 Lakeland Public Television presents Currents. I'm Bethany Wesley. Welcome to Lakeland Currents. For tonight's show, I'm pleased to welcome to the program Wayne Brandt. Wayne is the Executive Vice President of Minnesota Forest Industries and Minnesota Timber Producers Association. Together, we will be discussing the logging and timber industry and its impact on our local economies and communities. Wayne has served on numerous forestry and natural resource-related committees in private and public sectors, and it's currently a gubernatorial appointee to the Minnesota Forest Resources Council. Welcome to the program. Thanks for inviting me, Bethany. So first, as we get started, why don't you tell us a little bit about the two organizations you're from? Thank you, sorry, and how they differ from each other. Sure, happy to do that. Minnesota Timber Producers Association was formed in 1937. It's comprised of loggers, truckers, sawmills, allied businesses. It really has been the voice of the timber industry for many generations. Minnesota Forest Industries members are larger primary manufacturers of forest products, so here in the Bemidji area at Norrbord, potlatch with the sawmill, the paper mills in the state, large forest landowners, companies that produce electricity from biomass, utility poles, pallets, a whole host of things. So kind of one is larger companies and one is the independent loggers. A lot of shared interest, though, across the two. Many mutual interests. We share staff between the two organizations and tend to work on the same issues. There are some things that each organization does a little bit differently. Timber Producers Association has a trade show, the North Star Expo, which was here in Bemidji in 2014 and 2015. Also runs a drug and alcohol testing program for truck drivers, publishes a magazine and does a variety of other service types of things. And then would you tell us a little bit about like how long, how did you get into the industry, how long you've kind of been involved with it? A long time. About 27 years that I've been with the two organizations with a two-year hiatus in the middle when I ran the state's Iron Mining Association. It's something that, you know, you can't be part of the fabric of the state of Minnesota without knowing about the importance of the forest products industry. You know, whether it's the stories of Paul Bunyan when you're growing up as a little kid or, you know, just if you're an aware person, you know that we have a healthy and a vibrant industry. The forest products industry today is depending upon how you want to count at the fourth or fifth largest manufacturing industry in the state. We employ about 28,000 people. We have value of products that are produced in excess of $8 billion. So it's tough not to know about the industry. And actually a little-known fact, my great-grandfather was a logger in Pine County. Oh, interesting. So you said there's about 28,000 throughout the state that are employed by the industry. And then in this region specifically, are there figures in terms of how many are- I don't have it off the top of my head on a county-by-county basis, but, you know, I think everybody knows that when we're talking northern Minnesota, it's even a larger impact, you know. And these are the kind of jobs that, you know, sustain and support communities. Every job in a sawmill or a board plant, like Norbord, supports two other jobs outside of the plant. Every job in a paper mill supports four other jobs outside of plants. So the spin-offs are very important. And when you look at our smaller communities, you know, even if you have a small sawmill, you know, that'll employ, you know, three, four, five, six, eight people, you know, their families, their children going to school, the truckers that are moving their, you know, the wood to them and their finished lumber out to markets. So, you know, it has a very, very strong impact. Could you give us a brief description, perhaps? How do you go from tree to product, just for those who are maybe unfamiliar with how the industry works? Sure. In Minnesota, about half of the forest land is owned by the public through the federal government, the state government, or the county government. So they develop management plans, how they want to harvest, you know, what they want to maintain, what they would like the habitats to be in future years. And then they'll develop plans as to what they're going to harvest at any given point in time. And that will then be sold for the public wood at auction. So both mills and loggers will go to those auctions and they'll bid on the wood that's there and acquire the rights, the stumpage, as it's called, rights to harvest that timber. So the logger will then come in. Companies don't have any logging operations, so it's all independent loggers. So if the logger buys the sale, you know, he or she will work on their sale. If the company buys the sale, they'll contract with the logger to do the logging. So the logger will move their equipment on, meet with the forester as to what the prescription is, how they want it done, lay out roads, skid trails, landings, and all those kinds of things, and then harvest the wood and then be trucked to the mill, unloaded there, scaled, weighed, so that the landowners get paid based on that. And then the company, depending upon what their finished product is, will begin the process of converting it into that. Wood will be debarked in the case of oriented strand board. It'll then be stranded in the case of paper. It'll be pulped in the case of lumber. It will be, you know, sawn into boards. And then wrapped up and finished and put on trucks or railcars to go out for all the people that need those products. Thank you. We talked a little bit about the jobs that are provided and how those actually have a domino effect to provide other jobs and economic benefit. I'm assuming there's been studies to kind of look at that economic impact of the industry. Sure. There's about an 8.2 billion dollar impact in our state directly. If you add indirect and induced jobs, it's about double that, you know, so about 16 or 17 billion dollars worth of activity. For the primary industry, the folks that my organizations represent, we also generate about a half a billion dollars in tax revenos, property taxes, corporate income taxes, income taxes, and other taxes paid by the folks that work there. So it's a very significant impact in every community that we operate in. So it's fair to say that as the industry, of course, has had some ups and have some downs, but as those happen, you can see it throughout the communities that it has an impact on. Sure. You know, you can definitely, you can definitely see it. I think one of the other things that we've seen through the years, like so many industries, is technology and capital replacing individuals. I mean, the days of, you know, big guys with broad backs out there in the woods on the ground with saws that's long in the past. You know, our loggers are out there on fellow bunchers and processors that those individual machines can cost five, six hundred thousand dollars a piece. They're operating joysticks, computer controlled GPS systems that lay out, you know, what they're going to harvest and how they're going to harvest it. You know, and interestingly, Timber Producers Association has had a workers' compensation program with our members for 35 or 40 years. And if you look back, many of the claims from injuries going back, you know, 20, 30 years were traumatic kinds of industries. Trees falling on people, broken legs, you know, those kinds of things. Now what we see in terms of claims are carpal tunnel injuries from working with joysticks, back problems from sitting in the cabs in the seats, and really, you know, the primary traumatic kind of injury that we see is slips and falls getting on and off the machine. So it's a much safer activity. That's been reflected by when I started in 1989 in the industry. Workers' compensation rates for loggers were $60 for every $100 of payroll. So you'd pay the employee $100 and you'd pay the work comp insurance company $60. That has been for a number of years under $10. So it's one of the few things that's less. And that's a testament to the technology, the equipment, and the dedication of our members and their employees out in the woods to safety. I mean, I think about it every day. Interesting. I want to move a little bit into, like, the forest themselves resource and sustainability. So it's been said that Minnesota forests grow three times more wood than it harvests. That's accurate. So who is it that determines how much can be harvested and how that is done? You know, it's done a similar way for most of the land ownership. So the landowners, particularly the large public landowners, will have inventories of their land. So how much wood? What is it aspen? Is it jack pine? Is it spruce? Is it balsam? Is it red pine that's growing out there? You know, what are the ages of it from the different stands? And there will be a mosaic of that across the landscape. So they will then take that information and through various means, mostly these days, through computer simulation models, where you put that inventory data into the model. And we operate one of these in our association ourselves so we can understand what's going on also. So you load that inventory data and you say, you know, what we would like to have for our forest in the future is, you know, we want to have habitat for deer. We want to have habitat for grouse, for, you know, forest interior songbirds, for, you know, whatever the objectives are that may be out there. And then you can, using the software, you can plug those things in and say, this is what we would like to have the forest look like in 10 years, in 50 years, in 100 years. And from that then you can make your plans as to what you're going to do, you know, in each period. Typically they will look at 10-year periods of time for, you know, what are the activities that they want to do. And by doing it and thinking about it and using that technology, you can say, all right, we need interior habitats for some types of forest songbirds. Well, that doesn't mean that you don't harvest those acres, but it may mean that you look at that and say, if we're going to have forest interior habitats for those songbirds that want them in 30 years or 40 years, maybe we have to do a bigger patch or maybe over a period of time, you know, we'll do three or four or five or maybe two landowners, the state and the county will say, all right, we want to have that created so we're going to work together in terms of how we're going to lay out our harvest so that that habitat will exist in the future while we're still providing the jobs and the products that we use. So is the plans for the management then differ basically if it's a state versus a county versus a private? It's all tailored individually for that? They do individual plans. It would take a pretty sophisticated person to go out on the ground and say, this is a forest service sale, this is a county sale, this is a DNR sale without having a lot of knowledge. You know, they end up with similar types of outcomes, but you know, as with all levels of government, you know, we tend to be most efficient at the local level, less bureaucracy at the county, a little more at the state and a little more at the federal government. That's not to say that they do bad management or anything, that's wrong, it's just the way it is. You know, it's just the way the systems have developed. How important is it to manage forest? What happens if they're not managed? Well, A, you know, they become vulnerable to fire, to insects, to diseases, to windstorms, which, you know, that may have been the natural way, you know, 500 years ago, 300 years ago, but you know, society has changed. You know, we have a developed society with people living in or mingled out amongst the woods and, you know, that's really not acceptable. You know, we can look at that and say, how and what do we want going forward? You know, we need to provide some of our products. I mean, if we're not providing the products that we use, then we're shifting, you know, the environmental consequences, if you will, of producing those products to somewhere else. I mean, is it... And we happen to think here in Minnesota that it's much better to produce our products here, have good, strong, vibrant, healthy forests and a good, strong economy. And we can... we think we can have our cake and eat it, too. We know there are some resources available, some agencies where people can go to to get help with how to go about managing their forests. Can you tell us a little bit about those? Sure. You know, Minnesota has really been a leader in a number of these areas for private landowners, people that may own 20, 40, 60, 80, 100 acres. There are a number of programs out there. We, through Minnesota Forest Industries, support the Tree Farm program. You'll see the little Tree Farm signs, different places. That helps people get management plans. There's also, in fact, the state. Thank you to our legislators and the governor earlier this year in the 2016 session appropriated $2.5 million more to help private landowners get management plans, have some cost share for replanting, where that's necessary, and those types of things. So in terms of individual help, that is, you know, a key to folks kind of understanding what they're doing and getting the best outcome on their land that they can. Systematically and forest-wide and statewide, you know, our industry grew a lot back in the late 80s and through the 1990s. You know, we invested about $5 billion in new plants and equipment here in Minnesota. I mean, we can see that here in the Bemidji area, the Potlatch Sawmill. East of town was built from scratch. The Norboard Plant back in the 80s. West of town was built. And there were expansions at the Paper Mill in International Falls, the New Paper Mill in Duluth, expansions in Cloquet and other oriented strandboard capacity that was built in that time. And some folks got concerned about that. I mean, we were expanding pretty significantly, a lot of investments. There were a lot of questions about are we going to have enough trees? Are we doing the environmentally responsible thing and how we're harvesting and managing? So the state did a number of things. I don't want to be father-time and play the history lesson, but it is kind of important because Minnesota has been a leader. So the state back in the early 90s did a very large million-dollar study of all of these issues. The outcomes of that which continue today are several different programs and structures. First of all, Minnesota Forest Resources Council, which I sit on, you mentioned in the introduction, 17 people from all perspectives, tourism industry, the public agencies, Native American tribes represented, labor is represented. So a broad private landowners, environmental community, conservation, hunting and fishing groups, a broad set of perspectives. And we meet, oh, six or eight times a year, and have a number of different things that are done there. The first is an integrated set of forest management guidelines. So they are a guidebook of best practices as to how we should harvest and manage the land. What are the best things to do and what are the things not to do? So that is done. There's also a program of ongoing research. There's a program of coordination and planning at the landscape level, kind of bigger geographic areas to look at these issues. And then those guidelines are monitored on a regular basis, every couple of years. So actually contractors are hired, go out on the ground and look and say, well, we've got these best practices, are we really using them? Well, the answer to that is yes, we really are using them. So we do make a difference in what the outcomes are when we manage and harvest lands. Additionally, we started up, my two organizations started up, and then it was spun off into an independent organization, the Minnesota Logger Education Program. So that's a continuing education and training program for the folks that are out in the woods. And about 95% of the wood that's harvested in our state is harvested and training. And we were the first, we think anywhere in the world to have biomass harvesting guidelines which we developed through the Forest Resources Council, trained through the Minnesota Logger Education Program, implemented on the ground for the harvesting of biomass for the products that come from that. So it's been very progressive. We also, Minnesota is also a leader in certification of forests and marking standards for forest management. And they too go out and do audits on the ground and say, are you meeting, are you actually doing what you said you would do to the standards of these programs? State lands are all certified by both. Private lands are certified by one, the other both counties, one the other both. So that's been important because with half of the forest land being owned by the public, we have to be able to show folks and these are ways that we can show folks that we're doing a good job. So let's talk about the future. Is there room for expansion within the industry? Are there opportunities for more? Sure, yeah. There's clearly room. Physical supply of wood. As you mentioned at the outset, we grow about three times as much wood as we harvest. We use in the state right now about 2.6 million cords of wood a year 10 years ago when the recession started and the housing market crashed. We lost the pod latch then Ainsworth OSB plant that was east of town here. Well, we lost four plants like that at that time that comprised about a third of all the wood usage. So we went from about 4 million cords a little more down to about 2.6 million cords. So there is the possibility of doing that. But the challenge is with half of the land being sold, is that wood going to be brought to market through the planning and the auction and timber sale process. If there's not sufficient wood on the marketplace which, frankly, there hasn't been over the last year and a half to two years, then we end up back in the cycle that we were in a decade ago with stumpage prices rising rapidly. We've seen nearly a doubling of stumpage prices in Minnesota in the last 18 months, particularly when it was selling for about $25 a cord now selling in the 40s. The last time we saw that happen was in 2004 or 2005 running up to the crash in 2006. So if there's not enough wood on the market, then somebody's going to fail because the product doesn't support that kind of a stumpage price over any long period of time. So if you bring in somebody new and there's not enough wood on the market, you may just lose somebody else that's here. But that's an outcome that we don't want. I don't think any community wants to trade this neighbor's job for maybe this neighbor's opportunity for a job. We want to make the pie bigger. We touched a little bit on biomass, but that's been something that's been talked about increasingly over the last, I won't say decade, give or take. So tell us a little bit about how that would work and what that impact would be on the industry. Well, our industry uses a lot of biomass. It has for many years, basically everything that saw mill is going to get used or resold for another use. So it may be burned to generate electricity. It may be converted into the sawdust that comes off of sawmills, which may end up for animal bedding and things like that. So we've been doing that for a long time. And basically it has been the products of the material that's coming in to produce the paper, the lumber, and the oriented strand board. We have not seen in Minnesota a real significant increase in biomass usage per se. So it's been basically a come along product in use with the existing industry, which makes a lot of sense. It's a very low value conversion and with the way our system is working now. So basically the loggers moving their equipment on, setting up, putting in the landings and the skid trails, and if there's any road work that needs to be done. And that's all supported by the paper mill, the saw mill, the oriented strand board plant to pay for that through the price of the stumpage. Then you have the biomass that's there also, which can be chipped, ground, and then chopped in basically for the a limited cost. But if that market is going to support the entire cost, it changes the economics entirely. And there's also a transportation issue. Some parts of the country have had a big expansion of wood chip plants primarily for export to Europe. That really hasn't happened much in the lake states, and a significant part of that is the transportation issue. We don't have year round deep water transportation to ship that stuff to Europe. The St. Lawrence Seaway is closed for several months of the year. Okay. So what you're saying is that it's been around for a while and it's relatively stable. And do you see it possibly increasing as more people come on board? I think that when we look at the future of the industry, I think that the future of our industry here in Minnesota and nationally, we're going to continue to make OSP. We're going to continue to make lumber. We're going to continue to make paper. But it's not low value conversions like biomass. It's higher value conversions. So it's what SAPI and Cloquet has done to modify their pulp mill with a $170 million investment a couple of years ago to convert that wood fiber into a higher form of cellulose which is then converted into shirts. Cell phone covers can be made out of cellulose. And there's a lot of research and activity. I mean, at the bench level, you can convert the cellulose molecules into basically anything you can convert petroleum molecules into. So I think that those types of conversions, from trees, the chemicals that can be extracted from that, whether it's for pharmaceuticals or other uses, I think that as we look out 30, if I've been involved in the industry for 30 years, if you look out, I don't think it'll be 30 years. Much less than that. I think we'll start seeing more of those types of conversions. And I think that's really a good niche for our state and our country. It's using our brains. It's making products that are the next generation of products while we continue to make the products that we make. Oh, fascinating. That's interesting. Let's talk a little bit about the workforce in general. Is it pretty vibrant now? I mean, do you have good number in terms of those who've been doing it for a long time and some newcomers to the industry? We do. And for any parents or kids that are watching, TreesyDoesIt.com www.TreesyDoesIt.com has got a series of videos on jobs in our industries. You know, all the way from loggers to foresters to finance and accounting people to nurses in the plants, chemical engineers. Our needs are great. This is a good industry. It's going to be here for a long time. It's not just strong backs anymore. It's using our heads, using our skills. And there are real opportunities for young people growing up. And we need to continue to focus on that through our educational system. Our state needs to continue to invest in the educational system so that students, young people growing up, have the skills that they need to move into these jobs. And so that they also know that not all of us have to move to the Twin Cities to make a living. Some of us don't want to live in the Twin Cities. We want to live up here for good and valid reasons. And we have to have jobs up here. And, you know, it's an important message for schools and kids to hear. So are you finding partnerships with schools then and local agencies to kind of help develop that initiative that way through Bemidji State, through the two-year institutions, through a greater Bemidji organization, has been really one of the leaders in developing those partnerships and looking out, you know, not just a year or two, but five or ten years as to, you know, what should we be doing as a community. We would hope other communities would look to Bemidji for that as a model. How is it you've got paper? You've got electrical. But it looks good. The outlook for the industry looks strong. You have excitement within. Well, you know, we still have the benefit of those investments that were made, you know, 10, 15, 20, 25 years ago. So we have competitive facilities, but they're under tremendous cost pressure. Whether it's electricity, I mean, 25% of the cost of making a ton of paper is electricity. Electricity rates, you know, continue to go up. You know, we've got a good workforce. We've got, you know, wonderful forests. And we've got people that are committed to this industry. Well, Wayne, I want to thank you for joining us here today on Lakeland Currents. And we've learned quite a bit about the future of the industry. We've got a lot of people that have gone down. That's been helpful. Paper markets, you know, have been kind of wiggling their way down and we've learned quite a bit about the industry and we're headed into the future. So thank you for joining us and please join us next time.