Arizona Forest
Restoration Products Inc.
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Arizona Forest Restoration Products Inc. |
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A New Approach to Stewardship Contracts
The Healthy Forest Restoration Act that was signed into law in December 2003 also extends and expands the U.S. Department of Agriculture Forest Service stewardship contracting authority with communities, the private sector, and others, allowing the Forest Service and Bureau of Land Management to enter into long-term contracts (up to 10 years) to meet land-management objectives (for example, to reduce wildland fire risk and improve forest and rangeland health) in compliance with the guidelines established by the National Environmental Policy Act (NEPA) of 1969 as amended.
Stewardship contracts focus on producing desirable results on the ground that improve forest and rangeland health, and provide benefits to communities. Among other things, the new stewardship contracting authority allows forest products to be exchanged for ecological restoration services, which may include thinning and removing brush. Stewardship contracting allows private organizations or businesses to do the necessary thinning and remove small trees and undergrowth; as partial payment, stewardship contractors are able to keep part of what they remove. Stewardship contractors' utilization of woody biomass includes its harvest, sale, offer, trade, and/or use. This utilization results in the production of a full range of wood products including timber, engineered lumber, paper and pulp, furniture and value-added commodities, as well as bio-energy and/or bio-based products such as plastics, ethanol and diesel (http://www.healthyforests.gov/projects/stewardship.html ).
The first Forest Stewardship contract, the White Mountain Stewardship Contract, was issued in August 2004 for 150,000 acres over 10 years for the Apache-Sitgreaves National Forest of Northern Arizona, for the treatment of 5,000 to 25,000 acres annually, and is currently being executed.
The economic problem with Stewardship contracts
However, an issue that arises with Forest Stewardship contracts is the general lack of economic viability of the business models articulated around the production of low value-added products such as biomass co-generated electricity, wood pellets heating fuel, landscape wood chips, etc. These business models typically operate on very thin, or negative, organic gross margins and are sometimes not sustainable without not only the subsidizing of their raw material, but the cash payment by the Forest Service of several hundred dollars per acre treated.
Essentially, in the framework of Forest Stewardship contracts the Forests Service pays private contractors a cash payment of typically $500 to $700 per acre to thin the forest, and in effect subsidizes their economic activity.
This creates a dramatic constraint on the Forest Service, and on the private contractors, in as much as the thinning activity is limited by the Forest Service budgeting process, as opposed to be expanded to what science and ecology require.
A new approach to Stewardship contracts
But oriented strand board (OSB) manufacturing is different. It has a very large market (the weekly consumption of OSB is over half a billion square feet - about 40 times the production planned for the Arizona Forest Restoration Products plant!) and it is profitable.
Being able to sell the product profitably changes the paradigm of wood sourcing.
Therefore, because Arizona Forest Restoration Products' activity is economically viable and does not depend on cash payments from the Forest Service to exist, Arizona Forest Restoration Products proposes to decline receiving cash payments for the thinning activities required in the forest. Arizona Forest Restoration Products offers to only exchange its ecological restoration services for forest products (small diameter ponderosa pine typically 5” to 12” dbh – or larger if there are prescriptions for multiple age groups management) as authorized by the stewardship contracting authority, and to pay a stumpage fee when the value of the wood harvested exceeds the costs of the thinning activities To make this approach economically viable Arizona Forest Restoration Products is willing to look at long range (10 years) and large area (100,000+ acres) contracts in which areas that cannot produce the wood necessary to cover the costs of thinning still get treated without cash payment from the Forest Service and are "paid for" by other areas within the forest in which the value of the wood harvested during thinning activities exceeds the cost of thinning.
To further help manage the budgetary constraints of the Forest Service, Arizona Forest Restoration Products is ready to prepay for NEPA marking and preparations, within the framework of a collection agreement so that the implementation of the Stewardship contracts is not delayed or limited by budgetary issues.
Arizona Forest Restoration Products business model is fundamentally different, and rests on the profitable manufacturing of high value-added OSB yielding organic operating margins. Consequently, Arizona Forest Restoration Products does not require subsidies from the Forest Service to operate, and is declining cash payments for ecological services rendered.
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