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Irrationality of Continued Fire Suppression : An Avoided Cost Analysis of Fire Hazard Reduction Treatments Versus No Treatment
Gary Snider, P J. Daugherty and D Wood
Without large-scale implementation of fire hazard reduction treatments, the costs of uncharacteristic crown fires in southwest forests will continue to increase. Federal policy continues to allocate vastly more funds to suppression than to prefire hazard reduction. We examined the economic rationality of continuing this policy of emphasizing fire suppression activities over restoration-based fire hazard reduction treatments. We compared treatment plus fire suppression costs to the cost of fire suppression without treatments over 40 years for southwestern forests. This avoided-cost analysis estimates the amount one could invest in treatments to avoid the future cost of fire suppression. Using conservative economic values, we found that avoided future costs justifies spending $238-601/ac for hazard reduction treatments in the southwest. We conclude that the policy of underfunding hazard reduction treatments does not represent rational economic behaviour, because funding hazard reduction would pay for itself by lowering future fire suppression costs.
The history and culture of forest fires in the United States has been chronicled and described by Pyne (1982), Pyne et al. (1996), and Arno and Allison-Bunnell (2002). In 1905, the Bureau of Forestry became the USDA Forest Service with the responsibility of protecting newly designated forest reserves. A critical part of its charge was the prevention and control of fires. In 1908, Congress set up a system, “like an open checkbook,” that essentially authorizes deficit, unlimited expenditures for fire suppression (Pyne et al. 1996, Arno and AllisonBunnell 2002). Subsequent to the fires of 1910 the Forest Service embarked on a campaign to “battle fire to death” (Pyne 2004). Since that time the fire suppression checkbook has never run out of blank checks and remains open to this day.
Although it has become increasingly apparent that an ounce of presuppression activity is worth a pound of suppression funds (Pyne et al. 1996, Daugherty and Snider 2003) federal land-management agencies continue to allocate vastly more funds to suppression activities than to prefire hazard reduction. To a large degree, the histoty and institutional culture of management agencies and a long-conditioned public have perpetuated this policy of investing in the further disruption of fire cycles and the continued depreciation of forest values. In this article we examine the economic rationality of continuing this policy.
Historical practices starting with European settlers (e.g., overgrazing in the late 1800s, selective harvesting of large trees, and fire exclusion) have created vast areas of unhealthy forest ecosystems in the southwestern United States (Covington and Moore 1994). These practices have caused significant structural and functional changes in southwestern ponderosa pine (PP) and dty mixed-conifer (DMC) forests that include unprecedented tree densities and fuel loadings and anomalous fire regimes that are inconsistent with the region’s evolutionary history (Covington and Moore 1994, Dahms and Geils 1997). The overly dense conditions, exacerbated by drought, have increased bark beetle mortality and the size and frequency of stand-replacing crown fires. These interconnected symptoms warn society of the jeopardy of losing these forest ecosystems. To avoid this loss, we must implement large-scale restoration-based thinning treatments designed to significantly reduce tree densities, improve the cover, composition and production of the herbaceous understory, and reintroduce fire to its normal disturbance regime (Fule et al. 2002), sooner rather than later. Rieman et al. (2003) argued that we need additional study as to the effects of restoration-based thinning treatments and the use of fire in management on organisms, habitats, watersheds, and ecosystem processes. Continued study and research is necessary if we are to truly implement adaptive management (AM); however, the tired “more research is needed” mantra should not be used as an excuse to forego large-scale restoration-based fuel treatments. Hardy (2005) notes that there is no possible single metric capable of integrating all that must be considered with respect to fire hazard, and Finney (2005) states that the calculations required to determine burn probabilities and fire behavior are computationally and practically impossible because of the nearly infinite sequences of weather and ignition timing and location.
The significant gaps in our understanding of probabilities and effects are not limited to fire ecology and management. An analogous situation exists in fire economics. Fairbrother and Turnley (2005) have argued that without an understanding of the type, likelihood, and magnitude of changes that will result from fire (uncharacteristic or controlled burns) or conversely from the lack of fire, one can not quantify the risks, costs, and benefits associated with fire management activities. Kline (2004) describes the typical steps in determining the expected value of present net benefits and the information that would be required to make these calculations. First, one must know the probability of an uncharacteristic wildfire occurring at any given point in space and time with and without treatment. This information is not going to be available any time soon. He further states that any attempt to evaluate the net benefits of fuel treatments via cost-benefit analysis would require such information on everything from potential changes in fire severity and suppression costs to effects on forest conditions and ecological functions. This information must be sufficient to meet prevailing demands for scientific quality in forest management and policymaking. He concludes that currently there is insufficient information and analysis to determine whether or not investment in hazardous fuel treatments represents a rational economic choice. Conversely, the same lack of information and analysis could have been used to argue that we can not determine that continuing the current policy represents a rational choice, implying that a change in policy requires rationality, while continuation does not.
Although empirical precision and theoretical rigor improve the accuracy of costbenefit analysis, obviously unattainable precision is unnecessary for policymaking. Given the current conditions of PP and DMC forests of the arid southwest and the inevitability of future uncharacteristic largescale crown fires, simple and relevant is preferable to elegant and inexpedient. Although we understand that the issue is not a simple dichotomy between fire suppression and treatment, we argue that waiting for a complete understanding of the social and ecological complexities before taking significant action is folly.
A number of recent studies have asked the question, How much are fire hazard reduction treatments going to cost and can society afford to pay for restoration-based treatments? These studies examined the financial feasibility of implementing these types of treatments (Lynch et al. 2000, Fiedler et al. 2002, Larson and Mirth 2004). In general, these studies found it difficult to justify treatment expenditures based on the value of the wood fiber removed by the treatments. This conclusion suggests that restoration-based fuel treatments must be considered an investment and would need to be justified by the marginal benefits/value provided by a healthy ecosystem. However, it is possible we have been asking the wrong question. Perhaps the question we should be asking is, Can we afford not to implement restoration-based hazardous fuel reduction/thinning treatment? In other words: will continuing the current policy of emphasizing fire suppression cost society more than the alternative of investing in hazard reduction.
The ever-increasing cost of not doing restoration-based hazard reduction treatments suggests an approach for determining the level of investment that avoids the aforementioned described difficulties with costbenefit analysis. One can set a conservative lower bound on the amount to be invested by setting hazard reduction funding at least equal to the direct costs, such as fire suppression, that would be avoided by investing-in other words, each dollar invested in restoration-based hazard reduction would save at least a dollar in suppression. This study presents results of an economic analysis comparing the cost of implementing restoration-based hazard reduction treatments to no treatment for areas identified at high risk for crown fire. The with- and withouttreatment comparison focuses on PP and D MC forest ecosystems in Arizona and New Mexico (Forest Service Region 3). The analysis provides a conservative estimate of the potential economic losses due to a continuation of policies that emphasize suppression over proactive restoration-based hazard reduction treatments.
We developed a relatively simple economic analysis that compares the costs of restoration-based hazard reduction treatments to the costs of fire suppression and rehabilitation expected without treatment. This avoided-cost approach answers the question of how much can we invest in prevention to avoid the continued cost of fire suppression and rehabilitation. The approach assumes that the cost avoided (fire suppression) by investment is otherwise unavoidable, which is clearly the case with wildfire in the wildland-urban interface.
We used a 40-year time horizon for analyzing costs and a 4% discount rate for converting costs to PV. Annual suppression and rehabilitation costs were discounted to the present and summed to yield the present value (PV) of costs without treatments. Hazard reduction treatments were assumed to have an initial cost (e.g., restoration thinning and burning) plus maintenance costs (e.g., prescribed fire) that occurred every 10 years after the initial treatment. The withtreatment PV was calculated as the sum of the discounted costs of initial and maintenance treatments and the discounted costs of reduced fire suppression and rehabilitation. The net PV (NPV) of treatment was determined using a “with” minus “without” procedure: the PV without restorationbased treatments was subtracted from the PV with treatment to calculate the net value of the treatment. This difference (NPV) between projected with- and without-treatment costs represents a partial measure of the economic value of these treatments, i.e., the net avoided cost due to treatment. We determined break-even values by raising or lowering the initial treatment cost per acre until the NPV equaled zero. The break-even value indicates the dollar per acre that could be spent on treatment such that the PV of the treatment costs is just covered by the PV of avoided fire suppression and rehabilitation costs.
Study Area. The PP and DMC forests of Arizona and New Mexico provide a good application area for the analysis. These forests have undergone important changes, with two of the most important being simplification in structure and unprecedented increased tree densities (from about 50 trees/ac to upward of a 1,000 trees/ac). These conditions have resulted in increased fuel and the existence of a continuous fuel ladder. In 2002, there were 9,887,181 ac of PP and DMC forests in Arizona and New Mexico (Table 1). Over 90% of these forests are at high (condition 3) or moderate (condition class 2) risk of losing key ecosystem components (Schmidt et al. 2002). It is not possible to know exactly when, where, or the size of a future fire. We do know that given the current condition of the PP and DMC forests of the arid southwest, those areas at high risk are going to burn.
Table l. Acres and percentage of Ponderosa pine (PP) and dry mixed-conifer (DMC) by fire regime condition class for Arizona and New Mexico combined.
|Class I||Class 2||Class 3||Total|
Source: Based on data from Schmidt et al. (2002)
Data and Mode/Assumptions.
We set the initial expected acres burned per year without treatment at 443,307 ac. This figure was based on the average annual fire acreage for fires greater than 100 ac on state and federal lands in Arizona and New Mexico during the period 1993-2002 (National Interagency Fire Center [NIFC] 2003). The 443,307 ac represent approximately 4.5% of the total acreage of PP and DMC forests in Arizona and New Mexico. We assumed that future fire occurrence will be similar to that experienced during that decade.
We computed the costs for suppression and rehabilitation as the average per acre expenditure for large fires (greater than 100 ac) on public lands for which the Forest Service provided suppression support during the period 1993-2002 (Gebert 2003). All costs were converted into 2002 dollars. We only included variable costs directly associated with large fires. We did not include fixed costs of preparedness. During this period Forest Service Region 3 spent an average of $377/ac per year on suppression for large fires. The $3 77 I ac fire suppression cost is slightly less than the $387 /ac figure reported by Donovan and Noordijk (2005). They spent an additional $22/ac per year on emergency rehabilitation, which only covers emergency measures to control erosion/ sedimentation and only occurs on a limited number of acres. Rehabilitation does not include reforestation activities. This approach assumes that Forest Service costs are adequate estimators of costs on all public lands.
We assumed that restoration-based fire hazard reduction treatments can eventually eliminate large-scale, uncharacteristic crown fires and associated variable costs of large-fire suppression and rehabilitation incurred in the recent past. We assumed that a given amount of acres required treatment and that the number of largefire acres would diminish in proportion to the amount of required acreage shifted from high or moderate risk to low risk.We assumed that the restoration-based hazard reduction treatment would shift forestland to low risk. We also assumed that large fires also shifted forestland to low risk. The reduction in large-fire acreage was assumed to occur for both causes of shifts to low risk. In other words, both the with- and without-treatment scenarios results in reduction of large fires, with the difference being that treatment can accelerate the reduction in large fires. As largescale, uncharacteristic crown fires are diminished, the associated variable costs of fire suppression and rehabilitation will diminish also.
We kept the model simple by only including direct costs in the comparison of treatment versus no treatment. We did not account for losses and damages to structures, private land value, and other infrastructure associated with the wildland-urban interface. We also did not include nonmarket values associated with ecological goods and services. These nonmarket values include recreation, wildlife habitat, watershed condition, and water quality. These values generally are considered to be improved by restoration-based fuel treatments (Mason et al. 2006). Finally, we did not include lost timber harvest values. These values could be substantial, or not, depending on the resolution of such issues as the imposition of diameter caps and the successful development of a private sector smallwood utilization industry. Given that the only benefits accounted for in this analysis are the fire suppression and rehabilitation costs avoided, the total economic value of the restorationbased fuel treatments are significantly underestimated.
We developed analytical scenarios by varying the required number of acres to be treated and the rate at which they are treated (Table 2). We initially set the required number of acres to be treated at either 33 or 50% of the total acreage of PP and DMC forests in Arizona and New Mexico (3,262,770 or 4,943,590 ac). We used three treatment rates: treating 5, 10, and 15% of the required acres per year. We set the initial treatment cost to $200/ac, and used $50/ac for the maintenance treatments that occur every 10 years after initial treatment. We then varied the initial treatment costs to determine the break-even values. For these scenarios, we applied the assumption that reduction in large-fire occurrence would be proportional to the amount of required acres treated.
To test the sensitivity of results to the amount of acres requiring treatment, we conducted a series of sensitivity analyses (SEN) that varied the required amount from 30 to 65% of the forest (2,966,154 to 6,426,667 ac). For these scenarios we used annual treatment rates of 5 and 15% of required acres.
To test the sensitivity of the analysis to the proportional reduction assumption, we developed an additional scenario that incorporates a time lag before reductions in fire suppression and rehabilitation costs occur. This lag scenario (LAG) addresses the concept that a certain amount of strategically located treatment must occur before gaining any significant reduction in large-fire occurrence and associated fire suppression costs. The LAG scenario assumed no reductions in fire suppression and rehabilitation costs until treatment had occurred on 35% of the required acreage. We conducted the LAG scenario using 33% required treatment acreage and a 5% annual treatment rate.
With an initial treatment cost of $200/ ac, all treatment scenarios had positive NPVs and break-even values (Table 3). The no-treatment scenario’s (A) costs for largefire suppression and rehabilitation resulted in a PV of negative $2.0 billion. Treatment scenario costs resulted in PVs from -$1.1 billion to -$1.9 billion. The NPV of treatment scenarios ranged from $128 to 894 million. Break-even values for treatment scenarios ranged from $238 to 601/ac.
Table 2. Scenario variables-area requiring treatment and rate of treatment.
|Scenario||Area requiring treatment||Rate of treatment|
|(code)||(% total ac)||(ac)||(%/yr)||(ac/yr)|
|SEN||30-65||2,966, 154-6,426,667||5, 15||148,305-964,000|
Table 3. Results of analytical scenarios-NPVs, with minus without values and break-even values.
|Scenario||Required (%ac)||Rate (%/yr)||Rate (ac/yr)||PV costs ($billion)||NPV* ($million)||Break-even ($/ac)|
|SEN||30-65||5, 15||Variable||-1.4 to -l.9||649-128||601-238|
*NPV calculated as difference between PV of with-treatment scenarios (B through LAG) minus PV of without-treatment scenarios (A).
With-treatment NPV increased with increases in the annual rate of treatment and decreased with increases in the required amount of treatment. The increase in NPV with faster treatment rates occurs because the faster treatment rate results in a faster decrease in acres of large fires and associated costs. The earlier decreases in these costs offset the higher up-front treatment cost associated with faster rates. Although the NPVs increase with treatment rate, the break-even values show virtually no change. The faster treatment rate restores more acres and the increase in treated acres keeps the per-acre break-even values constant even though NPV increases. With the required treatment level at 33%, the 10% treatment rate (scenario C) treats 16% more acres than the 5% rate (scenario B). The 5% increase in treatment rate results in a larger percent increase in treatment acres, because the faster treatment rate also reduces the number of acres burned, making these acres available for treatment. The faster treatment rate also significantly decreases the annual amount of acres burned. Figure 1 illustrates this effect using scenarios B and C. The greater the number of acres treated per year, the fewer the number of acres burned by wildfire.
Figure 1. The effect of annual treatment rates on the amount of acres burned over time.
Figure 2. Effect of amount of acres requiring treatment on break-even values.
Increasing the number of acres requiring treatment significantly lowers the NPVs and break-even values. Increasing the required acres from 33 to 50% decreased the NPVs by 40% and break-even values by 38%. Figure 2 illustrates the result of the sensitivity analysis (scenarios SEN) on the effect of increasing acres requiring treatment on break-even values. Break-even values range from $601/ac if 30% of acres require treatment to $238/ac if 65% of acres need treatment. The rate of decrease in breakeven values slows as the acres requiring treatment increases. Even if 100% of the forest needs treatment (not shown), the breakeven value remains positive at $93/ac.
The LAG scenario tested the effect of a delay in large-fire reduction and suppression costs, using a 33% required treatment and a 5% treatment rate. The LAG assumption of no reduction in fire suppression or rehabilitation costs until 35% of required treatment has been accomplished significantly lowers the NPV and break-even value. When compared with its no LAG equivalent (scenario B), the LAG scenario’s NPV drops by 43% to $344 million, and the break-even value drops by 27% to $388/ac.
The results of all scenarios suggest that continuing the current policy of favoring fire suppression over prevention does not represent a rational economic choice. All with-treatment scenarios had lower PV of costs than the no-treatment alternative. The amount that could be invested in restoration-based hazard reduction treatments ranged from $238 to 601/ac.
We believe these scenario results are very conservative for several reasons. Our estimates of future fire occurrence use the average acres burned from 1992 to 2002. Given the worsening forest conditions, the assumption of no increase in large fires over the average of 10-year period is conservative. Our estimates of per-acre fire suppression cost did not include all charges for national contracts, such as many aviation or catering services. These costs averaged $96/ac for the period of 1993-2002 (Gebert 2003). The analysis only included variable fire suppression costs. Presuppression and other fixed costs are likely to decline as the occurrence of large fires declines. We assumed that treatment costs are net of any value recovered from the fuel treatment. If the treatment generated $200/ac in wood products, the total break-even investment value increases by this amount. We did not include losses and damages associated with structures, private land value, and other infrastructure associated with the wildland-urban interface in the avoided costs. We did not include changes in ecological and social values associated with restoration-based treatments. Although not market valued, the changes generally are considered to be positive and significant in magnitude. We essentially assumed that there is no difference between the value of a burned and restored forest.
The analysis supports the idea that the current pace and scale of implementation of restoration-based treatments that would begin healing degraded forests and reduce the threat of unnatural wildfire remains woefully inadequate. Inadequate federal funding for restoration-based fuel treatments and the reprogramming of treatment dollars to suppression activities perpetuates the problem. Although society demands suppression of fires, it is extremely expensive and fails to solve the underlying problem leading to fires. By underfunding restoration-based hazard reduction treatments, we ensure the continued need for suppression by undermining the rational approach to solving the wildfire problem.
The results indicate that the amount of acres requiring treatment significantly decreases NPVs and break-even values. This finding points out the importance of efficient spatial strategies and fuel treatment design that produce genuine reductions in the probability of uncharacteristic crown fire. Random or arbitra1y fuel treatment patterns will likely be ineffective and increase the total number of acres requiring treatment thus reducing the economically rational expenditure level.
There are several forces that prevent implementation of large-scale restorationbased fuel treatments in the forests of the arid southwest. Given current forest conditions we can not simply cease fire suppression efforts, especially in the wildland-urban interface. Thus, in the short run, costs will increase as we will be paying for both suppression and restoration. Elections are always just around the corner and the federal and private wildland fire industrial complex is heavily vested, politically and financially, in perpetuating the annual war on wildfire. Revenues are increasingly scarce and restoration of the health and resilience of the forested ecosystems of the arid southwest does not appear to be very high on the priority list. This situation is analogous to other funding paradoxes, e.g., funding emergency over preventative health care, funding flood disaster relief over levee maintenance. Clearly, it will be challenging to generate the long-term financial and managerial commitment for an activity for which ecological and economic benefits may not be evident for a number of years into the future-beyond the next election, budget crisis, or tenure of a forest supervisor.
Another significant force limiting implementation has been the near demise of the region’s wood harvesting and utilization infrastructure over the past 10-15 years. This loss stands as a critical impediment to the implementation of restoration-based fuel reduction treatments. Although there are initial signs of emerging small-scale operations, the development of a competitive market for the wood fiber removed by restoration-based treatment remains elusive. Commercial use of the wood fiber removed, especially small-diameter logs, could reduce treatment costs that will otherwise be borne by taxpayers; but the current limited scale of fire hazard reduction work in the Southwest presents a barrier to market development. Manufacturing firms want a reasonable expectation of a raw material supply throughout their planning horizon. Currently, the reasonable expectation is that the supply of wood fiber from southwestern restoration projects will remain intermittent and variable, because of litigation or the threat of litigation by groups skeptical of the influence that a profit-driven economic system can have on ecological systems. This concern that for-profit enterprises will corrupt or distort restoration-based treatment activities is perhaps the most vexing socioeconomic issue in the restoration of southwestern ponderosa pine forests. Although genuine, this concern prevents innovation by local entrepreneurs, who could create new uses for the raw materials (Daugherty and Snider 2003).
The latest management paradigm promoted by federal land-management agencies was ecosystem management, which has since evolved into AM, or learning by doing. We suspect that all the ecological and economic arguments for the implementation of landscape-scale restoration-based fuel treatments will avail us little for many of the same reasons given for our failure to implement AM. These include strong opposition to experimental policies and management strategies by persons protecting various self-interests; management agencies trapped by cumbersome, inflexible, formalized processes and narrow interpretations of legal mandates; and demands by various organizations and interest groups for spurious certitude (Walters 1997, Gunderson 1999). The fact that we will continue to learn is a given. The fact that we will do so intentionally and in time to avoid the odious and in some cases irreversible (Savage and Mast 2005) consequences of anomalous stand-replacing crown fires is not.
There are no risk-free management actions. Indeed, under present forest conditions, the no-action or go-slow alternative may very well be the most risky of all. As pointed out by Dambeck et al. (2004), to avoid risk in wildfire management today is to advocate even larger uncharacteristic wildfires and destruction of property and ecosystems. Our results indicate that the ever-increasing ecological and economic costs resulting from high-severity, ecosystemscale fires in the ponderosa pine and dty mixed-conifer forests of the southwest far exceed the cost to society of proactive restoration-based thinning treatments. The current sociopolitical condition of continuing to spend dollars on fire suppression while implementing limited treatment of highrisk forest areas represents an irrational ecological and economic decision.
We no longer face the question of whether society will spend the money or not. We are going to pay, one way or another, unless we make the unlikely choice to no longer spend money trying to fight and contain unnatural crown fires. We now face the choice of how we are going to spend the money and what are we likely to obtain from that expenditure. If we invest in restoration based hazardous fuel treatments, we invest in the future; we invest in healthy, sustainable ecosystems for our children and grandchildren. By not investing in restorationbased fuel treatments, we continue the depreciation of our forests, increasing the risk of radical shifts in their structure and function because of uncharacteristic crown fire. Given these choices, it makes a great deal of economic sense to conduct forest restoration on a large scale today to retain future ecological and economic values. Our analysis shows that the fire suppression costs that can be avoided in the future are sufficiently large by themselves to justify restoration-based fuel treatment expenditures today.