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September 8, 2014
MB20th: Forest Products

Forest products industry puts $8 billion into Maine's economy

PHOTo / Courtesy Maine Forest Products Council
PHOTo / Courtesy Maine Forest Products Council
Patrick Strauch, left center, executive director of the Maine Forest Products Council, leads MFPC members on a tour of the Robbins Lumber Co. woodlot.

Maine's forest economy

Total economic impact: $8 billion

Percentage of state's gross domestic product: 6.25%, or $1 out of every $16 produced

Total direct and indirect jobs: 38,789, or roughly 1 out of every 20 jobs in Maine

Total payroll: $1.9 billion

Total state and local taxes paid: $302 million

Total exports: $885 million (Maine's top export, and 28.9% of all state exports)

Paper and paperboard exports: $393 million

Pulpwood exports: $258 million

Wood exports: $234 million

Total annual harvest: 13.5 million green tons

Acres forest: 17.6 million acres, 89% of Maine's total land acres

Private forestland ownership: 16.3 million acres, 92.7% of forested land

State and local forestland ownership: 1.1 million acres, 6.3% of forested land

U.S. Forest Service ownership: 58,000 acres, 0.3% of forested land

Other federal agencies' ownership: 128,000 acres, 0.7% of forested land

Acres certified as using sustainable practices: 9.4 million acres, 53% of Maine's forestland

Source: Maine Forest Products Council, 2013 report

At quick glance, the aerial view of Maine's forest products industry looks pretty much the same now as it did 20 years ago.

First and foremost are the 17.6 million acres of forest that comprise 89% of the state's total acreage, making Maine the most heavily forested state in the country. The U.S. Forest Service's 2012 tree census reported 24 billion trees of at least an inch diameter growing on all those acres — an increase of 6.3% since 2007 and the equivalent of 18,688 trees for each of the state's 1.3 million residents. For the past 22 years, Maine has harvested an average of 6.7 million cords each year.

Then and now, no question about it, Maine's forest products industry is a major sector in the state's economy, with its current economic impact pegged at $8 billion. Although no one questions that Maine's forest products industry is a major business sector, it would be a mistake to conclude from a quick aerial view that not much has changed over the past 20 years. "This is not your grandfather's forest products industry anymore, or even your father's," says Patrick Strauch, executive director of the Maine Forest Products Council since 2004.

On every front — employment, land ownership, forest management practices and how all those harvested trees are being used — Maine's forest product industries has undergone sweeping changes in the past 20 years. Fewer loggers harvest more wood. The number of paper mill workers is less than one third what it was in the 1980s, but the output per worker has more than doubled. New technology and greater mechanization have dramatically increased productivity. And despite significant land ownership changes during the last 20 years, conservation easements and third-party audits have helped to keep those 17.6 million acres a working forest that also can be used for recreation and provide habitat for moose, deer, bear, Canada lynx and hundreds of bird species and other wildlife.

Fresh out of the University of Maine's forestry program, Strauch came into the industry in the early 1980s at the tail-end of the state's last spruce budworm epidemic, which killed 20 million to 25 million cords of spruce-fir trees in Maine between the 1970s and late 1980s, resulting in a 31% decline in those inventories. The epidemic caused the major forestland owners to spray intensively in an effort to curb the infestation; when that didn't work, they engaged in extensive rolling clearcuts to capture as much value out of hundreds of thousands of dead or dying trees as possible.

A strong public backlash followed, leading to statewide referendums in 1996, 1997 and 2000 seeking to impose stricter standards on timber-harvesting in the state. For much of the 1990s, the paper companies and other large forestland owners had to explain and defend their management of Maine's North Woods. Even though none of those initiatives were approved, Strauch says the forest products industry realized it needed to do a better job — both in the woods, and in the public arena.

"We created a more sophisticated industry," he says. "We realized that as a matter of policy discussion, if we didn't have the data we couldn't argue very effectively against the referenda .... What I try to do now is to show people how quickly the forests come back. I've put together a catalog of pictures and for every ugly clearcut of the 1980s we can put up a snapshot of what is there today."

The political battles of the 1990s over clearcutting also spurred the forest product industry's embrace of third-party certification programs, to the point where Maine now has the largest percentage of certified forestland in the United States.

Since the 1990s, Strauch says, more than 9 million acres of Maine forestland have become certified as sustainably managed by the three major certification programs: The Sustainable Forestry Initiative, the Forest Stewardship Council and The American Tree Farm System. Under these programs, he says, Maine's large landowners voluntarily become certified and agree to conform to sustainable forestry practices that are measured by an outside auditor. SFI certification, for example, involves meeting 20 standards promoting the protection of wildlife, plants, soil, air and water quality.

"The consumer was driving that, too, particularly on the pulp and paper side," he says, noting that magazines, retailers with catalogs, sellers of office supplies and other major paper customers want the wood used in making their paper to come from sustainably managed forests certified through third-party auditing.

Changing ownership patterns

In the span of four weeks in 1998, three major timberland deals closed in Maine, giving rise to fears that the state's vast North Woods would be sliced up by developers and lose its historic makeup as a working forest that could be logged and also used for hunting, camping, snowmobiling. In October, Bowater, the South Carolina-based parent company of the original Great Northern Paper Co., sold nearly 1 million acres for a reported $220 million to J.D. Irving Ltd. of New Brunswick and Sappi sold 905,000 acres for a reported $180 million to Plum Creek Timber Co. of Seattle. On the heels of those sales came Bowater's announcement that it was selling another 656,000 acres in western Maine for $155 million to McDonald Investment Company Inc. of Birmingham, Ala.

Just like that, 2.5 million acres, or more than 10% of all land in the state, had been sold.

Strauch says those sales and others reflect a convergence of two trends: first, the abandonment of vertical integration as a business plan by paper companies that began to sell their forestland to reduce debt stemming from consolidation or simply to turn a long-term asset into ready cash; and second, the rise of Real Estate Investment Trusts and Timberland Investment Management Organizations, which take advantage of favorable tax laws and are able to tap investors who see timberland as an investment that would yield steady returns, particularly if real estate development part of the equation.

By and large, Strauch says, the outcomes feared by critics of those 1998 transactions haven't materialized.

"What we've seen is that the race to development just hasn't occurred," he says. "These lands can be managed as investments and still remain a working forest."

Conservation easements are a big reason why, he says, pointing to the permanent easement on 363,000 acres within its Moosehead Lake region holdings that Plum Creek, the Seattle-based REIT, reached with The Nature Conservancy in 2012.

Strauch acknowledges recent news about Maine's paper mills are hardly encouraging — with the latest example, in August, being Old Town Fuel and Fiber's layoff of 180 employees and indefinite suspension of operations. But he balances those headlines with the $120 million expansion of the Woodland Pulp mill in Baileyville, Sappi Fine Paper's successful Westbrook and Somerset mills making coated fine papers and specialty release papers and Verso Paper's Bucksport mill's purchase of an adjacent gas-fired power plant that will enable it to supply electricity to the mill and also sell power to the grid.

"The demand for paper has shifted, but it's still there," he says, adding that new opportunities for value-added products using cellulose, a byproduct of the papermaking process, as well as low-grade biomass wood "have a lot of promise" for Maine's pulp and paper and forest product industries.

Likewise, he says, Maine sawmills that weathered the toughest recession since the 1930s are starting to see growing demand and higher prices. "They know the housing markets are coming back," he says. "Many of them are making investments in their facilities to capitalize on the new markets. It's pretty dynamic right now."

Strauch says overall he's hopeful, in large part because Maine's 17.6 million acres of forest historically have supported diverse industries employing hardworking, creative people.

"There's a lot of innovation taking place, there are a lot of great people in this business," he says.

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