Wall Street v. Family Business

Photo: Jason E. Kaplan
Aerial view of Zena Forest outside of Rickreall

A new forest tax proposal could boost revenue-starved rural communities, but small, sustainably minded landowners fear it could spell the end of their practices.

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A winding, gravel driveway through Zena Forest, 10 miles northwest of Salem, is scattered with pine needles, sticks and leaves. Sarah Deumling, owner and resident of this 1,300-acre commercial forest, has spent many hours clearing the larger debris that fell during an ice storm in February.

She says it will take months to clean up the mess. But most of the damage is not visible through the thick stands of Douglas fir, oak, ash and maple. Sunlight flashes in and out between mossy trunks, illuminating a deep layer of tangled undergrowth.

The mess left behind from the storm is driving Deumling crazy, she says, but to the untrained eye, it just looks like the kind of forest one might find in a children’s book, full of life and mystery. 

0421 sarahDuemling zenaforestSarah Duemling near entrance to Zena Forest.  Photo by Jason E. Kaplan

I am curious about how one comes to own a swath of idyllic forest like this one — and what it is like to work in the woods every day. 

But Deumling wants to talk about taxes. 

Her blood pressure spikes every two years when timber taxes are reconsidered, she tells me. This year, things are even more tense than usual. 

In June 2020, a collaborative investigation by ProPublica, OPB and The Oregonian revealed that rural Oregon communities lost an estimated $3 billion over the past three decades — money that would have come from a severance tax paid by private timber owners had it not been phased out through a series of tax cuts in the 1990s.

The elimination of the severance tax, along with more lenient environmental protections than neighboring states, motivated Wall Street investors to buy up forestland across much of the state, consolidating ownership and ramping up large-scale, industrial forestry practices like clear-cutting.

Today timber investment management organizations (TIMOs) and REITs (real estate investment trusts) own 2.8 million acres in Western Oregon, according to a report by the Coast Range Association. That is about 10% of Oregon’s total forestland, concentrated in the most productive forests in the state.

The ProPublica/OPB/Oregonian article spotlights Falls City, a former booming timber town in which half of the population now relies on food donations from a local church. The article has accelerated interest in reinstating the severance tax — money that once funded essential community services like libraries and police departments. A variety of bills related to the tax are being considered in this legislative session. 

Proponents of reinstating the severance tax argue that REITs and TIMOs are profiting off Oregon resources without giving back to the communities from which they extract. 

Representatives from the timber industry — including Weyerhaeuser, the largest land owner, which owns 2.9 million acres across Oregon and Washington — say that after a record forest-fire season, this tax could cripple the industry. But OPB recently reported that Weyerhaeuser and other industrial forest operations saw record profits this year. 

Jody Wiser of Tax Fairness Oregon has given multiple public webinars in recent months, educating Oregonians on the impacts of lost revenue from the severance tax and rallying support for bringing it back. 

When I asked about the reaction to this information about Wall Street-owned forestland, Wiser says many people were shocked and expressed frustration at having been misled.

For so long, the dominant narrative surrounding the state’s struggling timber towns has been to blame environmentalists and protections for the northern spotted owl, which caused a sharp decline in harvesting on federal lands. 

Wiser says the information coming to light about the lost revenue from the elimination of the severance tax is helping people understand why their counties are really in so much trouble. 

Deumling agrees that rural counties need money, and big corporations profiting off forestry should pay. But she is also worried that a severance tax could be the end of her family’s business, and that small forest owners who prioritize sustainability are already providing benefits to the community — and they are not compensated for them. 

“Natuergemaesse Waldwirtschaft” is a German term that means “near to nature forestry.” Deumling and her late husband first started managing forests in Germany, before the owners they worked for bought land in Oregon, which they recognized as some of the most productive forestland in the world.

After seeing the impact of acid rain on trees in Europe, Deumling and her husband became stewards of sustainable forestry and brought that conviction back to the U.S. 

“We are not the industrial forestry/Wall Street forestry model,” says Deumling. “We don’t clear-cut, we don’t release our trees with chemicals. We do it with machetes and it costs much more. We do things differently, and we can barely get by.”

At 75 Deumling still works 35-hour weeks among the trees. She preps sites for new trees and manages the undergrowth to help saplings grow. “I’m pretty good with a machete,” she tells me. “You have to cut the competition away so the little trees can reach the sunshine. That’s a big expense.” That is why larger operations use helicopters with chemicals, she says.

The extra work she devotes to avoid the use of pesticides is also why her profit margins are razor thin. “But we want all of the native shrubs and flowers to be there with the trees.”

Peter Hayes, owner of sixth-generation-owned Hyla Woods in the northern Coast Range, says taxation “needs to be done carefully. It needs to be done right. And it seems those shaping legislation have not done enough homework.” 

0421 peterhayes forestPeter Hayes, owner of Hyla Woods, photographed in Forest Park near his Northwest Portland home.  Photo by Jason E. Kaplan

Hyla Woods, similarly to Zena Forest, has made sustainability a priority for the family business. Its website states: “Using positive impact forestry methods, we aim to grow ecologically complex, economically viable, responsibly operated forests.” But Hayes echoes Deumling’s concerns that a severance tax could make it near impossible to keep up with sustainable forestry practices. 

“If we increase the rates of taxation, we’ll need to get the money from somewhere, and it will have to come from cutting more trees,” says Hayes. “It would pain us to abandon our goals in order to pay more taxes.” 

Those goals relate not just to the health of the land they manage; Oregon’s forests have immense potential for carbon sequestration, which scientists say is a vital element to avoiding the worst impacts of the climate crisis.

Per acre, Oregon’s forests are some of the best carbon sinks in the world. And carbon sequestration is a priority for both Zena Forest and Hyla Woods. The owners let their trees grow older and larger than industrial operations. 

Chuck Willer, executive director of the Coast Range Association, says the climate emergency calls for a drastic overhaul of how forests are managed in Oregon and elsewhere. 

“If we can grow those forests bigger, grow them larger, we can sequester millions of tons of atmospheric carbon,” Willer explained in an episode of the Coast Range Association’s podcast. “That would be our — Oregon’s contribution to the global problem.”

But industrial forests operate in a fashion that works counter to the carbon-sequestration potential that smaller, sustainable operations embrace. Investor-backed ownership means a focus on maximizing profit, and that means shorter growing cycles, more clear-cutting and the use of pesticides. Instead of storing carbon, industrial forest practices have contributed to making forestry one of the state’s largest carbon emitters.

The counties that rely on timber, the ones that have lost billions since the removal of the severance tax, are also often the ones paying the economic price for poor forestry practices.

In 2018 a cyanobacteria algae bloom made Salem water dangerous to drink for young children and vulnerable adults. It was believed to be caused by sediment runoff and fertilizers that are used in logging operations upstream from the watershed where Salem’s drinking water is sourced. The state capital spent $75 million managing the water crisis.

Seventy-five percent of all Oregonians get their drinking water from forested watersheds. And industrial logging near watersheds poses all kinds of risks that turn into big expenses, like the need for chlorination and filtration systems. 

Deumling and Hayes both believe that sustainable practices should be a big consideration in these conversations about who should be taxed what in the timber industry.

So far, most of the draft bills being considered do not account for these practices, and the big timber industry’s influence on Oregon’s government is creating an uphill battle for small family forests with sustainable practices and for those who understand the value of their work.  

HB 2379, sponsored by Rep. Paul Holvey, would impose a 5% severance tax on the value of timber at the time of harvest; it is the bill getting the most attention right now, with a work session scheduled in the House Committee on Agriculture and Natural Resources in mid-March.

While the details of a severance tax continue to be argued and assessed, another element of the timber industry is poised for big change. Three new members have recently been appointed to Oregon’s Board of Forestry. The seven-member board, appointed by the governor and approved by the state Senate, has power in establishing and enforcing forestry policies across the state.

Historically, it has been filled by individuals with ties to the timber industry. Environmental groups like 350PDX campaigned in support of Gov. Kate Brown’s nominees to fill four empty seats, after the state Senate refused to confirm similar nominees last year, with hopes that they will bring vital perspectives on more sustainable forestry practices. Ben Deumling, Sarah Deumling’s son and co-owner of Zena Forest, is one of those recently confirmed.

“All of us have a responsibility to create forestry that works both in the long run and short run,” says Hayes. “Too often, current profit comes at the expense of long-term viability. We need to imagine and create better approaches to forestry that maintain the strength of the status quo and address its weaknesses.” 

Wiser hopes that better approaches can be imagined and created by conversations between all parties on tax reform. “Right now, there’s no one bill that we think is fabulous the way that it is.” But Wiser and others are encouraging Rep. Brad Witt, chair of the House Committee on Natural Resources, to implement a group dedicated to working that out. 

Meanwhile, Deumling is holding out hope for the future of her family farm. Marking trees is one of her favorite parts of the job, though she is starting to hand off that labor-intensive responsibility to her son and other workers. Deumling tells me “the health of the forest is number one.” But she still enjoys selecting which trees will come down, “because you think about what you’re leaving, not what you’re taking.”

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