I would like to begin by thanking The Pacific Forest Trust for inviting me here tonight. The Trust has been a leader in bringing together different sides in the debate over the future of America’s forests, particularly private forests, and you’ve been a great partner for the Forest Service in our Forest Legacy Program for many years. I’d like to thank Laurie Wayburn in particular for her leadership in helping us think through the opportunities and options available for protecting private forests.

Tonight, I want to talk about some of the transitions we are seeing in forestry. I’ll talk about that in connection with our role at the Forest Service, so I’ll start by telling you a little about us.

Forest Service Background

Most people know that we manage the national forests—155 national forests and grasslands in 42 states and Puerto Rico , totaling about 193 million acres. That includes 17 national forests here in California on about 20 percent of the land area here.

As you know better than most, the national forests and grasslands deliver a tremendous number of ecosystem services, ranging from water delivery, to biodiversity, to carbon sequestration. About 60 million people get their drinking water from water sources that originate on national forest land. The national forests hold 80 percent of the habitat for elk and bighorn sheep in the lower 48 states; 50 percent of the nation’s premiere trout and salmon habitat; and 60 percent of the downhill skiing in this country. In a study we are jointly conducting with the University of Florida , we estimate the dollar value of ecosystem assets and annual services on national forest land to be well into the trillions of dollars.

What you might know—but most people don’t—is that our mission extends to other public and private trust lands as well. The Forest Service is charged with helping to sustain the health, diversity, and productivity of all of the nation’s forests. Working through State Foresters primarily, we help landowners in a variety of ways, including developing management plans for working forests and helping landowners establish working-land conservation easements. As the U.S. population grows and landownership changes, land managers are increasingly driven to consider whole landscapes—private and public, forest and farmland—in our thinking and planning.

In the past 5 years, we have seen some disturbing ecological trends—trends that seem to be accelerating faster than we can respond to with the tools we currently have. For example:

• The fire and fuels situation is worsening. In the last 4 years, six states have seen their largest fires in history, and this year more than 9.5 million acres burned, the most since 1954. About 400 million acres nationwide are at high or moderate risk of uncharacteristically severe fire.
• Forest pests and diseases are getting worse. About 70 million acres nationwide are at risk from 26 different insects and diseases. Some are exotic, and some of the native forest pests are operating considerably outside of their natural cycles in some places.
• Invasive species are spreading. Invasive weeds alone are estimated to cover some 130 million acres, an area larger than California . Insects like the emerald ash borer threaten whole landscapes like nothing since the chestnut blight of the early 20 th century.
• All of these factors are exacerbated by climate change. The last century was the wettest in the last millennium, and the wettest part of it was the last 30 years. In many areas—especially in the Interior West—trees grew faster and denser than ever before in recorded history, followed by warming and drying. This explosive combination of circumstances led to many of the problems we are seeing today.

Social and economic trends are also driving warp-speed change:

• Eighty percent of our population now lives in cities, which are expanding into the countryside at an alarming rate. This loss of open space is having an enormous impact on wildlife habitat, water quality, and a huge range of other amenity values. That includes the loss of working forests. Under current trends, by midcentury we expect to lose about 23 million acres of private forestland to development, an area larger than Maine. As you know, this represents a real change: For almost a century, our forest estate in the United States has remained fairly stable.
• But the problem isn’t limited to land use conversion. Large timberland ownerships are gradually breaking into smaller units with more houses and roads. This dramatically changes the character of the landscape and its ability to deliver ecosystem services. W e estimate that more than 44 million acres of forest are at risk of increased housing density by 2030, an area the size of New England.
• Global markets for forest products are contributing to significant changes in the forest products sector. Among other things, international markets for wood are increasingly driving investment in forests and forestry, and much of that investment is going overseas. According to a MeadWestvaco study a few years back, it was actually cheaper to produce timber in Europe or South America and import it to Baltimore , Maryland , than to produce it in North Carolina or Virginia . Only two major timber companies remain fully integrated—that is, they own and manage their own timberlands and mill their own wood. In the 5-year period from 1999 to 2004, about 34 percent of private industrial timberland in the United States was sold, and much of it went to timber investment management organizations and real estate investment trusts, or TIMOs and REITs. In 1980, the amount of timberland owned by TIMOs and REITs was exactly zero; today, it’s more than 20 million acres—something like 40 percent of America’s industrial timberland. These companies are not necessarily in timber management for the long haul. If these productive forestlands are lost, there will be a corresponding loss of the ecosystem services we’ve taken for granted.
• The United States has long had a robust small to medium forest products sector, with operations employing less than a hundred people. These smaller operations have perhaps been the hardest hit by global trends, including Canadian imports and rising operating costs. Milling capacity nationwide has decreased 25 percent in the past decade or so and close to 50 percent in the West. Rural areas have been hit hard. With this loss of infrastructure, it is difficult for the Forest Service to find buyers for small-diameter wood from thinning and fuels reduction work on national forests. Due to the same lack of buyers, small woodlot owners across the country are also losing an important income stream that helps them stay on their land.

To me and to many others in the Forest Service, these are alarming trends. As we looked at the impact these trends were having, we noticed a deterioration in the ability of forested landscapes to deliver a whole range of values and services—not just timber (though that, too), but also watershed protection, airshed protection, soil protection, wildlife habitat, and carbon sequestration to counter the effects of climate change.

And we also noticed that this was truly a global problem. The Millennium Ecosystem Assessment found that 60 percent of the world’s ecosystem services are in decline. For example, up to 25 percent of freshwater use worldwide is unsustainable, including here in California and across the West.

Market Prospects

That made us start to ask what we can do to stop the decline and maybe even reverse it, particularly on private land, which accounts for almost 60 percent of America’s forests. But we needed more information. We needed to engage a broader spectrum of people. We needed to stretch our imagination beyond the approaches of the past. And one of the things we started to look at, inspired by thinkers like Laurie Wayburn, Gretchen Daily, and Michael Jenkins and by organizations like Pacific Forest Trust and Forest Trends, is market mechanisms such as payments for ecosystem services to private landowners for managing working forests.

Here is what we know:

• Carbon markets appear to hold huge potential in the near future. There’s a growing consensus on the need for a national approach to regulating greenhouse gas emissions, and thanks to your great state, action may be sooner rather than later. Last year worldwide, trading in carbon exceeded $11 billion, expanding rapidly. Investors would love to come into the United States with projects. We have to be sure that forestry is on the table as offsets are being discussed.
• The United States has pioneered almost all the advances made in wetland mitigation banking, nutrient trading, and safe-harbor agreements. There is a great appetite for these to expand. For endangered species in the United States , prices have ranged from $3,000 per acre for fox habitat to $125,000 per acre for habitat with a breeding pair of red-cockaded woodpeckers . Wetland credits in the United States have traded from as little as $4,000 to as much as $125,000 per acre.
• Through organizations like Pacific Forest Trust, working-land conservation easements have been perhaps the most successful mechanism so far for protecting open space and promote working landscapes. Nationwide, about 37 million acres have been protected by land trusts, a 54-percent increase since 2000.
• As you might know, woody biomass from working forests holds enormous potential for helping to replace our nation’s current petroleum consumption. For existing mills, a companion facility for generating energy from biomass byproducts can increase income by almost 30 percent. As markets for traditional forest products become less competitive, growing trees for biomass and biofuels could become a much larger complementary enterprise—or even an independent business.
• Private market mechanisms like forest certification can help ensure that forest products come from sustainably managed and legally harvested forests. More than 60 million acres are certified in the United States, an area the size of Oregon. We are currently testing certification on national forest land in hopes of providing even broader recognition of the importance, worldwide, of sustainably managing forests. Certification can open new markets to landowners, and purchasers are anxious to have more certified products. Perhaps one day other ecosystem services—like clean water—can also be certified. Congratulations and thanks to Collins Pine for their pioneering efforts in this area.

More than anything, I see our role in the Forest Service as helping to test or pilot ideas that can be expanded more broadly if they work.

Mendocino Project

Let me give you one example. Because California is a national leader in the areas of carbon markets, renewable energy, and biomass utilization, we chose the Mendocino National Forest to try to demonstrate the net value of carbon credits from fuels treatments and biomass energy.

It works like this: To restore forest ecosystems and reduce the risk of catastrophic fire, we need to thin stands by removing low-value biomass. Without markets, this is very costly work. A contractor might recover some value by selling the biomass to a power plant, and the more money a contractor can get for that biomass, the more ecosystem restoration work we can get done in high-priority areas. But there are also several carbon benefits that could tip the economic scales if there were market values for them:

• First, by removing fuels, we reduce greenhouse gas emissions from wildfires.
• Second, by stimulating new growth in treated areas, we increase carbon sequestration.
• Third, by using bioenergy, we offset greenhouse gas emissions from fossil fuels.

Our project on the Mendocino National Forest quantifies these benefits. That will help establish a scientific basis for converting these benefits to carbon credits that could be tradable on the Chicago Climate Exchange or other markets, relying on California’s Climate Action Registry protocols for forest management. It is our hope that this work could then be expanded to private lands. Contractors could even be local enterprises that create jobs in rural areas—to say nothing of the benefits of reducing fire risks near communities.

New Forest Service Focus

Let me conclude with some final thoughts about the Forest Service and our interest in all of this.

Beyond its practicality, the idea of ecosystem services has introduced the Forest Service to something bigger. It has become an opportunity to reexamine what we do and why we do it. For example, as we write new plans for national forests in the next decade, how will we consider the effects of climate change, land parcelization, urban encroachment, etc.? Will we manage some areas for carbon sequestration and storage? For water purification, for soil stabilization, for sustaining key pollinators?

Clearly, our eyes have been opened to the ecosystem services, as well as the forest products, that flow from whole landscapes, public and private lands together. But maybe most important, we have realized the impact these services have on people. This has stimulated a different thought process and dialogue.

Which brings me to my final point and perhaps the most intriguing thing about markets for ecosystem services: the potential to connect ecosystem services to the people who depend on them. As people become more and more detached from the natural world—from the source of these services—our ability to conserve these services grows more difficult. Markets do a number of things well, and one of them is this: Because they attach value to what people buy, people come to appreciate the source of that value and their connection to those who provide it. Through markets, the beneficiaries of ecosystem services can begin to reconnect to the land and to the services it provides—services that they formerly took for granted. That holds enormous potential for private forestlands in America.

I think we are entering an exciting new time in the history of conservation—a time when forestry is expanding to embrace ideas, techniques, and enabling technologies all but unheard of just a few years ago. Working-land conservation easements, certification, markets for ecosystem services—these are all part of the trend. Maybe most exciting of all is the opportunity to use some of these new ideas to reconnect people directly to the land and the services it provides.

Thanks to each of you for all you are doing to conserve working forests in America —and for inviting the U.S. Forest Service to be with you here tonight.

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