Hardly anybody who lives in the American West (and few who live to the east of it) needs to be reminded that the 2020 wildfire season was devastating, with more than 10 million acres burned, 17,500 structures destroyed and $3.5 billion in firefighting resources consumed. And by the time these words reach print, 2020 may almost seem like the good old days. With deep drought, record-setting heat and the unhealthy state of many forests managed by the U.S. Forest Service, 2021 is on pace to be worse

No single factor explains the record wildfires. According to the Forest Service, topography, climate, weather and fuel buildup play significant roles. But the last of these — the accumulation of highly combustible dead or diseased trees, brush and other vegetation — is the most important, accounting for more than half the increase. Indeed, nearly a third of the 193 million acres of national forests are, according to the agency responsible for managing them, at high or very high risk of wildfire due to excess fuels.

Fortunately, a fix is not beyond our reach. Several innovative projects are aimed at tackling the forest restoration backlog by leveraging the many values national forests provide to local communities, indigenous tribes, industry and conservationists. One idea, the forest resilience bond, has been deployed to raise $4 million in private capital (backed by repayment commitments from government agencies) to fund 15,000 acres of restoration in California, allowing wildfire risk on these lands to be reduced a decade sooner than forest managers could otherwise be expected to do the job.

In Fix America’s Forests, a report written for PERC, we identified practical reforms that would help to scale such innovations by empowering the Forest Service to partner with states, tribes and the private sector, and by encouraging market innovations to make restoration more cost-effective.

Good Fire Versus Bad Fire

Fire is the forest’s friend — sometimes, anyway. Frequent low-intensity fires in low-elevation Western forests promote a diversity of habitats for wildlife, limit the damage of plant diseases and insect infestations, and protect the ecological niche of old-growth trees that can ride out the occasional blaze.

This idea did not originate in some ivory tower. For millennia, native tribes intentionally set fire to forests as a management tool. Thus, restoring fire to Western landscapes where it has been excluded for the past century on Smokey Bear’s misunderstanding that less fire was always better than more, is often a primary route to forest restoration.

Large catastrophic wildfires, like those that have dominated headlines in recent summers, can, of course, have tremendous negative consequences for forest health, wildlife and watersheds — not to mention the people who live nearby. As you already know, big fires are becoming more frequent. From 1960 to 1999, an average of 3.5 million acres burned annually. Yet three times in the past decade, the annual total has eclipsed 10 million acres (not counting the 2021-22 fire season).

As both commercial timber harvesting and the Forest Service’s internal capacity to perform restoration has been reduced, forests have undergone drastic changes. Tree growth has declined by more than half, while tree mortality has nearly doubled. The consequence has been flagging forest health and increased wildfire risks.

Recognizing that fire can be both valuable and destructive, the Forest Service is trying to shift from an “extinguish all fires quickly” approach to one of managing fire risks to promote resilient forests and communities. This requires agreement on management objectives and a hands-on approach. As Mike Cloughesy, director of forestry at the Oregon Forest Resources Institute, put it, “Forest health is a human construct and it can best be promoted by human actions.”

What this means will vary among forests and communities. Forests that historically experienced frequent low-intensity fires can be managed to mimic historical fire disturbance. Thinning out small-diameter trees, clearing the forest floor of flammable debris and prescribed burns can be effective ways to increase resilience to catastrophic wildfires, which threaten such forests by burning the canopy and killing older trees. Such projects can reduce risk but must be regularly implemented to maintain desired forest conditions.

Forests near cities and other populated areas may require more active management than remote areas, where prophylactic fires would be less destructive. The wildland urban interface, where forests abut communities, has grown by 46 million acres and 40 million homes in the last two decades. Reducing the risk of severe fire in these areas is key to saving lives, homes and valuable environmental amenities.

Private Money for Public Restoration

The Biden administration has called for more than doubling the acreage in which forested areas are culled of hazardous fuels over the next 20 years. However, the Forest Service has neither the budget nor the staff to perform restoration work at the scale needed — and most likely, the Biden goals are inadequate to stem dangerous wildfires.

The average cost of restoring an acre of forest is $1,000. With 80 million acres in need of attention, it would take decades to clear this backlog even if the Forest Service devoted its entire $2 billion annual forest management budget to restoration, instead of continuing to allocate it among many competing priorities. In 2020, it’s worth noting, only $350 million of this $2 billion was allocated to forest management to reduce the risk of severe wildfire.

In any event, the agency just does not have the personnel to ramp up restoration on its own. While the number of employees with firefighting expertise has doubled since 1992, the number of experts in forest management and restoration has been cut by more than half. A 2019 survey of Forest Service managers concluded that “it is readily apparent that the Forest Service cannot meet national direction to increase the pace and scale of forest restoration with its current work force.”

Fortunately, states, tribes and private partners do have the capacity to close at least some of the gap. National forests provide significant benefits to a gamut of public and private interests — think clean air and drinking water, outdoor recreation and habitat for wildlife. This gives each stakeholder an incentive to contribute.

In northern Arizona, for instance, the National Forest Foundation and the Salt River Project (a quasi-public water utility) formed the Northern Arizona Forest Fund so states, localities and the private sector could contribute to restoration projects in nearby national forests. The broad base of supporters reflected the wide variety of benefits that national forests provide. The Salt River Project, for instance, has an incentive to support restoration because wildfires threaten its water storage capacity and purification costs. Other companies want to protect outdoor recreation opportunities that support local tourism.

Since 2015, the Northern Arizona Forest Fund has raised $6.2 million, which has enabled it to reduce fuel accumulation on 13,600 acres in three national forests, to improve 2,600 acres of wetlands, to plant 90,000 trees and to address erosion along 170 miles of roads and trails. Its success has also led to the creation of a similar fund in southern Arizona.

Many communities, however, cannot afford to cover the upfront cost of projects in which the benefits will largely be realized years down the road. But private capital can overcome this challenge, effectively spreading the cost over the life of a project. In the Tahoe National Forest in California, Blue Forest Conservation and the World Resources Institute, two conservation-oriented nonprofits, developed forest resilience bonds, a financial tool to help pay the needed upfront investment in restoration.

Forest resilience bonds are repaid over time as the value is realized by those who benefit. In this case, private foundations and an insurance company provided the upfront capital. The Yuba Water Agency, the county water utility and manager, and the state of California are repaying the bond as the restoration work reaches certain benchmarks.

Unfortunately, such enterprises are limited by the fact that federal appropriations rules prevent the Forest Service from joining as an equal partner in finance. Federal agencies cannot commit funds beyond their current appropriation, which is generally four years. Changing the rules to allow the Forest Service the flexibility to commit to partnerships like the Northern Arizona Forest Fund or to sign onto a forest resilience bond as a beneficiary would enable these innovative models to scale up to a size that makes a big difference. One way to do this would be to endow the Forest Service with a restoration fund from which it could commit to long-term cost sharing agreements with public and private partners.

Empowering the Forest Service to commit to long-term restoration partnerships could have another important benefit: spurring private investment in processing innovative forest products, like biochar and engineered wood, to replace hardwood flooring. Currently, forest restoration is not profitable in many areas because the material removed is lowvalue brush and small-diameter trees. But at least some of this material could be made into valuable products, provided the new mills are there to transform the plant debris.

The catch: infrastructure to process small diameter trees culled from healthy forests requires a large upfront commitment, and a modern mass timber plant can cost tens or even hundreds of millions of dollars. Investors have little reason to commit such resources without parallel long-term commitment from the Forest Service. If the ducks can be lined up properly, though, this could be a win-win, creating a profitable market for forest waste.

Passing Go

Ramping up restoration also means getting projects through the environmental review process in timely fashion. Although well intentioned, such reviews slow projects and make them more costly, especially in regions where national forest decisions routinely generate interest-group conflict and litigation. Environmental impact reports under the National Environmental Policy Act (NEPA) take an average of three years to complete. And the limited number of Forest Service personnel to work on such reports is, in itself, a serious bottleneck.

Recently, the Forest Service has experimented with leveraging the value of national forest projects to cover these administrative costs. The staff of the Colville National Forest in eastern Washington State designed several restoration projects but lacked the expertise and money to complete environmental reviews. The Northeast Washington Forest Coalition, a local collaborative group working to enhance forest restoration and reduce wildfire risks, proposed to have a contractor pay for the environmental review in exchange for a contract to perform the work.

A local timber company, Vaagen Brothers Lumber, bid on and won the contract for the A-to-Z Project, which involved restoration of 54,000 acres. Under the terms of the contract, the company hired a third party to perform the NEPA analysis under the supervision of the Forest Service. This way, there would be no conflict of interest. Vaagen Brothers Lumber had invested in several mills equipped to process small-diameter materials, which meant that it could recoup the NEPA costs by processing the material harvested during the restoration project.

However, the potential of this approach is limited by the extent to which restoration projects can generate a market rate of return on investment after costs, the concern that the NEPA analysis will deep-six the project, and the time and money required to complete the analysis. Reforms to streamline NEPA could enable this model to be replicated elsewhere.

To this end, Congress has created a variety of “categorical exclusions” to encourage some types of projects that have predictable environmental impacts and could otherwise be frustrated by the delays and administrative costs associated with NEPA. The environmental review process for categorical exclusions is considerably less than a full NEPA review, reducing the average time from three years to seven months.

Categorical exclusions have already reduced NEPA’s burdens for many sorts of Forest Service projects. However, restoration projects are substantially less likely to qualify for an exclusion than others. Furthermore, categorical exclusions for forest restoration are subject to restrictive acreage limits. Restoration projects under 3,000 acres may be welcome, but are no substitute for more ambitious projects reflecting the massive scale of the problem. Relaxing strict acreage restrictions could help increase the pace and scale of restoration.

Cutting the Gordian Knot of Litigation

Litigation can — and at times does — play an important role in holding the government accountable. But it can allow relatively minor policy disagreements to trump broader considerations of forest health and the public interest. Of the nearly 300 lawsuits filed challenging Forest Service projects from 2005 to 2019, some two-thirds challenged forest restoration projects. The consequences were not evenly distributed, however. Some areas, especially Montana and Northern California (ground zero to many of the most serious recent wildfires), were targeted far more frequently than average.

Moreover, even the threat of litigation can be a major source of delay, as agencies try to litigation-proof their decisions. A survey of Forest Service personnel found that environmental reviews take substantially longer where an agency expects a significant risk that the decision will be litigated. The average NEPA delay for a forest restoration project that is litigated is 681 days, compared with 308 days for projects not caught in the litigation maze.

The Bozeman Municipal Watershed Project represents the worst-case scenario for such delays. In 2004, the Forest Service and City of Bozeman determined that wildfire risk in Hyalite Canyon, just south of Bozeman, threatened 80 percent of the community water supply. Six years and endless roadblocks later, the Forest Service completed its environmental review and formally approved a plan to tackle this risk through a mix of prescribed burns and mechanical thinning.

But opponents were just warming up. First, an administrative appeal was filed, forcing the agency to do more analysis before confirming the original plan. Then, a lawsuit was filed. While that was pending, the U.S. Court of Appeals for the Ninth Circuit issued a new rule governing Endangered Species Act reviews of forest plans, which necessitated another round of review for the project. This, too, was completed and, again, the Forest Service confirmed the original plan. In 2020, more than 15 years after the agency recognized the urgent need to address the wildfire risk, a court finally allowed the project to proceed (a decision that was promptly appealed).

Such litigation can sometimes serve the public interest by forcing more careful environmental analysis — although in this case, 15 years of delay did not lead to any significant changes in the plan. But litigation always comes at a cost, with agency resources spent on the analysis, as well as money spent by the challenger, the government and the court in the litigation. In this case, of course, the cost also included continued exposure of Bozeman residents and their water supply to serious (and rising) wildfire risks.

Such extreme delays are frustrating to local communities and Forest Service personnel. They are also a deal-breaker for anyone considering investing in a forest restoration project. Investors need to know when restoration will occur and when their investment will begin to pay off.

Fortunately, litigation can be made less disruptive without sacrificing the potential benefits of greater agency accountability. Today, lawsuits can be filed up to six years after a federal project is approved. A much earlier deadline would provide greater certainty without denying legitimate grievances a day in court. California, for instance, requires cases under its state analog to NEPA to be filed within 30 days.

Additionally, if projects are litigated, the courts could be required to expedite the proceedings in cases where the Forest Service’s ability to move forward with a project is threatened. The bipartisan Emergency Wildfire and Public Safety Act, introduced in 2020, would limit the time a project could be enjoined to 60 days and direct courts to expedite review in such cases.

Creating a Forest Restoration Economy

Increasing forest restoration to the scale needed to address the backlog will depend on having a sustainable funding source. Forest restoration is not a one-time effort. In many cases, it will require the regular removal of small-diameter trees, brush and other lowvalue vegetation. Hence, the key to ongoing success is creating markets for these waste materials, transforming forest restoration from a costly necessity to a profitable enterprise.

Getting from here to there, however, will also require substantial investment by entrepreneurs in innovative products made from forest waste and the processing capacity to convert low-value wood into high-value products. Cross-laminated and glue-laminated timber products, for example, can use small-diameter timber — the trees that must be culled to keep the large-diameter trees safe — to produce structurally sound building materials.

These engineered wood products are common in Europe and are gaining market acceptance in the U.S. But the infrastructure to process small-diameter wood and other materials requires a large upfront commitment and the promise of a long-term return to justify it. This just isn’t going to happen unless we bring certainty to the legal path to forest restoration.

Yes, We Can

Lands managed by the Forest Service play a critical role in countless communities across the Western U.S. as a source of fresh air, clean water, recreation and economic opportunity. However, unless these forests are properly cared for, these values will be increasingly vulnerable to the consequences of catastrophic wildfires.

While some threats to national forests, like climate change, may require long-term policy changes, there is an urgent need to address extreme wildfire risks now. To do that, the Forest Service must be empowered and encouraged to collaborate with other public and private interests with stakes in managing the looming catastrophe.

Forest restoration won’t be cheap, particularly when one considers the backlog created by decades of underfunding and misaligned management strategies. But it certainly won’t be as expensive as business as usual. And with the right incentives, public outlays can be amortized over decades — or better yet, recouped through the creation of new industries built around forest waste.

One celebrated strength of the American economy is its flexibility to adapt to changing circumstances. Another is the ability to create public-private partnerships that can serve the public interest more efficiently than either government or business alone. We can save the Western forests (and the communities that depend on them) from piecemeal destruction. All it will take is a lot of initiative.