C2 THE BULLETIN • SUNDAY, MARCH 7, 2021
OREGON’S LOGGING INDUSTRY
Can’t afford new taxes?
Even though prices have never been higher, and profits are soaring
BY ROB DAVIS
The Oregonian
T
hirty years after Oregon lawmakers
began giving the state’s timber indus-
try tax cuts that cost rural counties an
estimated $3 billion, industry lobbyists
warned them not to follow through on efforts
to reinstate the tax this year.
Legislators are considering whether to add
to taxes paid by the logging industry after an
investigation published last year by Oregon
Public Broadcasting, The Oregonian and Pro-
Publica found that timber companies, increas-
ingly dominated by Wall Street real estate trusts
and investment funds, benefited from the tax
cuts at the expense of rural counties struggling
to provide basic government services.
During hearings last week, a parade of indus-
try lobbyists and supporters said now would
be the worst possible time to reinstate the tax.
What they didn’t tell lawmakers: Lumber prices
are at record highs. The huge demand for lum-
ber and the accompanying high prices have
helped to boost stock prices and profits for
some of Oregon’s biggest timber companies.
The COVID-19 pandemic and record wild-
fires, which burned hundreds of thousands of
acres of private timberland last year, put the
timber industry “up against the ropes,” lobbyist
Chris Edwards said in testimony last week.
Edwards is a former Democratic state sen-
ator who now represents the Oregon Forest &
Industries Council, a lobbying group for the
state’s biggest timber companies. He suggested
that if lawmakers restored the tax, companies
might be forced to cut rural jobs or withdraw
from a landmark accord struck last year with
Oregon environmental groups to negotiate
tightening the state’s logging laws, which are
weaker than those in California and Washing-
ton.
Despite the wildfires and the pandemic,
lumber producers are “generating unbelievable
margins right now, record margins and profits,”
said Brooks Mendell, president of the forest in-
vestment consultancy Forisk.
Small-scale timber owners who lost most
of their timber in last year’s wildfires suffered
major financial hits. Others lost valuable equip-
ment. But large corporations and lumber man-
ufacturers are thriving, Mendell said.
A spokeswoman for the industry council,
Sara Duncan, didn’t directly address questions
about record lumber prices. In an email, she in-
stead pointed to the impact that restoring the
tax would have not on the council’s large mem-
ber companies but on smaller forest landown-
ers who also testified.
“There are over 65,000 forest landowners in
Oregon, many of whom lost land in the Labor
Day fires, and all of whom would be negatively
impacted by new timber taxes,” Duncan said.
The stock price for the largest timber com-
pany in Oregon, Weyerhaeuser, is sitting at a
three-year high. The Seattle-based investment
trust — which owns 1.6 million acres in Or-
egon, three times more than the next-largest
landowner — saw 125,000 acres of its timber-
lands burn during the Labor Day wildfires that
scorched more than a million acres across Or-
egon. The company didn’t respond to requests
for comment.
Despite losing $80 million to the fires, the
company reported net earnings of $797 million
last year, its highest mark since 2016.
Weyerhaeuser executives sounded bullish in
their Jan. 29 earnings release. The company’s
CEO, Devin Stockfish, called its 2020 perfor-
mance “remarkable” and said he was increas-
ingly confident that demand would continue
to bolster the housing market, which uses the
company’s lumber.
Charles Gross, a Morningstar senior equity
Dean Guernsey/Bulletin file
From left, Tony Wyse and Irven Newton secure a load of logs west of Sunriver in late September 2019.
analyst who follows Weyerhaeuser, said the
company’s earnings last year showed “a huge
net increase. It’s one of the best years they have
on record.”
Wildfire losses for Weyerhaeuser and other
large investment companies “pales in compar-
ison to how much they gain from high lumber
prices,” Gross said. “This is especially true for
Weyerhaeuser,” which not only owns forestland
but also owns mills that turn logs into lumber
and other products, he said.
Gross said he did not forecast any significant
financial effect on the companies if lawmakers
reinstated a severance tax of 5%, which would
be assessed based on the value of trees at the
time they’re cut down.
For decades, private timber owners in Ore-
gon paid a severance tax. But in the 1990s, law-
makers passed a series of tax cuts that phased
out the severance tax, which in turn lowered
the funding provided to schools and local gov-
ernments. Then they eliminated the tax for all
but the smallest timber owners, who can opt to
pay it in exchange for reduced property taxes.
If the tax were reinstated, Gross said, com-
panies would adjust prices and shift the cost to
consumers.
Since cratering at the beginning of the pan-
demic last year, lumber prices have tripled, set-
ting a record as wildfires reduced supplies and
low interest rates helped fuel a strong demand
from the housing market. Prices soared so high
that in January home builders asked President
Joe Biden for help as they struggled with lum-
ber costs and delivery times.
High prices for lumber, wood that has been
milled, have not boosted prices for logs in all of
the country’s wood-growing regions, like the
South, where production is higher than it’s ever
been, said Rocky Goodnow, vice president of
North American Timber Service at Forest Eco-
nomic Advisors.
But the rise in lumber prices has increased
the cost of trees harvested in Western Ore-
gon, the state’s dominant tree-growing region,
Goodnow said, where log prices are up about
40% since the early days of the pandemic.
A severance tax would reduce Oregon’s com-
petitiveness with other timber-producing re-
gions and “on the margin lead to less produc-
tion,” Goodnow said, particularly if the market
for lumber weakens.
Mendell, the forestry consultant, said his
firm forecasted Oregon’s timber production to
change little over the next 20 years, seeing a de-
cline of perhaps 2% based on wildfire damage
and estimates of when most of the state’s trees
will be old enough to be logged.
Proponents of the severance tax told law-
makers that the industry’s strong position
means there’s no better time to restore the tax.
Jody Wiser, founder of Tax Fairness Ore-
gon, a tax watchdog, told state representatives
that fires that burned 3% of the state’s private
timberlands were no reason to delay restoring
taxes that could fund sheriff’s deputies, men-
tal health workers and economic development
officers in rural counties that bore the brunt of
the cuts.
Disagreement exists about where the money
should go if a tax is reinstated. The current
proposal to restore the tax, introduced by state
Rep. Paul Holvey, a Eugene Democrat, would
institute a 5% tax to be paid by timber owners.
Half of the money would fund wildfire fighting
and a quarter of it would return to the counties
where the logging occurs. The rest would go
to the Oregon Department of Forestry and re-
search projects at Oregon State University.
Counties want to see all of the money re-
turned to them. But lawmakers have sidelined
two early bills to restore a severance tax that
would serve entirely as local government rev-
enue, while Holvey’s proposal received its first
hearing last week.
Meanwhile, small landowners with less than
5,000 acres, which together own about a third
of Oregon’s private forests, have protested the
use of tax revenue to pay to prepare private
homes for wildfires.
“These costs should be shared by all citizens.
We are very happy to support OSU forestry
and the Department of Forestry and pay our
share for fire,” Sarah Deumling, whose com-
pany manages 1,300 acres in Polk County, told
lawmakers, “but please think twice before try-
ing again to tax us out of business.”
The Association of Oregon Counties, repre-
senting the 36 counties that once received the
tax revenue, echoed the timber lobbyist’s state-
ments about the timing being wrong to raise
taxes and urged lawmakers to delay beyond the
2021 session.
Speaking on behalf of the association, John
Sweet, a county commissioner from coastal
Coos County, which has lost an estimated $208
million in severance tax payments since 1991,
told state lawmakers they should not restore
the tax without taking time to study it. If they
do act now, Sweet said, they should direct the
money where it once went, to local govern-
ments and schools, not to state responsibilities
like firefighting.
Sweet said in an interview that while timber
companies are currently seeing strong returns,
lawmakers still need to be careful in their ef-
forts to restore the tax.
“This may be a reasonable tax,” he said. “I
don’t want it to be imposed when we’re shoot-
ing from the hip.”
Sweet has received $29,000 in campaign
contributions, nearly 20% of what he’s raised
in nine years, from timber interests including
Weyerhaeuser. He said the contributions did
not influence his position.