Cluster Memo - 12-01-10

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TO: OFIC Board of Directors

CC: OFRI Board of Directors

Duncan Wyse, Oregon Business CouncilPaul Barnum, OFRI

FROM: Mike Cloughesy

DATE: Dec. 1, 2010

SUBJECT: Forestry and Wood Products Cluster Update

second-most forested state, Oregon is a national and international leader in softwood lumber production,plywood production, forestry productivity, timber harvest, logging, forestry education and wildlandfirefighting. In 2009, more than 2,200 firms directly employed 47,722 people who earned average annualsalaries of nearly $44,000 about eight percent higher than the statewide average for wage-earners.Thousands more people are employed indirectly as a result of cluster activity.

The Forestry and Wood Products Cluster is highly organized and well-established. Firms within the

cluster are known for their collaboration in state and their competitiveness . Thefuture success of the cluster is dependent on external variables, many of which are not within direct control. These include national housing starts, availability of mortgage capital, competition fromnon-wood materials, and the impact of federal legislation and regulations. Current cluster health is poor,

i h h O i b h h l i l b i h l (i l

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i h h 2009 O i b h h l i 1941 l b i h l (i l

U.S. District Court settlement that requires the Oregon Department of Environmental Quality todevelop stricter rules to protect streamside trees, prevent landslides in high-risk areas and halt

erosion and runoff from logging roa Thissettlementpitsonestateagency, DEQ, against another,the DepartmentofForestry. Historically,theBoard ofForestryhassetforest protection rules.

U.S. Environmental Protection Agency (EPA) Greenhouse Gas Tailoring Rule through BestAvailable Control Technology (BACT), which regulates biomass, including woody biomass, likecarbon-intensive fossil fuels. Until EPA takes aclear position on how itwill recognizethecarbonbenefitsofbiomassenergy, biomasswillcontinueto beheld in limbo and investment in biomassenergy willcontinuetostagnate.

the maximum achievable control technology rule forcommercial, industrial and institutional boilers and process heaters. Over 100membersofCongresssigned a letterto EPA Administrator Jacksontotell herthattheproposed Boiler MACTtthepotential impactofpending Clean Air Act regulationscould beunsustainablefor U.S.manufacturing andthehigh-

The U.S. Fish and Wildlife Service 2010 Draft Revised Recovery Plan for the Northern SpottedOwl, out for public comment until Dec. 15, which posits that habitat protection on public landmay not be sufficient and that protection may also be required on private lands. Uncertainty inthe

regulatoryenvironmentmakesbusinessplanning andcapital allocationextremely difficult.

Number One Cluster-Spec if ic Action InitiativeAs its number one action initiative, the Forestry and Wood Products Cluster named restoring Oregonfederal forests to historic standards of forest health and the related use of woody biomass from theseforests for energy. Specifically, the cluster calls for the following:

Support implementation of the recommendations of the Federal Forestlands Advisory Committeeto encourage active management of federal forests, especially by thinning and reducing fuels ondry-side forests and supporting collaborative groups.

Widely communicate Oregon forest health and forest cluster and rural community economicvitality as priorities of the Governor and the State of Oregon.

Explore a role for the State of Oregon to directly participate in addressing federal/private foresti t f i ith t t fi i t d di

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2010 Oregon Business Plan Cluster Update Form

Part I: General In formation

Cluster Name: Forestry and Wood Products

/ Contact Information:

Mike CloughesyOregon Forest Resources Institute

[email protected]

Industry, including Components or Subsetso Forestryo Wood Products

Number of Companies Involved in Clustero 2,284 companies in cluster

Primary Organizations and Companies Involved in the Cluster:

o Major Cluster Companies Weyerhaeuser Forest Capital Partners

Stimson Lumber Roseburg Forest Products Hampton Affiliates Campbell Group

Plum Creek Timber Jeld-Wen

Ochoco Lumber InterFor Pacific Georgia-Pacific Longview Timber

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o Nonprofit O rganizations Sustainable Northwest (www.sustainablenorthwest.org)

Defenders of Wildlife (www.defenders.org) The Nature Conservancy (www.nature.org/oregon)

o Cluster State Agencies Oregon Dept of Forestry (http://egov.oregon.gov/ODF/index.shtml) Oregon Business Development (www.oregon4biz.com) Oregon Dept of Energy (www.oregon.gov/ENERGY/index.shtml) Oregon Forest Resources Institute (Oregonforests.org)

Relevant Website Addresses: See above

Date of Cluster Launch/ First Meeting

o Dr. John McLoughlin built the first sawmill in Oregon in 1832 at Willamette Falls

o Oregon State University began offering Forestry degrees in 1906

o Oregon Department of Forestry was founded in 1911

o Oregon Small Woodlands Association was formed in 1960

o Oregon Forest Industries Council was formed in the 1970s

o

Oregon Forest Resources Institute was formed in 1991

o Oregon Forest Cluster Economic Development Core Team was formed in 2006

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Economic Impact of Cluster (Sales, Oregon Employment/ Employment Growth, Average

Wage/ Wage Growth, Multiplier Effects, etc.)

Forestry and Wood Products Oregon Covered Employment - 2009

Sub Cluster Total

Firms

Total

Jobs

Average

Pay

Wood Products Subtotal 1,238 34,744 $44,755

Forestry Subtotal 1,046 12,978 $41,802

Cluster Total 2,284 47,722 $43,952

Level of Cluster Organization Development (i.e. just getting organized, loosely

organized, well-established, etc.)

o Highly organized, well-established cluster

Organizational Structure (ie. Informal meetings, trade association, Google Group, etc.)

o Formal meetings of associations and cluster working group

Description of Participants (CEOs, Government Affairs executives, job seekers, etc.)o Various executives and mid- to upper-managers

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: not available

Recent/ Notable Industry Trends:

o 2009 Oregon timber harvest was the lowest since 1941o 2010 lumber prices (in real dollars) are the lowest they have ever beeno In 2010 there are only 106 open wood products mills, a 74% reduction since 1980

when there were 405 mills

Is there any other information that we should know about your cluster?o We are not dinosaurs modern forestry and wood products is a high-technology,

high-skill businesso We are survivors and we are here to stay

-sector industries to produceeconomic prosperity and quality jobs for Oregonians callsfor creating an economic climate with the right mix ofeducation and workforce capabilities, an attractive qualityof life, reasonable business costs, and an innovative,entrepreneurial spirit statewide. We call these ingredients

thefour Ps

people, place, productivity, and pioneering

innovationeconomic assets and liabilities, and potential strategies forour economic future. A fifth P, public finance, is also vital

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Please use the diagram below to tell us how Oregon rates in each of the Four Ps.

(5 = highest performance, 0 = lowest performance)

Is there one

Productivity: heavy regulatory and tax burdens

In which of the area listed above is Oregon strongest? Weakest?

Strongest: Recreation & Environmental Quality Weakest: Regulatory Environment, Personal Taxes & Resource Utilization

2.6

3.2

2.2

2.0

1.2

2.4

3.4

3.0

3.2

3.0

4.8

4.4

2.2

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Part III: OBP Core Initiatives

policies andactionsthat help achieve the conditions necessary for traded sector businesses to thrive. For more information or details about the

Oregon Business Plan initiatives, please visit www.oregonbusinessplan.org.

Suggested OBP InitiativesExtreme lyImportant

4Important

3

Not VeryImportant

2

NotImportant

At All1

Spec if icconce rns and spec if ic ideas to improve this ar ea

Adopt a long-term budgeting process thathelps policymakers prioritizeexpendituresand identify ways to deliv er quality serv icesat a lower cost.

2.6 The biennial budget would still be a mess.

Reform the tax system to improve the

stability of revenues and reduce reliance onthe income tax.

3.2 There needs to be better taxing that captures fees

or taxes from tourists or other visitors. Peoplewould favor a limited sales tax if it offset incometaxes. Voters are afraid the state would increasethe income tax later after getting a sales taxthroughneed trust from voters on any change.

Str engthen P rek-12 education 3.0 Improve efficiency and outcome = lower costsbut improve performance it must be done.

Str engthen university and communitycollegeeducation

3.2 All tuition funds should be received and retainedby the individual institution should never go toGF for redistribution.

-workforce .

3.2 K-12 program needs to recognize that not all kidsare interested in college and that we needqualified people in the trades need to provideopportunity for these kids to learn teamwork,safety, responsibility, communications, etc.

Support efforts to str engthencommercialization and innovation (such asthe O regon Innovation Plan).

2.8 A favorable tax climate for individuals andbusiness (particularly small business) would helpinnovation
http://www.oregonbusinessplan.org/http://www.oregonbusinessplan.org/

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Simplify and str eamline regulations andpermitting processes. Pr event n ewregulations and processes that add to thecost and difficulty of doing business.

4.0 There is a lot of opportunity to do thiswithout jeopardizing safety and publicvalues.

This is the biggest problem the state has.

Multiple agencies, conflicting regulationsprivate sector needs.

Creeping environmental regulations arestrangling our business.

Bring down health carecosts. 3.2 State has little effect.

cause of high health care costs; it a

result.Improve the availability of industrial andemployment land,connec ted toinfrastr uctu re.

3.0

Maintain and upgrade our infrastr uctu re(transportation, wa ter , telecommunications,etc.)

3.0 Particularly the capacity of I-5.

and incentives for business retention,expansion and rec ruitment .

3.0 Relates back to tax and regulatoryenvironment (workforce is a factor, but

not currently a limitation in Oregon). Oregon needs a better reputation for

Unfortunately,Oregon has the opposite reputation.

Provide mor e assistance to small businessessuch as assistance with market r esear ch,

2.0 If you provide a favorable businessenvironment, businesses will figure thisout on their own.

Assistance is fine, but we have to allowthe private sector to thrive. The state

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should provide an atmosphere that allowsbusiness development

Improve access to capital for emerging andexisting businesses.

2.5 Not a function for OBP.

Not easy in the current climate.

Ensur e reliable, affordable and cleansupplies of energy .

2.8 This is not a problem in Oregon as long as wesupport hydropower (improve efficiency,performance, and capacity) hydropower mustbe included as a renewable energy source

Mak e mor e producti ve use of our naturalresour ces (forests, wa ter ,etc.)

4.0 We have a unique resource that providesunique opportunities for Oregon naturalresource based businesses. Improvingutilization expands local business marketshare with direct economic,environmental & social benefit to Oregon.

Forest owners must have a favorableregulatory and tax environment to makevery long term investments in forests.This is important to keep.

Forestry is sustainable and provides

Though we recognize that many cross-cutting policy issues may be important to your industry, please indicate which O N E of theabove initiatives

Simplify and streamline regulations and permitting processes. Pr event new r egulations and processes that add to thecost anddifficulty of doing business. This is most important because:

Creeping environmental regulations are strangling business in our cluster.

There is a lot of opportunity to simplify and streamline without jeopardizing safety and public values

Note:Numbers are shown rather than Xs. These represent an average of actual responses where: 4 = Very Important, 3 = Important,2 = Not Very Important, and 1 = Not Important At All.

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Part IV : Spec if ic Fo rest Cluster Initiatives

-cutting policy priorities and concerns, please suggest industry-specif ic, action-

or iented initiatives that would orabilitytocreate new jobswithin the next year.

Please also rate the following specific forest cluster initiatives.

Spec if ic Fo rest Cluster InitiativesExtremelyImportant

4Important

3

Not VeryImportant

2

NotImportant

At All1

Spec if icconce rns an d spec if ic ideas to improve th is area

Federal Forest Restoration Initiatives:

Widely communicate Oregon forest health

and forest cluster and rural communityeconomic vitality as priorities of the

Governor and the State of Oregon.

3.4 Targeted communications are extremely

important, but general communicationsmay not be effective

Encourage and support local collaboration

efforts, such as community wildfire

protection plans and fully using Healthy

Forest Restoration Act authority, to

accomplish federal forest restoration work

and provide wood fiber to local mills.

3.4 These are showing some signs of success

Explore a role for the State of Oregon to

directly participate in addressing federal

forest/private forest interface issues with

respect to fires, insects, and diseases.

3.6 The role is already clearneed to assert

The state should be working with federalpoliticians on active management. Weseem too accepting of federalmanagement policies and need to fight forbetter policies

Need involvement from the Governor and

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4Important

3

Not VeryImportant

2

NotImportant

At All1


Federal Delegation

Budget for a state-level federal forest

natural resource advisor

2.6 Good idea, but specific positiondescription and definition of expectedoutcomes is key

Favor increased state/county forests; lessfederal

The Governor needs to lead

Forest Cluster Vitality Initiatives:

Promote development of market

opportunities and removal of market

barriers for wood products, non-timber

forest products and ecosystems services.

3.6

laws protecting public values. All wood

building certification systems. Woodshould be given greater credit insubstitution for non-renewable buildingmaterials. Oregon should lead the way bypromoting this in buildingsdeveloped/owned by the state.

LEED and other green certifications a

must.Promote increased funding for integrated

research programs that directly benefit the

forest cluster through improved

management systems, technologies, and

higher value wood products.

2.6 However, strong connection betweenresearchers/academics with forest sectorbusiness is necessary to have the desiredresult

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4Important

3

Not VeryImportant

2

NotImportant

At All1


Promote state and federal laws and

policies which provide economic

incentives for biomass energy research

and industry development.

3.2 Incentives are two-edged and may createwinners and losers this needs to be donevery carefully with attention to timeframeand sustainability

sector innovation system to increase

competitiveness and synergies among the

forest sector, higher education and other

Oregon business sectors.

2.5 Depends on executionneed to setaggressive objectives, measureperformance to ensure effective execution

forest cluster and green building cluster.

3.2 Absolutely and it is a no-brainer withforest sustainability, carbon sequestering

Forestry Workforce Initiatives:

Establish employer-led training consortia

by county or workforce region.

2.4 Training for what? Mentorship programutilizing retirees may be more effective?

Expand forest cluster employers outreach

programs to teachers, school counselors,

students and parents that promote careeropportunities in the cluster and develop

appropriate forestry education programs

and specific skill training for students who

want to pursue university/community

college education or enter the workforce

directly from high school

3.4 -based natural resources is important forall students so that they can become betterinformed about the environment they area part of and can better understand whysome forests are managed to producesustainable natural resources such aswood.

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4Important

3

Not VeryImportant

2

NotImportant

At All1


Establish a Career Pathways in

Renewable Materials program to link high

school students and adults with careers in

the cluster based on the Oregon Forest

Program model

program

3.2 This sounds like a mentorship program

Thank you for your input to the Oregon Business Plan and the Oregon Cluster Network.

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Part V: Cluster Top Initiative

cross-cutting policy priorities and concerns, please suggest industry-specif ic, action-

or iented initiatives that would orabilitytocreate new jobswithin the next year. You may listyour top three, but please indicate your TOP PRIORITY as we will only have room to publicize one initiative from each cluster in the2010 OBP materials. (Other suggestions will be kept for consideration in future years and can still be listed on the website). Your topinitiative should be well-defined, actionable, and likely to lead directly to job creation or direct economic benefit for the State of Oregon.

TOP FORESTRY AND WOOD PRODUCTS CLUSTER INITIATIVE:

Federal Forest Restoration and Biomass Energy Initiative Support implementation of the recommendations of the Federal Forestlands Advisory Committee to encourage active management

of federal forests, especially by thinning and reducing fuels on dry-side forests and supporting collaborative groups.

Widely communicate Oregon forest health and forest cluster and rural community economic vitality as priorities of the Governorand the State of Oregon.

Explore a role for the State of Oregon to directly participate in addressing federal/private forest interface issues with respect tofires, insects and diseases.

Promote state and federal laws and policies which promote economic incentives and technical assistance and reduces disincentivesfor biomass energy industry development.

Promote the development of market opportunities and removal of barriers for wood products, non-timber forest products and.

OTHERS:

Comments or Explanations:

This initiative is holistic. It addresses the environmental, social and economic situation by improving forest health, creating renewableenergy and creating rural jobs.

Documents

Cluster Memo - 12-01-10