Forestry Subcabinet s Growing Our Forests Initiative: Jobs, Environment, and a Great Place to Live

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1 Forestry Subcabinet s Growing Our Forests Initiative: Jobs, Environment, and a Great Pace to Live Executive Summary Forests, with a their resources, are priceess, natura assets that define who we are as Minnesotans. Trees, akes, and oons are the state s iconic images. This is an outgrowth of the critica roe forests pay, have payed, and wi pay in the ife and cuture of the state. Minnesota forests suppy: Raw materias to support a vibrant forest products industry and growing renewabe energy industries Amenities on which the state s tourism industry is heaviy based and that attract and hod Minnesotans Ecoogicay heathy and dynamic andscapes that continuay renew themseves to provide essentia environmenta, economic, and socia benefits. Minnesota s forests are natura assets that wi depreciate if we do not carefuy manage them. Conserving our forests wi ensure a heathy, vibrant, and competitive Minnesota into the future. To meet growing expectations, we must activey manage our forests to enhance their productivity, heath, and ecoogica integrity. For exampe: Industry needs heathy forests to ensure that a sustainabe suppy of high-quaity wood fiber is avaiabe into the future. Growing forests are needed so they can continue as the cornerstone for connecting Minnesotans to the great outdoors. Growing forests are needed to ensure that our forests remain beautifu, ecoogicay heathy, and productive in the face of conservation chaenges from exotic species and insects and diseases to widfires and and-use changes. Ensuring ong-term forest heath and productivity means creating a comprehensive and integrated management strategy that incudes: Directing investments to pubic and private forest management Conserving priority working forests across the state Streamining mechanisms for state timber saes to assist oggers, the state, and timber buyers Targeting economic deveopment incentives and poicy design to optimize the benefit of using avaiabe forest biomass as an energy source and to support viabe primary and secondary wood industries and vaue-added industries. The foowing three briefing papers and one fact sheet expain: 1. Needed investments to sustain and enhance Minnesota s forests 2. Needed poicy changes and future actions to improve the management of Minnesota s timber resources 3. Needs for a forest BioEconomy strategy 4. Quick facts detaiing the roe of the forest products industry in Minnesota s economy.

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3 Forestry Subcabinet s Growing Our Forests Initiative: Jobs, Environment, and a Great Pace to Live Forest Investments, Fisca Year 2010 Tota $10,000,000 Briefing Paper 1 Minnesota s Forests: A Cornerstone of the 21st Century Minnesota s native forests payed a critica roe in the estabishment of our state. Ever since then, our forests have been one of the state s cornerstones, generating weath and jobs. But the forests are more than a resource; they define Minnesota and the identity of Minnesotans. The iconic images of Minnesota are oons, akes, and trees because these resources are so fundamenta to our quaity of ife and what we vaue. We can keep forests a cornerstone of the state s economy and cuture through investing to sustain their heath and productivity. Heathy forests are key to retaining and growing jobs in forest products manufacturing and in supporting industry and tourism. Minnesota s resiient forests are aso key to providing quaity outdoor recreationa opportunities, finding conservation-based aternatives to fossi fues, and addressing cimate change effects. What It Takes to Sustain Minnesota s Forests Investments in the sustainabe management of Minnesota s forests hep provide a continuous fow of the raw materias needed to keep forest industry strong whie protecting the many connected forest resources and vaues that contribute to quaity of ife. Investments in key environmenta initiatives must continue if forest systems are to be sustained in the face of increasing pressures for timber, recreation, and deveopment. Just as important wi be sustaining a fow of wood from Minnesota s forests to maintain the viabiity of the state s forest products industry and to meet society s growing demand for raw materias. Minnesota s forest products industry is the fourth argest manufacturing sector in the state by empoyment, generating 11 percent of a manufacturing shipments. The estimated vaueadded impact of timber harvest is $41.60 per doar of timber sod. A Three-Part Approach. Whie the need for both wood and continued environmenta initiatives appears incongruous, they are very much dependent on each other. The foundation of sustainabe systems is three interconnected components a heathy environment, a viabe economy, and a vibrant community. A heathy environment is necessary for productivity and surviva. A viabe economy is essentia to be abe to afford programs that maintain a quaity environment. Vibrant communities are needed to support efforts that maintain environmenta quaity and economic opportunity. If any one of these three components is out of baance for ong, the state s forest systems wi not be sustainabe. Capita Budget Requests According to Artice XI of the Minnesota Constitution, the Legisature may provide for the enhancement, management, and protection of the state s forested pubic and private ands. The foowing requests for state bond funds wi support the conservation mission of both the state s constitution and Department of Natura Resources by heping to protect natura resources, provide outdoor recreation opportunities, and maintain the heath and economic vitaity of Minnesota s communities: Minnesota Forests Initiative. Minnesota s forests are natura assets that wi depreciate if they are not carefuy managed. Four requests wi enhance forest heath, productivity, and diversity and contribute to a heathy and competitive economy:

4 State Land Reforestation $3.5 miion to reforest state-administered forest ands. Site preparation, tree panting, tree seeding, and appying protection measures on newy panted trees on approximatey 10,000-15,000 acres each year over the next two years wi provide jobs approximatey 30 contracts of reforestation crew work. Forest Stand Improvement $ 2 miion to: u treat tree stands on state forest ands to improve the quaity and vaue of Minnesota s forest assets u provide grants to oca communities to impement fue-oad reduction projects that wi decrease a community s exposure to damage from widfires and provide a potentia source of woody biomass. Neary 100 percent of this request supports jobs by providing contracts to oggers to accompish the work. It is estimated that for every $1 miion spent, approximatey 100 contracts are created to improve 4,000 acres of forest ands. These are shove-ready opportunities that create jobs. Roads and Bridges $2 miion to repair, repace, and construct bridges, decks, road surfaces, and cuverts within the state forest road system, which encompasses more than 2,000 mies and provides access to 4.9 miion acres of state-administered forested ands. The Governor s Task Force on the Competitiveness of Minnesota s Primary Forest Products Industry (Juy 2007) found the transportation infrastructure on state forest ands to be critica to the competitiveness of the forest products industry. Maintaining this infrastructure is aso crucia to ensuring safe, pubic access to state forest ands. These road and bridge projects are shove-ready and can be competed by private contractors through a competitive bid process, such as the diapidated Mucky Creek bridge crossing in Badoura State Forest that was repaced within two weeks by a oca company. Minnesota Forests for the Future $500,000 to acquire perpetua conservation easements and fee tite on private forest ands. Working forest conservation easements are a core too to address the economic goas of sustaining regiona timber-based economies by protecting the forest and base on which they depend. Securing pubic recreationa access to private ands and securing permanent trai corridors aso benefits the outdoor recreation tourism industry. This appropriation woud be added to existing appropriations to everage neary $10 miion in federa funds for forest conservation. Community Partnerships. The Department of Natura Resources can work through partnerships to better meet oca resource needs and address emerging natura resource issues. The foowing request wi deiver grants to oca units of government to hep conserve natura resources and support economic growth: Diseased Shade Tree Remova and Repacement $2 miion to provide assistance to communities to treat isoated infestations of emerad ash borer (EAB), remove and repace trees, and deveop response pans for EAB and other invasive species. For Further Information Contact: Dave Eppery Director Division of Forestry Minnesota Department of Natura Resources 500 Lafayette Road St. Pau, Minnesota dave.eppery@state.mn.us

5 Forestry Subcabinet s Growing Our Forests Initiative: Jobs, Environment, and a Great Pace to Live Strategic Management of Minnesota s Timber Resource Poicy Changes and Future Actions Briefing Paper 2 Improve Resource Quaity and Utiization Improving the heath of Minnesota s forests and the quaity of the wood resource are critica to improving productivity of a forest resources whie addressing the expanding demands and pressures on forest ands. Quaity wood is critica to sustaining Minnesota s forest products industry. Having a quaity wood suppy reduces industry costs associated with manufacturing and waste treatments. Wood harvest and utiization are invauabe management toos for forest ecosystems. They aso provide sustained ong-term economic return to the state and other andowners. Economic deveopment and growth in the timber industry and the fied of renewabe energy wi be dependent on efficient utiization and procurement of avaiabe resources. In order for wood to be used in a broad range of energy appications, the state must enhance productivity on avaiabe forested ands and sustain its ogging and wood industry. Meeting expanding demands for wood fiber whie optimizing the productivity of a forest resources requires expanded investments and improved fexibiity in the management of ow productivity forest stands that cannot support a viabe timber sae. Expansion of renewabe energy utiization opportunities is a key factor in managing the cost of investments. Additiona economic growth wi be dependent upon managing for sustainabiity provided by heathy, productive forests and expanding the quaity of renewabe wood fiber resources. The current economic downturn, housing sump, cosures of severa mis, and an overa weak economy are causing significant strugges for Minnesota s ogging community. The state must ensure the sustainabiity of its ogging community to aow for the continued resource procurement necessary for meeting Minnesota s renewabe energy mandates. A needed change is providing fexibiity in how state timber saes are offered, secured, and managed. This shoud incude investments in evauating and impementing program and system improvements for increased efficiencies. Improve Wood Fiber Utiization The foowing strategy components support the Department of Natura Resources strategic direction to enhance the state s conservation-based energy sources. This strategy aso improves and streamines the mechanics of the department s timber saes. Amend Minnesota Statutes, Chapter 90 to: u Aow the commissioner of Natura Resources to reoffer unsod tracts of timber at pubic auction at beow appraised vaue. u Carify that down payments made on state timber sod at pubic auction conducted by a seaed bid process must be received or postmarked within 14 days of the date of the seaed bid opening. u Add that a bid guarantee, in addition to a down payment, is ony needed for a bid increase made on a timber sae permit that is in excess of $5,000 of the appraised vaue of the timber. (2010 egisative initiative) Survey Minnesota s and the Midwest Region s forest industries and ogging communities on timber sae design opportunities (e.g., arge bock saes) and marketing methods to improve utiization off of state forest ands. Provide

6 recommendations to the 2011 Legisature on changes to Minnesota timber statutes to address opportunities or probems identified in the survey. (Forestry Subcabinet future action) Estabish priorities within competitive state grant funds (e.g., Legisative-Citizen Commission on Minnesota Resources, Department of Empoyment and Economic Deveopment) to support research for and deveopment of woody biomass harvesting equipment. (Forestry Subcabinet future action) Improve Wood Fiber Quaity and Avaiabiity Provide support through bonding (see Briefing Paper 1) for investments to recover or enhance the productivity of state forest ands. (Forestry Subcabinet 2010 action) Convene an interagency roundtabe to provide recommendations reated to reducing voume and quaity osses associated with an aging forest resource. (Forestry Subcabinet future action) Charge the Minnesota Forest Resources Counci with impementing a 10-year anaysis of the opportunities and impacts of focusing a percentage of state timber harvesting operations on younger stands that have peaked in potentia for annua fiber productivity based on ecoogica cassification. (Governor s directive) Sustain the Logging Community Significant chaenges exist within the Minnesota ogging community in acquiring reasonaby priced security for state timber saes. Providing financia institutions access to the equity of the timber vaues on these permits shoud provide improved access to financia security within the ogging community. Amend Minnesota Statutes, Chapter 90 to aow banks and other security providers to have first access to timber under permit for which they have provided security. (Future egisative initiative) Provide contractua opportunities associated with forest stand improvement operations under the proposed bonding project above. (Forestry Subcabinet future action) Impementation of these strategies wi be pursued through the Division of Forestry s existing timber program. Accompishments To hep keep forest industry mis that are dependent on secondary species operating during the current economic downturn, Department of Natura Resources fied foresters have been directed to identify and offer for sae stands that can hep provide needed species primariy through intermediate stand treatments (i.e., thinning and seective harvest). An exampe of the response to this initiative is that the voume of red pine pupwood offered and sod increased by 86 percent from Fisca Year 2008 to Fisca Year 2009 (24,370 cords to 45,443 cords). Minnesota Statutes, section aows state timber permits to be divided into cutting bocks, thereby reducing upfront security requirements. This provides some reief for oggers with constrained cash fow, and may create stronger opportunities to harvest state permits. The Department of Natura Resources is encouraging permit hoders to take advantage of this muti-cutting bock option on existing permits where it makes sense for them to do so. In addition, this option is now being considered when new timber saes are set up. For Further Information Contact: Oin Phiips Forest Management and Protection Section Manager Division of Forestry Minnesota Department of Natura Resources 500 Lafayette Road St. Pau, Minnesota oin.phiips@state.mn.us

7 Forestry Subcabinet s Growing Our Forests Initiative: Jobs, Environment, and a Great Pace to Live Minnesota Forest BioEconomy Strategy Briefing Paper 3 Strategic Investments in Forest BioEnergy Deveopment Wood is Minnesota s odest and most versatie renewabe energy resource. Because wood is so versatie, it is imperative to focus investments on strategic opportunities. The Green Enterprise Assistance program and participating agencies wi work with companies to grow forest bioenergy projects that contribute to: Sound and ecoogicay appropriate forest management Reated state environmenta poicies such as the Regiona Haze State Impementation Strategy, carbon emission reductions, and carbon sequestration State economic goas such as job retention and expansion Efficient use of the wood resource Coordination of forest biomass strategies with agricutura biomass strategies. Emerging priority strategies incude: Shifting Minnesota s heavy industry from fossi fues to renewabe fues Buiding on existing industry Enhancing compiance with the Cean Air Act s visibiity standards for northern Minnesota. Smart poicy wi enabe growth of the wood energy sector, other renewabe sectors (wind, geotherma heat pumps, soar therma manufacturing, etc.), and position Minnesota empoyment engines such as taconite and paper production to compete in a changing word. Strategic Forest Biomass Utiization Compiments Other Renewabe Resources Smart poicy wi enabe forest biomass to compiment other growing cean energy industries in Minnesota such as the wind, soar, and geotherma industries. These technoogies have significant vaue but have ess fexibiity in their appication. Wood can be used to offset fossi fues in markets, such as industria process heat, where other renewabe resources are not suitabe. Forest Biomass Utiization Supports Forest Management Biomass markets can utiize wood resources that historicay have not had outets. This wi enabe resource managers to pursue a wider range of resource management practices. Impementing practices such as brushand harvest, precommercia thinning, and forest heath projects wi improve forest conditions and productivity. Refer to briefing papers 1 and 2 to see what bonding initiatives and current and future egisative poicy initiatives are recommended to hep increase forest productivity whie providing potentia sources of woody biomass. Impementation Strategy Under the direction of the Forestry Subcabinet, impementation wi be twofod: Expanding the sustainabe suppy of woody biomass (DNR ead) Targeting economic deveopment assistance (Department of Empoyment and Economic Deveopment ead). Biomass suppy deveopment incudes increased use of sash, pre-commercia thinning, invasive species treatments, utiization of ow-vaue species, fue-oad reductions, and brushand management. For Further Information Contact: Mark Lindquist Biofues Program Manager Commissioner s Office Minnesota Department of Natura Resources 500 Lafayette Road St. Pau, Minnesota mark.indquist@state.mn.us

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9 Forestry and the Forest Products Industry in Minnesota Fact Sheet February 2010 Why Forestry Matters With 33 percent of the state being forested, Minnesotans depend on their forests for many things, incuding widife habitat, recreation and tourism, cean water, natura beauty, and forest products. Sustainabe forest management is important to everyone in Minnesota. In simpe terms, sustainabiity means managing forests so future generations of Minnesotans can enjoy the same benefits provided by today s forests. In Minnesota, wood for industry comes from private state, county, and federa forests that are managed to provide mutipe benefits to the state s citizens. The Department of Natura Resources, many counties, and a number of arge private hodings have been awarded one or both of the Forest Stewardship Counci (FSC) and Sustainabe Forestry Initiative (SFI) third-party certifications on their managed forests. This documents a ong-term commitment to sustainabe forest management. Heathy Industry Is Critica to Heathy Forests There is an intricate connection between forest industry and sustainabe forest management. Trees are a renewabe resource and foresters normay use commercia timber harvesting as part of the process of maintaining forest heath and productivity, and for managing fue oads to reduce the risk of widfire. It is amost as simpe as this: No wood markets = No forest management. With the deveopment of improved markets over the past 25 years, foresters can now better accompish management and regeneration at commercia harvest time. Not ony are stands regenerated and forest heath improved, but andowners (incuding state, county, and federa governments) are paid for the timber! Puing Together in Tough Times The current housing sump and overa weak economy have caused great strugges in Minnesota s forest industry. Severa arge mis and many smaer ones have cosed in the past three years. It is critica that Minnesota s remaining industry stays competitive. The best thing we can do to ensure that it does is to continue managing our forests and making wood avaiabe. The future heath and productivity of Minnesota s forests depends on it. Minnesota's Forest Economy The forest products industry is the fourth argest manufacturing sector by empoyment, generating 11 percent of a manufacturing shipments. The vaue-added impact of timber harvest is $41.60 per doar of timber sod. And, forest industry generates an estimated $144 miion in state income and saes taxes annuay. Direct Economic Impact Empoyment Annua Payro Vaue of Shipments Vaue Added State Income & Saes Taxes Paid Tota Economic Effect 1 Empoyment Effect Output Effect Vaue Added Effect Manufacturing Faciities Pup & Paper Mis 5 Recyced Pup & Paper Mis 3 Hardboard & Speciaty Pants 3 OSB 2 / Structura Pane Pants 2 Sawmis 500+ Speciaty Businesses 150 Secondary Manufacturers , 850 jobs $1.6 biion $7.2 biion $3.5 biion $144 miion 121,120 jobs $13.1 biion $6.3 biion Timber Harvest Pupwood 2.3 miion cords 3 Sawogs & Speciaty Products 250 miion board feet 4 Fuewood 180,000 cords Tabe Notes 1 Economic mutipiers account for the indirect and induced effects of inter-industry and househod spending. 2 OSB = oriented strand board. 3 Cord = 79 cubic feet of soid wood. 4 Board foot = a piece of wood 1 inch by 12 inches by 12 inches. Minnesota DNR - Division of Forestry Lafayette Road - St. Pau, Minnesota

10 Outook In Minnesota, net wood fiber growth is significanty higher than removas pus osses to mortaity. This wood fiber surpus faciitates opportunities to maintain and improve forest heath, expand wood-using industries, and support quaity of ife through tax-funded pubic services. Housing: U.S. starts decined 75 percent from a peak 2 miion in 2005 to 550,000 in The composite forecast is that starts wi reach the 1 miion mark again in 2011 and reach the demographic demand of 1.5 miion by Industry Diversity: For both economic and forest management benefits, it is critica that Minnesota maintain a diverse forest industry with a significant vaue-added component. For exampe, Minnesota speciaizes in manufacturing wood windows, kitchen cabinets, oriented strand board, and paper products. This wi be no easy task in the current difficut economic and capita investment environment. Paper & Packaging: Growth in demand for paper is positivey correated with growth in gross domestic product (GDP). Word GDP growth was negative 1.1 percent in 2009, forecast to rebound to 3.9 percent growth in U.S. GDP growth was negative 2.5 percent in 2009, forecast to rebound to 2.7 percent growth in In comparison, the U.S. averaged 2.8 percent growth in GDP since China and India have been the primary growth markets over the past decade. Top 10 Economies by GDP US$ (triions) Forecast Change in GDP (percent) EU-27 $ US $ Japan $ China $ Russia $ Brazi $ Canada $ India $ Mexico $ Austraia $ Word $ Source: Internationa Monetary Fund, Word Economic Outook Update, January Location Quotient (LQ) = (E X /E T )/(N X /N T ) where: EX is state empoyment industry sector X, ET is state tota empoyment, NX is nationa empoyment in industry sector X, and N T is tota nationa empoyment. Renewabe Energy: Wood-based renewabe energy has important cimate change and nationa security benefits. In the U.S., wood fiber use for renewabe energy is forecast by some sources to increase from 5 percent to 40 percent of tota industria wood fiber consumption by Logging residues are readiy avaiabe and have the economic potentia to meet much of expected demand growth. Contact: Don Deckard, State Forest Economist, maito:donad.deckard@state.mn.us, (651) Minnesota DNR - Division of Forestry Lafayette Road - St. Pau, Minnesota