Chapter 4 - Private Monopoly of Natural Resources

The only thorough canvass ever made of the amount and ownership of standing timber in the United States was that made in 1910 by the Bureau of Corporations, U. S. Department of Commerce and Labor. The findings of this investigation are given in the report known as "The Lumber Industry, Part 1, Standing Timber." Some extracts from this report follow and they convey some idea of the degree of centralized control that exists in the lumber industry.

Letter of Submittal - Department of Commerce and Labor, Bureau of Corporations, Washington, Feb. 13, 1911:

I have the honor to submit herewith Part 1 of a report on the Lumber Industry of the United States. This part deals with the amount and ownership of standing timber. The foremost facts shown are:

• The concentration of a dominating control of our standing timber in a comparatively few enormous holdings, steadily tending towards a central control of the lumber industry.
• Vast speculative purchase and holding of timber land far in advance of any use thereof.
• An enormous increase in the value of this diminishing natural resource, with great profits to its owners. This value, by the very nature of standing timber, the holder neither created nor substantially enhances.

These are the underlying facts, of tremendous significance to the public welfare. They are primarily the results of our public land policy, long continued. The laws that represent that policy are still largely operative. The past history and present status of our standing timber drive home upon us the imperative necessity of revising our public policy for the future management of all our remaining natural resources. That history is here outlined:

From Government to Private Ownership

Only 40 years ago, at least three-fourths of the timber now standing was (it is estimated) publicly owned. Now about four fifths of it is privately owned. The great bulk of it passed from Government to private hands through (a) enormous railroad, canal and wagon road grants by the Federal Government; (b) direct Government sales in unlimited quantities at $1.25 an acre; (c) certain public-land laws, great tracts being assembled in spite of the legal requirements for small holdings. Such laws were wholly inappropriate to forest regions; but, though vigorously condemned in several public reports, they are still largely in force. In theory, they were intended to distribute the public lands in small tracts as homes for free-holders. In fact, they actually furthered timber concentration in vast holdings. The 1,802 largest holders of timber now own 88,579,000 acres of land, as compared with a vastly wider distribution of public lands in non timbered agricultural sections.

During this interval, and chiefly in the latter half thereof, the value of standing timber has increased ten-fold, twenty-fold, and even fifty-fold, according to local conditions. The present annual growth is only about one-third of the present annual cut. Replacement by new growth is very slow.

Examples of the increase during this interval are: From $5 to $30 an acre, $7 to $40, $20 to $150, $1 to $13, $4 to $140, $1 to $50. Specific tracts have been sold first for $24,000 and later for $163,000; $10,000 and later $124,000; $240,000 and later $2,500,000; $23,000 and later $500,000; $19,000 and later $1,125,000. These examples illustrate the remarkable profit made by certain individual holders.

What did the Government get for the timber? Of the Southern timber land sold for $1.25 an acre, much is now worth $60 an acre. Large amounts of Douglas fir in Western Washington and Oregon, which the Government gave away, or sold at $2.50 an acre, now range from $100 to $200 an acre. The great redwood belt in California was alienated on similar terms, and some of it is now worth hundreds of dollars an acre. Practically none of the great forests in the public land States was sold by the Government for more than $2.50 an acre. The great increase in value gives grave importance to the concentration of ownership.

The former Chief of Field Service of the General Land Office, H. H. Schwartz, stated officially (1909) that the Timber and Stone Act . . . has resulted in the sale of over 12,000,000 acres of valuable timber lands, of which fully 10,000,000 were transferred to corporate or individual timber-land investors by the entrymen. These lands brought to the people or General Government a gross sum of $30,000,000. At the date of sale they were reasonably worth $240,000,000. The profit of over $200,000,000 went not to the needy settler engaged in subduing the wilderness, but to the wealthy investors. Not over a fractional part of 1 per cent of the timber purchased from the United States under this act is held, consumed, or even cut by the men and women who made the entries.

An effective illustration of what has happened under our land laws appears in the report of the United States Forester for 1910:

An investigation emphasizes the probability that heavily timbered lands, if opened to entry, would pass into the hands of large owners of timber. Of 705,000 acres eliminated from the Olympic National Forest in 1900 and 1901 on the ground that the land was chiefly valuable for agriculture, and that the settlement of the country was being retarded, 523,720 acres passed ultimately into the hands of owners who are holding it purely as a timber speculation. Three companies and two individuals own over 178,000 acres in holdings of from 15,000 to over 80,000 acres each. Of timbered homestead claims on this eliminated area, held by 100 settlers, the total area under actual cultivation is only 570 acres, an average of but 5.7 acres to each claim. It will be seen that the original purpose of the elimination was defeated, and that bona fide settlement was not materially advanced.

Control of the Timber Controls the Whole Industry

Whatever power over prices may arise from combinations in manufacture and distribution (as distinguished from timber owning), such power is insignificant and transitory compared to the control of the standing timber itself or a dominating part thereof. The Senate and House resolutions, to which this investigation is responsive, ask for the causes of high prices of lumber and the effect of combination upon such prices. The resolutions, therefore, required determination of both the amount and the control of standing timber.

Amount of Standing Timber

There is now left in continental United States about 2,200 billion board feet of privately owned standing timber, of which 1,747 billion is in the "investigation area" covered in great detail by the Bureau. This area includes the Pacific-Northwest, the Southern Pine Region, and the Lake States, and contains 80 per cent of all the private timber in the country. In addition there are about 539 billion feet in the national forests and about 90 billion feet in other non-private lands. Thus the total amount of standing timber in continental United States is about 2,800 billion board feet. The present annual drain upon the supply of saw timber is about 50 billion feet. At this rate the timber now standing, without allowance for growth or decay, would last only about 55 years. The present commercial value of the privately owned standing timber in the country, not including the value of the land, is estimated (though such an estimate must be very rough) as at least $6,000,000,000. Ultimately the consuming public will have to pay such prices for lumber as will give this timber a far greater value.

This is the first comprehensive and methodical investigation of the amount and ownership of our standing timber. It rests on the best information obtainable from records of timber owners or the knowledge of men in the industry, information which daily forms the basis of actual business dealings. (A physical canvass of the forests was out of the question.) The data, collected by field work in about 900 counties, assembled, mapped, checked, and weighed in the office, are reliable within a relatively small margin of error. All figures relate to merchantable saw timber, in terms of lumber yield. The unit "board foot" is a foot square and an inch thick.

Concentration of Timber Ownership

Three vast holdings alone, the greatest in the country, those of the Southern Pacific Company, the Weyerhaeuser Timber Company, and the Northern Pacific Railway Company (including their subsidiary companies), together have 238 billion feet, or nearly 11 per cent of all our privately owned timber. They have 14 per cent of that in the "investigation area." With the five e next largest, they have over 15 per cent of the total privately owned timber and over 19 per cent of that within the investigation area. Finally, nearly one-half (48 per cent) of the private timber in that area is held by only 195 great holders. The term "holder" covers any single interest-individual, corporate, or group-which is so united as to be under one control.

The Pacific-Northwest - Five-elevenths of the country's privately owned standing timber is in the Pacific-Northwest (California, Oregon, Washington, Idaho and Montana), 1,013 billion feet. One-half of this is now owned by 37 holders; many of these are closely connected. The three largest holders (named above) alone have nearly one-quarter. This section now furnishes only one-sixth of the annual cut. Thus its timber is being largely held for the future, and the large owners there will then be the dominating influence in the industry.

The Southern Pacific Company - holding is the greatest in the United States--106 billion feet. This is about 6 per cent of the private timber in the investigation area, and 10 per cent of that in the Pacific-Northwest. It is difficult to give an adequate idea of its immensity. It stretches practically 680 miles along that railroad between Portland and Sacramento. The fastest train over this distance takes 31 hours. During all that time the traveler thereon is passing through lands a large proportion of which for 30 miles on each side belongs to the railroad, and in almost the entire strip this corporation is the dominating owner of both timber and land.

The second largest holder is the Weyerhaeuser Timber Company (including its subsidiary companies), with 96 billion feet. This does not include further very extensive timber interests of the Weyerhaeuser family and close associates.

These two holdings would supply the 46,584 sawmills in the country for four and two-thirds years. They have one-eleventh of our total private timber.

The third largest, the Northern Pacific Railway Company has 36 billion feet.

These three holdings have enough standing timber to build an ordinary 5 or 6 room frame house for each of the 16,000,000 families in the United States in 1900. If sawed into lumber and placed in cars, their timber would load a train 100,000 miles long.

The holdings of the two railroad companies are government grants, and 80 per cent of the Weyerhaeuser Timber Company holding was bought from the Northern Pacific grant. Many other large holdings (here and in other regions) were mainly purchased from some land grant.

Southern Pine Region - In the Southern Pine Region there are 634 billion feet of privately owned timber. Concentration in total timber is much less than in the Pacific-Northwest. There is, however, a high concentration in the more valuable species, longleaf yellow pine and cypress. Sixty-seven holders own 39 per cent of the longleaf yellow pine, 29 per cent of the cypress, 19 per cent of the shortleaf and loblolly pine, and 11 per cent of the hardwoods.

The Lake States - In Minnesota, Wisconsin, and Michigan there are 100 billion feet of privately owned timber. In Wisconsin 96 holders have three-fourths of all the timber. In Michigan 113 holders have 66 per cent. In Minnesota 6 holders have 54 per cent of the very valuable white and Norway pine, 16 per cent of the other conifers, and 2 per cent of the hardwoods. Taking all three states, 215 holders have 65 per cent of all the timber.

Effect of Concentration - such concentration in standing timber, if permitted to continue and increase, makes probable a final central control of the whole lumber industry. A few strong interests, ultimately holding the bulk of the timber, can set the price of timber and its products. The manager of the National Lumber Manufacturers' Association recently said to lumbermen on the Pacific coast:

The day of cheap lumber is passing and soon will be gone, but the men who make the money will be those who own timber and can hold it until the supply in other parts of the country is gone. Then they can ask and get their own price.

Certain further factors, not exactly measurable, increase still more the real concentration. First, a further interweaving of interests, corporate and personal, connects a great many holdings which the Bureau has treated as separate; second, there are very large totals of timber so scattered in small tracts through larger holdings that they are substantially "blocked in" or "controlled" by the larger holders; third, the concentration is much higher in the more valuable species.

General information obtained indicates a very high concentration in timber ownership outside the investigation area.

Policy of Great Holders - The largest holders are cutting little of their timber. They thus reserve to themselves those incalculable profits which are still to accrue with the growth of the country, the diminishing of timber supply, and the further concentration and control thereof. Many of the very men who are protesting against conservation and the national forest system because of the "tying up" of natural resources, are themselves deliberately tying them up far more effectively for private gain.

The fact that mature timber is thus withheld from use, is clear evidence that great additional profits are expected to accrue through further increase in value.

Land Monopoly - Standing timber is not the only question. When the timber has been cut the land remains. There has been created, therefore, not only the frame work of an enormous timber monopoly, but also an equally sinister land concentration in extensive sections. This involves also a great wealth in minerals. The Southern Pacific has 4,318,000 acres in northern California and western Oregon, and, with the Union Pacific, which controls it, millions of acres elsewhere. (The Government, however, is now suing to annul the title to the Southern Pacific lands in Oregon for non-compliance with the terms of the original grants.) The Northern Pacific owns 3,017,000 acres of timber land and millions more of non-timbered land. The Weyerhaeuser Timber Company owns 1,945,000 acres. In Florida five holders have 4,600,000 acres, and the 187 largest timber holders have over 15,800,000 acres, nearly one-half of the land area of the State. In the whole investigation area the 1802 largest holders of timber have together 88,579,000 acres (not including Northern Pacific and Southern Pacific lands in non-timbered regions); which would make an average holding of 49,000 acres or 77 square miles.

Finally, to timber concentration and to land concentration is added, in our most important timber section, a closely connected railroad domination. The formidable possibilities of this combination in the Pacific-Northwest and elsewhere are of the greatest public importance.

The Future - These are the facts of the lumber business in its most important feature, the natural supply. The paramount consideration remains still to be stated. There are many great combinations in other industries, whose formation is complete. In the lumber industry, on the other hand, the Bureau finds now in the making a combination caused, fundamentally, by a longstanding public policy. The concentration already existing is sufficiently impressive. Still more impressive are the possibilities for the future. In the last 40 years concentration has so proceeded that 195 holders, many interrelated, now have practically one-half of the privately owned timber in the investigation area (which contains 80 per cent of the whole). This formidable process of concentration, in timber and in land, certainly involves grave future possibilities of impregnable monopolistic conditions, whose far-reaching consequences to society it is now difficult to anticipate fully, or to overestimate.

Such are the past history, present status, and apparent future of our timber resources. The underlying cause is our public-land policy, resulting in enormous loss of wealth to the public, and its monopolization by a few interests. It lies before us now as a forcible object lesson for the future management of all the natural resources still remaining in the hands of the Government.

Very respectfully,
Herbert Knox Smith,
The President.
Commissioner of Corporations.

The "investigation area" is as follows: (1) California, Oregon, Washington, Idaho, and Montana. (2) The parts of Virginia, North Carolina, South Carolina and Georgia, east and south of the hardwood forests of the Appalachian Mountains; Florida, Alabama, Mississippi, Louisiana, Texas, Arkansas, and the southeast corner of Missouri; Michigan, Wisconsin, and Minnesota. For ease of reference these three divisions are called the Pacific-Northwest, the Southern Pine Region, and the Lake States, respectively. No canvass has ever been made of the privately owned timber in the United States outside of this area, but it has been roughly estimated by the Forest Service at 450 billion feet. The Forest Service has also estimated the amount of standing timber owned by the Federal Government and by the various States, and that on Indian reservations, at 639 billion feet.

This total of about 2,800 billion feet, it should be repeated, is the total merchantable saw timber only; that is, timber of such size and quality as to be suitable for the use of a sawmill, under present conditions in the industry. It does not include timber suitable only for posts, small poles, and similar purposes, or firewood.

Standing Timber

As the "letter of submittal" is practically a summary of part 1 of the report, only a few extracts of this report need be given. The following cover the most interesting and important points:

"The result of Bureau's investigation in the standing timber of the United States may therefore be summarized as follows:

"The predominating species of timber in the Pacific-Northwest is Douglas fir, which alone constitutes 52 per cent of the total privately owned. Western pine constitutes 15 per cent and redwood 10 per cent, the three species together aggregating 77 per cent. By far the heaviest stands occur on the Pacific slope west of the Cascades. No other single species contributes as much as 6 per cent. Thus of the 1,013 billion feet of privately owned timber in the entire Pacific-Northwest 867 billion feet (85 per cent) is west of the Cascades in Oregon and Washington, and in California, leaving only 146 billion feet for the eastern portion of this region.

Total Standing Timber in the Pacific-Northwest (in Billions of Board-Feet):

"In the Southern Pine Region the total of 634 billion feet of privately owned timber is distributed as follows:

"The predominating species in this Southern Pine Region is yellow pine, which contributes 384.4 billion feet (232.3 billion feet of longleaf and 152.1 billion feet of short leaf and loblolly to the total of 634 billion feet; cypress 40.4 billion feet; and all hardwoods together, 209.2 billion feet. The hardwoods include the least valuable timber in this region.)

"In the Lake States the total of 100 billion feet of privately owned timber is distributed as follows:

"The Lake Region is the least important of the three in quantity of timber, but much of its timber is exceedingly valuable.

Definition of the Term Holder

"The concentration of ownership shown in this report is a minimum only. Through the interweaving of interests, the interrelations of the individuals and corporations holding title to the timberland, there is a concentration of control far beyond what is shown by the listing of nominal or legal owners.

"The following are examples of the possibilities and limitations of such combining of interests. The Southern Pacific holding, as stated in this report, is made up of the timber of the Oregon and California Railroad Company subsidiaries of the Southern Pacific Company. Similarly the holding of the Weyerhaeuser Timber Company includes not only the timber of that concern, but that of its direct subsidiaries, the Clarke County Timber Company, the Weyerhaeuser Land Company, the Pohegama Sugar Pine Lumber Company, the Pelton-Reid Sugar Pine Company, and the Weyerhaeuser Realty Company. On the other hand, the Weyerhaeuser Timber Company holding does not embrace the interest of the Weyerhaeuser family or their associates in other extensive timber holdings not known to be so controlled that they will be managed as a unit with the holding of the Weyerhaeuser Timber Company itself. The holdings of the Northern Pacific Railway Company are chiefly held direct, a relatively small amount being owned by a subsidiary concern, the Northwestern Improvement Company.

Southern Pacific Company Holding

". . . about 71 billion feet of the Southern Pacific's timber is in Oregon and about 35 billion feet is in California.

The Weyerhaeuser Timber Company's Holding

". . . most of this timber-nearly 77 billion feet-is in Washington; about 18.7 billion feet is in Oregon, and an insignificant fraction in California. It is chiefly Douglas fir

". . . It does not include further very extensive timber interests of members of the Weyerhaeuser family and their close associates. This great holding, also, is nearly all being held off the market for the future rise in timber values.

Northern Pacific Holding

". . . The bulk of this timber is in the State of Washington ". . . these three immense holdings were virtually made possible by the land grants of the Federal Government to great railroad corporations.

"Under these grants enormous tracts of land were acquired by some of the leading transcontinental railroads. Thus there had been patented subsidiaries of the Southern Pacific Company in Oregon to the subsidiaries of the Southern Pacific and California, up to June 30, 1910, no less than 12,178,000 acres of land, not all timbered, of course-while the Central Pacific Railroad Company, one subsidiary, had secured in the States of Idaho, Nevada, and Utah, 4,878,000. The Union Pacific, which now controls the Southern Pacific, has also secured patent to no less than 19,136,000 acres of land in various States, while there have been patented to the Northern Pacific the enormous total of 32,664,000 acres. This is a total acreage granted to the Northern Pacific and to the several railroads now in the Union Pacific-Southern Pacific system of 68,856,000, or over 107,000 square miles, an area nearly as large as the land area of the six New England States and New York. Furthermore, lands are still being patented in large amounts, especially to the Northern Pacific.

"It is not to be inferred that these railroads still own the acreage noted above as patented to them. In various financial reports and unofficial manuals, however, it is stated that the present land holdings of these railroads are as follows: Union Pacific, 975,128 acres; Southern Pacific, 14,408,217 acres; Northern Pacific, 9,949,985 acres. Within the "investigation area" of the Bureau, however, the timbered acreage of the Southern Pacific reaches the very large total of 3,842,000 acres, not including about 130,000 acres in Texas and Louisiana, in which the Southern Pacific has an interest. The unsold timbered acreage of the Northern Pacific within the investigated area is 3,017,000 acres.

"Practically all the acreage of the Southern Pacific Company was secured through government land grants. The enormous holding of the Weyerhaeuser Timber Company, aggregating 1,945,000 acres, is based on the Northern Pacific land grant, no less than four-fifths of it having been bought from the Northern Pacific. In 1900, a single block of 900,000 acres was thus acquired at $6.00 an acre. Further purchases from the Northern Pacific brought up the total thus acquired to about 1,530,000. In the main purchase the Weyerhaeuser Timber Company selected the best part of the Northern Pacific's timber land in western Washington.

"In addition to the very extensive acreage thus sold to the Weyerhaeuser Timber Company, the Northern Pacific has sold a vast amount of timber land to a subsidiary of the Amalgamated Copper Company, and smaller yet important tracts to other large companies, in many of which the Weyerhaeuser family and their associates are interested.

"A report by the Forest Service, U. S. Department of Agriculture, submitted June 1, 1920, and entitled "Timber Depletion, Lumber Prices, Lumber Exports, and Concentration of Timber Ownership," states that since 1910, by decision of the Federal Courts, the land grant of 2,425,000 to the Southern Pacific Railroad Company in Oregon has reverted to the Government. The Weyerhaeuser Timber Co. has sold approximately 250,000 acres, chiefly to operators, and has itself become a large timber manufacturer. The Northern Pacific Railroad Co. has sold 522,000 acres of timber land in Washington. According to this report the situation as to timber ownership has not changed materially from that reported by the Bureau of Corporations in 1910."