Submitted: The Two Sides Team September 24, 2013

Clearing trees for drill pads, natural gas pipelines, and the power lines, collectively amount to one of the largest clearing of land in the region’s history. Yet, few of the felled logs are making it to the skids or the mills because the companies downing them – oil and gas exploration companies and electric utilities – aren’t in the wood business.
Scranton Times-Tribune – 22 September 2013

Clearing trees for drill pads, natural gas pipelines, and the power
lines, collectively amount to one of the largest clearing of land in the
region’s history.

Yet, few of the felled logs are making it to the skids or the mills
because the companies downing them – oil and gas exploration companies
and electric utilities – aren’t in the wood business.

As the housing market makes a plodding rebound and prices across all
wood grades edge up, the logs remain on property, stranded by the
urgency of utilities and gas companies to get their energy delivered and
the mounting cost of moving logs to market.

The irony is that utilities and gas companies often have the timber
appraised and compensate property owners for the value of the timber
they remove or at least take that value into consideration in
negotiations with property owners. Even though they pay for the value,
they leave it there for the landowner.

Recovering market

Prices paid at the lot for wood are so low, because the lack of demand
from the housing sector, that companies find it is hardly worth worrying
about wood.

Cabot Oil & Gas Corp. leaves firewood for the owner of a property
where it sites a well pad, after compensating the property owner for
cutting it down. When property owners decide they don’t want the wood,
Cabot sends it to Wyoming County Correctional Facility, where inmates
cut it into firewood and officials provide it to needy families.

“When we cut down trees, it is treated as damage and we compensate the
property owner for that,” said Cabot spokesman George Stark.
“Historically, it is the way we have done it.”

Allentown-based PPL Corp. owns easements over land owned by others for
high-voltage powerlines such as Susquehanna-Roseland. Even after PPL
pays for the trees, the company isn’t much interested in marketing them –
which is a whole other business. So even though PPL compensates the
property owner for the timber, it leaves it near the edge of the right
of way for the property owner to do whatever they want with it. Mostly,
it becomes firewood, said PPL spokesman Paul Wirth.

“We aren’t in the wood marketing business,” Mr. Wirth said. Small
trees, branches and other material gets chipped and spread as mulch.

The wood often just sits.

However in some cases, landowners have their property professionally
logged and sold to a mill before PPL’s contractors show up, Mr. Wirth
said.

That minority appears to have been enough to keep the market for low-grade wood down.

Norman Galvin, a semi-retired forester based in Dalton, said the
clearing is having an effect on the price of low-grade wood, since
rights of way tend to go through some of the worst terrain. Low-grade
wood is typically used by particle board makers and pallet producers.

“There is an awful lot of low-grade wood from gas and utility lines
going into the market,” Mr. Galvin said. “Most often, they leave it lay –
it’s not their end product.”

Despite the poor terrain, sometimes there is a diamond in the scrub. He
recently saw a group with a pickup snagging a valuable black cherry
log.

Other factors

Paul Lyskava, executive director of the Pennsylvania Forest Products
Association said lumber prices are down, but for a myriad of reasons.
When the natural gas industry first arrived, the association, foresters
and mills worked hard to educate drillers that trees from cleared land
had value, Mr. Lyskava said.

While utility and gas development pushed more wood into the market, it
is not solely responsible for low prices. The housing market collapse
cut deep into the demand for forest products. While housing construction
has improved, that improvement had been painfully gradual and demand is
down in the U.S. and Europe. State and local regulation has also made
it more expensive to get wood to market, Mr. Lyskava said. Localities
have adopted ordinances requires timbering permits. Road posting and
bonding adds another layer of cost. Many mills are in rural areas and
getting logs requires trucks that often exceed the posted weight limits.
Under state laws, those trucks have to pay up front for “excess
maintenance.” Recently, that bill has been increasing from a few hundred
dollars a quarter to five-figures.

“Haulers and mills have addressed that by factoring in the cost into
their bids or just avoiding areas with posted roads entirely,” he said.

While the price paid to landowners for logs on site may be very low,
those additional transportation and permit costs add to the price paid
by mills and other end users, such as Craftmaster Manufacturing Inc. in
Towanda, which produces interior flake board doors with a textured wood
finish.

CMI benefits from the rebounding housing market, having recently added
40 employees. But CMI’s raw material manager, Chuck Dibble, said his
company is actually paying more for the low grade wood it processes than
it did four years ago. For competitive reasons, he declined to name
specific prices, but said he is not getting a break.

“A lot of that wood material coming down from pipelines and electric
lines is not making it to market – it’s not a priority, not in the right
place, or right amount to be able to utilize it cost effectively,” he
said. “Pipeline companies and utility companies see it as something in
the way.”

The cost increases he sees are from the logging processors: the
middlemen, who face increasing fuel, insurance, and equipment prices,
costs they pass onto the mill.

There are logistical challenges to getting those logs out of where they
are. Drill pad and rights of way are, by design, in out-of-the-way
places that are harder to get to. The logs downed in a right of way
clearing are harder to consolidate into a marketable lot because they
are coming from a narrow strip of land. Same for drill pads, which are
about four acres.

Loggers and haulers usually don’t bother with lots smaller than 10
acres, said Vincent Catrone, forester at Penn State Extension based in
West Pittston. A logger picks a landing area that requires skidding the
logs the shortest distance possible before grading and sorting them for
sale. Small lots of wood – or wood from narrow strips of land – just
aren’t conducive for consolidating and selling the logs.

He knows a small logger who shifted its business into chipping and
spreading, because for the jobs they were getting, the logs weren’t
worth grading and getting to mill.

Contact the writer: dfalchek@timesshamrock.com

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