Federal Land Management:
Estimates of Timber Value and Economic Effects of Harvesting the Headwaters Forest
RCED-97-241R, Sep 24, 1997
Pursuant to a congressional request, GAO provided information on the value of timber resources in the Headwaters Forest area in northwestern California and the effects of harvesting the forest on jobs, payrolls, and taxes if harvesting were to occur. GAO noted that on September 28, 1996, the federal government, the state of California, and Pacific Lumber Company (the owner) signed an agreement for the public to acquire approximately 7,500 acres of timbered area in exchange for approximately $380 million in cash and assets from the United State and California.
GAO noted that: (1) the estimates of timber values that GAO obtained varied considerably; (2) the low estimate included two scenarios, one valued at $20 million and the other at $250 million; (3) although both scenarios were based on a discounted cash flow methodology, the $20-million scenario assumed that no standing old-growth timber would be harvested; rather, only down, dead, and dying trees would be removed; (4) in contrast, the $250-million scenario assumed that 509 million board feet of timber, including standing old-growth timber, would be harvested; (5) the Department of the Interior further adjusted the high end of this estimate by assuming higher timber prices over a 20-year harvest; this assumption resulted in estimated values of $410 million to $510 million for the same volume of timber; (6) MAXXAM, Inc., (Pacific Lumber's parent company) provided estimated timber values ranging from a low of $375 million to a high of $706 million; (7) the lowest of these appraisals, prepared in 1991, considered the value of 593 million board feet of timber on 3,158 acres; the price of redwood was assumed to be $650 per thousand board feet; (8) the highest of the appraisals ($706 million), prepared in 1993, considered the value of 607 million board feet of timber on 4,488 acres; (9) in this appraisal, the price assumed for redwood ($1,192 per thousand board feet) was almost twice as high as that assumed in the earlier appraisal; comparable increase in prices were assumed for Douglas fir and whitewood; (10) the estimates of employment and annual payrolls that would result from a harvest of timber in the Headwaters Forest also varied; (11) the low estimate projected a total of 97 direct and indirect jobs, with a total annual payroll of $2.9 million; (12) the high estimate projected a total of 443 direct and indirect jobs, with a total annual payroll of $18.9 million; and (13) GAO obtained one estimate of annual federal, state, and local tax revenues, which totalled about $1.9 million.