FEATURE STORY

UNPRECEDENTED NUMBER of devastating wildfires that have raged through the western U.S., including the devastating fires in western Oregon in September, will greatly affect longterm timber supply. (Photo by Evan Wright, Fremont-Winema National Forest) Western wildfires will have lasting impact on West Coast log supply

The U.S. West is experiencing some of the most devastating wildfires in its history this year. An extremely hot, dry summer has led to prime conditions for a severe wildfire season, with fast moving flames damaging over 6 million acres. The timber damage from these wildfires will impact log supply in the West for quite some time. In the near-term, salvage operations will attempt to recover as much of the burned timber as possible; and in the longer run, the loss of billions of board feet of timber will further stress log supply in a region already constrained by lack of timber availability.

The greatest damage has occurred in California, where five of the six largest wildfires in state history have occurred in 2020. Wildfires have raged in California since early summer, with current estimates placing the total area burned at more than 4 million acres. This is more than 10 times the five-year average of area burned by October. Exceptionally dry conditions helped fuel summer fires in California, especially on public lands with heavy fuel loads accumulated from years of strict fire suppression efforts and inactive land management.

While California has suffered the most devastation, the greatest impact to the forest products industry will be in western Oregon, where fires erupted in the Coastal region west of the Cascade Mountain range during early September. Wildfires are less common in the Coastal region which typically receives more precipitation than the drier climate in eastern Oregon. However, the combination of the hot, dry summer along with easterly winds blowing in over the Cascade Mountains created optimum conditions for intense wildfires that spread rapidly down the western slopes of the Cascade Range. In just a few days, wildfires spread to over 850,000 acres in Coastal Oregon.

There are two primary factors why the wildfires in western Oregon will have the largest adverse effect on U.S. wood products supply. First, the region is one of the largest producing regions for softwood lumber and plywood. Mills in the Oregon coast currently account for 15% of the U.S.’s softwood lumber capacity and roughly 25% of softwood plywood capacity. The wildfires in western Oregon will also have an outsized impact on the industry given how much privatelyowned timberland managed specifically for industrial timber production was affected by the Oregon wildfires.

Our preliminary estimates indicate that over 300,000 acres of privatelyowned timberland was within the fire perimeters of the five largest fires in Oregon, with over 80% of the private lands owned or managed by major forestry industry companies—either

wood products manufacturers or TIMOs/REITs. Estimates of timber volume killed by the wildfi res are still preliminary and the volume of timber loss will depend on many factors, including variation in the wildfi re intensity, stocking levels, and age of stands aff ected. However, based on initial reports, losses of 2 to 3 billion bd. ft. of privately-owned timber are realistic.

Salvage operations have started on damaged timberlands and are expected to continue as long as merchantable volume can be recovered. We expect that the increase in log availability due to the wildfi re will be limited both in duration and volume. Based on discussions with market participants and past wildfi re events, burned logs can be recovered for up to a year or more, although the recoverable volume begins to decline markedly after six to eight months. Consequently, we expect impacts of the salvage eff orts on western log markets dissipate rapidly after mid-2021.

On top of the short recovery period, we also believe the overall increase in log volumes available to the industry will be limited by a reduced logging force. In addition to burning timberlands, the wildfi res destroyed over 100 pieces of logging equipment, placing greater limits on the region’s already constrained logging sector. While anecdotal reports suggest logging crews from outside the region are being called in to assist with the salvage eff orts, the scale of this “surge” capacity is likely quite limited given the constrained logging capacity that persists across the West. Over the past fi ve years, harvest levels in the Oregon Coast have averaged 3.5 BBF, peaking at 3.7 BBF during the strong log markets of 2018. Given the logging constraints mentioned above, we believe harvest levels will be hard-pressed to materially exceed these peak levels over the next year.

Longer run, the loss of privatelyowned industrial timber inventory will exacerbate log supply in an already challenging timber market. Harvests levels in the West Coastal region have tested the sustainable yield of the private timberland resource in recent years, refl ected in the high log costs in the region. The loss of 2 BBF or more of operable timber will further reduce the sustainable harvest levels. The impact to log markets will be greatest on the eastern subregional markets (generally defi ned as east of Interstate 5), but timber defi cits in these subregional markets will likely lead to shifting log fl ows across subregional markets.

How this will play out in the coming years is dependent on the age class distribution of the damaged timber stands. If more of the damage occurred on older, merchantable timber stands, then the impact to supply will be more immediate. If the damage was greater on younger, pre-merchantable timber, then impacts to log supply will be delayed. However, although the timing and scale of the downward shift in sustainable yield remains unknown, it is clear that the wildfi res will lead to lower log supply in the West Coast.

FEA continues to update its outlook on West Coast log supply as more information on the scale and characteristics of the wildfi re damage become available. To this end, FEA and Mason, Bruce & Girard are partnering to study the impacts of the 2020 wildfi res on West Coast log supply and timber markets.

– Rocky Goodnow is vice president of timber at Forest Economic Advisors, LLC (FEA), Littleton, Ma. For more information, visit www.getfea.com.