowners Marine Corps Base Camp Lejeune 59 active RCW clusters FWS mandate to increase habitat and colonies Probable conflict with training ESA allows for mitigation by creating or enhancing habitat on private non-industrial lands

3 OVERVIEW OF ECONOMIC ANALYSIS AND NEW MBCI PROGRAM DEVELOPMENT Integrated Projects and New Program Field project to identify possible RCW recruitment or translocation stands, with habitat box inserts Economic analyses of RCW habitat development and management vs. existing land use alternatives Mapping exercise to identify focus areas for RCW New Market Based Conservation Initiative (MBCI) Recent program that developed parallel to RCW analyses, Rodriguez et al. landowner surveys Designed to protect Military Training Route (MTR) flight path Merits brief discussion in addition to economic analyses

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5 INTEGRATED RCW HABITAT PROJECT Task 1: Determine existing RCW recovery opportunities on private lands Task 2: Perform benefit: cost analysis for RCW recovery on private lands Task 3: Synthesize information in a map-based product

6 TASK 1 Identify and map RCW Colonies Identify and map recruitment stands Short term (<10 years) Long term (10-40 years)

7 Percent of Total Area Area of Stands by Age Class (thousands of acres) Stand Age (years) Extent Properties Surveyed Intensive Area 1, Extensive Area 2,536 1, Properties Surveyed Intensive Area Extensive Area Stand Age (years)

8 TASK 2 BENEFIT: COST ANALYSIS FOR RCW RECOVE RY ON P RIVATE LANDS 8

9 ECONOMIC PROJECT GOAL Estimate the financial compensation required to induce rural landowners in North Carolina to manage for RCW habitat and potential areas near Camp Lejeune This could serve as a means for the base to purchase RCW habitat & credits off base to substitute for ESA/FWS requirements on base

10 CASE 1: LONGLEAF SCENARIOS Scenario Maximum Timber Revenue Description Early herbicide Prescribed burns Pinestraw every 3 rd year Thin at 28, Harvest at 40 RCW Habitat Early herbicide Intensive prescribed burns Pinestraw every 3 rd year Less aggressive thin at 40 and 60 No final harvest 10

11 LONGLEAF GROWTH AND YIELD MODELS Author(s) Pub. Year Geography Smith & Hafley 1986/ Atlantic (NATYIELD)/ 1960 Coastal Schumacher & Plain Coile Farrar 1985 East Gulf Coast Lohrey & 1977 Texas, Bailey 1 Louisiana Stand Type Management Inputs Natural Past Dominant prescribed height burns Basal area Natural Prescribed burns, thinned twice Plantation Past prescribed burns Stand age Site index Basal area Stand age Site index Basal area Stand age 1 Lohrey & Bailey model run in conjunction with NATYIELD due to unavailable data

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15 Volume in ft 3, OB LONGLEAF YIELD: MAXIMUM TIMBER, SITE INDEX 60 4,000 3,500 3,000 2,500 2,000 1,500 1, Stand Age NATYIELD Farrar Lohrey & Bailey

16 LONGLEAF PINE STRAW 3 Cases: no pine straw, conservative, moderate Conservative pine straw Age 16 until 55 or final harvest Every 3 rd year $75/acre/year Moderate pine straw Frequency and duration unchanged $150/acre/year Consistent with literature Recent sales at Bladen Lake State Park from $150-$300/acre

17 volume (OB, cuft) for SI 70 LONGLEAF YIELD: ECOSYSTEM SERVICES, WITH PINE STRAW 6,000 5,000 4,000 3,000 2,000 1, Stand Age NATYIELD Farrar Lohrey & Bailey

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20 Longleaf pine straw Bladen Lakes State Forest 2011 ~$130/ac

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22 COSTS AND REVENUES, SI 60, 4% Costs and Timber Revenue Costs Timber Revenue NATYIELD Farrar Lohrey & Bailey Max Timber $596 $443 $594 $435 Multiple Products $577 $303 $535 $311 Without Pine $221 $505 $238 Ecosystem Services Straw $697 With Pine $171 $463 $191 Straw Pine Straw Revenue Conservative Moderate Max Timber $236 $393 Multiple Products $252 $420 Ecosystem Services $236 $393

23 SAMPLE LONGLEAF REVENUE SOURCES Revenue ($/ac), SI 60 at 50 years, 4%, NATYIELD Model $800 $700 $600 $500 $400 $300 Pine Straw (Conservative) Timber $200 $100 $0 Maximum Timber Ecosystem Services

24 OPPORTUNITY COST What must be sacrificed when choosing among possible alternatives Explicit and implicit RCW landowner incentives Manage parcel longleaf for RCW habitat for $39 per acre OR as loblolly for timber revenue for $201 per acre Opportunity Cost (OC): = $201 - $39 = $162 per acre

25 CAPITAL BUDGETING ANALYSIS Capital Budgeting Analysis (CBA) Evaluation of revenues and costs of different investment opportunities over time CBA of 76 potential land management scenarios specific to NC Longleaf managed for RCW habitat VS. Case 1 Case 2 Case 3 Longleaf managed for maximum timber revenue Loblolly managed for maximum timber revenue Row crop agriculture

26 CHOSEN CRITERIA NPV = Net Present Value The sum of the present values of the individual incoming and outgoing cash flows over time for a single rotation SEV = Soil Expectation Value The present value of this rotation if it is continued unaltered forever NPV SEV Year Activity Plant Rotation 1 Harvest Rotation 1 Harvest Rotation 2 Harvest Rotation 3 Plant Rotation 2 Plant Rotation 3 Plant Rotation 4

27 SEV per Acre ($) CASE 1: LONGLEAF COMPARISONS SEV at 4% discount rate, SI 60 at year 50 by Pine Straw Revenue $400 $300 $200 $100 $- $(100) $(200) $(300) None $(145) OC: $357 Conservative $104 $(218) OC: $322 Moderate $303 $(54) OC: $357 $(400) $(500) $(600) $(497) Maximum Timber Revenue RCW Habitat

28 CASE 2: LOBLOLLY BASE CASE $250 $150 $50 -$50 -$150 -$250 -$350 -$450 -$550 SEV per acre at 4% discount rate, SI 60 at year 50 by Pine Straw Revenue $201 $698 Loblolly for Timber Longleaf for RCW Habitat $(497) $(218) $(54) Pine Straw None Conservative Moderate None Conservative Moderate $(698) $(419) ($255) 28

29 CASE 2: LOBLOLLY HIGH PRICE SEV at 4% discount rate, SI 60 at year 50 by Pine Straw Revenue $700 $500 $300 $100 -$100 -$300 $1,017 $635 Loblolly for Timber Longleaf for RCW Habitat $(129) $36 Pine Straw None Conservative Moderate -$500 $(382) Opportunity Cost None Conservative Moderate Lob-Longleaf $(1,017) $(764) $(599)

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32 CASE 3: SUCCESSFUL AGRICULTURE Corn Soybeans Row Crop SEV per acre, 4% $1,757 $4,158 Opportunity Cost per acre by Pine Straw for SI 60 at 50 Years None $(2,254) $(4,655) Conservative $(1,975) $(4,376) Moderate $(1,811) $(4,212) Forestry cannot compete with average crop returns in average years on good sites Agriculture is highly variable, analysis only used on high quality sites Lower quality sites more representative of candidates for this public-private cooperation Poor sites, little rain, climate change, and crop failures may favor trees and longleaf 32

33 ALTERNATIVE AGRICULTURE TRIAL/EXAMPLE: LESS SUCCESSFUL CROP YIELDS AND RETURNS Year Crop Yield (Bu/ac) Cost ($/ac) Price ($/bushel) Sale Price ($/ac) Net Returns ($/ac) 2007 Soybeans Corn Soybeans Corn Soybeans Mean Mixed Actual yields based on field demonstration in Goldsboro, NC (Cubbage et al. 2012); costs and prices on NCSU crop budgets

34 INCENTIVE PAYMENTS REQUIRED TO MAKE LONGLEAF RETURNS EQUIVALENT TO ALTERNATIVE LAND USE Current Management Practice (1) Loblolly pine currently managed to maximize timber revenue (2) Longleaf pine currently managed to maximize timber revenue (3) Successful Corn NC state average yields and prices (4) Successful Soybean NC state average yields and prices 4% discount rate Opportunity Cost per Equivalent Annual Contract Payments Acre 10-year 20-year $56 to $698 $7 to $83 $4 to $49 $322 to $439 $38 to $42 $23 to $25 $1,612 to $2,254 $4,013 to $4,655 $191 to $267 $476 to $552 $114 to $159 $284 to $329 34

35 APPLY ECONOMIC OPPORTUNITY COSTS TO GEOGRAPHIC AREA Intensive Area Minimum pine straw - ~$450 million to convert all available area to suitable habitat over 40 years, averaging $350 / ac $418 million to $590 million 326 /ac to $460 / ac Extensive Area Minimum pine straw - ~$890 million $829 million to ~$1.2 billion by pine straw level $327 / ac to $458/ac 35

36 RCW/LONGLEAF CONCLUSIONS Economically viable for forested lands Required payments are low ranging from $7 to $83 per acre per year on 10-year contract, consistent with state and federal conservation programs payment levels Post-Recession prices are advantageous, does not include cost share Combination of payments/interim income/stacking are essential to make longleaf for RCW habitat competitive with alternatives 51% of landowners in nearby counties interested in endangered species habitat 36

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38 INTEGRATED RCW HABITAT PROJECT: TASK 3 Synthesize information from Tasks 1 and 2 in a map-based product Identification of focal areas of opportunities Model recovery scenarios Integrate RCW strategies on private lands with RCW recovery plans on public lands

39 Acres FOCAL OPPORTUNITIES Tree age model > Location of potentially suitable stands Assumed all stands would require management > LiDAR resolution > Cavity trees limiting factor Age (years) 800, , , , , , , Estimated acreage of pines 83% Cumulative % of pines 57% 34% 90% 80% 70% 60% 50% 40% 30% 20% Cumulative % 100,000-18% 5% 3% 10% % 0% Age Class

40 FOCAL OPPORTUNITIES

41 POTENTIAL CLUSTER SITES

42 TASK 3 CONCLUSIONS Short- and long-term recovery opportunities Nesting and foraging habitat Active management Strategic planning of recovery efforts Multiple spatial and temporal scales Target lands with high conservation value Landscape connectivity Habitat quality and quantity Spatial data needs Landowner willingness Improved resolution

43 LONGLEAF COMPETITION WITH LOBLOLLY Pine straw essential to make longleaf competitive Need more research on pine straw markets, price impacts Post-recession prices have negative impact on loblolly present values Price recovery sensitivity analysis increases opportunity cost between longleaf for ecosystem services and conventional loblolly pine from $56-$698 to $301-$1,017 per acre Lower risk in diversified longleaf scenario which includes both pine straw and timber Pine straw prices have not dropped

44 NORTH CAROLINA MARKET BASED CONSERVATION INITIATIVE Innovative new military/conservation program in NC To prevent encroachment from developed uses Designed to protect military training route (MTR) for flight path based at Camp Lejeune And contribute to rural land conservation Though long term contracts to keep rural lands in farm, forest, or wildlife status Payments from DoD/Navy/Marines Targeted at lands under flight path With qualifying agricultural status

45 PROJECT IN BRIEF Military Training Route is 2 miles wide and overlays an estimated 400,000 acres in 18 eastern counties Provides yearly payments for landowners to maintain land in agriculture and forest production Program uses contracts instead of conservation easements Reverse auction process whereby landowners compete for participation in program by placing bids (i.e. market based) $~6 million allocated as of October 2012 First round of submissions for Phase 1 by Spring 2013

46 MBCI Rollout Phases

47 MBCI PROGRAM REQUIREMENTS Land must be located under the military flight path Land must be in agricultural, wildlife, or forestry working lands or other open space land uses Land should be enrolled in a deferred tax program for agriculture, wildlife, forestry, or other open space land use Landowner must have or obtain an active management plan for conservation, agriculture, wildlife, forestry, or other open space land use Landowners must agree to keep the land enrolled in compatible uses, build no tall structures over 100 feet without permission, and refrain from upward shining light projections Landowners will offer bids they are willing to accept to limit development on their land

48 PROGRAM DELIVERY SYSTEM PRIMARY NC Foundation for Soil and Water Conservation NC Association of Soil and Water Conservation Districts 16 Local Soil and Water Conservation Districts OTHER PARNTERS NC State Cooperative Extension NC Department of Agriculture and Consumer Services Environmental Defense Fund NC Farm Bureau NC Department of Environment and Natural Resources NC Forestry Association Natural Resource Conservation Service NC Grange Local Voluntary Agriculture District Boards

49 MBCI - CONCLUSIONS Built on prior cooperation on landowner surveys, Texas habitat conservation program and model, North Carolina Market Based Conservation Committees Evolved from local project near Camp Lejeune to MTR project Pilot military-agricultural conservation program Innovative for military and ag community Stay tuned for progress and success 49

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51 CONTACTS RCW / Longleaf Habitat Fred Cubbage: fred_cubbage@ncsu.edu Viola Glenn: viola.glenn@gmail.com Nils Peterson: nils_peterson@ncsu.edu Ron Myers: ron.myers@ncagr.gov Todd Snelgrove: rtsnelgrove@ag.tamu.edu Brian Hays: bhays@ag.tamu.edu Amanda Dube: adube@ag.tamu.edu NC Market Based Conservation Program NC Foundation for Soil & Water Conservation, Michelle Lovejoy: ncfswc@bellsouth.net North Carolina Association of Soil & Water Conservation Districts, Dick Fowler: NCASWCD@gmail.com