Economics Report. Ten Cent Community Wildfire Protection Project. United States Department of Agriculture. Forest Service.

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1 United States Department of Agriculture Forest Service June 2017 Economics Report North Fork John Day Ranger District, Umatilla National Forest Whitman Ranger District, Wallowa-Whitman National Forest Grant County, Oregon Prepared by: Erik Thompson Timber Sale Administrator North Fork John Day Ranger District

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3 In accordance with Federal civil rights law and U.S. Department of Agriculture (USDA) civil rights regulations and policies, the USDA, its Agencies, offices, and employees, and institutions participating in or administering USDA programs are prohibited from discriminating based on race, color, national origin, religion, sex, gender identity (including gender expression), sexual orientation, disability, age, marital status, family/parental status, income derived from a public assistance program, political beliefs, or reprisal or retaliation for prior civil rights activity, in any program or activity conducted or funded by USDA (not all bases apply to all programs). Remedies and complaint filing deadlines vary by program or incident. Persons with disabilities who require alternative means of communication for program information (e.g., Braille, large print, audiotape, American Sign Language, etc.) should contact the responsible Agency or USDA s TARGET Center at (202) (voice and TTY) or contact USDA through the Federal Relay Service at (800) Additionally, program information may be made available in languages other than English. To file a program discrimination complaint, complete the USDA Program Discrimination Complaint Form, AD-3027, found online at l and at any USDA office or write a letter addressed to USDA and provide in the letter all of the information requested in the form. To request a copy of the complaint form, call (866) Submit your completed form or letter to USDA by: (1) mail: U.S. Department of Agriculture, Office of the Assistant Secretary for Civil Rights, 1400 Independence Avenue, SW, Washington, D.C ; (2) fax: (202) ; or (3) program.intake@usda.gov. USDA is an equal opportunity provider, employer, and lender.

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5 Table of Contents Economics Report... 1 Introduction... 1 Methodology... 1 Volume... 1 Harvest Systems... 1 Harvest Cost and Revenue... 1 Consideration of Small Diameter Wood Removal... 2 Analysis Indicators... 2 Spatial and Temporal Bounding of Analysis Area... 2 Affected Environment... 2 Environmental Consequences... 3 Alternative 1 No Action... 3 Direct Effects and Indirect Effects... 3 Alternative Alternative 2 and Direct and Indirect Effects... 3 Alternative Direct and Indirect Effects... 4 All Alternatives... 4 Cumulative Effects... 4 Safety... 4 Amendment to Economics Report... 6 Modification or Clarification of Environmental Consequences since the draft EIS... 6 Methods... 6 Affected Environment... 6 Environmental Consequences... 6 Alternative Alternative Alternative Alternative Summary of Effects... 7 Literature Cited... 8 List of Tables Table 1: Analysis indicators and associated measures... 2 Table 2: Alternative 2 and 3 Economic Analysis by Logging Systems and Products... 3 Table 3: Alternative 4 Economic Analysis by Logging Systems and Products... 4 i

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7 Economic Report ECONOMICS REPORT INTRODUCTION This section deals with the economic viability of the potential Ten Cent Project area timber sales. Economic viability is dependent on costs and revenues associated with a particular timber sale. Timber sales, non-commercial thinning, fuel treatments, and associated resource work can generate employment and stimulate the local economy. The direct costs and revenue are identified for each alternative measuring the value of wood products to determine the estimated value of each alternative and viability of the Ten Cent Project with the alternatives identified. While there are other economic values in terms of revenues and costs that will be created from the implementation of this project to wildlife (terrestrial, aquatic), recreation, roads, soil, water and vegetation, the values are intangible and subject to individual personal judgment. Therefore given the inability to determine each person s values for each resource respective of the alternatives those values are unavailable and cannot be used. Other environmental factors such as water quality, fish, wildlife, productivity, have value that can be expressed in economic or non-economic terms. However, these other environmental factors do not have financial benefits and cost that are identifiable and quantifiable with relationship to the activities proposed for the Ten Cent Project. Therefore, an analysis would not show any financial or economic difference in those factors between alternatives. Therefore, economic analysis of those other environmental factors will not be included in this report. METHODOLOGY Volume and per acre volume for the Ten Cent economic analysis are based off of a limited pre-cruise of the project units identified as having a possible commercial component including commercial thinning, post and pole, and firewood sales. The prescription used for determining cut volume was based on the residual basal area targets for the different stand types and experience with local fuel and silvicultural objectives. The pre-cruise estimates are assumed to apply to all potentially commercial acres in the project area, this volume estimate will go up in some areas that will make viable commercial units and down in others that are non-viable commercial units. Harvest Systems Harvest systems within the project area were primarily determined using a GIS Digital Elevation Model raster supplemented with some field observations. Continuing field work will improve the optimal harvest system determination. An assumption of the analysis is that entire analysis units will be treated in the same way. Ground-based systems are used for those units with average slopes less than 35%. Skyline units are those units with average slopes greater than or equal to 35%. Roadside units are treated as a mix of skyline and ground-based systems. The purpose of this determination is to inform harvesting cost but the determination is likely to change as technicians get a look at the ground. Harvest Cost and Revenue Harvest costs have been estimated using the Forest Service Region 6 programs LogCost v15.0, Haulcost v15.0, and Jipo Truck Cost. Data used in the programs for equipment, routes, and costs are based on project GIS, pre-cruise, and other recently appraised sales. Revenue estimates are based on pre-cruise data of species, diameter, and stocking. Along with average delivered log prices from the R6_TEACOST program. 1

8 Economic Resource Report Timber values and logging costs have the most direct effect on the economic values of this project. Market conditions may fluctuate widely throughout the year, and depending on the time of year the sales are offered for auction, the current estimates may or may not be accurate, which could have an impact on the final sales values. Rising or falling fuel and delivered log prices could create a substantial increase or decrease in sale operation and manufacturing costs. Consideration of Small Diameter Wood Removal The logging cost vs. revenue will be a limiting factor when considering this project as a timber sale. From the limited preliminary cruise data the quadratic mean diameter (QMD) is 9.8 inches across all species (46 percent lodgepole pine, 29 percent white fir, 10 percent alpine fir, 10 percent ponderosa pine, and 5 percent Douglas-fir) The logging costs per unit volume rise rapidly as the average or QMD of stems removed decreases. This is because more stems are needed to create the same volume, for example four average lodgepole pine with a diameter of 9 inches have the same merchantable volume as two 12 inches or one 15 inch lodgepole pine, but each stem requires relatively the same amount of time to fall, skid, process and load. While operating costs remain the same the total volume produced from stump to landing daily may be half as much with QMD of 9.8 inches versus a QMD of 12 inches. ANALYSIS INDICATORS Table 1: Analysis indicators and associated measures Economic indicators: Measure: Sawlog Volume Biomass/Fiber volume CCF (100s of Cubic Feet) Timber Gross Revenue $ Cords of Firewood Net Cost/acre CCF Cords available $/acre SPATIAL AND TEMPORAL BOUNDING OF ANALYSIS AREA The affected area, or economic impact zone, for the Umatilla National Forest consists of Grant, Morrow, Umatilla, Union, Wallowa, and Wheeler counties in Oregon. The Ten Cent Project area is within Grant county Oregon. Economic profiles have been developed for Wheeler and Grant counties and are available at the Heppner Ranger district. The profiles summarize demographic, employment, and income trends in those counties. Refer to the Umatilla National Forest, land and Resource Management Plan, Final Environmental Impact Statement, Appendix B, for additional detail description of the main social and economic characteristics of the area (USDA 1990). Timber values and logging costs have the most direct effect on the economic viability of this project. Market conditions may fluctuate widely throughout the year, and depending on the time of year the sales are offered for auction, the current estimates may or may not be accurate, which could have an impact on the final sales values. Rising or falling fuel and delivered log prices could create a substantial increase or decrease in sale operation and manufacturing costs. AFFECTED ENVIRONMENT Timber harvest in Grant County has averaged 29.3 MMBF over the past 15 years and declined from a high of 86.9 MMBF in 2004 to a low of 13.4 MMBF in 2013 according to the University of Montana Bureau of Business and Economic Research (2015). 2

9 Economic Resource Report The majority, 67%, of timber harvest in Grant County from was from industrial and nonindustrial private forestlands. From 2008 to 2014 the majority, 70%, of timber harvest was from National Forestlands (BBER 2015). The shift reflects the overall downward trend of timber prices leading to the low-point in timber values. ENVIRONMENTAL CONSEQUENCES Alternative 1 No Action Direct Effects and Indirect Effects Alternative 1 Under the No Action Alternative, no commercial timber harvest, pre-commercial thinning, or fuel reduction activities associated with the Ten Cent project would occur. Except for the in-house planning costs, Alternative 1 would incur no costs, produce no revenue, and would not change the conditions or level of economic activity in the surrounding counties. This alternative may, however, contribute to a decline in the local timber industry and local economy, since it would keep federal timber from the market and provide no revenue or support direct, indirect or induced employment. Current downward trends in timber harvesting from National Forests lands would continue into the future. Current employment in the wood products sector of the local economy would remain unchanged. Alternative 2 and 3 Direct and Indirect Effects Alternative 2 does not appear to be financially viable solely from a timber economics viewpoint. The costs of harvesting and hauling small diameter merchantable timber exceeds the expected revenues for a total project cost of $3,777,826. Harvesting costs are lower per CCF compared with Alternative 4 because of shorter average skidding and yarding distances distance. This option has a higher total net cost than Alternative 3 because it would mechanically treat more acres, though it has a lower net cost per acre because of the difference in average skidding distance. Table 2: Alternative 2 and 3 Economic Analysis by Logging Systems and Products Logging System/Product Vol (ccf) value ($)Stumpto-truck ($) Log Haul Road Maint ($/total). $/total total ($)BD & Erosion Temp Road ($) Sum of Costs Net Value 1 Ground based saw 14,287 2,428,820 1,308, ,200 50,005 36,289 14,287 1,966, ,762 1 Ground based fiber 12, ,792 1,722, ,652 42,597 30,913 12,171 2,282,466-1,369,674 2 Roadside Saw 13,711 2,330,922 1,981, ,741 47,990 34,827 2,598, ,919 2 Roadside fiber 11, ,000 2,376, ,520 40,880 29,667 2,902,948-2,026,948 3 Skyline Saw 4, , , ,191 15,812 11,475 4,518 1,066, ,350 3 Skyline fiber 3, ,632 1,079, ,089 13,469 9,775 3,848 1,256, ,033 s 60,215 7,605,177 9,326,424 2,348, , ,947 34,824 12,073,339-4,468,162 Road Const. 5 miles 2,000 Cost per Mile 10,000 Project -4,478,162 Net Cost/ac 8018 Acres

10 Economic Resource Report Alternative 4 Direct and Indirect Effects Alternative 4 does not appear to be financially viable solely from a timber economics viewpoint. The costs of harvesting and hauling the small diameter merchantable timber exceed the expected revenues by $3,560,210. Alternative 4 would treat 1291 acres less than alternatives 2 and 3 but would also cost more per CCF due to longer skidding and yarding distances. This option has a lower net cost than alternative 2 because it would treat fewer acres, though it has a higher net cost per acre due to the difference in average skidding distance. It would also supply less commercial firewood harvesting opportunities than alternatives 2 and 3. Table 3: Alternative 4 Economic Analysis by Logging Systems and Products Logging System/Product Vol (ccf) value ($)Stumpto-truck ($) Log Haul Road Maint. $/total total ($)BD & Erosion Temp Roads($) Sum of Costs Net Value 1 Ground based saw 9,899 1,682, , ,070 34,647 25,144 9,899 1,341, ,128 1 Ground based fiber 8, ,451 1,210, ,874 29,514 21,419 8,433 1,598, ,879 2 Roadside Saw 13,075 2,222,684 1,889, ,910 45,761 33,210 2,478, ,478 2 Roadside fiber 11, ,322 2,266, ,368 38,982 28,290 2,768,147-1,932,824 3 Skyline Saw 4, , , ,967 15,074 10,939 4,307 1,041, ,188 3 Skyline fiber 3, ,159 1,048, ,083 12,841 9,319 3,669 1,217, ,107 s 50,520 6,380,647 8,143,278 1,970, , ,320 26,308 10,444,996-4,064,349 Road Const. 5 miles 2,000 Cost per Mile 10,000 Project -4,074,349 Net Cost/ac 6727 Acres -606 All Alternatives Cumulative Effects Past Activities Past timber harvest activities on all ownerships within the local area have affected the viability of timber harvest to the extent that the present industrial infrastructure and workforce have developed as a result of the past activities. The effects of specific activities on the viability of timber harvest are not measurable. Present and Reasonably Foreseeable Activities Due to the competitiveness of the market, and its global nature, none of the alternatives would in themselves affect prices, costs or harvest viability of other present or reasonably foreseeable timber sales in the area. The overall trend of decreasing harvest could lead to a decrease in local capacity and demand for wood products. SAFETY An additional consideration for timber management is the safety of woodsworkers. Despite advances in safety and harvest technology and strict adherence to OSHA standards logging remains one of most dangerous occupations in the USA. From an estimated 14,920 workers died from traumatic injuries received in the logging industry. This translates into an annual fatality rate of 164 deaths per 100,000 loggers. For comparison, the annual fatality rate for all US workers is 7 deaths per 100,000 employees. Over this same 10-year period, the logging industry recorded an annual workplace injury rate 4

11 Economic Resource Report of 14,000 injuries per 100,000 loggers. This compares with a rate of 8,000 injuries per 100,000 for all US workers. Approximately 60% of all logging injuries and fatalities occurred when the workers were struck by falling or flying objects or were caught between objects. Approximately 90% of these injuries and fatalities involved trees, logs, snags or limbs (NIOSH Pub No ). The mechanization of ground-based harvesting has dramatically reduced the fatality and injury rates within the industry. Mechanized equipment such as feller-bunchers and cut-to-length processors are designed to protect the operator from being struck by falling logs and debris from tree felling and processing. According to a 6-year study in West Virginia mechanical harvesters have reduced injury rates from 19,400 per 100,000 loggers to 5,200 per 100,000 loggers, a decrease of 73% (Bell, J.L. 2001). Mechanization of forest treatments not only improves production rates it more importantly has decreased the amount of time workers spend unprotected near unmitigated hazards such as snags in the woods. Hazard tree felling and removal can mitigate some of the trees near roadsides and landings where unprotected workers congregate. Mechanization and hazard tree removal will not eliminate risk from gravity or other operational hazards but they do reduce exposure time and frequency. 5

12 Economic Resource Report AMENDMENT TO ECONOMICS REPORT MODIFICATION OR CLARIFICATION OF ENVIRONMENTAL CONSEQUENCES SINCE THE DRAFT EIS Methods The methods used for this analysis can be found in detail in the Economics Report and have not been changed. Affected Environment The Affected Environment has not been changed or modified from the Economics Report in draft EIS. ENVIRONMENTAL CONSEQUENCES Alternative 1 No change from Economics Report in draft EIS. Alternative 2 Logging System/Product Alternative 3 Road Maint. Temp Roads ($)BD $/total & Erosion ($) 1 Ground based saw 23,642 3,400,429 2,227,786 1,182, , ,133 23,642 3,729, ,333 1 Ground based nonsaw 2, , , ,050 22,175 11,668 2, , ,060 2 Post & Pole saw 8,662 1,245, , ,100 71,115 37,420 8,662 1,366, ,662 2 Post & Pole pole 4, , , ,800 33,464 17,608 4, , ,399 3 Skyline saw 1, , ,945 80,800 13,267 6,981 1, ,609-77,180 3 Skyline nonsaw 194 9,700 24,844 9,700 1, ,168-27,468 s 40,891 5,609,715 3,997,012 2,044, , ,649 40,891 6,594, ,102 Road Const. 5 miles 2,000 Cost per Mile 10,000 Project Logging System/Product Vol (ccf) Value ($)Stump-totruck ($) Log Haul Sum of Costs Net Value -995, Acres Net Cost/Ac -182 Road Maint. Temp ($)BD $/total & Erosion ($) 1 Ground based saw 26,269 3,778,270 2,475,328 1,313, , ,482 26,269 4,144, ,927 1 Ground based nonsaw 3, , , ,050 24,638 12,964 3, , ,388 2 Post & Pole saw 9,624 1,384, , ,200 79,013 41,576 9,624 1,518, ,062 2 Post & Pole pole 4, , , ,450 37,183 19,565 4, , ,892 3 Skyline saw 1, , ,996 89,800 14,745 7,759 1, ,096-85,777 3 Skyline nonsaw ,850 27,789 10,850 1, ,575-30,725 s 45,436 6,233,115 4,441,337 2,271, , ,284 45,436 7,327,886-1,094,771 Road Const. 5 miles 2,000 Cost per Mile 10,000 Project Vol (ccf) Value ($)Stump-totruck ($) Log Haul Sum of Costs Net Value -1,104, Acres Net Cost/Ac

13 Economic Resource Report Alternative 4 Road Temp Logging ($) Log Maint. total ($)BD & Roads Sum of Vol (ccf) Value ($)Stump-totruck $/total ($) System/Product Haul Erosion Costs Net Value 1 Ground based saw 20,914 3,008,061 1,958,387 1,045, ,704 90,348 20,914 3,287, ,993 1 Ground based nonsaw 1,152 57, ,873 57,600 9,458 4,977 1, , ,460 2 Post & Pole Saw 9,497 1,365, , ,850 77,970 41,027 9,497 1,492, ,690 2 Post & Pole pole 4, , , ,450 36,690 19,306 4, , ,753 3 Skyline saw 1, , ,996 89,800 14,745 7,759 1, ,096-85,777 3 Skyline nonsaw ,850 27,789 10,850 1, ,575-30,725 s 38,045 5,343,559 3,684,958 1,902, , ,354 38,045 6,101, ,397 Road Const. 5 miles 2,000 Cost per Mile 10,000 Project -768, Acres Net Cost/Ac -165 Summary of Effects The tables above have been modified to provide an accurate reflection of acreages that can be treated commercially based upon prescriptions. Material types to be removed have also been modified to better identify what can be removed. Alternatives 2, 3, & 4 remain to be not financially viable from a commercial removal aspect. Modifications that were made are as follows: Volumes from Roadside treatment areas that could be treated commercially were absorbed into the ground based, skyline, and post and pole volumes appropriately. Removal of materials in these areas would be the same as treatment of adjacent commercial units, therefore do not require separation. A Post & Pole category was added to the Logging Systems/Product column to represent units/areas that are predominately Lodgepole pine. These areas would generate both sawlog and pole material. Skyline acres were greatly reduced after further review of field observation data collected. Break-out of Alternative 2 and 3 volumes and associated costs due to the lower basal area that would be left in Alternative 3. Most units (acreages removed from Economic analysis) have been determined to currently meet desired stand densities. They are more suitable for small diameter thinning or mechanical treatment to meet purpose and need of the project with no need for commercial treatment. 7

14 Economic Resource Report LITERATURE CITED BBER University of Montana, Bureau of Business and Economic Research. Harvest by County, Grant County, Bell, J.L. Changes in Logging Injury Rates Associated with Use of Feller-bunchers in West Virginia. Proceeds from The International Mountain Logging and 11 th Pacific Northwest Skyline Symposium Conway, G.A., Lincoln, J.M., Bradley, H.J., Manwaring, J.C., Klatt, M.L., Thomas, T.K. Alaska s Model Program for Surveillance and Prevention of Occupational Injury Deaths. Public Health Reports. November/December 1999 Vol National Institute for Occupational Safety and Health (NIOSH). Preventing Injuries and Deaths of Loggers. NIOSH Publication No May Rasmussen et al The 2012 Forest Report, An Economic Assessment of Oregon s Forest and Wood Products Manufacturing Sector. Prepared for: Oregon Forest Resources Institute. State of Oregon. Simmons et al Oregon s Forest Products Industry and Timber Harvest, University of Montana, Bureau of Business and Economic Research. USDA Forest Service Timber Sale Preparation Handbook Chapter 10 Sale Program Development Gate System and Chapter 20 Timber Sale Project Development Gate 1. 8