A John Deere shovel lifts a log while sorting and stacking logs in the yard at the Kinza Lumber mill in Pilot Rock.

Pilot Rock is a mill town. Each entrance sign to the town of 1,500 hosts a broad circular saw painted with an Eastern Oregon landscape.

Just past the sign on the north end of town lies Kinzua Lumber. 

Hills and valleys of timber wait in the lumber yard to be processed.

Across the yard, the plant buzzes with activity as all those pine logs turn into planks and boards to one day be used as doors and window frames.

Oregon was once full of mill towns. But very few are left today.

Pilot Rock doesnt host the businesses it used to, and in many ways it has become a bedroom community of Pendleton, 15 miles to the north. But Pilot Rock continues to survive, much because of the survival of its mill.

Kinzua, and Pilot Rock, found a way to survive by teaming up with Boise Cascade, a forest products giant based in the Northwest but sprawling around the world. 

The Kinzua mill fits a specific niche to manufacture pine lumber. Thats why it looked like another gem for Boise Cascade to put in its crown when the larger company bought the mill in 2009.

Its a good outlet for our pine log volume, said Tom Insko, Boise Cascades inland region manager for Northeast Oregon and Washington.

Also, the pine shavings go over the Blue Mountain pass to the La Grande particle board plant.

That supply is very strategically important to our particle board plant, Insko said. As we continue to see facilities go away, supply of that product is more and more difficult to procure for the plant.

Also, the culture at Kinzua emphasizes the same values Boise Cascade wants in its mills and workers.

After we looked at the plant, we continued to like what we saw, Insko said. Theres a good workforce, a culture of success.

The advantages work both ways. 

Tony McKague, forester and log buyer at the Kinzua mill, remembers things being very slow in 2009.

Before Boise Cascade, buying plummeted,?McKague said. We struggled to buy logs.

Fewer logs meant fewer work hours. That meant less money circulating through the community to the few businesses left in town. 

Since Boise Cascade has taken over weve had a steady flow of logs,?McKague said. 

That means steady work, steady paychecks and steady money reverberating through the community.

Boise Cascade has been a very good thing for this mill and community,?McKague said. They have attacked things saying, Were going to run this mill and make money.

 

Supply and distribution

When it comes to lumber supply and distribution, Kinzua Lumber has become a microcosm of the overall Boise Cascade company. 

About 85 percent of the logs coming to the Pilot Rock mill come from private land, Insko said. About 9 percent come from federal forest lands, and 5 percent from state lands.

 The private land timber comes from central Washington and central Idaho. The timber coming from the federal lands comes from Northeast Oregon as well as Idaho and central Washington. There arent many state forests in Eastern Oregon, so most state timber comes from Idaho. 

Were purchasing from quite a broad geographical area, Insko said. 

The lumber coming out of the Kinzua mill is called cut stock, Insko said, and is used to make doors and window frames. They could go as near as the Bend area, to manufacturers there, or as far as companies in the Midwest. From there a window frame or door could go anywhere around the world. 

 

Changes in the forest

The heavy dependence on private land is a reflection of what has happened to the industry over the last 15 years, Insko said.

To give an example, he used what is known as the Iron Triangle in Eastern Oregon: the Umatilla, Wallowa-Whitman and Malheur National Forests.

Insko came into the industry in 1995. Then the harvest volume off the Iron Triangle was 180 million board feet. In 2010 the harvest volume was 75 to 78 million, Insko said. 

And not all lumber is created equal.

That 180 million board feet in 1995 was mostly timber volume. Today, half the 78 million harvested cant be used in Boise Cascades facilities.

Its firewood and other materials like that, Insko said. Its important to remove that. Its not a bad thing.

But 40 million board feet the rough volume of timber lumber coming off the Iron Triangle isn’t enough to run a single mill for a year, Insko said. 

Thats three national forests producing less saw timber than it takes to operate a single mill in Eastern Oregon, he said. Its a huge impact.

McKague agreed.

The Kinzua mill alone processes 45 to 60 million board feet per year, he said.

Looking at the national forest closest to Pilot Rock, the Umatilla National Forest, he said it takes about 27 million board feet from the forest every year. But 86 percent of that is firewood, pulp and chips those products that cant be used at the Kinzua mill. That leaves 4 million board feet coming off the Umatilla per year.

Kate Klein, operations staff officer on the Umatilla National Forest, had the same numbers for board feet on the forest this year, and the 86 percent figure.

Similarly, in 2009, she said the Umatilla harvested 30 million board feet, with a third of that usable in timber mills. 

Klein said this reflects the changing view of how the Umatilla National Forest is managed. On the east side of Oregon, she said, the standard is to not cut anything with a diameter greater than 21 inches. The goal is to protect old growth and restore the forest, she said.

In many forests in Eastern Oregon and across the West forests are choked with lots of little trees from a century of fire suppression. Historically, Eastern Oregon forests had few large trees and not much in between. Today, many forests are made of dense stands of smaller, younger trees.

Managing that means taking out more small timber, which means less board feet usable in timber mills like Kinzua.

Over time it is contributing to the downward trend in saw timber volume,?Klein said. 

Whether those smaller trees are what the timber companies want is debatable. Klein said the Umatilla National Forest is still able to sell much of that wood to boimass energy producers or pulp mills. 

Theres a demand, she said. Its just a different part of the forest products industry.

 

Forest health

The longer term problem of timber availability is even greater than the current economic downturn and the downturn in the housing market, Insko said.

And that isnt because the forests arent producing. It is because court challenges and other paperwork keeps companies like Boise Cascade from getting in and getting the lumber it wants, he said. 

He said 50 percent of what is growing on the forest is dying. If the national forests overall grow 780 million board feet, 390 million are dying because the forests are in such poor health, Insko said.

Insko believes if more lumber were coming off public land, less would come from private land. That 85-15 percent split may even out. But as it is, the market follows the rule of supply and demand. With less supply from public land, more is demanded from private land.

As the supply of logs decreased the remaining mills have obviously competed aggressively for that resource that is available, Insko said. Thats kept log prices relatively high and enticed private timber owners to harvest and make a profit off their logs.

In essence, Klein reflected similar numbers in growth and death of trees on the Blue Mountains. The annual growth for the Umatilla, Walllowa-Whitman and Malheur forest is about 800 million board feet. The mortality rate is 500 million board feet. That leaves a net growth of about 300 million board feet each year, Klein said.

Whether thats good or bad depends on your point of view.

Its a natural thing,?Klein said. Trees grow and trees die. So thats normal.

The only cases where it is not normal is in those forests choked by smaller trees, she said. Thats where forest health is at risk to insects and diseases.  

Our focus right now is to try to reduce those stand densities so that theyre more in line with where they should be ecologically, where they were historically,?Klein said. Thats what were focused on.

 

Diversification

Boise Cascade hopes to weather the current storm of tough times from the restricted access to federal lands to the extreme downturn in the housing market with a seemingly simple tactic: diversification.

Our objective is to put any given log into the mill where we can generate the highest return, Insko said. Weve positioned ourselves and been thoughtful of where we saw log supply going over time. As weve been downsizing across Idaho and Northeast Oregon, weve really tried to develop an integrated model that increases value at multiple points in the system.

Taking chips from the Kinzua mill to La Grande for particle board is a perfect example.

Weve focused on getting our cost structure and lumber mills to a level we can compete on a broad basis, Insko said. 

With multiple products, any one might get hit by an economic downturn, but it is less likely all will get hit at the same time.

McKague has seen other changes in the lumber industry over the past 50 years. One thing that has changed since his father was a forester, said McKague, is cooperation between mills. It has changed from the dog-eat-dog world it once was. In addition to working Kinzua into the Boise Cascade machine, McKague said he has seen more cooperation between mills of different companies in recent years. 

The Kinzua mill processes pine logs. But if it bought an order that included some fir, and another mill had pine, the two might swap. 

In the past that didnt happen,?McKague said. You were on your own.

That isnt the case any more.

If were going to survive weve got to work together, not against each other,?he said.

 

The future

With the support of Boise Cascade, McKague is confident about Kinzuas future.

I see no reason why this mill wont survive many more years,?he said. Its efficient, weve got a great crew, we have ownership backing us. If theres going to be a pine mill to survive, this is certainly going to be it.

That said, he agreed with Inskos belief. While diversification is key to Boise Cascades survival now, Insko believes the key to the future may be better access to the national forests.

At some point were going to have to see more activity on our national forests, he said. And one of the primary reasons is because those forests need to be restored. Theyre in awful shape. Theyre crowded. Theres high mortality rates. Theres a growing risk of catastrophic fire.

Its a two-way street,?McKague agreed. Not everyone may agree, but in my opinion the national forest needs timber harvest. And mills need the forest to have a product.

To prepare for the future Boise Cascade is trying to work with political leaders to free up some of those board feet in the forests. 

In looking at the future, Insko said, the mills that stick around will be dependent on what lumber they can get from the national forests. The industry is in the hands of that supply.

Its going to have to be. Otherwise more mills will go away and there are not many more of us left, he said. The risk is industry going away if something doesnt happen in terms of national forest getting more active.