Timber and sawmilling usually do not come to mind when you think of Southern California these days, and pallet manufacturers with sawmill capability in the region have been a rarity.
However, low-grade timber — brought on by drought, bark beetle infestation and wildfires — has recently become available. As a result, pallet companies have become involved in sawmilling to take advantage of the supply of cheap timber that has suddenly come on the market in recent years. Some companies, including one pallet business, have also benefited from government grants and loans made available to help accelerate tree removal and wood processing operations.
"Over the last three or four years, starting in late 2001, the area has been infected by a bark beetle infestation," noted Glenn Barlay, a unit forester with the California Department of Forestry in San Bernardino. The infestation was caused by a prolonged drought as well as overstocked forests that exasperated the drought conditions, he said.
Forestry policies that discouraged thinning for several years aggravated the situation. There were too many trees competing for what little water was in the ground, putting the forests under additional pressure.
"When the bark beetles hit during the drought, their population just took off," Glenn recalled. "We began to see increased bark beetle activity in 2001 and in 2002 and 2003. The bark beetle population literally exploded."
There was little infrastructure in terms of markets for the timber or loggers to cut it down and remove it. "It took awhile for that to come about, and a number of different players were involved in all of that," said Glenn.
Southern California Edison was one of the early organizations to become involved. The utility company began removing trees that were a threat to its power lines, resulting from a directive by the California Public Utilities Commission. The San Bernardino County fire marshal ordered people to remove dead trees from their property — a costly undertaking. About the same time, crews working for the California Dept. of Forestry and Fire Protection started to take down trees along transportation corridors, national forests, and around critical infrastructure.
Loans Available For Processing Wood
In order to expedite timely harvesting and processing of the timber, government funds were made available. The National Resource Conservation Service (NRCS) funded projects at the county level; over $120 million was awarded for various projects in San Bernardino, Riverside and San Diego counties.
While much of the funds were directed at subsidizing the removal of trees, some money was earmarked for timber processing. San Bernardino County issued four low-interest loans totaling $2.4 million to companies processing the timber, according to Kathleen Robles of the San Bernardino County Department of Solid Waste Management. San Diego County provided loans for timber harvesting as well as market development, but the market development loans, totaling $1.75 million to date, were only to subsidize the cost of hauling chips to markets. Riverside County officials did not return calls about funded projects.
In the case of San Bernardino, one loan went to a pallet company for sawmilling, another was made to a playground manufacturing company, and the other two were issued to businesses that provide grinding services.
More loan money is available to eligible applicants, Kathleen indicated. They are issued only for equipment, such as portable sawmills. Applicants must have been in business for two years in order to be eligible to receive a loan. They also must locate within San Bernardino, and the equipment for which the loan is approved cannot be moved out of San Bernardino without the county’s approval.
The loans offered by San Bernardino are for five years at 3% interest. No payments on the loan are required for five years.
"After five years you have a choice," Kathleen explained. "You can either return the equipment to the county and walk away or purchase the equipment for the amount of the loan plus interest. Or if you walk away from it, and the U.S. Forest Service doesn’t wish to buy it, we may be able to sell it back to you."
Companies considering applying for a loan should investigate timber availability and ensure that they have an adequate log supply, Kathleen suggested. The abundant supply of timber that was available the last few years has diminished somewhat, and there is some question about future availability. Timber has been slow to be sold from U.S. Forest Service lands, Kathleen indicated, although there has been "no problem" with timber coming from county, Edison, or private lands.
Part of the issue is that funds are required for the logging efforts, and to date these efforts have focused on the most urgent needs – removing trees close to critical infrastructure, such as power lines and evacuation corridors, and houses.
There are safeguards in the loan requirements to protect companies from timber supply disruptions. "If someone we make a loan to has their supply of wood dry up through no fault of their own, then they are not in default on their loan," Kathleen said.
Timber Recovery Outlook
The amount of timber has definitely declined the last year, according to people familiar with the region’s wood markets.
"There’s a lot of dead material that has been removed already," said Glenn. "There’s still more to go. There’s still some out there, but the bigger question is how much green material will be cut, and I don’t think anyone knows the answer to that one. That’s going to depend on what happens in the (San Bernardino) National Forest."
One of the leading salvage timber contractors involved is Evergreen Resources Management of Lake Arrowhead. "There isn’t a lot of material available," said Evergreen’s Clay Baremore. "We have been working at half capacity for the last eight months."
"There is a lot of material out there, but there are a lot of logistical problems in getting it where it needs to be," Clay added. The counties have been slow to put logging jobs out to bid, he indicated. "One key will be how much timber the (U.S.) Forest Service makes available." Evergreen is "scrambling" to keep logs supplied to sawmill, a pallet business that is cutting 30-50,000 board feet per day in the Lake Arrowhead area.
Don Muhhern of Asplundh Tree Service in San Diego County said that timber is "absolutely" available for a local pallet company that might be considering a sawmill operation. "We’ve got logs on the ground right now," he said. Asplundh anticipates a steady flow of logs the next 12 months.
Wayne Williams, Recycling Coordinator for the San Diego County Department of Public Works, agreed that there is still a lot of inventory left in San Bernardino, but a number of factors, including a limited budget, control the prioritization of cutting.
In the Cleveland National Forest in San Diego County, Wayne noted, substantial timber is available, but some is too remote and some is "too far gone." The timber must be harvested within about four years after dying in order to have any marketable value.
Substantial timber is still available in the mountains, according to state official. "Generally speaking the nature of the epidemic is winding down, but there is still a significant amount of material that is being recovered and will continue to be recovered over the next years in southern California," said Chris Zimny, Regulations Coordinator of the California Board of Forestry and Fire Protection. He spoke earlier this year at the Western Pallet Association annual meeting about the potential opportunities the timber windfall has made available to the pallet industry.
The California Forestry Commission has been undertaking a biomass inventory of southern California salvage timber and how much will be available in the next few years, but the report has not been completed yet.
However, John Shelley, a University of California Cooperative Extension Advisor and one of the principal researchers for the inventory, said that estimated saw log volume that will be removed in the region in 2005 is about 40 million board feet. Volume will drop to an estimated 33 million in 2006 and continue to drop by about 15% annually thereafter, he said.
"Of the 30 to 40 million board feet expected to be removed, I believe about two-thirds could find its way into the pallet market. The higher grade logs will continue to be transported to northern California mills on backhauls."
An estimated 80 million board feet was converted into lumber in 2001, according to John. The small mills that spring up in San Bernardino and San Diego counties processed about 36 million of that amount – mostly into pallet and non-graded lumber.
Pallet Companies: Mixed Views on Timber Supply
Pallet companies involved in timber salvaging have a number of opinions, ranging from downright pessimistic to guardedly optimistic.
"It’s a complicated situation," said Lance Abbot of Southland Wood Products, whose company runs a sawmill at Lake Arrowhead in the San Bernardino Mountains. The mill processes logs into cants, which are shipped to Southland’s pallet plant in Tijuana, Mexico.
"One thing I can say for sure,"
Lance added. "They forecasted this
huge amount of timber, and it hasn’t
materialized."
When asked if it was a matter of timber being available but not being harvested, as others have suggested, Lance was more guarded. "You’d have to talk to the foresters about that," he said. "All I know is that we’re not getting the supplies we need. There’s just not enough material, and I’m about ready to pull out."
Others were more optimistic. Roger Caruso of Century Pallets runs a Baker Products portable sawmill at his plant in Lynnwood, Calif. to process logs from the San Bernardino Mountains. He believes there is a five or six year supply of timber but conceded that logs are not as easy to get as they were a year ago. "There are trees available, but you have to have the right connections," he said. Roger considered applying for a loan
to set up a sawmill at Lake Arrowhead but decided against it for a number of reasons.
Peco Rivera Pallet, located in San Bernardino County, is in the process of applying for a loan to invest in sawmilling capacity for its plant. David Avina of Peco Rivera has been told by county officials that there is a five to seven year supply of timber. If there is a shortfall, he plans to run cants through the mill.
Jim Evans of Far West Forest Products agreed that the windfall of free timber may be over, but there are still opportunities, he said. "A third of the timber went into landfills or was burned before people started to get involved," he said, indicating that initial opportunities related to the timber were very lucrative. Jim is the California representative for Wood-Mizer and sold several portable sawmills in the Lake Arrowhead region and also became involved in earlier logging operations.
"If I was in the pallet business, I would find a logger who is taking logs to the mill and cut out the middle man," Jim said. "A lot of people are shipping to distant mills – the closest is five and a half hours away. If you bought direct from loggers, you could buy your own mill for $50,000 and cut your own material for 20 years." This would be a good approach in just about any area with a good supply of timber, he suggested.
In the final analysis, reports on timber availability are generally positive, but a prudent approach is advised. Loans are still available from San Bernardino County, but companies interested in applying should investigate the potential log supply first.
Jim remains bullish, indicating that he may be able to put potential customers in contact with loggers. "There is a lot of potential down there," he said. "It’s a good time to check in."
