Committee Working on New Regulations to Eliminate Liquidation Harvesting

By Phyllis Austin, Maine Environmental News ( 10/30/03

Liquidation harvesting is a controversial but legal way of doing business.
(Subdivision in Whiting on former IP land. Photo by Phyllis Austin)

It has been a tough few months for the rulemaking committee working on new regulations to shut the door on liquidation harvesting. Frustration and disagreement have overshadowed lengthy meetings, causing participants to wonder whether they can come up with a serious proposal. But finally, there seems to be progress on a draft bill for the 2004 legislature. "As hard as it is, people are trying to recommit to a win/win solution," says Don Mansius, director of forest policy and management for the Maine Forest Service.

Forest Service chief Alec Giffen has held the committee's feet to the fire, repeatedly reminding members that their legislative directive is clear and firm -- to come up with a proposal to "substantially eliminate" liquidation harvesting. By the late October meetings, Mansius says, "that message had sunk in" and members accepted that they had to do more than "ratify the status quo . . . they have to do something meaningful."

There now seems to be general agreement on a rule framework that would offer landowners several options for harvesting wood on parcels held for less than five years. The committee is less comfortable with some of the exemptions in the latest draft proposal prepared by the forest service. To say that the committee has reached "consensus" -- as the legislature encouraged -- would be going too far right now, says Mansius, who is overseeing the rulemaking meetings and writing of the draft bill. On the other hand, "we've come a lot closer to where I had hoped we would," he adds.

The draft rule is aimed at forcing liquidators into having a forest management and harvesting plan that assures continued productivity of the resource. The other options are deliberately restrictive in order to discourage liquidators from viewing those as easier ways out.

While the rulemaking committee is working on the regulatory side of the liquidation issue, a second group -- called the complementary solutions committee -- is trying to come up with an economically viable alternative to cut-and-run harvesting. So far, most members support a declining state capital gains tax based on years of land ownership and/or amending the state subdivision law to outright prohibit liquidation harvesting.

A public hearing on the rulemaking committee's draft proposal will take place sometime in December. The "real action," according to Mansius, will happen in the legislature, where forest industry and environmental lobbyists will fight it out. That is where who's who in the industry will show whether they support or oppose an end to liquidation harvesting.

The forest service must present the proposed rule to the legislature by Feb. 4. The deadline for the complementary solutions committee report is Jan. 2.

Liquidation harvesting is a controversial but legal way of doing business. It has been a high profile issue for a number of years because of its growing momentum and adverse impacts to forestland. The practice has increased as a result of the unprecedented turnover of millions of acres of forestland resulting from the sale of large historic ownerships. The lands became available to the highest bidder, providing unexpected opportunities for independent loggers and contracting businesses. By harvesting parcels and reselling them quickly, the profits rolled in, enabling the liquidators to continue to cut, subdivide and run.

Gov. John Baldacci has pledged to end cut and run logging, deeming it a threat to the state's workers, the forest products industry (putting landowners who use sustainable forestry practices at a competitive disadvantage) and fish and wildlife habitat.

Gov. John Baldacci, pictured with MFS Director Alec Giffen, has pledged to end cut and run logging, deeming it a threat to the state's workers, the forest products industry and fish and wildlife habitat. (Photo by Phyllis Austin)

In 2002, lawmakers defined liquidation harvesting as "the purchase of timberland, followed by a harvest that removes most or all of the commercial value in standing timber, without regard for long-term forest management principles and the subsequent sale or attempted resale of the harvest land within five years." The Maine Forest Products Council recently stated that the removal of 85 percent of the commercial timber value would be consistent with the current definition of liquidation harvesting.

The forest service estimates that up to 64,000 acres of forestland is liquidated each year. Liquidators usually leave enough low-value trees standing to avoid compliance with the Forest Practices Act (FPA), which sets clearcut size limits and requires buffer strips between stripped parcels. Once subdivided for sale, the liquidated lots are too big than needed for residential use but too small for meaningful forestry.

The 2003 legislature considered two bills to end liquidation harvesting. One was the "leave more trees" approach that would have required landowners with more than 20 acres to leave enough trees after harvesting so the woods could be managed for timber in the future if they sold within eight years. The other was a timber gains penalty that would have levied a penalty on landowners who bought land, cut almost all marketable timber off and sold within 10 years. The tax would have increased the more wood was cut and the quicker the land was sold. Vermont uses both approaches and has reportedly eliminated liquidation harvesting.

After strong debate, lawmakers set aside the two proposals and instead passed LD 1616 -- an Act to Promote Stewardship of Forest Resources. The bill directed the forest service to form the two committees currently at work so the 2004 legislature could deal with the problem of liquidation harvesting with more information. It called for members from stakeholder groups representing industry, environmental organizations, state agencies, financial institutions, the legislature, municipalities, real estate and development interests, sporting camps and the public.

Lawmakers asked for a groundbreaking rules bill and a complementary solutions report that represents a "high level of consensus" within the two committees. They also passed a joint resolution supporting sustainable forestry and encouraging the industry to buy wood only from suppliers who engage in responsible harvests. When all is said and done, they envision results that will help Maine become a world leader in green-certified forestland and forest products.

The two groups began meeting in late summer, and it was obvious their tasks would be hard. Comments by some members at the beginning suggested they were putting in the meeting hours but not acting with the same level of "good faith" as others. Even those with the best of intent expressed frustration at finding an answer to cut-and-run because of savvy operators who would likely find loopholes in whatever they could come up with.

"It makes no sense for us sitting here if we can be beaten by someone with a first grade education," said Andy Irish of Irish Logging, a certified master logger, at the September rulemaking meeting. Forest service director Giffen acknowledged that "any set of rules you come up with, people will try to find ways around," and challenged the committee to design rules with as few loopholes as possible.

Another continuing concern of committee members was the capability of the forest service to monitor and enforce new regulations. "Whatever we do, you have to make sure it's enforced," Irish told forest service representatives. "There is no enforcement of what we have now," he said. Giffen acknowledged that the agency is short-staffed -- 10 rangers have been cut due to state budget woes. But he said rangers still "try to inspect 60 percent of harvests in their area in any given year." He estimated that it would cost $70,000 to $80,000 to enforce the kind of new rule the committee is drafting.

At the Oct. 15 rulemaking meeting, Giffen asked for members to restate their interests and expected outcomes of the group's task. Maine Audubon Society forest ecologist Rob Bryan and independent logger Harry Dwyer of Kent's Hill advocated a proposal that will maintain the forest ecosystem and economy and long-term land ownership. Ken Lamond of McPherson Timberlands wanted to see better control of harvest operations. Doug Denico of Plum Creek Timber was interested in maintaining land values and having no unintended consequences as the result of the draft rules on liquidation harvesting. Harry Dwyer also said certain harvesting violations should be criminalized to make people to take property crimes seriously.

The forest service estimates that up to 64,000 acres of forestland is liquidated each year.

From that discussion and those at previous meetings, the forest service revised a draft rule that would offer five harvesting options for landowners who strip most of the commercial value of timber from a parcel held for five years or less.. Otherwise, their operations would be illegal. As the draft goes through different revisions, the forest service is emphasizing that it does not represent the official position of the agency or the Baldacci administration.

The first option would involve a Maine-licensed forester and is the standard that the state expects most landowners to choose. Prior to the harvest, the landowner would hire a forester to develop a harvest consistent with the principles of long-term forest management. The plan would need to provide a silvicultural justification for the harvest, such as blowdown salvage, insect and disease outbreak, or a poor quality overstory with high-quality young trees needing "release". A forester -- the same one or a different one -- would attest that the plan had been followed. The forester licensing board would hold the forester accountable.

Having the same forester who wrote the plan sign off on it has been opposed by the Natural Resources Council of Maine (NRCM). Liquidators have foresters in their employ, and questions have been raised as to the forester licensing board's willingness to hold foresters accountable. At the September meeting, NRCM's Cathy Johnson said, "It is really important that there's a check and balance." Those who disagreed with Johnson on having two foresters involved in the sign-off said that a forester is bound by professional ethics to do the right thing.

"I would have enough faith in the profession and would be willing to take a chance [on one forester]," said Plum Creek's Denico. "I hope we would give the forest community respect." A forest service review of the forester licensing board's enforcement history indicated a handful of foresters have been sanctioned in the past decade for infractions related to business practices, such as fraud, poor communications. But no forester has been charged with violations of land use laws, although a number have been involved in violations of FPA, Land Use Regulation Commission standards and the state Erosion and Sedimentation Control Act.

The second option would be for small landowners who need to sell unexpectedly and might have not have a management plan. In that case, a post-harvest signoff by a forester would be necessary to certify that the harvesting was consistent with the principles of long-term forest management. The forest service said it would be very difficult to enforce this alternative because the agency does not track land sales, and obtaining the information is costly.

The third option would apply to situations where landowners choose not to hire a forester. They could simply leave 60 square feet basal area of quality standing trees. That number is twice the amount of basal area now required by the FPA and is seen as enough wood to ensure something is left for a subsequent landowners to work with. No clearcut larger than five acres would be allowed. This option is not intended to be the default for all operations, Mansius emphasizes. (Basal area is the area of cross-section of a tree at 4.5 feet from the ground.)

The fourth option would require that a harvest did not remove most or all of the volume of commercially valuable trees, and the fifth option would require that a harvest did not remove most of all commercial value -- both options put forth by the industry. These two options appear simple in concept but would be complex and time-consuming to enforce if the burden of proof falls entirely on the forest service and no prior documentation was required, says Mansius. Enforcement actions would more likely end in litigation and be expensive.

"Of the five options, we want to make sure that the latter four were drafted conservatively enough to drive people to the first option," says Mansius. "But we do not want to force small landowners to hire a forester if they don't want to."

On Oct. 28, the committee spent hours discussing the draft bill and harvest planning and forest stocking standards. There were sharp differences over some of the 10 exemptions. The proposal would exempt lands with independent third-party certification, and old conflicts surfaced on the question of what counts as bona fide certification. Mansius says the legislature has already defined certification, and the committee was advised they couldn’t dig into that issue. The group did agree to remove from the exemption list lands transferred to non-profit organizations or governmental entities for conservation.

The committee will continue to work to fine tune the draft bill, but Mansius says, "We're not going to get all [loopholes] right away. This [draft] focuses on behavior that needs to change the most."

Both committees will continue their work in early November.

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