34. The Forest Options Group

In the mid-1990s, that portion of the timber industry that depended on federal timber sales was on the ropes. National forest timber sales had declined from 11 billion board feet in 1989 to less than 3 billion in 1995. Mills that had bought most of their timber from the national forests for the previous five decades were hard pressed to find alternate sources of wood.

So perhaps it wasn’t surprising that timber industry representatives were eager to talk with environmentalists about finding common ground for reforming the Forest Service. Nor was it surprising that environmentalists were reluctant to talk; after all, they were winning, so any talks that might lead to a compromise seemed to be unnecessary.

But I wasn’t a typical environmentalist, and as the term was defined by the “progressives” in 1995, maybe I wasn’t an environmentalist at all. I was less interested in “total victory” than I was in getting the answer right. How much was the right amount of timber to be cut from federal lands? What was the right amount of wilderness? What was the proper balance between clearcutting vs. selection cutting given their differing impacts on wildlife, watershed, and other resources?

Perhaps I no long fit within the environmental movement, but I had several good friends who did, starting with Andy Stahl, who had worked for the National Wildlife Federation and Sierra Club Legal Defense Fund (now Earth Justice) before taking a job as executive director of the Forest Service Employees for Environmental Ethics. I also had a good friend in the timber industry, Doug Crandall, who had managed a lumber company that purchased national forest timber in Livingston, Montana before becoming a leading lobbyist for the American Forest and Paper Association in Washington, DC.

Doug is an amazingly likable guy who you would want to have working for you as a lobbyist. He is equally comfortable riding his horse into a bar in Emigrant, Montana as he is rubbing shoulders with senators and representatives in Washington DC.

When he first moved to DC, someone told him he should go to parties to make contacts. So, as he tells the story, he dutifully went to a party where he stood by the food table, feeling out of place. He got to talking with a woman who said she was taking fly fishing lessons. He offered to take her fly fishing on the Potomac River. She eagerly took up his offer and they agreed that he would pick her up at her office.

“Where’s your office?” Doug asked.

“At the Supreme Court,” she said. “I’m Sandra Day O’Connor.”

I don’t remember who came up with the idea first, but one day Doug and I agreed we needed to have some sort of “areas of agreement” meeting for environmentalists and timber industry leaders. I contacted Andy and he was happy to participate.

Doug invited attorney Steve Quarles, Keith Olson of the Montana Logging Association, and Brad Little, an Idaho rancher who has since been elected to be the state’s governor. Andy invited Tom France of the National Wildlife Federation and Michael Jackson of the Friends of Plumas Wilderness. We also invited UC Berkeley professor Sally Fairfax, whose research on alternative institutional designs was inspired by the 1984 Mission Symposium, and Doug MacCleery, John Crowell’s deputy during the Reagan administration who in 1996 was working for in Forest Service’s Washington office.

We held our first meeting in 1997 at the Gallatin Gateway Inn, a hotel built by the Milwaukee Road near Bozeman, Montana. John Baden often held meetings there so I was familiar with it and its railroad heritage made it extra special for me. Later meetings were held at Timberline Lodge in Oregon, a ski resort in Utah, and similar locations.

I proposed to mediate the discussions, but the others didn’t feel comfortable with me doing it, so for one meeting we brought in an outside mediator. After the meeting, the participants agreed that this mediator had tried to force the discussion into certain directions, and so they agreed to let me mediate. While I wasn’t hesitant to express my opinions at the appropriate times, they agreed that my mediation was even-handed and didn’t attempt to impose my views on the rest of the group.

After the first meeting, we doubled the size of the group to include Siuslaw National Forest supervisor Jim Furnish; Santa Fe National Forest district ranger Tom Quinn, Colorado state forester Jim Hubbard, several more environmentalists including Andy Falendar of the Appalachian Mountain Club, and several more industry representatives including Steve Bennett of Stone Forest Industries and Tom Nelson of Sierra Pacific.

At meetings like these, people often ended up debating the “mission” of the Forest Service. We decided that arguments about the mission were pointless, partly because we wouldn’t be able to reach a consensus and partly because many in the group (including me) felt that the mission grew out of the agency’s budget, not the other way around. We also agreed that a mission was pointless if the agency couldn’t function, so our goal was to make the agency functional.

We also discussed the idea of splitting up the federal forests into two categories, one for environmental values that would be managed like parks and one for resource values that would be managed like industrial lands. I called this the “New Zealand solution” because that’s what New Zealand did with its forests when it had a budget crisis in the 1980s. Historically, New Zealand had cut its native hardwood trees and replaced them with North American conifers. When the budget crisis hit, it took all remaining native forests and managed them as natural areas and privatized the areas that had been planted with conifers. I didn’t like the New Zealand solution because I still believed in the idea of multiple use: that the same land could produce multiple outputs.

Indeed, I thought that a market solution to the Forest Service’s problems could provide many different outputs so long as people were willing to pay for them. Michael Jackson, a founder of the Quincy Library Group, liked the idea of collaborative governance, that is, that local groups consisting environmentalists and industry representatives acting as a sort of board of directors over individual national forests. Sally Fairfax’s research had suggested that state lands that were managed as fiduciary trusts worked a lot better than the federal model because the burden of proof was on the trustees to show they were doing a good job while, in the federal model, the burden of proof is on the public to show that the government managers are doing a poor job of management.

We realized that we were really talking about two different issues: budgeting and governance. Budgeting options to traditional appropriations could include open-bucket appropriations where forests received one lump sum instead of many separate line items and set their own priorities for how to spend that money; funding out of a specific percentage of gross receipts; and funding out of a specific percentage of net receipts, the idea being that the incentives from being funded out of net receipts would be different from being funded out of gross receipts.

Governance options to the current federal system included boards of directors appointed by the Secretary of Agriculture and/or the governor of the state in which each national forest is located; boards of directors elected by a “friends of the forest” group whose membership would be open to all for a nominal fee; a self-selected collaborative board consisting of a balance of environmental and industry representatives; a fiduciary trust with or without a board; and management by a private or non-profit group. Any of the budgeting options could be combined with any of the governance options.

Steve Quarles suggested that we should develop several ideas to be used on a trial basis on selected national forests. In the late 1980s, Forest Service Chief Dale Robertson had tried some different budgeting ideas on a few forests, which he called pilot forests.

Open-bucket budgeting was one of the things he tried. National forest budgets consisted of up to 75 line items, and forests were required to spend each line item only on the activities specified by that item: roads, timber sales, recreation, or whatever. Pilot forests were allowed more freedom.

Pilot forests were also allowed to keep any funds unspent at the end of the year to apply to future years. Traditional government budgeting follows a use-it-or-lose-it principle that leads agencies to hastily spend heavily in the last few weeks of their fiscal years so they don’t lose the funds and, worse, have the budgets cut the next year because they apparently didn’t need as much as they were budgeted.

(This turned out not to work in every case: I have an angry letter from the supervisor of the Mark Twain National Forest to his regional forester. As a pilot forest, the Mark Twain had saved money, but instead of letting the forest keep the money, the regional forester had applied it to two other forests in the region that had spent more than their budgeted amounts. “I guess I missed the memo telling us to overspend,” said the supervisor.)

While Robertson’s ideas were sound, they only scratched the surface of the problems facing national forest managers. Quarles’ idea was that we would prepare several pilot forest concepts and encourage the Forest Service to try each of them out on at least two national forests.

With roughly a hundred forest supervisors’ offices, there was room for plenty of possible pilots. While acknowledging that more were possible, we developed five pilots:

1. Entrepreneurial budgeting: Forests would be allowed to charge fair market value for all resources and would be funded out of the net income they earned. For purposes of the pilot, a “safety net” would guarantee that the forest would get at least half of its historic funding.
2. Collaborative governance: A collaborative board of directors would oversee the budget and operations of the forest.
3. Collaborative planning: A collaborative board would write the forest plan. When the plan is done, the forest would be funded out of its gross receipts with a safety net like pilot 1.
4. Forest trust: The forest supervisor becomes the trustee with the obligation to preserve the corpus of the trust while producing revenues for the trust beneficiaries, which in the pilot’s case would be county roads and schools (which historically had received a quarter of national forest revenues).
5. Rate board: The forest would be funded out of gross receipts with a safety net like pilot 1. To address concerns that forests would charge monopoly prices for some things such as wilderness recreation, rates would be set by a rate board appointed by a committee of local recreationists selected by the forest supervisor.

None of these ideas by themselves were perfect. While the entrepreneurial budgeting pilot was based on my book, Reforming the Forest Service, I could see that it was deficient in several ways. Most important, it didn’t have any way of protecting non-market resources such as endangered species or historic sites. I was very attracted to Fairfax’s ideas about trusts, but in the long run I didn’t think county roads and schools were the appropriate beneficiaries. While collaborative groups might be an appropriate stop-gap measure, I didn’t think that self-selected groups should be allowed to manage resources that belongs to everyone. Yet the point of pilots was to test these ideas, one by one, to see what worked and what didn’t work so that the best ideas could be combined in a final reform package for the entire National Forest System and perhaps other federal lands as well.

Since we were proposing a number of options for reform, we started calling ourselves the Forest Options Group. After developing these ideas, we decided to write a report for the Forest Service, Congress, and the public to review. Since the Forest Service would celebrate its centennial in 2005, we called the report the Second Century report. In 1998, I published a draft version of this report as an issue of Different Drummer magazine.

In the magazine, the report was accompanied by several background articles. One, by a former director of the Texas Parks and Wildlife agency, described entrepreneurial budgeting in Texas State Parks. An article by a writer with High Country News described some collaborative management projects around the West. The article about state trust lands by Jon Souder and Sally Fairfax that had appeared in the State Lands and Resources issue of Different Drummer was reprinted. Tom Quinn, the chief advocate for the Rate Board pilot, submitted an article about recreation as a public utility. Finally, we included an article by Maurice McTigue, a former New Zealand politician, about the New Zealand solution, even though we didn’t have a pilot based on that option.

These articles made up less than half of the 64-page Different Drummer issue, while I wrote the rest. As it turned out, a couple of the environmentalists who attended our meetings were caught up by the “zero cut” movement, which advocated no timber cutting, no grazing, no mining, and no off-road vehicles on national forests, and refused to include their names in the report. But the rest of the group was satisfied with my ability to fairly represent the various alternatives.

We asked people to submit their own ideas for pilots, and we did get some useful responses. While most of the pilot ideas that were submitted were simply combinations of ideas already included in the five pilots we proposed, other ideas included asking Congress to create a special line item in the Forest Service budget for pilot forests, creating a system for selecting pilot forests, and adding safeguards for non-market resources. The group added these ideas to the final report, which came out in 1999.

One group suggested that the Forest Service call the pilot forests “Region 7.” The Forest Service divides its lands into regions 1 through 6 and 8 through 10, but Region 7 disappeared when its lands were merged into Region 9. While this as an amusing idea, members of the Forest Options Group thought that the idea of regions was obsolete, and we didn’t want to promote it by calling the pilot forests a region. Instead, they would be overseen by an “Office of Pilot Projects” in Washington DC.

Progressive environmentalists, however, regarded any governance system that didn’t absolutely guarantee zero cutting as a sell-out, so they refused to give us any useful feedback. Nevertheless, we did get some bipartisan support in Congress for pilot forests. For example, Tom Udall, a Democratic representative (now senator) from New Mexico liked the idea.

After George Bush entered the White House, his first budget proposal specifically endorsed pilot forests. Unfortunately, this proved to be the kiss of death for the idea, as the progressive environmentalists took advantage of increasing partisanship to demonize any idea that came from a Republican.

Today, my own ideas for agency reform have evolved far beyond what I wrote in Reforming the Forest Service, and it is largely thanks to the many discussions we had in the Second Century group. I see sound management resulting from a number of checks and balances:

1. Funding forests out of their net receipts will discourage them from losing money on timber sales or anything else.
2. Allowing forests to charge fair market value for all resources will lead to a balance of uses that accommodates everyone willing to pay for what they use.
3. Created boards elected by a friends group for each national forest will give the public an opportunity to be involved in decision making and rate setting.
4. Turning the forests into fiduciary trusts will clarify the mission and put the burden of showing they are doing a good job on the managers.
5. The beneficiaries of the forest trusts should be a second set of trusts set up to explicitly maximize non-market resources such as endangered species and historic areas.

The first two ideas were in Reforming the Forest Service; the remainder came from the Second Century group. The Cato Institute published these ideas in a 2009 report.

At the present time, there is little momentum for reforming the Forest Service or other federal land agencies. Though the zero-cut extremists haven’t reached their goals, national forest timber sales remain at about 25 percent of the levels in the 1970s and 1980s. That portion of the timber industry that depended on federal timber is mostly gone. The American Forest & Paper Association hardly even lobbies on national forest issues today and Doug Crandall is now the Forest Service’s director of legislative affairs, i.e., its chief lobbyist.

Nevertheless, the existing system isn’t sustainable. The federal government owns about 27 percent of the nation’s land, and those lands contain many valuable resources, yet management costs taxpayers roughly $10 billion a year. The only resources that return any substantial revenues to the treasury are coal and oil produced on less than 1 percent of the land. Almost all of the revenues from everything else, including timber, grazing, and recreation, are either kept by the agencies or given to special interests such as the counties. At some point, reforms will be needed, and when they are, I hope these ideas will be considered.