Kenner, La.

Aside from its recreational benefits, one of the reasons why farmers in colonial days turned corn into whiskey was because it slashed the cost of carrying the product to market. Now, with barrels of oil selling at triple digits, people are starting to think along the same lines with regard to trees. In essence, it could become more lucrative to distill wood into energy than to haul it around whole.

"If the price of wood as a fuel source exceeds it as a source for lumber, that could affect supply," says Russell Richardson, director of industrial markets for the Southern Forest Products Association, Kenner, La.

That's not too wild a dream. This summer, four researchers from the U.S. Forest Service's Forest Products Laboratory compared the value of a cubic meter of wood if it were cut into 2x4s, processed into ethanol, or turned into wood-stove pellets. At then-current prices, the researchers concluded, a cubic meter of wood would produce $81 worth of 2x4s, $75 worth of ethanol, and $70 worth of wood pellets. In other words, if framing lumber gets any cheaper or ethanol and wood pellets get more expensive, mills might conclude it's more valuable to stop sawing and start processing.

Research by the University of Florida's Matt Cohen has found that producing ethanol from Southern pine plantations requires less than half the water and one-tenth the nitrogen required to produce the same amount of ethanol from corn. ArborGen, a Summerville, S.C.-based venture, is conducting research to develop trees that would be optimized to create cellulosic ethanol–basically, fuel from trees and plants. In particular, it's looking at freeze-tolerant eucalyptus, short-rotation hardwoods, and several varieties of pine.

The National Renewable Energy Laboratory estimates that, once researchers figure out how to do it, cellulosic ethanol could be made at a price of about $2.25 per gallon. By 2030, the United States conceivably could produce enough feed stocks (trees, sugar cane, corn, switchgrass, and the like) to provide about 30% of America's gasoline consumption.

Those ideas are going to take a while to develop. On the other hand, sawmills have long burned sawdust and other leftover tree detritus to fire boilers that generated power. Now, several timber companies are looking at ways to expand to the point where they're generating power for the nation's electrical grid.

Even if lumber continues to sit atop timber's value pyramid, the cost of transporting it is certain to weigh more heavily in the future.

"I'm more concerned about the state of energy over the next 20 years than I am about [the future of] lumber," says Brian Luoma, the Nashville, Tenn.-based vice president and general manager for LP's engineered wood products. "We're moving products around the country on $6 a gallon diesel. ? I don't see hybrid freight liners going up and down the highway."

Much of the long hauling is done relatively efficiently today over rail, but coal and other products go over the same tracks, and huge traffic jams are developing. And much of a shipment's final miles are covered via tractor-trailer.

"You might have great product in Oregon, but you might not be able to afford to bring it here," says Kevin Hynes, COO of Maine's Hancock Lumber.

Keep in mind, too, that, green construction rating programs boost materials that are extracted and processed within 500 miles of where they're used. But to Mike Baker, director of product technologies for iLevel by Weyerhaeuser, "The cost of fuel is going to drive changes faster than any [green] certification [program]. You can't ship a bulky product like ours from one side of the country to another just for fun."

OSB sales already are influenced by rail prices, and it's possible the same could soon hold true for other wood products. That's likely to have an impact on today's forest owners who, by and large, view their trees much differently than their predecessors.

–Craig Webb