Timber investors mull options with demand down

Faced with declining prices for timber products, owners of forest lands could find new sources of revenue in environmental efforts, industry experts said on Tuesday.

Because uncut trees are stores of carbon, forest owners may be able to extract value from them by just leaving them alone, particularly as a U.S. market for trading carbon emissions develops, experts told a conference in San Francisco.

Also, timberland owners and investors can sell easements that protect resources or wildlife, or provide sustainable fuel for burning in biomass power plants.

"Conservation and biomass are new return drivers," said Andrew Kelsen, director of alternative investments at investment consulting firm Gray and Co.

The hope of revenue from green initiatives comes at an uncertain time for investors in timberlands. Forestry investing has accelerated in recent years, driving up prices for timberland and leading some analysts to question whether a recent slide in their prices signals a steeper fall.

"If we are in a bubble, (investors) are buying at a peak," said E. Thomas Tuchman, president of U.S. Forest Capital LLC.

The current housing slump has driven down demand for lumber products and pounded stocks like International Paper Co and Weyerhaeuser Co.

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