BURNED

Fallout

Forest Service logging undercuts fire victims' recovery efforts

Story by

TED SICKINGER

&

LAURA GUNDERSON

Aug. 12, 2016

The Canyon Creek inferno wiped out decades of future timber harvests in eastern Oregon. But in the months afterward, private landowners could still salvage some of their charred logs, if they acted quickly.

Residents whose land and livelihoods were devastated by last year's fire soon found themselves in a race against the U.S. Forest Service to get their wood into the area's only remaining mill.

And the government won.

Looking to maximize the value of its burned timber, the Forest Service expedited its tree cutting after the fire. The glut swamped the Malheur Lumber Co. with millions of board feet of timber and further depressed a weak market for pine logs. By the spring, the government's logging had frozen out private landowners.

The U.S. Forest Service sent millions of board feet of timber to the Malheur Lumber Co. in John Day last summer and fall, depressing the market for pine logs and preventing landowners from selling their logs to the mill.

Now, with the mill still clogged, landowners are watching their remaining logs turn blue with a fungus that makes them virtually worthless on the wood market.

"We were hoping to treat people equally," said Bruce Daucsavage, president of Ochoco Lumber Co., which owns the mill in John Day. "But some people got burned twice on this."

The Forest Service was able to move swiftly because of an existing logging contract established three years earlier, one credited with keeping the mill afloat by guaranteeing an adequate supply of timber coming out of the forest.

Malheur National Forest Supervisor Steve Beverlin says the deal has delivered substantial economic benefits to Grant County, where the timber industry was in danger of extinction. He said no one ever asked him to slow down the flow of publicly owned wood to the mill. And private landowners, he contends, "had every opportunity to sell their wood, but many chose not to do so."

Now those opportunities are mostly gone.

The overloaded mill is just part of the financial fallout of the fire, one of the most destructive in modern Oregon history. It destroyed 43 homes and nearly 100 barns, pumphouses and other structures. Some residents lost virtually everything and were uninsured. Many were underinsured.

Now, as residents look to rebuild, they face skyrocketing premiums on insurance covering their homes and property. And they haven't received much help from federal and state assistance programs.

Read offline: Download the Canyon Creek wildfire package

In a part of the state where frustration with the federal government had already been amplified by the 41-day occupation of the nearby Malheur National Wildlife Refuge, the private timber losses only deepened the mistrust.

"We had something for the kids and grandkids here, but now all we're leaving them is a big mess," said Steve Mullin, a cattle rancher who was forced to clear-cut much of the 800 acres of timber on his land. He sold it at fire-sale prices. "We're not like the government; we need to get something out of it."

Timber losses

The Forest Service started cutting burned trees as soon as the smoke cleared. Initial volumes weren't huge, but the agency's salvage logging picked up pace over the winter.

Agency officials issued "categorical exclusions," allowing them to speed up the harvest within 250 feet of roads in the burned areas. The exclusion enabled the government to skip the exhaustive environmental reviews typically required to log on public land.

"We thought it was remarkable that the Forest Service was able to get the (salvage) sale out as fast as they did," Daucsavage said. "It's very uncommon."

In part, that's because the agency already had a fast track to the mill under its existing 10-year "stewardship contract" with the largest local logging company, Iron Triangle.

The deal was set up in 2012 to ensure that the mill would have an adequate supply of wood to remain economically viable.

It also allows Malheur Forest officials to keep timber proceeds in their coffers by bartering the value of harvested timber in exchange for thinning, prescribed burns and habitat improvements.

The Forest Service issued two orders under the contract in December and April, calling for Iron Triangle to log 17.4 million board feet from roadside trees. Last month, the company won another federal bid to log 3.6 million board feet from a research project in the burn zone.

King Williams, a consultant for Iron Triangle, said the Malheur's trees are generally larger and yield better-quality boards than those on private land. He said Iron Triangle also has been put "on quota," limiting its log sales to the mill.

"We didn't cause it," he said. "The Forest Service didn't cause it. There's simply not enough (sawmills) in eastern Oregon to process all this wood."

At present, the John Day mill can process only a little more than 30 million board feet a year, Daucsavage said. It's running extended hours to manage the surge of wood but doesn't have an adequate supply of workers or headroom under its air-quality permit to expand production.

Mark Bagett, a Canyon Creek homeowner whose 240 acres of timbered land was completely burned over, stands in front of a pile of salvage that will be useful only as firewood.

Private landowners were warned at a community meeting in September that they needed to get their wood out fast, and 52 filed notice with the state that they intended to log their properties.

But many were in recovery mode, distracted by the need to clean up, negotiate insurance settlements, find housing and work day jobs. Loggers were in short supply. And they faced state rules requiring them to replant any land they logged -- another potential expense.

By April, the mill had purchased about 3.7 million board feet of salvaged timber from private landowners. But the bulk came from two lumber companies with substantial land holdings in the canyon, including mill owner Ochoco Lumber.

As the flow of salvaged wood from the Forest Service increased this spring, Daucsavage said he was forced to stop accepting pine logs from residents.

"I wish we could have absorbed this, but it was just too much wood out there," he said. "I can't have that sitting in the yard."

Most of the Forest Service wood is being sold under its stewardship contract, which Beverlin said provides a "small, agreed-upon profit" for Iron Triangle.

Private timber owners and other local loggers have no such guarantee.

Residents claim the federal salvage sales came at their expense and wouldn't be tolerated by any other producer. They contend the agency is essentially auctioning off a subsidized crop on which it requires no profit.

Gordon Larson, who has one of the largest ranches in Canyon Creek, estimates his timber was worth $1 million if logged sustainably over his lifetime. Now, much of it has been incinerated and he's trying to liquidate the rest in a market saturated by the Forest Service.

"It's one thing to see that razed," Larson said. "But then take what value that remains, which is 30 to 40 cents on the dollar, and then completely wipe it out by them saying 'We're going to sell our logs to the mills, your logs be damned.'

"It's an unfair trade practice."

Eastern Oregon log markets were already severely depressed before last year's catastrophic fires. Prices for large, high-value ponderosa pine logs in Burns and John Day had dropped by a third, from $575 per thousand board feet before the recession to $380 in June 2015, according to the Oregon Log Market Report. In the months following the fire, prices fell another 20 percent, to $300 per thousand board feet. Local loggers say the price these days is often even lower.

With John Day's mill swamped, small landowners have few options. They can truck logs to a mill two hours away. But it costs $85 an hour for a truck and driver, expenses that cut deeply into any profits.

Meanwhile, no one wants smaller logs. While mills once bought pine logs as small as 6 inches in diameter, the Malheur mill initially set a minimum of 10 inches. Loggers say out-of-town mills also reject smaller logs.

WHO CAN MAKE A DIFFERENCE?

Would you like to let those responsible for firefighting in Oregon know your reaction to "Burned"? Contact

James Pena

, the Pacific Northwest regional forester for the U.S. Forest Service, at the links below.

Landowners could leave the burned timber in place. But falling trees pose hazards to humans, livestock and fencing. Downed trees restrict grazing and provide fuel for future fires. Dead wood attracts bugs and disease that threaten the live trees that remain.

On top of it all, waiting out the Forest Service isn't an option. With warmer temperatures come bark beetles, which carry a fungus that stains vulnerable wood bluish gray. While the fungus doesn't weaken wood, its stain cuts the value of pine that's typically used for finish products such as windows and trim.

Otherwise high-value logs that are heavily blue-stained might see their value drop to $100 per thousand board feet -- well below the cost of cutting, de-limbing and hauling them to the mill.

Avoiding blue stain is a race against time. By summer's end, say landowners and mill officials, much of the standing timber killed by the Canyon Creek fire will be stained blue and virtually worthless.

"These things were killed in the middle of August last year. It's rare that you go too much longer without blue stain," said Mark Bagett, a Canyon Creek homeowner whose 240 acres of timbered land was completely burned over. "Once that blue stain is in it, it goes right in the toilet."

Insurance issues

The Canyon Creek fire highlighted the painful limitations of insurance policies, especially in Oregon's more rugged and economically struggling regions where wildfire risks are high.

Very few would be made whole.

Sam Palmer and his business partner and childhood friend Tad Houpt estimate they lost about $1.5 million in last August's fire.

While the county tax assessor estimates the market value of their three destroyed cabins at $84,000, Palmer says they'd need about $225,000 to rebuild them. He also figures they'd need $20,000 for his pumphouse and its machinery, and around $25,000 for the tools they lost.

But like 11 other Canyon Creek residents, Palmer said they didn't have home insurance.

Some of his neighbors, especially older residents, say fixed incomes and high insurance costs forced them to make tough choices. And in a community where residents often work several jobs to get by, insuring equipment like bulldozers, tractors and trailers can be prohibitively expensive, especially when most residents aren't running commercial operations.

Rick Brookshire lost his shop but his house, though the siding melted, survived the Canyon Creek fire.

A policy for a hobby farm or ranch in eastern Oregon with about 100 acres, a few outbuildings and a tractor starts around $1,500 to $2,000 a year. That price goes up as you add acreage, more equipment or outbuildings.

Palmer, a nurse, said he was maxed out paying for policies to cover his cars and a $2 million liability policy on the logging business he works on the side. He plans to replace his fencing and replant saplings. Other than that, he said, "I'm just not going to replace anything. I can't afford to do it."

Even residents who had insurance say the depreciated value of tools, structures and personal possessions doesn't come near the cost of replacing them.

Early last year, retirees Judith and Bob Reed had begun planning to downsize and asked a real estate agent to estimate the value of their home, outbuildings and 30 acres of timbered property in Canyon Creek.

Then the fire destroyed their barn, shop, the bridge to their home and 75 percent of their timber. They still found a buyer, but the sale price was $150,000 less than the agent's estimate last year.

The insurance company sent them a check for $30,000 to cover the structures that burned, and $8,000 to cover the depreciated value of personal possessions. The latter, Judith Reed said, wouldn't come close to replacing their motorcycles, their horse-packing equipment, their camping and fishing gear, their tractor attachments and custom shop equipment.

Instead, they moved.



"Every day is a constant reminder of the horror," Judith Reed said. "This was my dream home. Now it's a nightmare."

As with the Reeds, most of the landowners in Canyon Creek are not in the commercial logging business. In fact, they're more like tree farmers, with most of their timberland holdings enrolled in a tax deferral program.

And since most of those landowners' timber holdings are relatively small, they can't buy insurance for their timber.

Patrick Goodman, an assistant vice president who specializes in standing timber for the Portland insurance company Durham & Bates, said his firm underwrites policies only for timber valued at $5 million or more -- and that policy costs $35,000 a year.

A few out-of-state companies offer coverage for landowners with $1 million or less in timber holdings, as was typically the case in Canyon Creek.

But those annual premiums start at $10,000.

To help address some of the shortcomings with private insurance, Canyon Creek rancher Larson wrote to U.S. Rep. Greg Walden, R-Ore., and U.S. Sen. Ron Wyden, D-Ore., suggesting a need for federal wildfire insurance, similar to the National Flood Insurance Program.

WHO CAN MAKE A DIFFERENCE?

Would you like to let those responsible for firefighting in Oregon know your reaction to "Burned"? You can contact

Sen. Ron Wyden, D-Ore.

, a member of the Senate Energy and Natural Resources Committee who is pushing legislation to fix Forest Service budget, bolster restoration efforts, at the links below.

He has also urged Walden and Wyden to consider legislation offering tax breaks or credits to private timberland owners who are affected by the sale of federal timber, particularly in the case of wildfire salvage.

Larson estimates his own property and timber losses at $1.5 million, and says his insurance company has paid him $110,000. Meanwhile, he told Walden that because of the Canyon Creek wildfire that started on unmanaged Forest Service land, he is facing a 300 percent spike in his insurance costs. That's despite the fact he has little left to burn. The same issue is coming up in wildfire-prone communities around the West.

WHO CAN MAKE A DIFFERENCE?

Would you like to let those responsible for firefighting in Oregon know your reaction to "Burned"? You can contact

Rep. Greg Walden, R-Ore.

, who represents eastern Oregon and is a longtime advocate of Forest Service budget and restoration at the links below.

Larson said his ranch policy, which had covered his two homes, several outbuildings and some of his tools and equipment, jumped from $1,280 a year to $7,000.

"I am not asking for sympathy -- running a ranch is in many ways a gamble: disease, fire, market prices all have a direct impact on the bottom line," he wrote Walden. "As a father, husband, business owner and local school board member, I believe these outlandish insurance rates are one more nail in the coffin of eastern Oregon livability."

Federal, state aid limited

Even with 43 homes destroyed, 300 people evacuated and 110,000 acres burned, the Canyon Creek fire wasn't considered devastating enough to qualify for federal assistance.

The Federal Emergency Management Agency won't help individuals until a state has declared a disaster and the request is approved by the president. That opens the door to a variety of services and long-term federal loans designed for farmers, ranchers and business owners. At the most, families can receive $32,000 to compensate for their losses.

WHO CAN MAKE A DIFFERENCE?

Would you like to let those responsible for firefighting in Oregon know your reaction to "Burned"? You can contact

Doug Decker

, Head of Oregon Department of Forestry, which works with Forest Service and helps administer programs for community wildfire protection, smoke management at the links below.

But the bar is high. The threshold for a disaster declaration in Oregon is $5.4 million in losses to the state. Overall losses from the fire certainly surpassed that total, but most of the devastation occurred on federal land, and FEMA doesn't count private losses.

Nevertheless, Oregon was able to use FEMA to cover its own costs. The state regularly applies for FEMA money to pay for most of its firefighting expenses. In 2015, the state received $19.6 million in FEMA grants to help pay for six fires, including Canyon Creek.

The state itself also lacks any substantial assistance for wildfire victims. In early 2015, Oregon lawmakers created a $50,000 fund for low-income families whose homes were damaged or lost in wildfires. The program provides $5,000 to victims whose household income is 25 percent below the federal poverty level -- or about $18,000 for a family of four.

While many Canyon Creek families needed help, none met the low standard. In fact, only two families applied for the help last year and both were denied, leaving the $50,000 fund untapped during one of Oregon's most devastating wildfire seasons.

WHO CAN MAKE A DIFFERENCE?

Would you like to let those responsible for firefighting in Oregon know your reaction to "Burned"? You can contact

Gov. Kate Brown

at the links below. In the past, the governor's office has pushed for Forest Service reforms, increased pace and scale of treatments.

"I went to John Day and did outreach and there were a lot of residents who needed help," said Kenny LaPoint, housing integrator for Oregon Housing and Community Services, the agency that manages the fund. "But the income levels designated in the Legislature are very low and don't meet the need of communities experiencing wildfires."

Early on, a group of residents even explored the possibility of filing a class-action lawsuit, suing the government for negligence that led to their losses. But they said they struggled to raise money and pay a lawyer for what they've been told would be a tough case to win.

No seedlings

Steve Mullin's 3,000-acre ranch is just over the ridge from the Strawberry Mountain Wilderness area. Federal laws ban any type of thinning in the wilderness area or using chainsaws to cut up and clear downed snags.

The fire burned hot through the wilderness area, stoked by its abundant downed trees and dried vegetation littering the forest floor. Then, it jumped onto private lands and headed north toward Prairie City.

Mullin's land was in the fire's way.

In April, Mike Mannell and his wife were staying in a tent at the site of their home, which burned in the Canyon Creek fire. The Mannells had recently returned to the area.

Mullin hired a logger to clear-cut his burned timber. But after the mill in John Day stopped taking logs, they scrambled for a month to find another buyer.

They eventually sold most of it to mills in Pilot Rock and Elgin, but his property remains littered with massive piles of brush, tree tops and smaller logs that he'll need to burn.

Mullin said he used to use his timber as a bank account, sending a few loads to the mill when prices were good and he needed the money. He has no idea how much value he lost in the forced sale after the fire.

"The dollar value was a kick in the pants," he said. "When the mills have a glut of logs, they don't pay squat for it."

Ultimately, many landowners had hoped to clear their land, sell their timber and start planting trees for future generations. They want to see green again, not a gray and black charred landscape.

But they'll have to wait for that, too.

Because the 2015 wildfire season was so severe, saplings to replace the native trees have been in short supply. The Forest Service recently did some replanting and gave 44,000 surplus seedlings to the Oregon Department of Forestry to distribute in Canyon Creek. About 48 homeowners, most of whom were affected by the fire, received the trees, according to Kirk Ausland, the state's stewardship forester in John Day.

But, he said, more saplings aren't likely to be available until 2018. For some, that's too long to wait, and adds to their frustration with the federal government.

"As far as I'm concerned," Mullin said, "they burned us out, so they ought to come and replant the damn thing. But it don't work that way."

- Ted Sickinger and Laura Gunderson

Read what experts think and offer your comments

Tsickinger@oregonian.com

503-221-8505| @tedsickinger

Lgunderson@oregonian.com

503-221-8378 | @lgunderson

Burned: More coverage

Firestorm: Poor planning, tactical efforts fueled a wildfire catastrophe

Fallout: Forest Service logging undercuts victims' recovery efforts

The Forest Service responds to key findings

Editorial: A monster wildfire that could have been tamed

Video: How Oregon's worst fire in 80 years played out

Video: Canyon Creek fire was mismanaged on multiple levels

Video: Harvest of timber fraught with problems

Video: A 360-degree hike where the Mason Spring fire started

Video: A 360-degree hike where the Berry Creek fire started

Video: A 360-degree trek through the burnt forest

Read offline: Download the Canyon Creek wildfire package