Local Timber Mill In Receivership Continues To Struggle
by Kati O'Hare
May 24, 2012 | 1126 views | 0 0 comments | 5 5 recommendations | email to a friend | print
MONTROSE – Two years have passed since Intermountain Resources in Montrose went into receivership, and the timber mill, the only functioning mill in the Rocky Mountain region with the capacity to deal with the growing pine and spruce beetle epidemics, continues to struggle to keep operations consistent.

The mill reopened May 14 after being shut down for about four weeks, said Pat Donovan, its court-appointed receiver.

"We couldn't get logs," he said.

The mill had been operating on and off with a limited and inconsistent supply of logs even before it went into receivership on May 19, 2010.

When the housing market bubble burst and lumber demand plummeted, the mill struggled to fulfill timber contracts that were not economically viable because of the contracted prices.

And after receivership, the mill was left to deal with high-priced contracts and was not allowed negotiate any more timber purchases, Donovan said.

The mill's predicament, combined with U.S. Forest Service efforts to manage the beetle kill epidemics, led to talk about how to get logs out of the forests to keep the mill operating.

Those efforts continue, but there’s not enough volume to upgrade mill operations.

With few logging contracts, the mill was unable to stockpile logs prior to the "break-up" season, when trucks have limited access to the forests because of melting snow, Donovan said.

As a result, the mill had to shut down once again, sending employees back to the unemployment office.

"We had 85 people collecting unemployment," he said. "It's not that we don't want to have them on our payroll, but if I can't operate, then I can't pay them. … This is jobs, and if that mill doesn't run, we're losing as a whole community."

As a result, the mill was short of workers when its operations resumed.

"It's very disruptive," Donovan said of the temporary closures. "It's disruptive trying to keep a workforce in place,” and disruptive as well “to our supply chain, our loggers and haulers.

“Then, on the other side of it, if we are not a reliable, consistent route for our suppliers, they are not going to haul our logs. They need a reliable source."

Meanwhile, Donovan is scrambling to obtain enough logs to stay open. He is lucky to be in contact with a few loggers who purchased Forest Service contacts and are willing to enter into agreements with the mill.

"But there are very few loggers with the financial capability and the desire to enter into those contracts, because they become exposed, if the mill were to shut down," Donovan said.

He said he hopes the logs the mill has secured will get it through the summer.

"It's too much of an unattainable model when you have to scramble like that. We need to be able to plan a couple of months out," he said.

Upon going into receivership, the mill had 51 contracts through the Forest Service, and only two of them were economically feasible to fulfill.

The Forest Service decided to allow mutual cancellations of contracts that met specific criteria, said Lee Ann Loupe, spokesperson for the Grand Mesa Uncompahgre and Gunnison National Forests.

Loupe said that Intermountain Resources cancelled all seven contracts approved by the Forest Service, and the Delta mill was offered three mutual cancellations, all within her forest territory.

After the contracts are cancelled, those logging units are re-evaluated by the Forest Service and put back up for bid. But that takes time, Loupe said.

Of those contracts, eight will be reoffered in the next three years — about 14,156 ccf (100 cubic feet) will be reoffered this year, 12,488 ccf in 2013 and the remaining 6,517 ccf will be reoffered in 2014.

Although mutual cancelations sound good, Donovan said, they benefit neither the mill nor the Forest Service – the mill looses log supply, and it takes longer to log areas that need it, which can lead to problems.

The mill is currently dealing with one of those problems – the quality of the logs removed under older contracts. He said some older contracts have logs that have been dead for up to six years, and are so cracked and dry they are no value to the mill. It's been a contentious issue between the Forest Service and the loggers, he said.

"Things just move very slowly," he said.

A reliable and long-term source of logs is what will make the mill attractable to a potential buyer, Donovan said. But after two years working toward that goal, the mill still doesn't have a long horizon, he added.


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