Timberland

Forestland Ownership and Forest Certification Uncertainty

 

What should forestland owners know about forest certification in the U.S.? Does it make sense for forest landowners to participate in these programs? Recently published research finds that forest certification creates, ironically, uncertainty for landowners and, in cases, destroys landowner value while producing unclear forest health benefits, if any, relative to standard and commonly applied best management practices (BMPs). So where does that leave forest owners?

Let’s review the results.

Prelude: Forest Certification Refresher

Forest certification includes third-party programs that attempt to signal responsible forest management based on an audited set of criteria. Established forest certification programs in North America include:

  • Sustainable Forestry Initiative (SFI). In 2005, the Programme for the Endorsement of Forest Certification endorsed SFI, giving it international recognition.
  • The Forest Stewardship Council (FSC), based in Oaxaca, Mexico, is a major international certifier.
  • The American Tree Farm System (ATFS) supports a program for nonindustrial family forest owners in the United States.

Generally, landowners enrolled in SFI or FSC programs are industrial owners that participate in certification as an industry standard and to satisfy investor requirements for sustainable management and public relations. Typically, small or nonindustrial private landowners either participate in ATFS or not at all.

According to 2011 research by the Southern Group of State Foresters, the Northeast has the highest percentage of forestland enrolled in certification programs, followed by the South. Most acres enrolled in FSC certification are located in the Northeast while the South favors SFI and ATFS programs.

Act I: Previous Research

Private landowners question the added costs for programs that seem to mirror existing sustainably-oriented forest management plans. This has been reinforced by research published in the Journal of Forestry (Lang and Mendell. 2012. “Sustainable Wood Procurement: What the Literature Tells Us”) that shows state-mandated management practice guidelines provide effective means to protect water quality. For example, when BMPs are followed, water quality on forest stands in the South recovers in 2-5 years following a timber harvest. Research in the Pacific Northwest also confirms that buffer zones along stream banks allow water systems to recover following timber harvest.

Act II: New Research

Recent studies commissioned by the American Consumer Institute (ACI) and EconoSTATS at George Mason University assess implications from on-the-ground implementation of ATFS, FSC and SFI.

ACI’s white paper, “Comparing Forest Certification Standards in the U.S.: How Are They Being Implemented Today?” by Brooks Mendell and Amanda Lang at Forisk Consulting, notes that “adherence to a given certification program does not necessarily confirm specific forest management practices or restrictions.” The authors conducted nearly two dozen interviews with timberland owners, managers, and auditors. Forest owners and certification auditors have wide latitude to design and interpret management plans that broadly conform to responsible forest management and satisfy forest certification objectives.

EconoSTATS, in “Comparing Forest Certification Standards in the U.S.: Economic Analysis and Practical Considerations” by Brooks Mendell and Amanda Lang, supported efforts to model and quantify operational and economic implications to timberland owners in Arkansas and Oregon from implementing four forest certification scenarios. The estimated effects are above and beyond what forest owners already account for in current management activities. The modeled scenarios comprise criteria from ATFS, FSC and SFI related to clear cut size, land set-asides, adjacency (“green-up”) and streamside management zones.

Key implications to timberland owners based on the EconoSTATS study include:

  • In Oregon, two FSC scenarios significantly reduce economic returns to landowners. Relative to base forest management practices and SFI scenarios, forests managed as either natural stands or plantations under FSC reduce the estimated present value of net operating cash flows by 31% to 46% for modeled 46-year operating period. The FSC guidelines reduced the acres available for timber harvests, which resulted in 30% to 42% lower harvested volumes of wood compared with the base case and SFI scenario.
  • In Arkansas, the FSC-Plantation scenario significantly reduces economic returns to landowners. Forests classified as plantations under FSC reduce the estimated present value of net operating cash flows by up to 26% and reduce total harvest volumes by up to 28% for the modeled 36-year operating period compared to other scenarios. For those seeking FSC certification in the South, this creates tremendous incentives to avoid classification as a plantation as defined by FSC.

Timberland owners enrolled in third-party certification programs adhere to program standards and are subject to confirmation by third-party auditors. However, when implemented, forest certification criteria remain subject to interpretation. Certification under a given program does not necessarily confirm specific forest management practices or restrictions. Even auditors responsible for verifying landowners’ compliance with certification programs acknowledge how some standards, even if explicit, remain subject to interpretation in implementation.

This content may not be used or reproduced in any manner whatsoever, in part or in whole, without written permission of LANDTHINK. Use of this content without permission is a violation of federal copyright law. The articles, posts, comments, opinions and information provided by LANDTHINK are for informational and research purposes only and DOES NOT substitute or coincide with the advice of an attorney, accountant, real estate broker or any other licensed real estate professional. LANDTHINK strongly advises visitors and readers to seek their own professional guidance and advice related to buying, investing in or selling real estate.

About the author

Brooks Mendell, Ph.D.

Brooks Mendell, Ph.D. is President and Founder of Forisk Consulting, a forest industry, timber REIT, bioenergy and timber market research firm. Dr. Mendell has over fifteen years of operating, research, and consulting experience in forest business and finance. Mendell has published over sixty articles and two books on topics related to timber and timberland REITs and markets, forest business management and operations, and communication skills.

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