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Conservation groups buy working forests

Capital Press 12/29/09

SISTERS, Ore. (AP) -- Brad Chalfant eases a 12-passenger van over a jagged logging road just miles from the Three Sisters.

Once owned by a timber company, the 50-square-mile forest that Chalfant, executive director of the Deschutes Land Trust, hopes to buy isn't the kind of place that typically attracts tour groups.

Invariably, someone on a fundraising tour will ask about the stumps and slash piles, which are everywhere.

"Why would I give money to cut trees down?" asks a woman on a November day.

The question highlights Chalfant's challenge as he shapes the future of forestry in Oregon: How do you convince the public that logging forests is a means of saving them?

Conservation groups are now the forest industry's biggest allies, as institutional investors buy millions of acres of forestland nationwide.

From Maine to Montana, they're giving rise to a new model of private ownership, called community forests, hoping to save them from homes and subdivisions.

They're finding creative ways to finance big purchases and pushing a surprising tactic to preserve trees: harvesting them.

In Oregon and Washington, some conservation groups are looking to purchase forests for the first time. But even though the cool real estate market means it's a great time to buy, it's also a tough time to fund raise.

"The recession is a huge challenge," says Tom Tuchmann, of U.S. Forest Capital, which helps conservation groups purchase forests from investor-owners. "But it's also an opportunity. Pricing is level, but it's going back up again."

Here, two miles outside of Bend, Oregon's first community forest could be created on a 30,000-acre parcel known as the Skyline Forest, formerly owned by timber giant Crown Pacific Partners. When the company went bankrupt, Florida-based Fidelity National Financial Corp. acquired the land, hoping to build a gated residential community with dazzling views of the high desert.

From a clear-cut outcrop, Chalfant points out a million-dollar view that a developer would most certainly covet.

"When you have those types of growth pressures, it's really clear what the fate is for these timberlands," Chalfant says. "If we thought private owners were going to keep the land in forestry, we wouldn't be interested in owning land."

By 2030, 44.2 million acres of private forestland across the country will be developed, according to a 2007 Forest Service study. That's twice the size of Maine.

While the rate of development has been much slower in Oregon, the number of structures in forests continues to grow. Oregon loses an average of 2,600 acres of wildland forest a year, 80 percent of which is converted to low-density residential, according to the Oregon Department of Forestry.

"Economically, those counties are going to be better off if that land doesn't go to development," says economist Ray Rasker, who studied the impact of development in Montana's forests. "From a firefighting standpoint, any tax benefit would be outstripped pretty quickly."

In Oregon, nowhere has the real estate market been hotter than in Deschutes County. The county has also lost large tracts of forestland.

"The land use system is under attack," says Erik Kancler, executive director of nonprofit Central Oregon Landwatch. "It's an issue that's fallen off the radar."

And despite the recession, development pressures from destination resorts, subdivisions and single homes are rising.

In Klamath County, applications to subdivide property have soared recently from six a month to 120 a month.

"There's more development happening now than during the housing boom," says Leslie Wilson, county planning director. "Building permits are way down, but planning is way busy. People are definitely getting ready."

In Washington's Mount St. Helens area last year, Skamania County officials put a moratorium on development until they could come up with a zoning plan.

"There was a sudden building of large, mansion-type homes, even in the economic doldrums," says Cherie Kearney with the Columbia Land Trust. "It caught everyone off guard."

Now, the Columbia Land Trust hopes to purchase a 20,000-acre parcel from landowner Pope Resources, a first for the nonprofit.

"Working forestlands are a real priority right now," Kearney says. "People always took for granted that those forests were going to be there."

Today, the fate of the bankrupt Crown Pacific's lands in Oregon is the legacy of a fading forest products industry. At its peak, Crown Pacific owned sawmills, wood chip plants, lumberyards and 800,000 acres across Oregon, Washington, Idaho and Montana.

In 2003, the company filed for Chapter 11 bankruptcy, one of now dozens of Oregon forest products companies to go out of business in the past decade.

The company left 520,000 acres in Oregon and Washington to its creditors, who formed Cascade Timberlands LLC. Fidelity National Financial Corp., a publicly traded title insurance company, acquired the land holdings through its subsidiary Fidelity National Timber Resources.

Fidelity, like many institutional investors, saw big bucks in developing their forestlands. Near Gilchrist in Klamath County, the company hopes to develop a 5,000-acre destination resort. In Montana, on an 80,000-acre cattle ranch, it built a luxury golf resort.

Under Oregon land use laws, Fidelity could build one house for every 240 acres, which would have given it 137 homes at Skyline, considered a prime migration corridor for mule deer and other wildlife.

In this year's legislative session, lawmakers helped strike a deal that would allow the company to build 282 homes on 3,000 acres. In exchange, Fidelity would sell to the Deschutes Land Trust the remainder of the property and another 34,700 acres farther south at timber value, far less than development value. The company has five years to exercise the option, which would preserve a total of 66,000 acres, including conservation easements.

If the deal goes through, the Skyline Forest will be the first project to be financed with community forestry bonds in Oregon, approved by state lawmakers in 2005.

Chalfant will finance some of the big ticket purchase through federal grants and public donations. But the community forestry bonds will allow the nonprofit to tap into bond markets at a lower cost.

To pay down the debt, Chalfant will have to harvest some trees. But nonprofit ownership will mean the land will be managed for wildlife and factors other than revenues. Hikers, mountain bikers and equestrian riders for decades have used the Skyline Forest, never knowing it was privately owned.

"Everyone thought this was a national forest," Chalfant says.

Keeping property on the tax rolls -- and not in state or federal ownership -- is increasingly important as rural Oregon counties struggle to balance their budgets. For every tree it harvests, the nonprofit will pay a tax.

In a slow real estate market, Fidelity also hopes to sell 68,000 acres near Gilchrist to the Oregon Department of Forestry and another 93,000 acres to the Klamath tribe. If successful, the three deals together would be one of the largest conservation projects in the country.

"There's a way to do a conservation project and still make a return on an investment," says Greg Lane, chief operating officer with Fidelity National Timber Resources. "If we could put all the pieces together, we could set a national model for a conservation-driven agenda and still make profits."

Institutional investors and insurance companies are now some of Oregon's biggest land owners. And while they've ushered in a historic changeover of land ownership, they've also given opportunities to nonprofits that didn't exist previously.

Hancock Timber Resources Group, one of the nation's largest timber investment management organizations, has completed several big deals with conservation buyers in the Snoqualmie Forest and elsewhere.

"If you don't move it into permanent protection, you haven't accomplished anything," says John Davis, Hancock's acquisitions manager, based in Vancouver, Wash. "But we have a fiduciary responsibility not to give something away. If we feel that prices are not what we want, we can afford to wait."

For longtime forest products companies, a greater possibility of preservation comes with collaboration.

"The Skyline Forest represents an opportunity to educate the community," says John Shelk, president of Ochoco Lumber in Prineville. "For the citizenry to experience owning and managing a working forest, it would be magic."

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