A6
OREGON
East Oregonian
Tuesday, January 11, 2022
With logging contract expiring, officials wonder: What’s next?
By STEVEN MITCHELL
Blue Mountain Eagle
JOH N DAY — The
10-year stewardship contract
bet ween t he Mal heu r
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
criticism from some who
feel the John Day-based
logging company has prof-
ited at the expense of smaller
rivals.
Now, with the contract
set to expire early next year,
federal forest managers are
trying to decide what form
stewardship contracting on
the forest should take in the
future.
A different approach
Stewardship contracts
are fundamentally different
from traditional timber sale
contracts.
According to Roy Walker,
a program manager with the
Forest Service, the federal
agency awards timber
contracts by identifying
an area with commercially
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 evalu-
ates the fair market value of
the timber and opens up a
bidding process to compa-
nies that can meet bonding
and other requirements.
As the Forest Service
expanded its forest resto-
ration, fuels reduction and
thinning activities, Walker
said, it melded forest manage-
ment work, which often lacks
commercial value, with
timber sales.
Stewardship brings the
two together, allowing the
Forest Service to award
the commercial value that
loggers would ordinarily
bid on to finance restoration
work on national forest land.
In 2013, faced with the
imminent closure of Malheur
Lumber, Grant County’s lone
sawmill and largest private
employer, due to an incon-
sistent and unreliable supply
of timber, Malheur National
Forest officials decided to
award a long-term steward-
ship contract to a single oper-
ator in a bid to stabilize the
situation.
The 10-year, $69 million
contract went to Iron Trian-
gle, the winner in a compet-
itive bidding process. The
contract, which was signifi-
cantly more long-term and
broader in scope than most
stewardship deals, accel-
erated timber sales and
increased the pace of resto-
ration 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 overar-
ching goals were to promote
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.
STEWARDSHIP
BY THE NUMBERS
Richard Hanners/Blue Mountain Eagle, File
Raw logs ready to be milled at Iron Triangle’s post and pole plant in Seneca. The plant is one
example of investments made by the company to carry out its 10-year stewardship contract
with the Malheur National Forest.
Richard Hanners/Blue Mountain Eagle, File
Finished product ready to be shipped at Iron Triangle’s post and pole plant in Seneca.
Current contract
The Iron Triangle contract
expires in March 2023, and,
just like last time, any new
contract will be awarded
through a competitive
bidding process open to all
qualified operators.
But even though a decision
is still a year out, Malheur
National Forest Supervi-
sor Craig Trulock said he’s
already contemplating some
changes in the next steward-
ship deal. While he is lean-
ing 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
stewardship contract will
likely have a lower percent-
age of the Malheur National
Forest’s commercial timber
volume. Instead of the
current 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 mechanism that
Trulock said has both pluses
and minuses. For instance,
Trulock said, the Malheur is
required to commit appro-
priated 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 guar-
anteeing a steady supply of
logs for Malheur Lumber’s
John Day sawmill. But it
could also create a problem
for Malheur officials. With so
much of their discretionary
timber revenue committed
to the stewardship contract,
they could find themselves
strapped for funds if unex-
pected circumstances arose,
such as congressional budget
cuts.
The contract’s long time
span and financial guaran-
tees have also made it possi-
ble for Iron Triangle to invest
in infrastructure, equipment
and workforce development.
That benefits the company
in obvious ways, but it
also provides assurance to
Forest Service officials that
the company will be able to
fulfill its contractual obli-
gations to meet stewardship
goals such as reducing fuel
loads in the forest, preventing
soil erosion and maintaining
roads.
When the Forest Service
put the 10-year stewardship
contract out for bid in 2013,
it was looking for some-
thing 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 government 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 contract, one that
has created the perception of
winners and losers.
While he was not the
supervisor when Iron Trian-
gle 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,
Williams 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 contract, and
Since winning a 10-year
contract with the Mal-
heur National Forest in
2013, Iron Triangle has
completed stewardship
projects on more than
150,000 acres of forest.
The work includes:
• 12,000 acres of
pre-commercial thin-
ning.
• 10,000 acres of slash
piled.
• 1,000 acres of aspen
treatment.
• 2,000 acres of soil stabil-
ity treatment.
• 3,000 acres of masti-
cation, a fuel reduction
process to reduce the
risk of wildfire.
• 1,100 miles of road
maintenance.
• 1.2 million tons of total
biomass removed.
the remaining 174 million
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 monop-
oly, he feels, are just sour
grapes.
“People will always shoot
at those on top,” Hannibal
said. “The 10-year steward-
ship (contract) was issued in
fair competition. Whoever
won it would have been shot
at.”
Still, some smaller oper-
ators 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 origi-
nal 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 Wash-
ington 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 coun-
ties 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 Daucsav-
age, who helped broker the
contract in 2013, said the
gripes Trulock hears in the
community are understand-
able. But he added that,
once people look closer at
the commitment required
of larger contractors such as
Iron Triangle — the invest-
ments, expansions, risks and
capacity necessary to imple-
ment 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
subcontractors, he said, had
the technical expertise, the
capacity and the equipment
to carry out the work that
would ensure the reliable
timber supply the mill needed
to survive. That is not to say
a smaller company could not
have fulfilled the criteria to
get the contract, 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 equip-
ment 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 perform, you will be
in breach of contract,” Young
said.
Iron Triangle declined to
disclose how much money
it has spent to fulfill the
terms of the 10-year stew-
ardship 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-diameter logs
cut to reduce fuel loads on the
forest. The plant has 25 full-
time employees.
Altogether, according
to information from the
Malheur National Forest,
the stewardship contract has
created or sustained a total
of 268 jobs at Iron Triangle,
its subcontractors 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 st abili zed t he
com mu nit y, st abilized
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
officials plan to hold an infor-
mational meeting sometime
in the next few months to
explain how stewardship
works and discuss ideas for
future stewardship contracts.