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The 2016 Forest Year in Review
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From a bitter Presidential campaign to concern about increasing government regulation, forest landowners won’t soon forget 2016.

By Pete Williams editor of Forest Landowner Magazine

Just about any issue or trend that impacted forest landowners in 2016 was overshadowed and influenced by the 2016 Presidential election.

   Whether it was the death tax, markets, regulation on multiple fronts, they were all subplots to the most polarizing Presidential election in American history. 

   When we reviewed 2015 a year ago, we wrote about upstart populist candidate Donald Trump, who it seemed would fade behind a more conventional Republican candidate such as Jeb Bush, Marco Rubio, or at least Ted Cruz. Bush, the former Florida governor, had written a Wall Street Journal editorial where he promised, among other things, to repeal the EPA’s new rule extending federal jurisdiction under the Clean Water Act over millions of acres of private land.

   Trump, of course, never faded, outlasting all 16 opponents to win the Republican nomination before delivering a stunning upset of heavily favored Democrat Hillary Clinton to become the 45th President of the United States.

   Trump’s election headlines any list of top stories of the year since it has far-reaching implications into every aspect of society.

   The world of forestry, of course, is no exception. In the last eight years, forest landowners have seen the federal government expand its powers through regulatory overreach. That, along with a stalled post-recession economy, continues to leave landowners nervous about the future.

   Trump’s election gives forest landowners hope that the era of executive overreach and overregulation that so characterized the Barack Obama administration might be coming to a close.

   Not only did Republicans take control of the White House for the first time since 2008, they retained majorities in the House and Senate and expanded their influence in state houses and governors mansions throughout the country.

   Like many issues during the campaign, Trump did not provide much insight or depth when it came to landowner rights. At one point the billionaire developer suggested he’d abolish the EPA. But he also reiterated his support for eminent domain. On the other hand, he expressed support for repeal of the death tax, something President George W. Bush twice failed to accomplish.

   With a Trump administration and Republican Congress, many of the existing and pending Obama administration regulations that impacted private forest management and ownership will be changed or repealed. These include Waters of the U.S. (WOTUS), which would have given the federal government broad oversight over most any body of water on private land; the Clean Power Plan; and Section 2704 of the IRS tax code, which would have had a devastating impact on the passing down of land to the next generation.

   As always, markets for U.S. wood remained volatile, perhaps the only constant in the forest industry. With the Trump administration taking office in January, the coming year promises to be one of change. Before that occurs, let’s look back at the ten most important stories of 2016, in no particular order.

DEATH TAX BATTLES: In August, the U.S. Department of Treasury proposed changes to the way estates are valued in what is known as section 2704(b). Under the 2704 proposed rule changes, an appraiser will be forced to value land based on a prorate share of the value established by “sum of the parts” approach rather than the typical comparable sales approach. This could be a devastating blow to family forest owners since it would double estate tax valuations for timberland owners.

   The Forest Landowners Association is supporting two bills in Congress aimed at stopping the proposed rule changes and a public hearing on the issue was scheduled for early December in Washington after this issue went to press. Many FLA members responded to a call-to-action, expressing concern about the proposed rule changes to their members of Congress.

    The estate tax exemption for 2017 is $5.49 million for individuals and $10.98 million for married couples. The estate tax was overshadowed by other issues and personal attacks during the Presidential election. Donald Trump favored total repeal while Hillary Clinton proposed a return to a lower $3.5 million exemption and a graduated tax rate of 45 percent. For 2017, eighteen and the District of Columbia have estate or inheritance taxes, a group that includes New York, New Jersey, Illinois, and Oregon.

    With Trump and a Republican Congress, his rule change could disappear.

WEYERHAEUSER EVOLVES: When Weyerhaeuser bought Plum Creek in November of 2015 – shareholders approved the merger in February - it created the nation’s largest private forestland ownership with more than 13 million acres of U.S. forestland. In May, Weyerhaeuser sold its five pulp mills to International Paper for $2.2 billion, signaling that the company wants to focus on its core business of buying and selling timberland and growing the wood such acreage produces.

    This was seen again in August, when Weyerhaeuser completed the sale of its liquid packaging board business to Nippon Paper Industries Co., Ltd. for $285 million in cash.

“This transaction further focuses our company as we work together to be the world's premier timber, land, and forest products company,” said Doyle R. Simons, president and chief executive officer of Weyerhaeuser.

 

WEATHER ISSUES: The weather is always unpredictable, but 2016 seemed to provide one disaster headline after another. Heavy rains plagued the Southeast long before Hurricane Matthew came along in October and caused severe flooding, particularly in North Carolina where even portions of interstate 95 were shut down for several weeks. Forest fires continue to plague the West, focusing the spotlight again on how federal lands are managed (or not managed).

   Weather issues tend to affect the forestry business positively and negatively.  While it destroys forests and impact forestry-related businesses, at least in the short term by rendering roads impassable and forests too wet to cut, it can stimulate the industry with increased demand for wood for rebuilding.

HOUSING STARTS STEADY: U.S. housing starts were projected to finish above 1 million for the second straight year in 2016, the first time that’s occurred since prior to the recession in 2006-2007. We’re a long way from returning to the 2 million-plus annual levels of starts from the early 2000s, of course, and the South experienced a downturn in housing starts in the third quarter of 2016, ending a recent hot streak. But for an economy and a forest products industry that’s been lagging for eight years, the signs are encouraging heading into 2017.

WESTERMAN BILL PROGRESSES: The Resilient Federal Forests Act of 2015, co-authored by Congressman Bruce Westerman, inched further toward becoming law in 2016. In May, the U.S. House of Representatives approved amendments to S. 2012, the Energy Policy Modernization Act of 2016, and the Resilient Federal Forests Act was included as an amendment.

Active forest management is needed to improve forest health, prevent wildfire, promote clean air and water, improve wildlife habitat, strengthen rural America, and protect life and property,” said Westerman, a trained forester and longtime FLA member who represents Arkansas’s 4th Congressional District. “I am proud to see this important legislation pass the House for a second time, and hope to see the President sign it into law.”

   That looked like a challenge had Hillary Clinton won the election. But with Trump on board, Westerman could see that happen in 2017.

ENDANGERED SPECIES: The Senate and House continued considering Endangered Species Act (ESA) reform, working on new strategies aimed at reforming the law and making specific changes to benefit the people that use the land imperiled species call home.

   This remained a focus of FLA in 2016 with the goal of ensuring that at-risk species determinations provide timberland owners with regulatory assurances, cost-share options and the means to continue managing their land for economic viability.

 PELLET MARKET GROWTH: Forest landowners, especially those in the Southeast, continue to benefit from worldwide demand for wood pellets, which Research and Markets estimated in April will grow 11 percent annually through 2020.

   In 2010, there were six pellet facilities operating in the South, with a combined annual capacity of about 2.6 million tons of pulpwood. Now there are at least 37, with a combined capacity totaling 15.5 million tons of pulpwood.

   The pellet industry has been heavily subsidized in foreign countries, particularly in response to elevated renewable energy targets by the European Union and its member states. Still, many landowners across the South have seen the value of their timber rise as pellet mills have moved into their areas.

 

 

 


 

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