Forest Service to allow mutual cancellation of unfavorable timber contracts
By Bob Berwyn
SUMMIT COUNTY — Three struggling sawmills in Colorado will have a chance to get out of some costly timber contracts that were signed before the 2008 recession collapsed the timber and housing markets. Some of the mills locked into those contracts have been hovering on the verge of bankruptcy.
Acting Rocky Mountain Regional Forester Jerome Thomas said Thursday that the agency will give the mills the option of mutually cancel timber sales that aren’t economically viable, subject to very specific conditions. The old contracts locked the mills into unprofitable terms, driving them to the brink of bankruptcy.
The Forest Service decision will enable the mills to negotiate new contracts that could help expedite the removal of beetle-killed trees in the region.
This decision applies to purchasers located within the Rocky Mountain Region where the unique circumstances of millions of acres of dead trees, coupled with an ailing industry require extraordinary measures. In Colorado, it applies to contracts between the Forest Service and sawmills in Montrose, Saguache and Delta counties.
“The reality and enormity of the beetle kill problem in the Rocky Mountain region is alarming,” Thomas said during a media conference call Thursday. “The forest product industry is struggling to stay in business. Dead trees and trees at risk of beetle infestation across millions of acres in the Rocky Mountain Region pose risks to public safety, watersheds, critical infrastructure and create severe wildfire hazards,” Thomas said. “Timber sale contracts are critical tools for treating hazard fuels and reducing these risks. Ensuring a viable forest products industry is in the best interest of the Forest Service and the public,” he explained.
While there are a number of reasons the forest product industry is struggling, one significant cause is that some purchasers hold high-priced U.S. Forest Service timber sale contracts sold in the early to mid-2000s that are no longer economically viable and have become a financial liability. (These timber sale contracts are “high-priced” because they were sold before the recent drastic decline in the timber market.)
For a variety of reasons, many of these sales were ineligible for various relief measures accorded to the timber industry during the drastic market decline in the late 2000s. Other sales did receive relief measures, but market conditions remain so severely depressed that many of them continue to be uneconomical and are destined for default.
“The loss of mills and independent loggers in this region because of financial struggles, or otherwise, will negatively impact the Forest Service’s ability to be responsive to the hazards posed by the bark beetle epidemic,” Thomas said. “It is critical that we do all that we can to support this struggling industry while continuing to provide for public and employee safety and protecting critical infrastructure like roads, watersheds and powerlines.”
Eligibility for the timber sale mutual cancellation option will be evaluated on a case-by-case basis. Timber sale purchasers that exercise the option to cancel a contract will not be prohibited from bidding on future timber sale contracts.
The Forest Service decision came after Sen. Mark Udall previously asked the Forest Service to consider relief for the mills.
“In June, I asked Agriculture Secretary Tom Vilsack and Tom Tidwell of the Forest Service to allow the sawmills in Montrose, Saguache and Delta counties to renegotiate contracts with the Forest Service, which they had signed before the recession began,” Udall said. ” I was deeply concerned that if the contracts weren’t renegotiated, Colorado’s sawmills would be forced to close … a serious loss for the state not only because the mills are major employers in our rural communities, but because they’re needed to help deal with the 4 million acres of Colorado trees killed by bark beetles. If Colorado’s mills close, the nearest mill capable of processing meaningful volumes of beetle-killed trees is 800 miles away in Montana. Read Udall’s letter to the Forest Service here.
“By allowing the ‘mutual cancellation’ of these contracts, the U.S. Forest Service is helping the local economy and promoting a healthy forest management industry,” Udall said. “Our mills employ hundreds of Coloradans, and they provide an irreplaceable service, crucial to reducing wildfire risk to communities and removing hazardous beetle-killed trees near roads, power lines, trailheads, picnic areas and campgrounds. After they are free from these old contracts, the mills can take dead or hazardous timber that would otherwise go to waste and use it to create jobs.”