This steep slope in Oregon’s Coast Range is littered with ruddy dead branches and freshly cut stumps, but at least it offers sweeping views of the Pacific Ocean. Until recently, the view was blocked by 65-year-old spruce, hemlock and cedar trees. But last summer, the landowner liquidated them, felling six city blocks of mature forest and its biologically diverse understory. State law requires the land to be replanted, but in order to maximize profits, the owner will likely clear-cut it again in 30 or 40 years — well before a mature forest is re-established.
This parcel isn’t owned by an individual or a conventional timber company; a pension fund, the Teachers Insurance and Annuity Association of America, acquired it a decade ago, recognizing the relatively low risks and high returns of investing in timber. Today the land is managed by the pension fund’s subsidiary, Nuveen, a timber investment management organization, or TIMO. Altogether, this pension fund owns about 156,000 acres of forest in Oregon’s Northern Coast Range. (Nuveen did not respond to requests for comment.)
Oregon is the nation’s top producer of softwood lumber and plywood, a fact not lost on institutional investors, such as pension funds, mutual funds and insurance companies. TIMOs and similar entities now manage or own about two-thirds of western Oregon’s private forestland, a total of 2.8 million acres. In the Coast Range, where institutional investors control 80% of private forest land, fresh and recovering clear-cuts define the landscape.
Yesterday’s timber companies clear-cut forests, too, but their long-term ownership of the land motivated them to allow longer recovery periods and maintain some accountability to local communities. In contrast, today’s institutional investors regard forests merely as assets, cutting and trading them in pursuit of the greatest — and fastest — return. Thanks to Oregon’s tax loopholes and lax forestry regulations, its forests are especially vulnerable to this kind of exploitation.
“As they say, stumps don’t lie, and neither do aerial photos,” said Chuck Willer, executive director of the Coast Range Association, a conservation nonprofit. “You’ve got this lineup of the stars here: a highly productive area that grows the best timber in the country, owned by a few dominant players, in a state that is deferential to the industry.”
“You’ve got this lineup of the stars here: a highly productive area that grows the best timber in the country, owned by a few dominant players, in a state that is deferential to the industry.”
IN THE 1990S, CHANGES to the federal tax code offered timber companies an incentive to either sell their land to institutional investors, which would then manage it through a TIMO, or else form a real estate investment trust (REIT) that would own and manage the timberland on behalf of investors. Because neither TIMOs nor REITs pay corporate income tax, a wave of U.S. timber companies took advantage of the opportunity to restructure.
Timber companies in Oregon, which already enjoyed relatively low property taxes, lobbied the state Legislature to dramatically reduce the harvest tax, a state tax on cut logs that helped support timber-rich counties. A ProPublica investigation in 2020 estimated that the loss of harvest tax revenue in Oregon has cost local governments $3 billion over the last three decades, even as it enabled REITs and TIMOs to offer higher dividends to their investors.
Timber investors are also buoyed by Oregon’s outdated Forest Practices Act, which was groundbreaking when it passed in 1971 but has since been outpaced by forest protections in Washington and, especially, California. And Oregon state law compensates landowners for certain costs they may incur from amendments to the Forest Practices Act – major reason for Oregon’s Board of Forestry to avoid making significant changes.
“This is the capital structure we have now, and it goes back to the thing that has haunted forestry in the United States for just about forever — that for all the benefits forests provide, only a few of them are compensated monetarily,” said Norm Johnson, emeritus professor at Oregon State University’s College of Forestry. “And when we combine that with a state that allows a landowner a lot of freedom, well, this is the outcome.”
The result is a forest that is becoming less diverse and less productive. And this worries Johnson: “Those forests are being harvested when they’re only half the volume they could hold, so we’re losing a lot of the ecological and social benefits, let alone the carbon storage, and that’s a real problem,” he said. “If we really want those benefits, are we willing to pay for them?”
RELATIVELY FEW REITs and hardly any TIMOs operate in California, where bitter political battles over logging in the 1980s and ’90s led to tougher state oversight of timber harvests on private land, deflating the potential profits for investors.
“If you want environmentally sustainable forest management in a way that respects forests as more than just a crop, you can try to mandate those values that are non-timber-related,” said Erin Kelly, professor of forest policy and administration at Cal Poly Humboldt. “California has done this through state laws, bringing in other agencies and giving them oversight of private timber operations. When you get somebody from Fish and Wildlife out on that timber harvest, you’re looking at the forest differently. It changes how you’re going to harvest.”
Oregon officials have taken a very different approach to the timber industry. Although its Legislature is controlled by Democrats, Oregon is known for its timber-friendly politics, embodied by The Oregon Pioneer, a gilded statue of a logger that stands atop the state Capitol. The industry maintains its power by making generous donations to candidates from both parties.
Oregon’s citizens, however, have a strong tradition of effecting change through ballot measures. An initiative proposed for the 2020 ballot sought to substantially expand stream protections on private timberland. When polls indicated that it would pass, then-Gov. Kate Brown, D, persuaded the timber industry — represented mainly by REITs and TIMOs — to work with select conservation leaders on a habitat conservation plan that, when implemented, would significantly expand Oregon’s stream protections. Once the agreement was in place, the proposed initiative lost momentum.
“For all the benefits forests provide, only a few of them are compensated monetarily.”
“The TIMOs and REITs are very much in risk management, and they are responsive where it looks like something worse than increased state regulation might happen,” said Johnson. “The industry was very worried about the wording of that citizens’ initiative and what it would really mean, and because there was something risky on the horizon, they wanted to respond.”
Johnson considers the forthcoming habitat conservation plan the first major advance in Oregon’s forestry rules in 30 years. “And then you look at how it happened — that’s a model for the future, one of the models. We need to recognize that big environmental and social gain and think about how we can push the ball forward.”
While it’s unlikely that Oregon will ever adopt California-style forest regulations, Johnson believes that future ballot measures, or even the threat of them, could achieve meaningful change. Ultimately, it may be up to Oregon’s citizens — and the millions of pension holders and insurance policyholders who unknowingly support the state’s practices — to demand that Oregon start valuing healthy ecosystems over the portfolios of institutional investors.
This story is part of High Country News’ Conservation Beyond Boundaries project, which is supported by the BAND Foundation. hcn.org/cbb
We welcome reader letters. Email High Country News at editor@hcn.org or submit a letter to the editor. See our letters to the editor policy.
This article appeared in the December 2024 print edition of the magazine with the headline “Is your pension fund liquidating Oregon’s forests?”
Republish our articles for free, online or in print, under a Creative Commons license.
