Lumbering along, barely

Brad Siegel can clear 6 to 10 acres of beetle-killed timber in a day with a full crew. This summer, however, he's settling for a single acre per day, as he removes topple-prone trees from campsites and insulates Keystone, Colo., from wildfire. There's just not a market for the wood.

When Siegel calculated the per-acre rate he would charge the White River National Forest for this stewardship contract back in 2008, he anticipated offsetting costs by selling the timber to a local stove pellet mill. But last year, both nearby mills made more pellets than the market could handle and eventually ceased production. So after clearing more than half his contracted 1,038 acres, Siegel's sitting on 8,750 tons of logs, and selling his current cut as firewood.

"I shouldn't go broke on it," says the third-generation logger, who moved to Colorado after getting laid off from a recession-hit Washington mill. But if he were to bid on another beetle-kill contract that recently came up near Frisco, he would have to charge the feds 65 percent more to make it worth his while.

Such woes are not uncommon in Colorado and southeastern Wyoming, where federal officials are putting tens of millions of dollars towards clearing beetle-killed trees from some 210,000 acres near communities and along hundreds of miles of roads and powerlines. The burst of economic activity that many hoped would be the upside of the beetle epidemic -- which has claimed some 3.6 million acres of lodgepole in both states -- has yet to materialize. Many of the trees have been dead for years, and their value as lumber is declining. Meanwhile, alternative markets for the wood have been unreliable or slow to emerge, forcing contractors to charge more for their already expensive work. The net result, says Cal Wettstein, Forest Service Rocky Mountain Region beetle-kill incident commander, is that "the overall cost has increased over the last several years." And the feds may ultimately end up holding the bag.

Complicating such efforts here and elsewhere is the continued decline of the timber industry. The West lost about 120 lumber mills over the last decade and was down to only 169 in 2009, according to the Western Wood Products Association. In the first quarter of this year, Western mills were producing at an average of only 70 percent of capacity. Colorado's last big sawmill, which processes beetle kill, went into a form of corporate bankruptcy this spring, even after a $500,000 federal stimulus grant. And with housing starts declining sharply over the last three months and expected to stay at historic lows for 2010, the short-term future looks grim.

Mills that have diversified do better, experts say. "I don't know whether we're over-optimistic or whether I'm stupid or just stubborn, but we continue to fight to survive," says Eric Sorenson, co-owner of Delta Timber Company, Colorado's second-largest mill. A $500,000 stimulus grant stabilized his business, Sorenson says, by allowing it to double to 40 employees, process new species of trees and make specialized boards used for trim, shelving and other products, which sell better than the company's former staple: aspen paneling. Ninety percent of the company's trees were victims of beetles or sudden aspen decline.

Given the sheer volume and declining quality of the cut, though, isolated success stories hardly guarantee contractors like Siegel a market. Colorado's two major pellet mills are running again, more cautiously now, but construction won't likely recover soon. Biomass plants that convert trees into heat, fuel or electricity have been much ballyhooed, but the handful that have gotten off the ground in the state are relatively small. Meanwhile, big proposals -- Vail has been pushing a 28-megawatt plant without success -- often have trouble securing financing because they can't lock in a long-term supply of wood.

Beetle-kill tree removal may simply end up an almost fully subsidized industry, confined to areas where dead trees threaten people or critical infrastructure. "That's what it's gotten to," says U.S. Forest Service Rocky Mountain Region community forester Susan Ford, who works with state and private foresters to build markets for the wood. "And I think that's what it's going to be."

• Growth & Sustainability