OREGON
Tuesday, January 11, 2022
THe OBserVer — A7
MALHEUR NATIONAL FOREST
With logging contract expiring,
officials wonder: What’s next?
Photos By Blue Mountain eagle, File
Raw logs, above, are ready to be milled at Iron Triangle’s post and pole plant in Seneca in June 2019, and the finished product,
below, awaits shipment. The plant is one example of investments made by the company to carry out its 10-year stewardship
contract with the Malheur National Forest.
By STEVEN MITCHELL
Blue Mountain Eagle
J
OHN DAY — The 10-year
stewardship contract between
the Malheur National Forest
and Iron Triangle is widely cred-
ited with saving John Day’s last
surviving lumber mill, creating
hundreds of jobs and improving
forest health.
But it has also prompted criti-
cism from some who feel the John
Day-based logging company has
profited at the expense of smaller
rivals.
Now, with the contract set
to expire early next year, fed-
eral forest managers are trying to
decide what form stewardship con-
tracting on the forest should take
in the future.
A different approach
Stewardship contracts are fun-
damentally different from tradi-
tional timber sale contracts.
According to Roy Walker,
a program manager with the
Forest Service, the federal agency
awards timber contracts by iden-
tifying an area with commer-
cially marketable trees, marking
the boundaries of the proposed
timber sale and estimating the
amount of merchantable wood in
the sale area. Then, he said, the
agency evaluates the fair market
value of the timber and opens up
a bidding process to companies
that can meet bonding and other
requirements.
As the Forest Service expanded
its forest restoration, fuels reduc-
tion and thinning activities, Walker
said, it melded forest management
work, which often lacks commer-
cial value, with timber sales.
Stewardship brings the two
together, allowing the Forest Ser-
vice to award the commercial
value that loggers would ordinarily
bid on to finance restoration work
on national forest land.
In 2013, faced with the immi-
nent closure of Malheur Lumber,
Grant County’s lone sawmill and
largest private employer, due to an
inconsistent and unreliable supply
of timber, Malheur National Forest
officials decided to award a long-
term stewardship contract to a
single operator in a bid to stabilize
the situation.
The 10-year, $69 million con-
tract went to Iron Triangle, the
winner in a competitive bidding
process. The contract, which was
significantly more long-term and
broader in scope than most stew-
ardship deals, accelerated timber
sales and increased the pace of res-
toration work on the Malheur.
Universally regarded as a
success in stabilizing the local
economy, the unusual contract has
won praise at the national level.
Its overarching goals were to pro-
mote ecological restoration and
reduce wildfire risk on 180,000 to
500,000 acres of forest land while
improving economic vitality in
Grant and Harney counties.
Current contract
The Iron Triangle contract
expires in March 2023, and, just
STEWARDSHIP BY THE NUMBERS
Since winning a 10-year contract with the Malheur National Forest in 2013, Iron Triangle
has completed stewardship projects on more than 150,000 acres of forest lands. The work
includes:
• 12,000 acres of pre-commercial thinning
• 10,000 acres of slash piled
• 1,000 acres of aspen treatment
• 2,000 acres of soil stability treatment
• 3,000 acres of mastication, a fuel reduction process to reduce the risk of wildfire
• 1,100 miles of road maintenance
• 1.2 million tons of total biomass removed
like last time, any new contract
will be awarded through a com-
petitive bidding process open to all
qualified operators.
But even though a decision is
still a year out, Malheur National
Forest Supervisor Craig Trulock
said he’s already contemplating
some changes in the next stew-
ardship deal. While he is leaning
toward awarding another long-
term contract, there will be less
timber to go around this time. The
agency expects a lower annual
timber harvest target — down
from 75 million board feet to
between 50 and 55 million board
feet per year.
Trulock said the next stew-
ardship contract will likely have
a lower percentage of the Mal-
heur National Forest’s commercial
timber volume. Instead of the cur-
rent guaranteed 70%, he expects
to decrease the share to between
30% and 50%, with allowances for
annual adjustments.
Pros and cons
Iron Triangle’s current deal is
what’s known as an integrated
resource service contract, a mech-
anism that Trulock said has both
pluses and minuses. For instance,
Trulock said, the Malheur is
required to commit appropriated
dollars up front at the appraised
price of timber for the duration of
the contract.
With 70% of the total volume
of timber sales off the Malheur
going to the program, Trulock
said, that provides a high level of
predictability for the contractor
while also guaranteeing a steady
supply of logs for Malheur Lum-
ber’s John Day sawmill. But it
could also create a problem for
“We stabilized the
community, stabilized
the mill. I can’t think of
any way that I would
say this was not a
success. Would you
repeat that, if the intent
is to grow a community?
Would you do it exactly
the same way to grow
a community, and grow
new businesses? I don’t
know. But I think that’s
the conversation we
need to be having.”
— Craig Trulock,
Malheur National Forest Supervisor
Malheur officials. With so much of
their discretionary timber revenue
committed to the stewardship con-
tract, they could find themselves
strapped for funds if unexpected
circumstances arose, such as con-
gressional budget cuts.
The contract’s long time span
and financial guarantees have also
made it possible for Iron Triangle
to invest in infrastructure, equip-
ment and workforce development.
That benefits the company in
obvious ways, but it also provides
assurance to Forest Service offi-
cials that the company will be able
to fulfill its contractual obligations
to meet stewardship goals such as
reducing fuel loads in the forest,
Turning 65, paying too
much or want to
compare your options?
preventing soil erosion and main-
taining roads.
When the Forest Service put
the 10-year stewardship contract
out for bid in 2013, it was looking
for something it couldn’t get out
of an old-fashioned, straightfor-
ward timber sale contract: It was
looking for a partner that could
get the cut out, do the stewardship
work and deliver a steady stream
of logs to Malheur Lumber.
Zach Williams of King Inc., a
subcontractor of Iron Triangle who
works in operations, summed up
the situation this way: “The gov-
ernment said, ‘We want to induce
investment.’ There was a reason
for that, and that hasn’t changed.
They’ve made timber sales (the
old-fashioned way) for 100 years,
and that’s why Malheur was going
to close down.”
Perception of monopoly
There is a social dynamic that
goes along with the long-term con-
tract, one that has created the per-
ception of winners and losers.
While he was not the super-
visor when Iron Triangle won
the contract, Trulock said people
occasionally tell him that the
Forest Service created a monopoly
in the community with the deal —
even though the bidding process
was open to anyone who met the
criteria.
And Iron Triangle is not the
only company making money on
the Malheur National Forest.
Since September 2013, Wil-
liams noted, the forest has sold
405 million board feet of timber.
Of that total, 231 million board
feet was sold to Iron Triangle
through the stewardship con-
tract, and the remaining 174 mil-
lion board feet sold on the open
market.
Dave Hannibal with Grayback,
a subcontractor on the stewardship
contract, said Iron Triangle won
the contract fair and square. The
complaints about a monopoly, he
feels, are just sour grapes.
“People will always shoot at
those on top,” Hannibal said.
“The 10-year stewardship (con-
tract) was issued in fair competi-
tion. Whoever won it would have
An Independent
Insurance Agency
been shot at.”
Still, some smaller operators
in the area say they would like a
bigger share of the timber coming
off the Malheur.
Tim Rude, the owner of John
Day-based Rude Logging, was one
of the contractors on the original
stewardship proposal to work with
Iron Triangle but now operates
his own timber sales and others
for various logging companies,
such as Boise Cascade and Wood
Grain. Some of those sales are
on the Malheur, but he and his 22
local employees follow the work,
whether it be in Western Oregon
or Washington state.
“We go where we have to to
stay busy,” Rude said, “but it
would be nice to have local work.”
Rude said multiple logging
contractors in Grant, Harney and
Baker counties are working out
of the area but would like to work
locally.
“(Traveling for work) takes our
people out of the area,” Rude said,
“and it takes our people away from
their families.”
Malheur Lumber General
Manager Bruce Daucsavage,
who helped broker the contract
in 2013, said the gripes Tru-
lock hears in the community are
understandable. But he added
that, once people look closer at the
commitment required of larger
contractors such as Iron Triangle
— the investments, expansions,
risks and capacity necessary to
implement the scope and scale of
work — the arrangement begins
to make sense.
One of the things that came
up in the contract negotiations,
Daucsavage recalled, was that
Malheur Lumber would need to
spend $5 million to upgrade the
sawmill but would need to see a
return on that investment within a
limited window of time.
Iron Triangle and its subcon-
tractors, he said, had the tech-
nical expertise, the capacity and
the equipment to carry out the
work that would ensure the reli-
able timber supply the mill needed
to survive. That is not to say a
smaller company could not have
fulfilled the criteria to get the con-
tract, Daucsavage added, but it
would have been a stretch.
In fact, it was a stretch for Iron
Triangle at the time.
Owner Russ Young said the
projects included in the contract
were beyond the scope of anything
the company had done in the past
and required reliable equipment
that would allow them to ramp
up and produce on landscapes
where the harvest was upward
of 7 million board feet of timber
on a single task order with hard
deadlines.
“We were on the hook from day
one that says if you shall not per-
form, you will be in breach of con-
tract,” Young said.
Iron Triangle declined to dis-
close how much money it has
spent to fulfill the terms of the
10-year stewardship contract, but
some of its investments are on full
display. One recent example is the
company’s post and pole plant in
Seneca, built to process small-di-
ameter logs cut to reduce fuel
loads on the forest. The plant has
25 full-time employees.
Altogether, according to infor-
mation from the Malheur National
Forest, the stewardship contract
has created or sustained a total of
268 jobs at Iron Triangle, its sub-
contractors and the national forest.
What now?
In Trulock’s view, the 10-year
stewardship contract has achieved
the objectives it strived for by all
metrics that the Forest Service has
reviewed over the past eight years.
But that doesn’t mean the next
stewardship contract has to be a
carbon copy.
“We stabilized the community,
stabilized the mill,” Trulock said.
“I can’t think of any way that I
would say this was not a success.
Would you repeat that, if the intent
is to grow a community? Would
you do it exactly the same way to
grow a community, and grow new
businesses? I don’t know. But I
think that’s the conversation we
need to be having.”
Malheur National Forest offi-
cials plan to hold an informational
meeting sometime in the next few
months to explain how steward-
ship works and discuss ideas for
future stewardship contracts.
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