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Below-Cost Timber Sales: An Overview

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The USDA Forest Service (FS) sells some timber at prices that are less than the agency expenses to administer the timber program. These below-cost timber sales have been debated by Congress sporadically for more than two decades, but no policy to address the issue has been adopted legislatively or administratively.

Part of the debate over below-cost timber sales has been about their relative frequency. At the direction of Congress, the FS developed a system for reporting the financial and economic results of timber sales. Data were reported annually for each national forest, beginning with FY1989, but no report has been issued since FY1998. Interest group estimates of "losses" continue to be made public with much fanfare and attendant news stories, but the estimates of the financial results of FS timber sales vary widely. This disparity is due to differences in basic approach: profitand-loss, cash flow, or other approach; and in assumptions about relevant costs.

The FS sells timber for a variety of reasons. In some cases, the purpose may be to provide timber for a local mill, and mills (and communities) have been built on the implicit promise of continuing timber availability. Timber sales may also be used to modify existing conditions: to reduce fuel loadings, to alter the mix of tree species, to provide habitat for specific animal species, to restore forests to more natural conditions, to provide access for recreation and other uses, etc. While alternative means of modifying vegetation exist, timber sales may be more efficient (have a lower net cost to the Treasury and to society) than the alternatives, even though the sales may not cover costs according to strict financial criteria.

The issue is what, if anything, Congress and the Administration should do about below-cost timber sales. Some argue that no action is warranted, because the fiscal concern is merely a tool being used to reduce timber sale levels. Others are concerned about the net cost to taxpayers, about the environmental damages that result from some timber sales, or about alleged "subsidies" to timber companies. The debate is often characterized as either "do nothing" or "eliminate all below-cost sales." However, other options exist. Choices for a below-cost policy might include how to measure fiscal results, over what geographic and temporal scales, with what opportunities to demonstrate improvement, and with how much agency discretion over how to factor costs into the decision to sell or not to sell timber.