38 



The present accounting system is inconsistent with the Forest Service's new em- 

 phasis on ecosystem management, forest health and forest reforestation. The 

 present system also divides timber activities between commercial and noncommer- 

 cial, a distinction that will be difficult and inappropriate to make under the new 

 system. 



The costs of achieving a desired forest condition through these new techniques 

 can be accounted for in the integrated aggregate. But accurately allocating them 

 among the integrated values of the desired forest condition would be something like 

 trying to allocate the cost of a baseball game ticket among the hits, the great 

 catches, and the crowd ambiance and other elements of attending the game. In 

 either case, the parts aren't meaningful if they are separate from the integrated 

 whole. 



The Forest Service must update its accounting system to properly match its new 

 management approach. The relevant question will be the cost of achieving the de- 

 sired future condition. If the cost is too great, then the desired condition will have to 

 be redefined as a whole. 



Resolution on Below-Cost Must Include Cost Control 



Although sales with higher costs than revenues are called below cost, they should 

 more accurately be called high-cost sales. Without effective cost reduction, timber 

 program profitability will remain elusive. 



Under Appropriations Committee direction, the Forest Service recently completed 

 a comprehensive study of timber sale program costs. The results are revealing; envi- 

 ronmental documentation and nontimber support costs have risen. According to the 

 Forest Service study, total obligations for nontimber support costs have risen by 170 

 percent over the last 4 years. By comparison, other timber sale preparation accounts — 

 program planning and sale preparation — increased by 35 percent and 23 percent re- 

 spectively. 



The study notes that environmental documentation costs, project mitigation costs, 

 resource monitoring costs, appeals and litigation costs, and threatened and endan- 

 gered species protection are the primary external reasons for the increased costs. 



The Black Hills National Forest is a good example of recovery from below cost 

 through cost reduction efforts. Between 1981 and 1984, the Black Hills National 

 Forest stood in the forefront of the below-cost debate, reporting some of the greatest 

 financial losses in the System. Forest Supervisor, Jim Mathers, took charge by ap- 

 pointing a citizens advisory group and a Forest Service team to review the problem. 

 He then took their recommendations and moved on them; changing utilization 

 standards, repackaging timber sales, reducing road standards, and reorganizing to 

 allow a reduction in force of 42 forest personnel. As a result, profitability was re- 

 stored. 



Unfortunately, increased use of appeals by environmentalists threaten to put the 

 Black Hills back into a below-cost situation. Any well-managed, above-cost forest is 

 jeopardized this way. As preservationists purposely target a forest through numer- 

 ous appeals, forest outputs drop, costs go up, and below cost becomes inevitable. 



A comparison with Montana State lands is beneficial to this discussion. During 

 the years 1987 through 1992 the State of Montana sold from their lands 192 million 

 board feet at an average cost of $74.35 per thousand board feet. The revenues from 

 those sales averaged $146.62 per thousand board feet. In other words, the State of 

 Montana made $2 for every $1 they spent. In 1992 they made over $3 for every $1 

 spent. 



On adjacent Federal lands, with similar terrain and tree species, the Forest Serv- 

 ice lost money, overall, selling timber. On the Flathead National Forest, for exam- 

 ple, one of Montana's most productive forests, the average cost to sell timber was 

 $147.84 per thousand and the average revenue was $130.25 per thousand— a net loss 

 (during the same 5-year period). 



With timber revenues for State and Federal about the same, this huge discrepan- 

 cy in profitability falls on the cost side. The Forest Service's large size and accompa- 

 nying bureaucratic inefficiencies are, for sure, a large part of this. But after further 

 analysis we find that the major difference is in environmental procedure and docu- 

 mentation — and appeals. With a multitude of Federal laws that require the accumu- 

 lation of paper, blanketed by layers of appeals and litigation, the process becomes a 

 nightmare — and an expensive one. 



The question then arises, does all this paperwork ensure a more environmentally 

 sound timber harvest? The answer is no. A few years ago the Montana State Envi- 

 ronmental Quality Council initiated a combined effort with the State Department of 

 Fish, Wildlife and Parks, the Forest Service, the Department of State Lands, private 

 landowners, and other groups to randomly assess and rank the environmental im- 



