FEATURED PROFESSIONAL: Mark Corrao, Hydrologist, Northwest Management, Inc.

Stock Water Rights and Instream Flow Rights in Montana

As we all look forward to the snow melting and spring green-up, despite the high waters spring brings, some of us will start our planning for the dryer months of summer and fall. Protecting the livelihood of Montana’s ranching heritage and supporting the fascination with Montana’s fishing both require management, storage and conservation of our most precious resource. Water use within the State of Montana is considered a public good and because of that, use requires certain permits. There are commonly two permits supporting these foundational uses of Montana’s water; the Completed Stockwater Pit or Reservoir (Permit 605) and the Beneficial Water Use Permit (Permit 600).

Completed Stockwater Pit or Reservoir Permit: A 605 Permit for stockwater use can be filed for storing if (1) the capacity is less than 15 acre-feet (4.8 million gallons) with an appropriation of less than 30 acre-feet (9.6 million gallons) per year, (2) your storage pit or reservoir is located in a pasture or on a non-perennial stream, and (3) the storage is located on your property or property you control that is 40 acres or larger. The 605 Permit form needs to be filed after you complete the pit or reservoir. Current application costs is $125.

The Beneficial Water Use Permit: The 600 permit is the most common for water use throughout the State. It covers all surface water uses and all ground water use exceeding 35 gallons per minute or 10 acre-feet per year. This includes in-stream flow rights for fish conservation, habitat management or water quality protection. As discussed in the last news letter, beneficial use must be designated in order to file for a water right. The most common misconception for in-stream flow applications under a 600 Permit is that, leaving water in a stream is considered a beneficial use; this is not the case. However, cooperation with an organization such as MT Fish Wildlife & Parks, the Fish & Wildlife Service or Trout Unlimited can help an applicant classify an application for instream-flow as a beneficial use.  Each of these organizations have the potential to classify instream-flow as a beneficial use depending on their structure and guidelines for water conservation and species management. The guidelines will differ by organization.

Northwest Management, Inc. has extensive experience with Montana water right permitting and can help you get the most for your time and effort.

Mark Corrao is a graduate of Colorado State University with a Masters in Hydrology.  He has been employed with the State of Montana and Wyoming specializing in water rights.

The 2012 Forester

by Gary Ellingson, Northwest Management, Inc.

I recently attended the 11th annual Forester’s Forum in Coeur D’Alene, Idaho with approximately 160 professional foresters from across the inland Northwest.  The Forester Forum is a primary continuing education opportunity for many of who attend and training is provided by noted speakers from across the country.  Events like this provide an excellent opportunity to look at what is on the mind of foresters and leaders in the industry who are preparing themselves to meet future challenges and better serve the needs of society.  The agenda generally reflects what is new and exciting in the forestry world.  The agenda also reflects the base of knowledge that foresters require in order to perform their daily work.  I started to think about this recently when I was asked “What do you do for work?”

I responded with “I am a forester”.  The questioner went on “Oh, that must be nice but what do you do as a forester”.  Well based on the Forester’s Forum agenda I might respond as follows.  “Well some days I look at international wood product markets, such as those in China, to see how housing starts are impacting the price of saw timber in Idaho and Montana.  Other days I pull out my Excel spreadsheet to analyze forestry investments with by calculating present values of timberland.  If it’s really slow I catch up on forestry regulations related to protecting water quality during timber harvesting operations.  That’s if I’m not brushing up on legal issues related to easements, property surveys and timber trespass.  Of course there are those days, usually when it’s snowing or raining, where I am laying out timber sales, planning reforestation projects and doing boundary surveys.  Some days I work on conservation easement projects, volunteer on a forest landowner board, or negotiate rates on a road construction project.  That’s if I can ever get away from writing and reviewing harvest contracts, preparing for sustainable forestry certification audits, or trying to learn various software programs used for map making, work planning, or computing forest inventory results.  I also spend time looking at forest insect and disease problems and try to determine what management approaches will best meet the management objectives of the landowner.  If I finish early I’ll take a look at my text messages and emails”.

It’s hard to describe what a forester does on a typical day because most are very different and each day requires the forester bring a different set of skills and abilities to the table. Its impressive to see foresters with 30 plus years of experience at continuing education venues such as the Forester’s Forum because its obvious that they have a passion for their profession and that they understand there is always something new to learn that will help them to do their jobs in the most environmentally sound and cost effective manner possible.  Foresters need a broad skill set to navigate the social, economic, political and environmental realities of natural resource management in today’s world.  So next time I am asked “So what does a forester do?” I am still not sure what I will say other than “Do my best to leave the forest in better condition than I found it”.

FEATURED PROFESSIONAL: Mary Anderson, Smoke Management Program Coordinator

Open Burning in Idaho

The issue of open burning slash and other woody debris throughout Idaho is deeply rooted in our state.  Most people are rightfully concerned about protecting their forested lands from disease and other problems associated with slash and undergrowth.

The benefits of burning under controlled conditions to provide access to forests, lessen fire danger, and improve wildlife habitat are undisputed.  However, improperly managed burns can create excessive smoke and are more likely to impact communities and adversely affect the heath of many individuals of Idaho.  Since many open burning practitioners are focused on fire safety (and rightly so), they don’t realize there are other rules that are intended to protect public health along with forest health.

Smoke generated by open burning is comprised primarily of small particles and gases.  Smoke can irritate the eyes and airways, causing coughing, a scratchy throat, irritated sinuses, headaches, stinging eyes or a runny nose.  Inhaling smoke may worsen the symptoms of those with heart conditions. Certain populations such as small children, pregnant women, older adults, and people with asthma or other respiratory ailments are much more susceptible to these health impacts and are more likely to experience more serious long-term effects.

Open burning in Idaho is regulated by state law and rules, tribal code, and local ordinances.  The state law and rules apply to all lands other than the five Indian Reservations in Idaho.   The Idaho Department of Environmental Quality (DEQ) administers rules designed to allow open burning while protecting air quality and limiting smoke impacts on the public.  Sections 600 – 623 of the Rules for the Control of Air Pollution in Idaho describe the state’s regulatory limitations on open burning, under the jurisdiction of DEQ.

Slash burning begins in earnest on or about October 20 each year.  Many large timber holding companies and federal and state land managers adhere to an effective smoke management program called the Montana/Idaho Airshed Group. This group utilizes available monitoring of weather conditions, weather prediction models, air quality data, and the Air Quality Hotline to develop burn approvals in a geographic region to lessen the potential for smoke impacts in communities.  It is the responsibility of all individuals who conduct open burning to minimize smoke impacts from their fires.

DEQ may issue burn bans as a result of weather and air quality conditions.  When DEQ issues a burn ban, all open burning is restricted in the area identified.  DEQ encourages all individuals conducting open burning, whether burning a pile of tree limbs in the backyard or a slash pile, to call the appropriate Air Quality Hotline for information on current air quality conditions, allowable forms of open burning, and any restrictions on open burning.  For burning within Reservation Boundaries, please contact the appropriate Tribe.

DEQ Website:  www.deq.idaho.gov/air-quality/monitoring/daily-reports-and-forecasts.aspx
Boundary, Shoshone, Bonner, Benewah, and Kootenai Counties:  1-800-633-6247
Lewis, Latah, Nez Perce, Idaho, and Clearwater Counties:  1-855-401-4636
Ada and Canyon Counties: (208) 373-0313
Pocatello:  (208) 236-6173

DEQ reminds all burners that it is their responsibility to manage their smoke as well as their fire.
Remember, open burning should be limited to only dry vegetative material, should occur only on days when good ventilation will provide excellent smoke dispersion, and must not include any material listed as restricted material such as construction/demolition debris, trade waste or treated wood.

Mary Anderson
Smoke Management Program Coordinator
Idaho Department of Environmental Quality
(208) 373-0202

The Art and Science of Smoke Management with the Montana/Idaho Airshed Group

by Erin Law, Program Coordinator

Most forest landowners are keenly aware of the advantages to being able to burn forest debris.  Unfortunately, the disadvantages are also keenly felt when a burn does not proceed as planned.  The Montana/Idaho Airshed Group was formed by professional fire managers who burn significant acreage every year and air quality specialists who protect public health to prevent one of the most common outcomes of a burn gone bad – smoke impacts to surrounding residents.
Members of the Airshed Group analyze the amount of fuel in their burn units and each burner enters detailed information regarding how those fuels are arranged across the landscape into a database they access from the internet.  This database, called the Airshed Management System, or AMS, (www.smokemu.org) catalogs each burn and its data and displays each burn location on a Google-based map.  The location and fuel information for each burn are then evaluated with the air quality and weather forecast to make a daily go/no go call for each burn unit based on whether the burn is expected to cause smoke problems.

From the burners’ perspective, the objective of the daily decision is to make sure they get a ‘thumbs up’ when smoke will disperse well.  From the Department of Environmental Quality (DEQ) regulatory perspective, the objective is to shut down burns that might cause public health impacts.  While it may seem like one accomplishes the other, in actuality those are two distinct analyses made successful by conditions at opposite ends of the fire environment spectrum.

The science at each extreme is pretty straight forward.  When air quality monitors (Montana – http://todaysair.mt.gov/, Idaho – http://airquality.deq.idaho.gov/) indicate that smoke amounts are approaching health thresholds, burning is restricted.  When air quality is good and the forecast indicates continued good dispersion, most all burning is approved.  The art of the decision comes into play when environmental conditions are somewhere between the two, a common occurrence during fall burn season.

Many factors determine which burn units can be lit safely when dispersion conditions are less than ideal.  Obviously, the location of the burn is very important.  How far smoke will have to travel before it may affect people is related to many factors including the volume of slash, how old it is, how dry it is, how much of it is large logs in contrast with smaller sticks and twigs or duff, and how it will be ignited.  Depending on the season, this assessment may also have to factor in anticipated wildfire smoke, smoke produced by agricultural burning, small residential open burning and woodstove smoke to adequately  protect air quality.  These variables are not quantifiable but nevertheless must be considered in context with the weather forecast to estimate future total smoke load from proposed prescribed burning.

Each day, a brief discussion occurs between the Airshed Group’s fire behavior specialist and each state’s DEQ smoke management staff to review current and forecast air quality and the following day’s proposed burn activity.  The two parties jointly assess potential impacts and determine whether burns will need to be restricted.

The Airshed Group enjoys a high level of commitment to protect air quality from each of its member burners, and each state’s smoke management staff is fully supportive of the prescribed burning program.  As a result, the cooperative nature of the MT/ID Airshed Group daily decision process has resulted in an extremely high success rate at both allowing burns that wouldn’t present problems and restricting those that probably would.  It is this spirit of cooperation that is the highest art, and its results can be appreciated by all the residents of Montana, Idaho, and downwind!

FEATURED PROFESSIONAL: Mark Corrao, Hydrologist, Northwest Management, Inc.

Surface Water Rights in Idaho

While looking at that stream running across the back of your property, or that big open space in your pasture that seems to be wet all year round, there are a few things all landowners should know about water rights in Idaho before building a pond, diverting a stream or drilling a well.

The surface water permitting process in Idaho (for ponds and streams), is based on the Prior Appropriations Doctrine. In short this doctrine means the first person to construct a diversion and put water to a beneficial use is entitled to the amount of water they can show is needed for that use. Permits are granted by the Idaho Department of Water Resources and include three main parts; Physical availability, Legal availability, and Beneficial use. The success of your permit will depend on all of these parts and some background knowledge of your water source.

Physical availability means the source of water, wet spot or creek, needs to have enough water to allow you to complete the project; for example, enough water to water the land or fill a horse trough or a pond.

Legal availability means even after all other water rights on your proposed source are fulfilled there will still be sufficient water for your project. For example, if a stream has 12 inches of water in it and someone downstream is already using 6 inches, there is 12 inches physically available but only 6 inches are legally available.

Beneficial use means the proposed water use is recognized as a beneficial use of water by the State. Many of these beneficial uses have been established by the historic development of water in the arid West and legal disputes. Some of the most recognized beneficial uses are; crop irrigation, stock water, domestic consumption and municipal water.

Water Wells: Currently in Idaho surface water permits are not needed for drilling a well…if you desire a well on your property there is a $75 well drilling permit and you can hire a certified well driller to complete the project, commonly they will complete the drilling application for you.

Northwest Management, Inc. has extensive experience with water measurement, availability and Idaho surface water permitting. Give us a call and we will be happy to assist with the details of statues, rules and the process for application of a new water right.

Mark Corrao has a graduate degree from Colorado State University in Hydrology with experience in Idaho, Montana and Wyoming water rights and water resources.

A New Zealand Logging Perspective

by David Joll, Asset Forestry LTD

Like many countries, the early days of the New Zealand forest industry was based on harvesting what was viewed as a plentiful resource of native timber for local markets.  As the industry developed so too did its competition with an agricultural industry that wastefully clear-felled and burned large tracts of timber to establish pasture for livestock.  This land-use conflict continued until the 1900s when the government, recognizing that the native resource could not be sustained, began systematically establishing exotic timber plantations, predominantly of Radiata pine.  The depression of the 1930’s saw a rapid expansion in the size of plantation forests.  By the 1980’s the logging of native timber had all but ceased and timber from the fast-growing radiate plantations was providing all the country’s needs plus a growing surplus for export.

I started my professional forestry career working for Asset Forestry in 2000 as a dispatcher but it was in 2002 having been given an opportunity to work for a logging company that I discovered a real passion for the industry.  Over the next 10 years I have experienced most facets of logging from working on the ground, as management and eventually in 2009 owing my own logging business.  As someone that is reasonably young my experience so far is that of an industry that is hugely dependent on the log export market and the impact that this reliance has on the logging industry.

Survival in the industry now requires loggers to be increasingly business-minded, professional, and willing to adapt to new techniques and/or technologies.  Along with the uncertainty and inability to control factors such as the dollar exchange rate, shipping costs, oil prices and global economies, loggers are dealing with rapidly increasing operational costs, difficulty in attracting new employees into the industry, and harvest sites moving further from the customer.

In many respects, the methods and machinery used for harvesting in New Zealand are still very similar to those used 20 years ago.  However, it is becoming increasingly common to see the owners of older cable equipment, such as towers made by Berger, Madill etc, receiving major overhauls with modern engines, transmission, track gear and modernizing operator work-environment to gain efficiencies and reduce cost.  These improvements coupled with the use of existing systems such as motorized carriages and electronic-chokers have resulted in production improvements.  These may not be new practices but the decision to run these systems is a growing trend – even with new carriages costing upwards of $100,000 NZD.  The use of 70ft towers and swing yarders to haul steeper terrain is also becoming more common practice as it becomes increasingly difficult to find people with the skills or the desire to work with the 100ft towers.

Loggers are looking to purpose-built forestry machines such as the Caterpillar Log loaders, rather than adapting standard excavators, as well as other local innovations to remain competitive.  For example, New Zealand-made mechanized-head manufacturers like ‘Woodsman’ or the innovative ‘ClimbMax’ steep country harvester that uses a winch drum based in the chassis of an excavator.  The ‘Forestry Falcon Claw’, which uses camera technology to remove Breaker Outs from the logging face, is another example of the move away from the ‘way we have always done it’ approach.

However, it is not just the logger who has been forced to adapt.   Forestry companies have also had to reconsider how they approach the market and increasingly there is a realization that rather than focusing on competing with local companies for the Asian log market, the real competition is coming from global competitors like Chile, the USA and Canada.  The ability of other countries to produce a comparable or superior product at a lower cost means that as an industry we must work collectively to ensure we can compete on the global market.

David Joll is the Operations Manager of Asset Forestry LTD, New Zealand. Currently Mr. Joll is coordinating the Inland Northwest log truck Dispatch Transportation Logistics project with Northwest Management, Inc.

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FEATURED PROFESSIONAL: Eric Femreite, Northwest Management, Inc.

Timber Tax Thoughts

As tax season approaches, there are some things you may want to consider as you and your tax professional get ready to prepare your returns.  If you harvested timber this year, this article will outline some tax consideration you should discuss with your tax professional prior to filing.

It is beneficial to landowners to first determine the value of their timberland, which is called the basis. Landowners need to know the value of the timber and the value of the underlying land on the date of purchase.  Part of the purchase price is allocated against the timber and the remaining is allocated to the land and other improvements identifying the basis.

The first step in determining the value of timberland is to obtain an accurate estimate of the timber volume by completing a timber cruise.  A timber cruise is a systematic, intensive, statistically reliable sampling of your forest that gives the best estimate of the species composition, size and quality of the timber found on your property today. To identify what the timber volume was on the date of purchase, a model is used to “reverse” the current estimated volume obtained from the cruise to the estimated volume on the date of purchase.  The next step is to determine the value of merchantable wood on your property.  This timber value is based on the market conditions within the general location of your property as of the date of purchase.  A good database of log prices over time is necessary for this valuation.

Income from a timber harvest usually creates a taxable event for most landowners.  However, not all income is necessarily taxable; a portion of the purchase price may be allocated against this income as part of your timber basis.  When the timber is sold, you may be able to take a depletion deduction against the timber volume sold, which allows you to adjust the basis. Working with your tax professional is necessary to accurately adjust the basis.  Keeping good records is a must and your tax advisor will need any timber cruises, timber valuations, and scale reports that support your depletion allowance.

If proceeds from a timber sale are reported as ordinary income, you can expect to pay much more in taxes than if the income is reported as capital gains.  To qualify for long term capital gains, you must have owned your property for more than one year.  If income from a timber sale is reported as ordinary income, the landowner may be subject to self-employment taxes as well. This is something you should discuss with your tax professional.

You may be eligible for a tax credit if you plant seedlings on your property.  Remember, in order for you to take advantage of this tax credit, you must include it when you file your taxes in the year that the expenses were incurred.

Finally if you are treating your timbered property as a business and you are actively participating in this business you may be able to deduct your expenses.  These expenses may include property taxes, interest, and other management expenses.  This deduction may apply to income from any source.   Please check with your tax advisor for help with determining if you qualify for any of these tax savings options.

Eric Femreite has a B.S. Degree in Forest Products from the University of Idaho, Moscow, ID and has completed multiple forest stewardship plans for Idaho landowners.  He has worked for Northwest Management, Inc. since 2004.

The Super Cycle is Coming?

by Vincent P. Corrao, President, Northwest Management, Inc.

What is the Super Cycle?   Some think it’s a Greek myth sent from the gods, others think it’s been calculated by an economist in a dark room.  Many hope it’s true while others hold their breath in expectation and try to not think about it for fear that it may not happen.  It is supposed to occur in the next 3 to 5 years and it has something to do with the possibility of reaching some of the all-time highest prices for lumber seen to date and the effects may be seen as soon as 2013.
Is it possible that sometime between 2013 and 2017 we could see some of the highest prices for lumber and therefore some of the best prices for delivered logs in recent history? What are the factors forecasters are using to speculate these results? Some of the basic factors include that in 2009 we had 550,000 home starts and sometime around 2017 home starts are projected to be between 1.5 and 1.6 million. This could be possible as the 2012 home start estimate exceeded expectations and reached 894,000 starts. The mountain pine beetle epidemic in British Columbia will kill over 60% of the pine and by 2014-2015 a decline in the available timber coming from British Columbia will occur. Additionally Canada overall is expected to reduce harvests throughout the country by 30%. Canada has historically provided up to 36% of the lumber used in the US and this is expected to decline during this period.

Internationally China will continue to use US and Canadian lumber products to feed demand and economic growth. The Asian markets are also expected to use US and Canadian lumber and between these economic powers, the demand for lumber worldwide is expected to continue and the outcome is a significant increase in lumber value.

Lumber prices on the composite index have increased almost 30% during 2012 and have provided increases in the delivered log prices through 2012.  Species such as Western Red Cedar, White Pine and Douglas fir have seen the strongest gains in 2012. The State of Idaho timber sales have been receiving stumpage prices ranging from $200-$250/mbf, all good signs for the future.  Landowners should begin to think about where and what they would like to manage in the next few years and start to monitor log prices.  Take advantage of the Super Cycle when and hopefully it appears.

Vincent Corrao, President, Northwest Management, Inc.
Northwest Management, Inc. is a private natural resource consulting firm established in 1984. Services include: landowner forest management plans, range and wildlife management, water resources, land use assessments and wildfire hazard management. www.consulting-foresters.com