Armstrong J FEMC2007

"What Happened to Economics?" Incorporating forest business economic attributes into tactical analysis and planning

Jonathan Armstrong, Forest Ecosystem Solutions Ltd., 227-998 Harbourside Dr., North Vancouver, BC, V7P 3T2, Canada, jarmstrong@forestecosystem.ca
Chris Niziolomski, Forest Ecosystem Solutions Ltd., 227-998 Harbourside Dr., North Vancouver, BC, V7P 3T2, Canada, chris_niz@forestecosystem.ca

Operability, in the strategic timber supply context, refers to a classification of the land base as either suitable or not suitable for timber extraction. Suitability for timber extraction is influenced by the physical characteristics of the land, social and environmental concerns, and the potential economic return generated contrasted with the costs incurred during all phases of production.

Economic operability can be a difficult element to quantify. Until recently, operability assessments within B.C. have been undertaken by excluding certain forest types and conditions when determining the timber harvesting land base. The basis for exclusion can include stands located above certain elevations, stand types typically considered uneconomical or by excluding all or most stand types within certain geographic locations (typically isolated or far away). A number of attempts have been undertaken to improve the above methodology - to make the methodology more site specific. Many such efforts have been based on attaching economic parameters to stands or groups of stands in an effort to determine their relative margin or conversion return.

In 2004, Forest Ecosystem Solutions along with D.E. Gyton and Associates undertook an economic operability assessment for the Mackenzie Timber supply area. One of the objectives for this project was to use actual, site specific cost and value data taken from the local licensees. FESL's economic analysis model FEAM (Forest economic assessment model) proved to be an efficient tool to evaluate the complex economic questions that arose during this project. FEAM in essence defines relationships between existing sources of data common to the forest industry such as inventory data, timber cruising stand tables, lumber recovery factors and sales records and operating costs. The use of existing real data to define economic operability and the ability of this model to “capture” the full potential conversion return of forest products produced from any stand are the features which separate the FEAM approach from previous similar operability projects.

FEAM is a model that can operate on a variety of scales, from single forest stand, to a landscape unit, a supply block, or a timber supply area. The concept behind FEAM is that currently existing data can be connected together to produce a value and cost for individual forest stands, that is specific to the geographic location, stand attributes and operating conditions within the assessment area. FEAM produces a stand-specific value and cost that can then be combined in any size analysis groupings (woodsheds, watersheds, landscape units, etc.) to produce an economic operability assessment.