As an eco-tour business, The Boat Company is troubled by an column written by Southeast Conference that appeared March 30, 2016, in SitNews. The column insists that government needs to increase efforts to supply public timber resources to the region’s largest timber operators, Viking Lumber and Alcan.
Southeast Conference argues that government timber sale programs sustain community economies and contribute to the State of Alaska’s general fund. That argument ignores economic and market realities. The state and federal timber sale programs require massive, unjustifiable public subsidies.
The governments should instead manage public lands to support fisheries and tourism growth. A 2014 Alaska Department of Fish and Game economic study stated that wildlife hunting and viewing alone generates 2,463 jobs annually in Southeast Alaska, provide $138 million in labor income and $360 million in total economic output. A 2015 McDowell Group study shows that Southeast’s visitor industry generates average annual spending of $1 billion, supports well over 10,000 jobs, and produces labor income impacts reaching $400 million.
Fishing, the region’s other major private-sector industry, generates comparable economic strength. Its output would be even higher but government support for industrial-scale logging causes adverse impacts to salmon habitat and its productivity.
Thus, Southeast Conference’s own most recent annual report (2014) identified the commercial fishing, visitor and maritime sectors as the “bright points in our economy.” These sectors have contributed to an overall growth in employment, population and wages — a market-based transition. The free market incentivizes private investments in those sectors, supplanting dependence of some communities on expensive federally- and state-funded timber sale programs.
For example, the Alaska Department of Labor notes the Prince of Wales Island area redefined its economy over the past decade around small, specialty wood mills and fishing, seafood and hospitality businesses. Southeast Conference’s 2014 report shows population increases in Ketchikan and Wrangell and nearly all of Prince of Wales Island.
Conversely, the timber industry is a marginal component of the regional economy. Federal and non-federal timber sales support less than 1 percent of regional employment and earnings, not even registering as a “key industry” in Southeast Conference’s 2014 report. Viking Lumber employs a mere 34 mill workers (2015 USFS data). The Alaska Department of Labor says non-residents hold nearly half of the timber jobs in Southeast Alaska.
Southeast Conference’s column wrongly attributes the timber industry’s decline to supply issues. The industry’s decline results from three things: past logging of the highest value timber; long-term market demand declines; and high operating costs. Viking, Alcan and competitors in other regions depend on foreign raw-log export markets that are in persistent, prolonged decline. Declines in the value and volume of Alaska and West Coast lumber and log exports are much steeper than for other timber-exporting regions that have inherent competitive advantages.
Southeast Conference blames the Forest Service as unable or unwilling to address timber supply. The Forest Service does not control global markets and indeed has done much to keep the industry in business. It allows Viking and Alcan in large part to operate as federal timber brokers through raw-log export policies that shift manufacturing jobs to other countries.
The agency also spends millions of dollars supporting Viking and Alcan. The fiscally conservative watchdog group Taxpayers for Common Sense estimates it will cost over $100 million to keep Viking in business for the Big Thorne Project. Estimated government receipts are $2.5 million — a huge public loss that follows five years of federal expenditures on timber sales and publicly subsidized infrastructure for Viking and Alcan that generated a $130 million net loss.
Now Southeast Conference recklessly encourages shifting some of this fiscal burden to the State of Alaska. Gov. Bill Walker, through Senate Bill 32 and House Bill 87, says Alaska faces an era of “unrivaled fiscal uncertainty” and a $3.4 billion gap between spending and revenue. The Division of Forestry’s 2014 Annual Report shows the program’s total statewide revenues over the past decade averaged just $699,000 per year, but its yearly costs were $5 million to $7 million. The state cannot afford to support an industry that returns roughly a dime on a dollar. Perhaps this is why industry representatives on the Board of Forestry are — incredibly — eyeing the cruise ship head tax to help fund the timber program, or even to tax commercial fishermen to pay for mitigating the mess left by Viking’s and Alcan’s operations.
Taxpayers for Common Sense recommends that companies benefitting from timber sales should bear the burden of the costs. The Boat Company agrees. If they are unwilling to do so, southeast Alaska loses nothing from their departure and will likely increase economic outputs by transitioning toward market-oriented economic sectors.
• Larry West is a chief naturalist and conservation specialist with The Boat Company.
