Experts say lands Weyerhaeuser sold likely lack mature timber

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Rich with game, Weyerhaeuser owns much of the land surrounding the Lost Trail National Wildlife Refuge west of Kalispell.

Why does Weyerhaeuser intend to sell its timberlands so cheap?

That’s the question still looming after the company announced the pending $145 million cash sale of its 630,000 acres of timberlands in Northwest Montana. The announcement was made in mid-December and the timber giant has said little about the sale and the buyer’s intentions for the acreage.

According to leaders in Montana’s forest industry, there’s still only speculation as to why the timberlands sold for only $230 per acre — a number that pales in comparison to other timberlands in the state that recently have sold for as much as $700 per acre. But one possible explanation becoming more widely shared among those leaders and other stakeholders is that the sale price is tied to how much timber is actually available for harvest on the lands.

“We are all wondering what is happening there with respect to timber volume,” said Peter Kolb, an extension forestry specialist with Montana State University. “Most of the merchantable value on that land has already been removed. So it is probably stocked with plenty of trees, but young ones.”

Todd Morgan, director of Forest Industry Research at the University of Montana, added if the prospective buyer, Southern Pine Plantations, intends to continue using those lands for timber harvest, a forest full of young trees is nothing short of a long-term investment.

“It could take 20 years or longer until immature trees are ready for harvest and in the meantime they will most likely have to do some timber stand improvements — proper thinning of the forest and other maintenance things that take time and money,” Morgan said.

The idea that Weyerhaeuser’s forests are lacking merchantable timber is one that was actually expressed by the company’s former president and chief executive officer about three years ago. Shortly after the company purchased the timberlands from Plum Creek Timber Co. in 2016, a press release was issued announcing the permanent closure of Weyerhaeuser’s lumber and plywood mills in Columbia Falls.

“For some time now our operations in Montana have been running below capacity as a result of an ongoing shortage of logs in the region,” Doyle R. Simons wrote in a prepared statement. “These closures will allow us to align the available log supply with our manufacturing capacity, including adding shifts at our Kalispell facilities.”

The announcement came mere months after the company promised the change of ownership wouldn’t impact mills. And it’s those remaining facilities and their operations that new President and Chief Executive Officer Devin W. Stockfish recently said won’t be impacted by the sale to Southern Pine Plantations.

“Our manufacturing operations in Montana continue to deliver strong results,” Stockfish wrote in a prepared statement in December. “Our people have done an outstanding job driving improvement in safety and operational excellence over the past several years, and they also do terrific work where we operate.”

But that promise is one that was made before. And if mature trees are as scant as they are thought to be, feeding the remaining mills in the coming years will be a challenge, experts say.

Speculation aside, financial information from the Montana Department of Revenue and reports on the state’s forest industry from the University of Montana may offer some insight into the land’s current and future value, as well as its merchantable timber.

Faculty with the University of Montana’s Bureau of Business and Economic Research play a key role in compiling and providing up-to-date research on the state’s forest industry. The department creates regular trend reports on Montana’s timber harvests and forest industry, overall timberland productivity and more.

In one of the more recent reports released in 2018 Montana’s forest industry employment and income trends are described at length. According to the document, timber harvests in Montana have declined substantially since peaking in the late 1980s, with private harvest declines beginning in the 1990s — a trend that continued until “private harvests bottomed-out in 2009 as a consequence of the housing collapse and low wood-product demand.” Following this trend in timber harvests, lumber production and sales from Montana’s primary wood products industry “declined substantially since the late 1980s.” According to the report, lumber production in 2018 was one-third of what it was in 1989.

The report concludes, “without substantial increases in timber availability and timber harvest volume in Montana, we can expect the industry to erode further, employ fewer people and generate less labor income.”

As for the state’s perspective, Sanjay Talwani, spokesperson for the Montana Department of Revenue, said the department must determine the value of forest lands for tax purposes.

Forestland is reassessed every six years and, specifically, “is valued based on the productivity of each parcel of land,” which is determined by the University of Montana College of Forestry and Conservation with input from the timber industry. There are four grades of forest property that are determined by the cubic feet of lumber produced on each acre per year. Standing timber on the property is not taxed.

Based on the state’s calculation, Talwani said there are nearly 542,000 acres of Weyerhaeuser forestlands, and the state has valued those lands at $257 million. He added that figure may not include all Weyerhaeuser properties due to “variations in ownership name.”

That comes out to about $474 per acre for the nearly 542,000 acres, meaning by this state assessment alone, Weyerhaeuser is poised to sell its timberlands at a more than 40% discount to Southern Pines.

Talwani also shared insight into what the company has paid in taxes on those forest lands in 2017 and 2018.

Weyerhaeuser paid a total of $569,053 in taxes on the 542,000 acres of forest land in 2018, or about $1.05 per acre. This was down from $618,418 paid in forest land taxes in 2017, which comes out to about $1.15 per acre.

The amount of taxes paid seems low to several industry experts even in Montana where timberland taxes are some of the lowest land taxes in the West. According to Kolb and Morgan, this is partially because the state’s land and climate lends to slow tree growth compared to other areas such as north Idaho, Oregon and Washington. Kolb said and the state’s tax system is designed to reflect this low rate of return on lands used for grazing and timber.

Reporter Kianna Gardner may be reached at 758-4407 or kgardner@dailyinterlake.com.

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