ERIC HOLST - Associate Vice President for Working Lands Environmental Defense Fund

DAVE TENNY - President and CEO National Alliance of Forest Owners

DR. ANN BARTUSKA - Senior Advisor Resources for the Future

ROBERT BONNIE - Executive in Residence Nicholas Institute for Environmental Policy Solutions, Duke University

EH: ERIC HOLST
DT: DAVE TENNY
AB: DR. ANN BARTUSKA
RB: ROBERT BONNIE

EH: Dave Tenny is the Founding President and CEO of the National Alliance of Forest Owners. Ann Bartuska is Senior Advisor at Resources for the Future. Robert Bonnie is an Executive in Residence at the Nicholas Institute at Duke University. We all seem to agree that forests and forest products can provide a real climate solution, while returning significant economic benefits to rural communities. Why does this traditionally contentious issue seem to lose some of the contention when we start talking about natural climate solutions?

DT: I think we’re in a moment of time when a lot of ideas have converged into a few simple premises.

First, we all agree that the forestry sector has this tremendous capacity to produce true carbon mitigation to scale. I like to think of it through the three S’s. The first is carbon sequestration in trees.

The second is carbon storage in forest products. And the third is carbon substitution or the substitution of forest products for more carbon intensive or environmentally harmful alternatives. The second thing we agree on is that strong forest products markets are really critical to maintaining this mitigation capacity. And the third thing that we agree on is that the incredible contributions that this sector can provide really transcend administrations or politics or agendas; they’re just intrinsically vital to the overall climate change solution.

​AB: I spent a lot of time in my career with private landowners, whether they be forest landowners, range landowners or [owners of ] agricultural lands. And one thing they all have in common is a desire to stay on the land and be productive and to be multigenerational.

We’re all in agreement because to be able to keep that kind of landscape requires work and requires investment, to enable people who are in those communities, who own that land, to have the ability to stay on that land economically. We’ve been seeing it recently with agriculture; we’re seeing it over the decades and with forest landowners. So being able to keep forests in forests is more than a slogan to me — it’s really a critical part of the American landscape.

Rural communities are also part of the American landscape. And to be able to have rural communities, you need to have a solid economic base, and to be able to have that, you have to be able to have markets that support it. If we can farm carbon and grow carbon and make that into a marketplace, that just adds more value.

RB: If you think about the climate challenge we face, the science tells us we need to make significant greenhouse gas reductions in the next 30 years. You can’t get there without forests. And if you look at the role forests are playing in the U.S. right now, it’s an enormous carbon sink. And it’s largely for free right now.

And if you think about the threats that face forests, one big threat is fire, bugs, and disturbance. And then a second one is the importance of keeping forests as forests. To do those things, we’re going to need to think about incentives and policy — and markets are going to be critically important.

If you think back to some of the fights we’ve had about forests in the ‘80s and ‘90s, that was pitting management against the environment. What you recognize in the climate issue is that we’re going to need to manage our forests. And so management becomes really important, private lands become really important, markets become really important. And that alignment allows for constituencies that maybe weren’t thinking this way 20 years ago to come together in some really interesting ways.

EH: There’s one camp that’s saying hey, we’ve just got to keep trees on the ground, that’s how we solve this. And then you have another camp that’s saying this climate change deal is just another opportunity for the government to kind of get in our business and over regulate. How do you navigate those issues?

DT: When you’re in the middle of a firefight, there’s an incredibly powerful temptation to just keep your head down. We’ve got to recognize that there is risk in engaging on this issue, for the reasons that you’ve mentioned. But there’s far greater risk in doing nothing. And so there are three things we ought to keep in mind in all of this.

The first is that the climate change issue isn’t going away. We’re now seeing that both parties are talking about it and talking about the need to address it. We’re seeing that in this conference. That should be a pretty strong signal about which way the prevailing winds are blowing on this issue.

The second thing is that if we don’t chart our own course in this sector, then someone else will do it for us. That’s just an immutable fact. We can either choose to act or we can choose to be acted upon.

The third thing that is important for us to consider is that we have this vital contribution to make and we have influential partners like EDF (Environmental Defense Fund) or Resources for the Future or the Nature Conservancy, who are political leaders in both parties, who really want to help us make that contribution. And we shouldn’t overlook that.

So with those ideas in mind, if we really want to succeed, here are a few thoughts to think about. First is the consistent and proactive driving of the narrative. That markets and trees and products provide mitigation and scale. That message over and over and over again, told in such a compelling way that others want to adopt it as part of their own narrative, is going to be critical to making this relevant to the solution.

The second is that we need to stay coordinated as much as possible and aligned as much as possible internally and with our partners. There will be times when we will speak different dialects within and along the supply chain on different aspects of the carbon or climate change solution, and that’s OK. But we need to stay aligned and coordinated at every step of the way, because like it or not, there will be those who will look for ways that we might differ. Or that will look for ways to divide us if they can. So we need to maintain that internal discipline as a sector, to be coordinated and as aligned as possible.

And then the third thing is just another fact. We can’t do this on our own. Our sector can’t do it on our own. And so that means we need strong partnerships with influencers like the folks on this panel and others who will help us make the case for markets and trees and wood as a solution for carbon mitigation scale. We will go much farther with a much broader range of influencers and policy makers if we’re working in this kind of a coalition rather than trying to do it on our own.

EH: Robert, what did that survey of rural attitudes on conservation issues in the environment reveal about how folks are thinking about climate change and sort of environmental protection in general in rural America? RB: Anybody that spends time with rural constituencies knows that there’s this deep-seeded stewardship ethic in rural parts of the country. But there’s also concern about the way environmental laws have been implemented, written.

We’ve done a series of focus groups across the country, we’ve done some polling of rural voters and suburban and urban voters, and we’ve done interviews with rural leaders across the country. We’re really trying to get at whether there is an urban/rural divide on the environment — if so, what is it? And it turns out that yes, there’s a divide, but if you look at attitudes on who cares about the environment, there’s basically no difference between urban, suburban and rural voters. They both care about the environment about the same and quite a lot. There’s a stewardship ethic across all Americans.

If you ask about economic tradeoffs, maybe the divide is about rural folks seeing economic tradeoffs where maybe urban folks don’t, but that’s not the case either. In fact, urban or rural voters will talk about the importance of health and healthy soils and water for rural livelihoods. So that’s not it either.

What we really found is, it’s differences about people’s views on the government. And it’s not just because today, if you think about the sort of politics, there are more Republicans in rural America, that’s true. But rural Democrats and rural Independents also show more concern about government oversight on the environment than their urban and suburban counterparts. And so there’s a real cleavage around people’s view of policy.

And as I presented this research across the country, and a lot of times to folks in the environmental community, I’ve said, you know, this isn’t a problem that’s going to be resolved with better talking points. We’re not going to gussy up the stuff we want to sell [by] appealing to people with poll-tested, focus-group tested talking points.

It’s going to be important to how we communicate, but we’re going to need to engage with rural constituencies. They listen a lot more to folks that they trust: farmers, ranchers, forest owners, scientists, those types of folks. But we’re also going to need to think about how we do policy differently, and that’s really important in the climate context because things like markets are going to matter; incentives are going to matter.

We’re not going to regulate our way out of this problem on private lands. It’s not going to be an anti-market approach on federal lands either. We’re going to have to think about collaboration, we’re going to have to think about incentives, markets, locally led projects, how do we work with folks.

EH: What do we know now about forests and climate science and the role that forests can play? Where is there a consensus, where is there some sort of need for deeper research? What does it tell us about solutions?

AB: One of the good things is, the investment that the USDA and the university started making back in 1989 has really paid off. The U.S. Global Change Research Program started in 1990. So we’ve been really been building a knowledge base; it’s not just something [where] we snap fingers, and there we’ve got the answers.

That’s really worked to our benefit that we’ve been able to investigate various aspects of not only forests, but all sorts of ecosystems and what does it mean in terms of climate response, both adaptation and now the potential for mitigation?

Where the consensus has landed is knowing that forests do offset about 14 to 16 percent of CO2 emissions annually, so that’s been a figure that’s been tossed around and showing up many places and nobody’s really refuting.

So we know forests have a value. We know about 700 million metric tons, that’s the amount of carbon that’s sequestered annually. And so we could build from that. We know now that there are opportunities to expand the forest base, to continue to retain the high conservation value of forests as stocks of storage of carbon. Even as we are growing new stocks through plantation forestry and regeneration and reforestation. And now we can probably add about another 50 million metric tons annually of CO2, or carbon sequestration, through forestry practices.

Those are pretty solid numbers and are pretty indisputable. Some of the questions include: Where does this occur? What are the tradeoffs? Are you going to be taking land out of food production to put it into forests?

One of the really excellent conversations we’re having is how do we use marginal lands better and why those are the places where forests actually can — and planting trees really does — contribute to the overall growth. But it’s this allocation of lands and what goes where and how they’re used, and then how do we reverse the trend in terms of losing forests to development, which had started. And so being able to work in a much more integrated way.

That’s where you start getting at some of the issues. The other is some aspects of what kind of carbon. Is it carbon and a tree, or is it carbon and a product? And what does that look like? You need to look at the whole life cycle and the potential from whether it be maintaining old growth forests to solid wood products to the use of mass timber buildings and the emergence of that. And including forest bioenergy. The challenge is when and where and how much, and I think that’s where some of the assessment needs to be done.

We really have not worked through, what are the economic opportunities through all of those markets and the allocation of lands for that? What does the distribution look like, what’s the opportunity to access the amount of wood that is needed for the different products? And so being able to look at that in a much more integrated way is a really critical next step. ■

 Investors
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Amidst the pandemic, the underlying thesis for timberland holds as well as ever for long-term investors: stability, diversification and security. Timberland is a hard asset and a finite resource; land will always be in demand. If the investment helpfully diversifies portfolios and generates cash as needed relative to other opportunities, then ignore the noise and focus on other issues. Timberlands are doing what they are supposed to do​.

Timberland investments benefit from the fact that they comprise a diversified bundle of businesses.A given forest can serve multiple, often countercyclical, markets, including hardwood and softwood, grade and pulpwood, along with  non-timber markets such as land, recreation and cell towers.Thirty years of data indicates timberland satisfied its mandate.Since 1990, timberlands outperformed appreciation of the S&P over the longer 20- and30-year timeframes that included three recessions (in 1990-91, in2001, and the Great Recession of 2007-2009), while the S&P 500 outperformed private timberlands for shorter time frames and from 2010 to 2019.

Timber satisfies needs for diversification and safety. What distinguishes timber from other commodities is the pairing of continuous, positive (biologic) growth along with the ability to store volume and wealth over time as business markets cycle. Current market turbulence reminds us that we don’t live in an absolute-returns world; we live in a relative-returns world. In real terms, timberland investments stabilize portfolios.
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— BROOKS MENDELL, President and CEO, Forisk Consulting

 Landowners

​Owners that are highly  reliant on cash flow - particularly REITS - could be challenged to maintain revenue and dividends. This may lead them to increase strategic land sales to meet quarterly earnings requirements. As time goes on, low interest rates and economic uncertainty will likely lead private owners and speculators to begin looking for acquisition opportunities. Institutional owners (TIMOs and REITs) will be evaluating their positions to determine their ongoing participation in the sector. Some will see this event as a validation of the fundamental reasons to own timberland and either enter the timberland investment space or increase allocations. Others may decide to rebalance allocations or exit the sector altogether.

— DAVID FOIL, President, Forest Resource Consultants 

Sawmills

Independent sawmill owners have more flexibility than corporate-owned sawmills during downturns or periods of economic uncertainty. During tough times, independents most often prioritize workforce integrity, protect their banking relationships, take strategic downtime for capital improvements, and maintain a long-term focus. During the same uncertain times corporate owners often prioritize quarterly metrics to satisfy Wall Street and industry analysts. We have already seen significant curtailment of previously committed capital expenditures. We anticipate potential for mergers and/or acquisitions within this sector.
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— DAVID FOIL, President, Forest Resource Consultants 

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