Wading out of the Tilla-Muck: reducing timber harvests in the Tillamook and Clatsop state forests, and protecting rural timber economies through ecosystem service programs.

• Author: Wigington, Tim G.
• Position: IV. Decoupling County Budgets from Ors 530 Timber Harvest Revenues through VII. Conclusion, with footnotes, p. 1305-1338

4. DECOUPLING COUNTY BUDGETS FROM ORS 530 TIMBER HARVEST REVENUES

   One way to achieve this long-term GPV balance of economic and non-economic values would be to remove ecologically important ORS 530 lands from revenue generating activities that cause ecological degradation by placing land in permanent conservation reserves. Although it may be legal under Tillamook I to extinguish the revenue-generating capacity of these lands for a long period of time (but not permanently), a better course of action would be to "decouple" (224) these ecological reserves from the ORS 530 revenue disbursement scheme. As discussed and modeled in Part V, the counties would suffer a budget shortfall as a result of decoupling because they would not be able to earn revenues from the removed ORS 530 lands. (225) As detailed in Part VI, to pay for this "cost of conservation," foregone timber harvest revenues from these ecologically important ORS 530 lands would first be replaced by an upfront cash infusion to the counties, which would be repaid by non-extractive, environmentally neutral "ecosystem services" (226) revenue streams. Once shifted to ecosystem services, the ORS 530 lands would continue to generate revenue, thus complying with Tillamook I. (227) However, as discussed in Part VII, "leakage" (228) controls would need to accompany decoupling so as to ensure that the foregone timber harvests did not simply shift to other non-decoupled ORS 530 lands.

   Decoupling would also yield several positive benefits, which are discussed in this Part. Decoupling and subsequent ecosystem service programs would help the counties diversify their economies in the face of the shifting regional and global timber economy and a changed forest products industry. (229) With this flexibility, the counties may be able to avoid the stark, timber-dependent financial situation currently faced by Curry, Josephine and other southern Oregon Counties with respect to the federal "Oregon & California" (O&C) forestlands. (230) Moreover, as a result of decoupling, less ORS 530 land would be subject to clearcutting and monocultural replanting. (231) Thus, decoupling may improve the overall health of the ORS 530 lands by decreasing their susceptibility to disease and pest outbreaks, while limiting habitat fragmentation, and allowing for more C[O.sub.2] sequestration. (232)

   Decoupling could also help to correct some statutory flaws in ORS 530. Because the statute does not impose any revenue caps, the counties, as statutory beneficiaries of ORS 530, have an incentive to harvest as much ORS 530 timber as possible. (233) Arguably, GPV imposes an ecological cap, but until more balanced management occurs, this cap may not be observed. (234) In its current form, ORS 530 is thus quite similar to a statute guiding the federal highway system. Both statutes tie annual beneficiary funding to activities--logging and driving, respectively--that if maximized, would stress and degrade the underlying resource over the long-term. In both schemes, the beneficiaries' short-term incentive to derive more funding overrides their long-term interest in maintaining the health of the underlying resource. However, in contrast to the federal highways, decoupling would partially correct the perverse, short-term incentive to maximize timber harvests. As such, the proposal might help the ORS 530 land ecosystem avoid the long-term structural decay that now plagues the federal highway system.

   Finally, decoupling and replacing ecosystem service revenues would arguably diminish the political argument for timber harvest maximization based on county budget impacts. Assuming the counties are both economically and ideologically motivated, lessening the economic rationale for timber harvest maximization on ORS 530 lands through decoupling might also help defuse the politically contentious atmosphere surrounding Oregon forest management. As a result, there might be less support for amending the CWA in a way that would undermine environmental protections afforded by the Ninth Circuit in NEDC v. Brown. (235)

   1. Economic Benefits of Decoupling

      Among its many benefits, decoupling would help the counties mitigate the region's changed economic landscape. Although the counties once counted on robust demand for Oregon's prized Douglas fir timber, this assumption may no longer be true. (236) During the late 1980s and early 1990s, the spotted owl controversy and the subsequent Northwest Forest Plan (237) dramatically downsized the overall Northwest timber economy. (238) Moreover, sub-equatorial nations have developed productive, short-rotation, low-cost, timber farms. (239) Soon, these timber imports are expected to fulfill a significant portion of American demand. (240) Further, timber prices are "highly correlated" with housing starts. (241) As housing starts decline, so does the demand for timber. (242) Because housing starts decreased dramatically during the current recession, (243) Oregon timber prices have remained low. (244)

   1. Economic Benefits of Decoupling

      Among its many benefits, decoupling would help the counties mitigate the region's changed economic landscape. Although the counties once counted on robust demand for Oregon's prized Douglas fir timber, this assumption may no longer be true. (236) During the late 1980s and early 1990s, the spotted owl controversy and the subsequent Northwest Forest Plan (237) dramatically downsized the overall Northwest timber economy. (238) Moreover, sub-equatorial nations have developed productive, short-rotation, low-cost, timber farms. (239) Soon, these timber imports are expected to fulfill a significant portion of American demand. (240) Further, timber prices are "highly correlated" with housing starts. (241) As housing starts decline, so does the demand for timber. (242) Because housing starts decreased dramatically during the current recession, (243) Oregon timber prices have remained low. (244) Combined, these macro-economic factors make it more difficult for Oregon timber to compete in the global marketplace. (245)

      The Oregon forest products industry has also changed, further denting the competitive advantage once held by Oregon timber communities. In the past, the Oregon timber industry enjoyed a competitive advantage as a result of the cluster of businesses that arose to support the forest products industry. (246) In the middle of the cluster were the milling and forest product companies; in support were equipment manufacturers, distributors and business services. (247) Most of this support infrastructure was located in Oregon, close to the forests. (248) But now, many of the formerly clustered customers and suppliers are no longer local. (249) This changed dynamic makes it even more difficult for Oregon timber and forest products to compete globally. (250) Combined, these regional and macroeconomic market shifts make continued economic reliance on Oregon timber, and the ORS 530 revenues that flow from them, a risky bet.

      Decoupling, combined with a shift to a diverse array of ecosystem service revenue streams, would help the counties adapt their economies to the changed regional and global timber industry. Doing so might also help the ORS 530 counties avoid the economic and public service shortfalls now faced by several counties--including Curry County--in Southern Oregon that are dependent on federal timber revenues. (251) Curry County is home to large tracks of the federally owned Oregon and California ("O&C") forestlands. (252) Originally, the O&C lands were grant lands held by private railroads. (253) When the railroad companies violated the terms of the 1866 grant, the grant lands revested to the United States. (254) Congress' initial management regimes failed, (255) but in 1937 it enacted the Oregon & California Lands Act (OCLA). (256) The OCLA provided the O&C counties 50% of the revenue earned by the federal government from logging operations on the O&C lands. (257) This revenue was meant to replace the tax revenues the counties would lose as a result of the revesting. (258) For many years, this arrangement sufficiently supported the O&C Counties.

      Since the spotted owl controversy of the late 1980s and 1990s, Congress has authorized a variety of payment programs to help the counties deal with the financial uncertainty caused by the dispute. (259) In 2008, Congress reauthorized the appropriation of money for county payments originally approved under the Secure Rural Schools and Community Self-Determination Act of 2000 (SRSA). (260) The 2008 act appropriated money for fiscal years 2008-2011 on a declining basis. (261) Congress has not reauthorized the SRSA or Payment in Lieu of Taxes (PILOT), although both houses of Congress proposed payment extensions for both programs in 2012. (262) Currently, the O&C counties estimate that they will need $110 million annually to sustain county services and avoid possible insolvency. (263) Indicative of its dire economic situation, Curry County has announced plans to place a county sales tax measure on the November 2012 ballot. (264) In response to the O&C counties timber-centric revenue problems, three Oregon congressmen recently outlined a proposal whereby the O&C lands would be divided into a privately held timber trust managed for the benefit of the O&C counties, and federally owned conservation lands protected from harvesting. (265) Moreover, a bipartisan group of Congress members recently proposed a new timber-centric management scheme that would attempt to return the O&C lands to greatly elevated harvest conditions and extend PILOT funding. (266) Neither proposal has been enacted.

      Although the financial woes of the O&C Counties are connected to federally-created timber dependency, they represent the danger of timber dependency in the changed Northwest timber economy. Preemptively decoupling some ORS 530 lands, and developing replacement ecosystem service revenues, could diversify the counties'...