White Paper: The Economic Implications of Energy Production from Forest Residuals


Gregory Morris

Green Power Institute
2039 Shattuck Ave., Suite 402

Berkeley, CA 94704
(510) 644-2700

October 19, 1998


Forests all over the American West are suffering from a common malady, the build-up of biomass to levels well in excess of what would be found in native, undisturbed forest ecosystems. This build-up is in large part a result of vigorous and successful forest-fire fighting efforts over the last century, and represents a significant threat to forest health and ecosystem functioning. In particular, the excess biomass accumulation causes a heightened risk of catastrophic wildfires, decreases water availability in downstream water ways, and inhibits the normal succession of species towards mature forest structures.

The options available to land owners and managers for ameliorating the problem of excess biomass build-up are limited. The traditional management tool for biomass reduction is prescribed burning, which involves isolating an area with fire breaks and fire fighters, and setting ground-level fires to consume the brush and undergrowth. Prescribed burning in overstocked forests is a dirty and dangerous operation, which produces large quantities of air pollutants, entails a risk of initiating uncontrolled wildfires, and kills and damages the mature trees that are desirable to maintain.

The major alternative treatment to prescribed burning of overstocked forest stands is mechanical thinning, in which the bulk of the overstocking is cut down using standard forestry techniques, and either removed from the forest or managed on-site, usually by burning. In some cases, mechanical thinning and biomass removal alone can provide the level of fire protection desired by the land manager. In other cases prescribed burning is required after thinning to complete the job. Performing thinning operations prior to prescribed burns greatly mitigates the undesirable effects of the burn, reduces the amount of damage to mature trees, and reduces the risk of off-site fire initiation. If the bulk of the thinnings are recovered as biomass fuel or other products, then the air pollution created by prescribed burning is also reduced significantly.

A portion of the recoverable thinnings from overstocked California forests may be used for the manufacture of wood products, but the majority of the residue material that is desirable to remove from the forest is not suitable feedstock for higher-valued applications. The thinnings can either be used as biomass fuel for power production, or, in the absence of such use, they must be burned or spread in the forest, neither of which are desirable alternatives. As long as there is a suitable biomass fuel user in the vicinity willing to pay more for the fuel than the cost of delivery, fuel use is the most cost-effective disposal alternative for forest thinnings, as well as environmentally the most desirable. If higher-valued products can also be produced, the cost-effectiveness is increased.

Current State of California Forests

California has almost 40 million acres of forest land, much of which is located in the north of the state, and along the Sierra Nevada foothills. California's forests have been subjected to human intervention throughout history, providing wood for building materials, and fuel for heating and cooking. However, during the past one-hundred years, the scope and extent of human interventions in the forests have increased tremendously. In particular, two practices have inexorably altered the condition of the state's forests: widespread commercial logging, and extensive fire suppression efforts. While it is difficult to define a baseline for an “undisturbed” native California forest ecosystem, it is clear that both of these practices have interfered with normal forest succession, and engendered a long-term build-up of biomass in excess of the levels that would exist in the native, undisturbed forest ecosystem.

Periodic fire is a natural part of the functioning of many western U.S. forest ecosystems. Fires serve to clear underbrush, reduce stem densities, and affect the mixture of species in growing forests. The California Department of Forestry and Fire Prevention estimates that the natural repeat time for forest fires in undisturbed native California forests averages about 30 - 40 years (CDF 1996). Most natural fires are low-intensity fires that clear out underbrush, but do not kill the mature trees in the forest. Large-scale, destructive wildfires are extremely rare in the undisturbed California forest ecosystem.

Modern fire suppression efforts do not prevent fire initiation, but try to quickly isolate and extinguish fires once they have started. One result of these efforts has been that the natural, fire-caused biomass clearing process is not being allowed to take place in California's forests. Ironically, fire suppression has vastly increased the risk of catastrophic wildfires in the state, which are completely different in nature than the natural fires that have been so successfully suppressed. Catastrophic wildfires kill almost everything in their wake, and incinerate the top layer of duff and soil as well. It takes several years for a forest to even begin to regenerate following a catastrophic wildfire.

The overstocking of biomass in California's forests causes several undesirable consequences, including an increased risk of catastrophic wildfires, diminishment of the wildlife habitat qualities of the ecosystem, and a decrease in the amount of water production from forested watersheds. Overstocked biomass increases the rate of evapotranspiration from forest soils above the rate that would occur in the undisturbed ecosystem, thereby reducing the amount of ground water that percolates into streams and rivers. The decrease in water production is greatest during the summer season, when flowing water is most needed for both environmental and consumptive uses.

While acknowledging that there is a great deal of variability in California forests, it is estimated that undisturbed, native northern California forest ecosystems would have an average canopy closure of approximately forty percent (CDF 1996). Today, a large proportion of the existing forests in the region have canopy closures in excess of sixty percent. Canopy closure rates, while relatively easy to measure, are not directly correlated with biomass stocking levels, as measured, for example, in tons per acre. Independent estimates put the average level of biomass in California's overstocked forests at approximately 125 - 140 percent of the amount of standing biomass in the native, healthy forest ecosystem. The excess biomass material includes a mixture of healthy and diseased standing biomass, dead and decaying standing biomass, and downed and decaying biomass.

Options Available for the Improvement of California's Forests

In current practice, most of the overstocked forest biomass in California is left in place in the forest. The California Department of Forestry and Fire Prevention and the U.S. Forest Service, as well as many private land owners, increasingly recognize this as a major impediment to maintaining forest health and productivity in the state. Public agencies also see the consequences of fuel loading on their fire fighting budgets (CDF 1996), which have sky-rocketed in recent years. The only means to improve the condition of the standing forests is to remove the excess biomass.

There are two basic tools available for reducing biomass overstocking and reducing wildfire risks in California's forests: burning excess material in place in the forest, or physically removing it from the forest. Controlled, in-forest burning of biomass, called prescribed burning, has long been practiced as a method of disposal of unwanted forest residues, often after commercial logging operations have been undertaken. Thinning of overstocked standing forests has also been practiced, with the harvested biomass either removed for off-site productive use, or burned in the forest for disposal. Each technique has its own set of costs and characteristics, and decisions about when and which ones to use for a given application are site-specific.

Most of the management operations currently undertaken in California forests are performed in conjunction with other activities, usually commercial-forestry related. The U.S. Forest Service (USFS), which manages approximately one-half of the forest land in California, increasingly requires mixed product removals and post-harvesting treatment operations to be performed as conditions for sales of high-valued timber. Private land owners also are using management operations to reduce fire risks, and up-grade the quality of their holdings. Both classes of land owners are interested in extending forest management operations to overstocked forest stands that are not otherwise being harvested or actively managed.

Thinning and management of standing forests that are not otherwise being harvested is a relatively new concept in California. The California biomass power industry played an important role in promoting management operations in California's standing forests during the early 1990s. Several USFS management districts credit the operation of biomass facilities in their regions with allowing them to carry out extensive management operations in their forests. The treated forests are in significantly better condition than similar forests in the state that are more remote from biomass energy facilities, and have not benefited from the conduct of biomass fuel-production operations in standing forests.

During the early part of the decade, biomass fuels in California were in short supply (Morris 1997), and biomass fuel prices were high enough to cover all of the costs of in-forest fuel-production operations. However, mechanical thinning and fuel removal is expensive, and as state-wide biomass fuel prices have decreased in response to various market factors, the ability of fuel purchasers to underwrite the full costs of in-forest operations has diminished, resulting in a broad drop-off in the production of forest-residue fuels. With the incidence of destructive wildfires increasing dramatically in the state in recent years, many land managers are taking a hard look at the options available for in-forest fuels reduction on their holdings.

Many forestry officials would like to see extensive biomass reduction operations performed on California's forests over the next several years and decades. The USFS states that at least 250,000 acres per year of the land under their jurisdiction would benefit from thinning operations in order to fully realize the fire suppression, forest health, and water-yield increases that are desirable (Jackson, 1997). During the height of the use of in-forest residues by the biomass power industry, only about 60,000 acres per year were being treated state-wide for purposes of biomass fuel production. At the present time, biomass fuel production is contributing to the thinning of less than 15,000 acres annually. Thus the magnitude of the challenge is enormous.

The simplest fuel-reduction measure that can be performed on overstocked forest lands is prescribed burning. Prescribed burning alone, however, entails serious problems, including high levels of emissions of smoke and other air pollutants, a significant risk of fires raging out of control and initiating off-site, uncontrolled fires, and high levels of damage to the mature trees that are desirable to be retained in a healthy state after the burn.

The risks and drawbacks of prescribed burning can be reduced significantly by performing thinning operations prior to the burn. Thinning operations performed prior to burning remove the bulk of the standing material that is desirable to clear, including the ladder fuels that tend to spread fires to the crowns of the mature trees. Thinning before prescribed burning significantly reduces the risk of uncontrolled wildfire initiation, and reduces the killing and damaging of desirable trees.

Although the cost of prescribed burning is reduced when thinning is performed prior to the burn, the overall cost of the biomass-reduction operation, in terms of dollars per acre treated, is increased. The increased management cost can be offset in whole or part by revenues that can be earned from the sale of the products and biomass fuels derived from the thinnings. At the height of the biomass fuel market in California during the early 1990s, when fuel producers were receiving $40 per bdt or more for delivered fuel, the fuel market made thinning operations a cost effective treatment for excess biomass reduction. At the current market price for forest-residue biomass fuels in the state, forest fuel reduction operations are no longer free, so forest managers are reluctant to carry them out, despite their concerns about wildfire risks and ecosystem health on their holdings.

In-forest thinning with the recovery of biomass fuels or higher-valued products is only practical to do when two important conditions are met: (1) The site has appropriate slopes, forest access, and other suitable physical characteristics. (2) There are biomass fuel users or markets for higher-valued products at reasonable proximity to the site. Thinning without fuel or product production can be performed in places that do not have access to markets for useful products, however the benefits of thinning are reduced, and the costs increased, when the thinned residues are left on the forest floor to be consumed as part of the prescribed burn. Piling the residues before a burn can reduce the burn's emissions and risks, but at an increase in management cost.

The USFS has been selling high-valued timber from federal lands for many years. Environmental issues increasingly have become a factor in the development of timber sales contracts, and today harvesters usually are required to recover low-valued timber and/or perform post-harvest management operations as a condition of sale. These types of contracts work well when there is enough high-valued material being recovered to underwrite the costs of the entire enterprise. However, for cases in which the net value of the recoverable materials is less than the cost of the operations, for example in situations where fuel reduction is desired in the absence of commercial harvesting, the standard contracting mechanism for timber sales does not work. In this type of situation contracts for services have to be used, and the USFS has to pay for the cost of the operations in order to accomplish their goals. Service contracts are a relatively new phenomenon for the USFS, and they are struggling to put procedures into place to deal with them, as well as looking for funds to provide for better forest stewardship on national forest lands (Husari 1998).

Costs and Benefits of Alternative Management Options

During the peak of the California biomass fuels market in the early 1990s, the price of biomass fuels was high enough to pay for all of the costs of producing fuels from in-forest residues. With biomass fuel prices in the state at current levels, all of the management alternatives available to land owners for biomass reduction in standing timber lands incur net costs. This represents a significant barrier to their being pursued, despite the great desirability of doing so. In order to select the management treatments that deliver the best package of values to land owners it is important to understand all of the costs and benefits of the available alternatives. Comparisons among the various alternatives are difficult to make on a generic basis, due to the site-specific nature of their applicability, and to the fact that data are limited because many of these types of treatments have not been conducted very extensively in the past.

Prescribed burning costs are usually quoted in terms of dollars per acre treated. Depending on conditions, the cost for prescribed burning of logging slash can vary from as little as $50 per acre to as much as $400 per acre or more. Other conditions being equal, the greater the amount of management and removal of biomass that is performed prior to the burn, the cheaper the cost of the burn. Biomass removal also significantly reduces the amount of air pollution that is produced by the burn.

In typical cases of prescribed burning of logging residues in California forests after commercial harvesting operations, the costs of the burn fall in the range of about $250 - 300 per acre (Kallenberger, 1998). If the burn is being conducted in a large contiguous area, for example one greater than 500 acres, the cost can fall to about $150 - 200 per acre. Burns that entail special risks factors, such as proximity to homes or other properties, are more expensive to conduct. If biomass fuels are recovered from the logging residues prior to conducting the burn, the cost of the subsequent burn is reduced by fifty to seventy-five percent. Pollution levels are reduced by an even greater amount.

Prescribed burning is almost never used as a management treatment for fuels reduction in overstocked forests that have not previously been harvested or thinned. Burning in overstocked forests without prior thinning is extremely hazardous, and produces very high levels of pollution and damage to the mature trees that are desirable to save. High risks of damages, both on-site and off, translate into high costs for performing a burn. Burning under these conditions requires large numbers of fire-fighting personnel and equipment to be present during the operation. It is estimated that the cost of conducting a prescribed burn for purposes of fuel reduction in an overstocked California forest that has not been thinned could go as high as $1,500 per acre (Husari 1998). Typical applications would be expected to cost in the range of $400 - 750 per acre.

Mechanical thinning operations performed in unmanaged, overstocked forest stands can prepare the stands for prescribed burning. The thinning operations remove ladder trees, which serve as conduits for transferring ground level fires to the crowns of mature trees, and brush and other material. All of the material that is designated for removal is placed on the forest floor or in piles prior to the burn. The cost of performing a prescribed burn would be reduced after the thinning, probably to a range of about $250 - 600 per acre. The thinning operation, however, adds considerable cost to the activity (see below), and pollution levels are not reduced significantly compared with the case of no pre-thinning, because all of the material to be removed is still being open burned. Combining mechanical thinning and burning as a management technique for performing fuels reduction in overstocked standing forests is almost never performed in current forestry practice.

During the early years of the 1990s, when biomass fuel prices were at a high level, forest managers in California had a viable option for carrying out cost-free fuel reduction operations in their forests. Mechanical thinning operations were combined with biomass fuels production, with the bulk of the material slated for reduction actually removed from the forest site for use as biomass fuel in the production of electricity. The need for prescribed burning after thinning and fuels production operations are conducted depends on site-specific factors. In general, the better the condition of the forest prior to treatment, the less likely the need for prescribed burning after thinning and fuel production have been performed. Because private forest lands in California tend to be in better condition than national forest lands, thinning and fuel production on private lands is often the only management required, while national forest lands often require a subsequent prescribed burn to complete the treatment. The cost of the burn is similar to the cost of prescribed burning of logging residues after commercial harvesting operations. Table 1 summarizes the costs of prescription burning under a variety of conditions.

Table 1. Cost of Prescibed burning under a variety of conditions.
Slash Clean-Up $ / acre
  Without Fuel Production 150 - 300
  With Fuel Production 50 - 150
Timber-Stand Improvement  
  Without Pre-Treatment 400 - 750
  After Mechanical Thinning 250 - 600
  Thinning & Fuel Production 75 - 150

Costs of Forest Thinning and the Production of Useful Products

Mechanical thinning operations can be used prior to prescribed burning to significantly improve the performance and reduce the risks of the planned burn. The bulk of the thinnings are suitable for conversion to biomass fuels for the production of electricity. In some cases higher-valued products, such as small saw logs or pulp chips, can also be produced from some of the material. Export of the residues from the forest site prior to prescription burning reduces the cost and emissions of the subsequent burn. In some cases, the need for prescription burning can be eliminated altogether. The economic viability of fuel and/or product recovery is dependent on a variety of market factors.

Mechanical thinning operations in California forests typically are carried out with a crew of feller-bunchers and grapple-skidders. Feller-bunchers are machines that grab stems slated for removal, snip them near ground level, and carry them to a pile. Several stems can be carried in a single load, depending on their size and form. Skidders then move the piled stems to a landing site for further processing. Material that is to be prescription-burned can either be left in place in the forest, or piled for more controlled burning.

Feller-bunchers are the most expensive piece of equipment to operate in the forest. Estimates of the cost of operating a feller-buncher in a forest-thinning operation are in the range of $120 - 150 per hour, based on interviews with a variety of forestry contractors in the state. Grapple-skidders operate for a cost of $60 - 70 per hour. Both pieces of equipment have similar productivities, approximately 5 - 6 acres per day, depending on a variety of site-specific conditions.

The amount of material reduction that is desired from an overstocked forest stand in typical California applications falls in the range of 10 - 35 bdt per acre. Most of the material slated for reduction can, in principal, be recovered and removed from the forest for useful applications, either as fuels, or, in some cases, as higher-valued products. Fuel production entails operating a chipper at the landing site, with the fuel product loaded directly into vans for delivery to power plants. Chippers cost approximately $100 - 130 per hour to operate, and produce 10 - 15 van loads of chips daily (25-ton vans). Depending on the application, higher valued products require various processing operations at the landing site, such as debarking, delimbing, or chipping, followed by transportation to market.

Table 2 shows a summary of the costs of carrying out a variety of in-forest management operations, that may either be performed in conjunction with, or in lieu of, prescribed burning. The costs are shown in terms of cost per acre, where relevant, and cost per bdt of recoverable biomass fuel for all categories. These costs are based on interviews with a variety of forestry services providers who are active in the state, and on calculations performed for purposes of researching this white paper. They are based on typical California conditions. Actual costs for any given case are highly site-specific, and may fall outside of the ranges shown.

Table 2. Summary of forest management operation costs.
  $ / acre $ / bdt
Slash Collection 150 - 350 8.50 - 21.00
Mechanical Thinning 190 - 280 12.00 - 16.00
Skidding 95 - 115 5.00 - 8.25
Chipping NA 6.50 - 8.50
Site Management 90 - 120 5.00 - 8.25
Product Transportation NA 8.00 - 15.00

An interesting example of higher-valued product recovery during thinning operations is provided by management treatments that have been performed over the past couple of years on a privately-held, old-growth forest stand located near the Donner Summit in the Tahoe region of California (Beedy 1998). Thinning operations were carried out on approximately 80 acres during 1997, with material up to a diameter of 24 inches slated for removal. All of the mature, large trees were left in place. Thinned material that had a positive market value was recovered and sold to sawmills, and the remainder of the thinnings were prescription burned on the property. The stand was judged to be located too far away from existing biomass generating facilities to justify biomass fuel production operations at existing prices for biomass fuels.

Logs in the size category of 6” - 24” dbh (diameter breast height) with adequate form were recovered during the thinning operations, and sold to sawmills. This type of material can be used for the production of products such as small saw logs, fence posts, and stakes. Because this was an old-growth forest, the amount and size of the thinnings were large compared with what would be found in a typical California forest situation. Approximately twenty tons per acre of recoverable products were removed from the forest during the thinning operations, consisting of approximately 25 percent small saw logs, and 75 percent pulp chips. Another 15 tons per acre of fuel-quality chips were left in the forest and burned, due to the lack of an adequate market. The land owners received approximately $12,000 as stumpage fees, and the contractor absorbed all of the costs of thinning and removal. Prescribed burning of the residues was performed at a cost of about $6,500 ($75 - 80 per acre). This left the land owner with a net income of about $5,500, and 80 acres of improved, fire-protected forest.

The example described above is not typical of the situation that exists in most of California's overstocked forests. The yield of higher-valued products from most overstocked commercial forest land in the state, especially on federal lands, represents a relatively small fraction of the total overstocking. Sales of all products recovered from thinning operations, including biomass fuel and higher-valued products, will not be sufficient to completely off-set the cost of the management operations. Land owners must incur a net cost in order to perform management operations on their standing forest lands.

Costs of Alternative Management Operations

Large areas of California's forests are overstocked with biomass. Overstocked forest stands are neither undisturbed ecosystems, nor healthy ones. The alternatives available to land owners include doing nothing, and thus continuing to expose their forest stands to the risks of poor ecosystem health and highly destructive wildfires, or performing management operations that reduce the risks of wildfire damages, and improve forest health and watershed productivity. The immediate cost of performing management treatments is always greater than the cost of doing nothing. However, the eventual cost of fighting wildfires is substantial, and one that is rarely taken into account in decisions about land management. Proper integration of eventual fire fighting costs and property losses into land-use management decisions would lead to a major shift in strategies.

In cases where markets exist for biomass fuels or other materials, the cost of the management treatment is offset by the revenues received for product sales. During the early 1990s, when market prices for biomass fuels in California were in the neighborhood of $40 per bdt, fuel sales completely paid for the cost of forestry treatment, and in-forest residue fuel production exceeded one-million bdt per year. With current market prices for biomass fuels this is no longer the case, and forestry management operations aimed at reduction of in-forest fuel loading present net costs to land owners.

The range of management alternatives available to land owners for fuels reduction and timber-stand improvement in overstocked stands can be modeled in five representative management options, that are summarized as follows:

Forest stands that are harvested for commercial timber products require post-harvest management treatment operations. Slash residues represent a significant fire hazard, as well as an impediment to healthy regeneration of the forest. Post harvest management activities are usually required as a condition of contemporary timber sales in California. No management generally is not an alternative for this type of application. The three representative management alternatives that can be applied after commercial harvesting of timber are:

Table 3 shows a summary of the costs of the seven management alternatives presented above, based on the costs in Tables 1 and 2, and research done for this paper. Fuel transportation costs are based on standard industry trucking rates of $50 per hour for 25-ton chip vans, and average trip lengths for the delivery of in-forest biomass fuels to biomass power plants in the state. Product-sales revenues of $28 per bdt are based on average prices in northern California for in-forest residue fuels in the first quarter of 1998. All of the values shown in the table are averages of broad ranges of values. Costs in all categories, for any given application, are site-specific.


Slash Clean-Up     Timber-Stand Improvement        
  burn only fuel & burn fuel no burn no man. burn only thin & burn fuel & burn fuel no burn
Thinning, Collection, Skidding - 18.25 18.25 - - 14.00 20.50 20.50
Chipping, Piling, Spreading - 7.50 14.00 - - 6.50 7.50 14.00
Prescribed Burning 18.00 8.00 - - 40.00 27.50 9.00 -
Fuel Transportation - 11.50 11.50 - - - 10.50 10.50
Total Cost of Treatment 18.00 45.25 43.75 - 40.00 48.00 47.50 45.00
Revenues from Fuel Sales - 28.00 28.00 - - - 28.00 28.00
Net Cost 18.00 17.25 15.75 - 40.00 48.00 19.50 17.00
Expected Cost of Firefighting, $/ac       860 180 180 180 180
Fire Damage Loss, $/ac       170 150      
Equivalent Net Cost, $/ac 225 216 197 1,030 830 780 424 393
Recoverable Residues: 12.5 bdt/ac            

For slash clean-up operations, where timber-harvesting has taken place in reasonable proximity to biomass generating facilities, the net costs of the three alternatives considered are approximately the same, a signal that the market price for the material as a fuel is related to the cost of non-fuel alternatives for slash management. The alternatives that include biomass-fuel production offer major air-pollution benefits in comparison to prescribed burning alone. The choice of whether to require prescribed burning after fuel production depends on site-specific environmental factors, as well as the type of commercial harvest that was conducted.

The risks of destructive wildfires in California due to forest overstocking is increasingly acknowledged as a major problem in forest management, on both public and private lands. More than one-billion dollars is now spent annually in the state fighting fires, and major property losses add to the cost. Destructive wildfires consume an average of 300,000 acres per year of forest land in California (Sampson 1997). Land owners are expressing increasing interest in conducting management operations on their overstocked forest stands, but management operations are optional, unlike the case of management of slash left over from commercial timber harvesting. In the absence of biomass-fuels or higher-valued product opportunities, management operations are very expensive, typically costing in excess of $500 per acre, and are virtually never conducted.

When prices for in-forest residue fuels were in the neighborhood of $40 per bdt in the state during the early 1990s, the net cost of conducting management operations for forest stands with good proximity to biomass power plants was small. In effect, fuel sales were sufficient to allow landowners to upgrade their forest stands free of charge. In today's biomass fuels market there is a net cost for standing-timber management that is roughly equivalent to the per-acre cost of logging slash treatment. However, since landowners are not required to perform these types of operations, and are not receiving compensation for timber sales, few are choosing to perform them in the current environment, despite their concern over the condition of their holdings.

The USFS, with the support of a variety of environmental organizations, is beginning to search for funds for performing management operations on standing timber lands under their jurisdiction. Prescription burning is receiving considerable positive attention as a management technique, as it does not impinge upon the environmental community's concerns about the promotion of increased logging on national forest lands. However, the cost of prescription burning without product recovery is very high, and the pollutants produced are a major concern for air-quality regulators.

Timber-stand management operations are expensive to perform, but failing to perform them on overstocked forest stands also entails a cost. At some time in the future, all forest stands in the state will be hit by fire, but the damage done by the fire will be much greater in overstocked conditions. It is difficult to determine the value of this cost, but simple estimates show it to be significant. For example, using the per acre cost of fighting fires in California as a damage indicator, and a reasonable assumption about the annual risk for the occurrence of a wildfire that would require suppression efforts, it can be estimated that the present value of the expected cost of fire fighting on a given plot of overstocked forest land is approximately $680 per acre (see below), which is as much as the cost of the most expensive management option considered, and three times higher than the management cost when biomass fuel production is included in the operations.

Annual wildfire losses in California vary over a wide range. The long-term average amount of forest fire loss in the state is about 300,000 acres per year (Sampson 1997), approximately 0.75 percent of the state's total forest land. This implies a 133-year repeat time for destructive wildfires. The annual average cost of fire fighting in the state is $750 million, for an average per-acre cost of $2,500. The present value of the cost of fire fighting on a given plot of forest at some time in the future is calculated as the sum of the annual probabilities of fire risk times the fire fighting cost for that year, properly inflated and discounted. Assuming that typical overstocked California forests have a two percent annual risk of destructive wildfire, and using a real (inflation-adjusted) discount rate of six percent, the present value of the expected cost of fire fighting on a given plot of forest is calculated as $860 per acre.

After thinning and prescribed burning is performed, there remains a risk of forest fire on the land that will require suppression efforts and entail property loss. However, the probability of a destructive wildfire is greatly reduced, and the cost of suppression is also reduced, due to the lower density of biomass, and the absence of ladder fuels. Assuming that the annual probability of wildfire on treated land is reduced to one percent, and the cost of fire fighting is reduced to $1,000 per acre, the expected value of the future cost of fire fighting after treatment is $180 per acre. Thus, the net reduction in expected cost of future fire fighting resulting from fuel-reduction treatment is in the neighborhood of $680 per acre.

The present value of the expected asset loss on a given plot of land due to wildfire occurrence can be calculated in a similar manner. Typical mature commercial forests in California have a standing timber value of approximately $1,500 per acre. Most of the mature timber can be salvaged after a wildfire occurs, but a generation of growing stock is lost, and management and seeding operations have to be conducted after salvage logging that are not necessary with normal harvesting operations. In general, property losses of at least one-third of the standing timber value can be expected from a destructive wildfire, or at least $500 per acre. This leads to an expected property loss due to wildfires of approximately $170 per acre, which is preventable with proper management.


California's overstocked forests are not in good condition. Past harvesting and fire suppression practices have left the forests in poor health, and at high risk for destructive wildfires. At the height of the California biomass fuels market in the early 1990s, the revenues that could be earned from biomass fuel sales were sufficient to fully offset the cost of performing thinning and management operations in standing forests, offering landowners the opportunity to upgrade their holdings free of charge. With prices at current levels, that is no longer the case, except in unusual applications such as the example presented regarding the production of wood products from the thinnings of an old-growth forest in the Tahoe basin.

A healthy fuel market clearly helps to keep the cost of management to a minimum. At current biomass fuel market conditions, timber-stand improvement operations incur a net cost of approximately $200 - 250 per acre, which is much less than the present value of the expected cost of fire-fighting ($680 per acre) and loss of property value ($170 per acre) if the management operations are not performed. The problem is that finding available funding for management operations today is difficult to accomplish. In addition, the cost of fire fighting is borne by a combination of public-sector agencies at the federal, state, and local levels, not by the land owners or managers, so they do not take this cost into account in their decision-making processes.

Property values similarly are not fully taken into account in decisions about land-use management practices. Private property values generally are protected through insurance programs, which transfer the risks to a pool. Insurance managers should have an incentive to encourage and reward their clients for undertaking risk reduction measures, but the necessary information and signals are lacking from the market at the current time.

Development and growth of the biomass fuels market is the best option available to promote better forest management in California. With the biomass fuels market at its present level in the state, management operations performed today cost less than half the amount of the expected future costs and losses due to wildfire occurance. In the absence of fuel outlets, the costs of management are almost as high as the expected future costs of wildfire. However, performing management treatments requires an allocation of funds in the present, whereas the expected losses simply impose themselves at some time in the future. A pro-active approach to forest management will provide significant benefits for Californians.


Beedy, Ted, private land owner, personal communication, 1998.

Burke, Jerry, Western Coal and Timber Co., personal communication, 1998.

California Department of Forestry, California Fire Plan: A Framework for Minimizing costs and Losses from Wildland Fires, March 1996.

Griggs, Joe, Robinson Timber Co., personal communication, 1998.

Holland, Jeff, forestry contractor, personal communication, 1998.

Husari, Sue, USFS, personal communication, 1998.

Jackson, Michael, Quincy Library Group, presentation to California Integrated Waste Management Board workshop, January 21, 1997.

Kallenberger, Barry, private forester, personal communication, 1998.

Morris, Gregory, The Environmental Costs and Benefits of Biomass Energy Use in California, NREL Report No. NREL/SR-430-22765, May 1997.

NEOS Corp., Evaluation of Biomass Utilization Options in the Lake Tahoe Basin, report prepared for the Nevada Tahoe Conservation District, funded by the Western Regional Biomass Energy Program, Sept., 1997.

Ostergaard, Craig, forester for Sierra Pacific, Inc., personal communication, 1998.

Sampson, R. Neil, Forest Management, Wildfire and Climate Change Policy Issues in the 11 Western States, report of Forest Policy Center, American Forests, Washington, D.C., June 11, 1997.

TSS Consultants, Quincy Library Group Northeastern California Ethanol Manufacturing Feasibility Study Feedstock Supply and Delivery Systems Final Report, report to the Quincy Library Group, June, 1997.


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