Subject: Forwarded: Chief's ltr to NY times
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Comments:
From: Dave Iverson:R04A
Date: Dec 06,91 9:07 AM
***Timber Program Disputes--How does it all add up?***
On November 3rd the NY times "Week in Review" section spotlighted the
US Forest Service timber program, attacking FS accounting, the level
of timber harvest, and the rationale for harvest from the National
Forests. On November 19th Chief Robertson counter-atacked, in a
manner not dissimilar to the counter-attack launched by Dept. Asst.
Under Sec. of Ag. John Beuter against the Atlantic Monthly just two
months ago. I've not seen the NY times article, so will refrain (for
the moment) from taking sides. But one thing must be remembered:
Neither news articles nor accounting systems are value neutral. When
Niel Sampson, Exec. VP of the American Forestry Assn. pondered the
timber sales/planning/accounting debacle some years ago he concluded
that the problem wouldn't go away by adopting a new accounting
system or a new planning process or any other novelty. The problem,
said Sampson, is that the American people have a deep-seated and
fundamental disagreement as to how to manage their forests. On
that note be sure to get the Dec. 9th issue of Time magazine and
read: Whose Woods are these? I wonder who will write the rebuttal to
that one? I've enclosed the Chief's letter for your perusal (10
pages including a 5 page appendix). Dve......
Previous comments:
From: ERNEST SCHNEIDER:R04F13A
Date: Dec 05,91 6:25 AM
Dave: Please forward to your ECO-Watch mailing list. Thanx.
Previous comments:
From: Joe E. Ragsdale:R04A
Date: Dec 04,91 2:42 PM
Chief's letter. Good reading for those of us who are proud of the
-------========X========-------
United States Forest Washington 12th & Independence SW
Department of Service Office P.O. Box 96090
Agriculture Washington, D.C. 20090-6090
Date: November 19, 1991
Arthur Ochs Sulzberger, Publisher
The New York Times
229 W. 43rd Street
New York, New York 10036
Dear Mr. Sulzberger:
The articles by Donald McNeil, Jr. on the National Forests in the November 3
"Week in Review" section of The New York Times provide a grossly distorted,
highly biased perspective on the various issues surrounding management of the
National Forests.
It is difficult to comprehensively rebut an article so laced with distortions
and half-truths. One scarcely knows where to start. However, this letter will
respond to the following three general categories of allegations: (1) the Forest
Service cost accounting system is seriously flawed by understating costs and
overstating returns; (2) the National Forests are being overcut, with inordinate
and unnecessary impacts on important environmental values, especially dwindling
areas of old-growth forests; and (3) the Nation does not need timber from the
National Forests, which are mostly marginal timber growing sites anyway. I will
respond to each one of these allegations.
The Forest Service Cost Accounting System is Flawed
The articles reported in great detail the "findings" of the Wilderness Society;
Randal O'Toole of the Cascade Holistic Economic Consultants; and Robert Wolf,
retired forester, that the Forest Service timber accounting system (TSPIRS)
understates timber costs and overstates revenues.
Actually, it is the accounting approaches used by these persistent critics of
the Forest Service timber program that are flawed. The Forest Service timber
accounting system was developed over the last several years with the objective
of being consistent with generally accepted accounting principles (GAAP) used
in the accounting profession. TSPIRS was developed under the intense oversight
of the Appropriations Committees of Congress, the General Accounting Office
(GAO) and the independent accounting firm of Brown & Company.
Although we continue to refine TSPIRS, it clearly has infinitely more integrity
as a principled accounting system than any of the approaches used by the
individuals and interest groups cited in the articles (who are long-standing
critics of National Forest timber programs).
Rather than getting into a point-by-point rebuttal here of the allegations
raised about the Forest Service timber cost accounting system, I have enclosed
an attachment that describes TSPIRS, as well as the flaws in the approaches used
by those cited in The New York Times articles.
On the surface it would seem that accounting for the costs and returns
associated with the sale of an economic commodity, such as timber, would be
relatively straightforward. What makes the accounting issue so difficult to
deal with is that timber harvest activities are used to achieve a variety of
non-timber objectives on the National Forests. Examples are removal of insect
killed trees that pose a fire hazard to other uses and values, providing road
access for recreational uses, enhancing habitats for many wildlife species, and
similar objectives. Often timber costs are much higher and returns much lower
than would be the case if only efficient timber management were the objective.
We are seeking ways to display this dimension better. Our revised policy on
below-cost timber sales, which is due to be issued soon, will seek to separate
sales designed primarily for non-timber objectives from those that are part of
the commercial timber portion of the program. This policy will provide that the
commercial timber portion of the program will be operated at above-cost levels.
The National Forests are Being Overcut
By law, each National Forest must be managed on a sustained-yield basis. That
means that no more can be harvested today than can be harvested over the
long-term under the management practices assumed for that period. The long-term
growth capacity cannot be exceeded. All areas harvested must be reforested,
either by planting, seeding, or by special provision for natural regeneration.
The following is some additional information on the National Forest timber
situation:
Nationally, timber growth on National Forest lands exceeds timber
harvest by 55 percent.
Since 1952, tree growth on National Forest land has increased by 67
percent, from about 9 billion to over 15 billion board feet per year.
Timber harvest is currently about 10 billion board feet annually.
National Forest area and timber harvest:
The National Forests contain 191 million acres of land. This is
an area about the size of the States of Texas and Louisiana
combined.
About 73 percent, or 133 million acres, of the National Forest
System is forestland.
About 30 percent, or 57 million acres, of the National Forest
System is classified as suitable for timber production, where
timber harvest is permitted as one of the multiple use
objectives, along with wildlife, recreation, grazing, watershed
protection, and other uses and values. This is an area the size
of Mississippi and Tennessee.
Last year harvest for the purpose of starting a new forest
occurred on about 384,000 acres, or two-tenths of one percent of
the National Forest System.
Last year for every child born in the United States, the
National Forests planted over 40 trees.
While timber harvest levels must be set at a sustainable level, that does not
mean that all uses and values will remain the same on all areas of the National
Forests. Such is the crux of the debate. Choices as to how these lands should
be managed are arrived at during the land management planning process, which
seeks to combine scientific information about the capacity of these lands to
support alternative uses, values and outputs, with expressed public preferences
and needs, including the broader demands of society for timber, minerals,
recreation and other uses commodities. This is a tall order. That what comes
out of this process is controversial and reflects the fact that one cannot
simultaneously meet all of society's demands and preferences on the same area
of public land.
One might infer from the article that the last old-growth forests on the West
Coast are about to be harvested. Actually in just the Pacific Northwest States
of Oregon and Washington alone, about 6.3 million areas of old-growth remain on
National Forest lands--an area larger than Massachusetts and Rhode Island
combined. Over half of this old-growth is already protected in wilderness and
other land uses that do not permit timber harvest. At the timber harvest rates
projected in current forest plans, 5.6 million areas of old-growth will remain
in 10 years.
The Nation Does Not Need Timber From the National Forests
While the Nation would surely survive if no more timber were cut from the
National Forests, the Nation's consumers and economy would suffer. The National
Forests include about 18 percent of the Nation's timberland, yet contain about
one-half of the Nation's standing softwood sawtimber (the primary source of
lumber and plywood). They provide the raw material for about 23 percent of the
Nation's consumption of softwood lumber and plywood. This is enough to build
about 700,000 single family homes each year. If all of this lumber and plywood
had gone into homes, it would have built about 47 percent of the total number
of homes constructed in the United States over the last 10 years.
If National Forest timber were not harvested, the following results would be
expected to occur:
Consumer prices for timber products would increase by about one-third,
thereby increasing the cost of homes for thousands of prospective
homeowners. This would amount to over $5.5 billion in increased costs
of lumber and plywood to U.S. citizens.
Lumber imports from Canada and elsewhere would increase dramatically.
The United States is already a net importer of timber products. The
U.S. trade deficit in wood products amounts to $4 billion. Halting the
sale of National Forest timber could increase this trade deficit by 75
percent to about $7 billion. Imports of lumber and panel products would
increase from Indonesia and other countries where environmental controls
are less rigid. This would worsen deforestation problems in Third World
countries.
The economies of hundreds of rural, timber-dependent communities
throughout the West would suffer greatly. Contrary to the implication
in The New York Times articles, few new jobs are being created in these
small towns. Most new jobs are in urban areas.
A valuable tool to manage forest vegetation for the benefit and
enhancement of non-timber values will be lost. Under current forest
plans, timber management is used to achieve a variety of non-timber
purposes, such as wildlife habitat improvement, reducing forest fuel
buildups, enhancing water yields, providing road access for recreation,
maintaining the health and vigor of the forest, and similar purposes.
Forest will be subject to increasing susceptibility to wildfire,
insects, and disease. Populations of many species of wildlife will
decline if wildlife habitats are not managed.
The benefits of managing a highly productive resource for the benefit of
society would be lost. Contrary to the statement in the article that
most National Forest land is too steep or too cold to manage for timber,
the National Forests contain much highly productive timber growing land.
In the Pacific Coast states alone, National Forests contain over 6
million acres of the highest site timberland (Site I and above). This
is some of the best timber growing land in the world.
Private forest landowners in the United States would find it difficult
to increase harvest in response to the loss of National Forest timber.
These lands do not contain sufficient standing softwood timber to easily
fill the gap that would be created by a loss National Forest timber,
especially over the next 20 years. Substantial areas of young forest
exist on private land in the South and elsewhere and are well positioned
to provide for the wood needs of the Nation after the next 20 years.
The loss of National Forest timber could put great pressure on these
young forests and result in premature harvest, jeopardizing the ability
of these private forests to maximize their contribution to the long term
benefit of the Nation. Because of the low volumes per acre of these
young forests, many more acres will need to be harvested to provide for
the Nation's wood demand, increasing the environmental impacts
associated with timber harvest.
Decisions as to how the National Forests are to be managed, by law, require
comprehensive, interdisciplinary land management planning, and project-level
analysis, including disclosure for public comment, of everything that happens
on a National Forest.
It cannot be expected that everyone will agree with every proposed National
Forest activity, but by the time one is undertaken, there is reasonable
assurance that it is in the public interest. That goes for timber sales, as
well as campground construction, wildlife habitat enhancement, water resource
development, oil and gas development, and all other uses and services provided
by our National Forests. That goes even for decisions about forest protection
(insects, disease and fire) and preservation (set-aside and special management
areas). Nothing is taken for granted. Everything gets reviewed internally,
across disciplines and up the hierarchy externally by the public and special
interests, and may even get judged through appeals, litigation and congressional
oversight.
That is not to say there are not sometimes undesirable and controversial
results. With 191 million acres and 40,000 employees spread across 42 States,
and millions of Americans who care about what happens on the National Forests,
it would be miraculous if there were no controversy about National Forest
management.
Managing the National Forests is a big and complex job. It has evolved with the
growth of the Nation, responsive to changing needs and values. Overall, there
is infinitely more to be proud than ashamed of over the 100 years of management
since the first forest reserve (later renamed National Forest) was created in
1891. Harvested areas get regenerated, undesirable impacts get mitigated with
management and time. Above all, management is responsive to public concerns and
resource demands.
Debates over the way the National Forests are managed are inevitable in our
democratic society as various individuals and groups tug and pull to influence
that management in a variety of ways. It is hoped that such debate can be based
on facts, rather than innuendo and assertion. Articles like the ones in The New
York Times do little to elucidate or inform that public debate. Instead, they
only serve to muddle it and injure the quality of the dialogue.
I don't believe the public interest is well served by such journalism.
Sincerely,
/s/ F. Dale Robertson
F. DALE ROBERTSON
Chief
Enclosure
ATTACHMENT A
Timber Sale Accounting Approaches
TSPIRS
The Timber Sale Program Information Reporting System
(TSPIRS) is an accrual based accounting system which
provides a statement of revenues and expenses, often
referred to as an income statement. The system accrues
costs of production over time and then matches those
costs to the revenues earned when timber is harvested.
As such it allows us to determine if our production
process is earning a net revenue or resulting in a loss.
Relative to the utility of the income statement versus
a cash flow statement, there are two important
differences to note: (1) the cash flow statement
reports expenditures that are not matched to revenues as
they are in the income statement; and (2) the cash flow
statement does not recognize the asset value of
investments, while the income statement does.
Wilderness Society Approach
The Wilderness Society in its attempts to discredit
TSPIRS has presented a "cash flow" statement of the 1990
Forest Service timber sale program. However, the table
does not include all cash transactions nor does it
include the three categories required by generally
accepted accounting principles (GAAP) for statements of
cash flow, including cash flows from operating
activities, cash flows from investing activities, and
cash flows from financing activities (Financial
Accounting Standards Board, Standard No. 95). A copy of
the standard format for statements of cash flow is
enclosed. The table provided by The Wilderness Society
appears to be a statement of receipts and disbursements,
which is not an acceptable financial statement. As
such, it is only a partial statement of cash and has
limited utility. If audited, we believe a public
accounting firm would determine that the table is
inconsistent with GAAP for statements of cash flow.
In making financial decisions, it would be beneficial to
have information available from a full family of
statements that portray historical financial
performance, including a balance sheet to report assets
and liabilities, an income statement such as the one in
TSPIRS, and a cash flow statement. While The Wilderness
Society table is incomplete, a similar cash flow
statement--one designed to conform to GAAP--could
provide good information about the performance of the
timber program. However, we do not believe it should be
used to define below-cost timber sale programs.
Investments in timber sales occur over time periods of
several years and the income statement provides a
logical process to match costs of production to related
income. Only the income statement can appropriately be
used to answer the question: "Did we make or lose money
in producing timber?"
In reference to the Wilderness Society's allegation that
regeneration costs are being "amortized" over an
1,800-year period on the Chugach National Forest. The
FY 1990 TSPIRS reports carry the historical costs of
regeneration in cost pools which are expensed against
the timber harvested in the current fiscal year. The
amortization period for the growth activity cost pool is
a function of the average rotation length (109 years for
the Chugach) and the allowable sale quantity. The
Wilderness Society used one years worth of harvest
volume (which was particularly low that year) to
represent the average that would be harvested per year
over the 109-year rotation. This is incorrect and
grossly misleading. One year's worth of harvest volume
does not allow for a true calculation of the
amortization period -- an average of several year's data
is necessary for an accurate calculation. If, on the
average, the Chugach harvests the allowable sale
quantity, the regeneration costs in the growth activity
pool would be amortized over an 109-year period.
In their audits of TSPIRS, GAO and the independent
accounting firm Brown & Company noted problems with this
method of expensing growth activity pool costs, since
the allowable sale quantities were not always attained.
They suggested two improvements, (1) that we begin
capitalizing roads and depreciating their asset value
over a useful life and (2) that we use a rolling 10-year
average of harvest volume in place of the allowable sale
quantity. In response to these audits, we have already
implemented these change for use in the fiscal year 1991
TSPIRS reports.
Robert Wolf Approach
Unfortunately, there is very little explanation provide
by Mr. Wolf on the details of his approach. It is
apparently based on revenues reported in ASR-13 (a
report produced by the All Service Receipts system).
The ASR system calculates the 25% payments to states
based on cash basis receipts. The table presented by
Mr. Wolf mixes apples with oranges. The revenue
displayed is on a cash basis while the expenditure of
payments to the states is on an accrual basis--the
actual payment is not made until December 1. That is,
the payment to states is an account payable as of
September 30. Therefore, to gain a true picture, one
must include the accounts receivable (outstanding
billings) as of September 30 in the revenue. We have
enclosed an analysis of FY 89 and 90 presented on an
accrual basis for comparison purposes. As you can see,
the timing of the recognition of revenues and
expenditures makes a great deal of difference.
If we understand Mr. Wolf's approach correctly, the
reported unit revenue ($/MBF) is assumed to be
"available" to cover appropriated funds (expenses). We
are unaware of any standard accounting procedures which
would provide information in this format. The "KV"
fund is treated as unavailable and salvage sale fund
receipts are not recognized as income "available to
cover appropriations." This indicates that the money
available would only cover a portion of the activities
necessary to carry out the Clearwater timber sale
program. For purposes of comparison our analysis was
calculated in the same format. Technically, however,
the "balance available to cover appropriations" would
include KV and SSF resulting in $57.68 for FY 89 and
$58.60 in FY 90.
The following observations relate our other concerns
with this report:
-- Purchaser credit roads and facilities are not
recognized as assets.
-- The accounting fails to report changes in fund
balances for KV, salvage sale, brush disposal,
and cooperative road maintenance funds.
-- Payments to States is based upon 25% of the
timber receipts (cash basis) for a fiscal
year. These receipts include purchaser road
credit and SSF. Only KV is excluded from the
calculation. Payments to States is not a cost
of doing business, nor is it a payment in lieu
of taxes. It is more akin to revenue sharing.
Therefore, it should not be considered a
"cost" when measuring the efficiency of timber
operations.
Based on these observations, the table appears to be
substantially incomplete compared to statements of cash
flows and income statements prepared in accordance with
GAAP. Without a comparison to expenses, it is nearly
impossible to draw a substantial conclusion about the
financial performance of the Clearwater timber sale
program. We believe that this table does not conform to
GAAP.
USDA/ Forest Service
11/8/ 91
SAMPLE FORMAT FOR STATEMENT OF CASH FLOWS
to conform to
STATEMENT OF FINANCIAL ACCOUNTING STANDARD NO. 95
Financial Accounting Standards Board (FASB)
Cash Flows From Operating Activities:
Net Income .................................... $
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization ............
Equity in earnings .......................
(Decrease) increase in accounts
payable and accrued liabilities ........
Decrease (increase) in receivables ........
(Increase) decrease in --
Inventories ............................
Assets .................................
Net Cash flow provided by (used in)
operating activities ........................
Cash Flows From Investing Activities:
Investment in Facilities ......................
Additions to other assets .....................
Net cash used in investing activities .........
Cash Flows From Financing Activities:
Cash Proceeds from debt financing .............
Payment of debt ...............................
Cash proceeds from public offerings ...........
Cash distribution .............................
Non-cash distribution .........................
Net cash (used in) provided by
financing activities ........................
Net Increase (Decrease) in Cash ...................
Cash, Beginning of Year ...........................
Cash, End of Year ................................. $
An Extract of Mr. Wolf's Table presented on an accrual
basis....
Part A
"HI-BID" |Purchaser| KV | NFF |Payments
|Bal Avail| SSF
FY Equivalent |Road Cred| |E=B-C-D-H|to
States|Cover App|
| | | |
| |
A B | C | D | E | F
| G | H
| | | |
| |
90
13,153,251|2,511,508|2,852,809|7,428,986|1,985,365|5,4
43,621|359,948
| | | |
| |
89
9,608,933|1,614,481|2,196,927|5,462,955|1,035,726|4,42
7,229|334,570
Part B
90 89.05| 17.00| 19.31| 50.29| 13.44|
36.85| 2.44
| | | |
| |
89 79.65| 13.38| 18.21| 45.28| 8.56|
36.70| 2.77