Posted 11/25/2013 12:00 am
Updated 12 months ago
Rick R. Holley is CEO of a real estate investment trust that owns about 6.3 million acres in 19 states, including 720,000 acres in 22 counties in Arkansas.
Before becoming CEO of Plum Creek Timber in 1994, Holley had served as vice president and chief financial officer since 1985. He began his career at General Electric Co. in 1974, where he served in a variety of financial management positions. In 1983, he joined Burlington Northern Inc. where he worked as assistant vice president, corporate audit. He held that position until joining Plum Creek in 1985.
Holley received a Bachelor of Science degree in accounting and business administration from San Jose State University. He also completed an advanced education program at Northwestern University.
What is your outlook on timber demand going forward for, say, the next year or two?
Timber demand is directly correlated to lumber production. In the depth of the recession, North American lumber production fell to 43 billion board feet (from a peak of 78 billion board feet in 2005). Through the modest recovery we’ve seen, lumber production has grown to 53 billion board feet — a nice improvement, but still below historical levels. As housing recovers to what most believe to be a demographically supportable number of 1.5-1.6 million starts, lumber production will need to increase to 64 billion board feet to meet demand.
At the same time, the Chinese have been an active buyer of North American lumber and logs. In each of the last three years, the Chinese have purchased over 3 billion board feet of lumber and over 1 billion board feet of softwood logs. All of this bodes well for timber demand going forward. As lumber demand grows, so does timber demand and with that, prices for timber products. The U.S. South, as a low-cost region, will be a big winner in this recovery.
Plum Creek notes that all its land has been independently certified to the Sustainable Forestry Initiative. What practices does the company follow to lead to that?
All Plum Creek lands have been certified under the Sustainable Forestry Initiative Standard since 1999. We were the first to certify 100 percent of our lands. Compliance with SFI is part of our culture. As such, Plum Creek has been the largest purveyor of conservation in the U.S. We’ve put 1.4 million acres of lands in one form of conservation or another. We’ve also put 1.1 million acres of our land into Habitat Conservation Plans, protecting many endangered species while allowing us to have some predictability to manage our timberland assets. Some of the more notable practices that SFI requires us to follow involve clear-cut size, reforestation requirements, streamside buffer requirements to protect water and fish habitat, logger training, annual third-party audits of all of our practices, etc.
Purely from a business standpoint, has Plum Creek, as a major grower of a natural resource — timber — noticed any change in growing conditions?
We get asked this question a lot. Has global warming, climate change, etc., affected the ability to grow trees? Clearly, weather patterns seem to be changing, storms seem to be more frequent, and winters seem to be getting warmer. We have not seen a change, but if weather conditions do really change over time, that will affect the ability to grow all agricultural products, not just trees. For example, in the Northern states, where the climate is generally colder, trees grow slower. In the South, where we get a fair amount of rain, have good soils and lots of light, trees grow a lot faster. That is one of the reasons we like the South. Trees grow really well, markets are good, the regulatory environment at the state level supports the industry, and this is where the growth is going to be in the future.