TED Case Studies

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Lake Superior Sunken Logs

CASE NUMBER: 421

CASE MNEMONIC: SUNKWOOD

CASE NAME: SUNKEN WOOD USE

I. Identification

1. The Issue

In Checaumegon Bay, Wisconsin, on Lake Superior, the Superior Lumber Company is involved in the recovery of millions of sunken logs 60 feet below the bay's surface. Because the logs have existed for approximately 100 years at large depths and in very cold water, they have been preserved almost to perfection. Most of the old slow growth wood at the bottom of the bay was clearcut in the late 1800s from areas in Canada, Minnesota, Wisconsin and Michigan, and were floated downstream to ports in lake Superior to be loaded onto ships for transport. During the 1930s, most of the northern Midwest old growth forest was deforested, and the large timber corporations had begun to leave the areas, along with all the timber at the bottom of Lake Superior. Today, treasure hunters like Scott Mitchen are involved in an effort to raise approximately one million logs to the surface of Lake Superior to be processed and sold to furniture makers, architects, contractors, instrument makers and the Japanese at incredibly high prices. The high prices are because there no longer exists the same quality of old growth lumber anywhere in the world that can compare to the lumber that was harvested by the U.S. and Canadian logging companies during the late 1890s to early 1930s.

2. Description

In the small community of Ashland, Wisconsin, a recycling effort is underway by an emerging lumber company. The company's name is Superior Lumber, owned by the treasure hunter Scott Mitchen, and the product being recycled is the old growth lumber that has remained at the bottom of Lake Superior for approximately 100 years. The lumber that is being brought up from the bottom of the Lake includes 40 foot strands of red oak, giant white pines, richly figured maples, hemlocks, basswoods, yellow birches and red elms that were all seedlings when Columbus landed in America, but were clearcut almost to the point of extinction in the late 1800s.(1) Since the wood that Superior Lumber is finding is so rare, and large quantities are being recovered, the recycling effort could provide an alternative to the forestry of rare wood until the recovery effort ends. That is because Mitchen's recovery has spurned other treasure hunters interested in large profits, to hunt for sunken logs in various rivers and lakes in Minnesota, Wisconsin and Northwest Canada. The recovery of sunken logs in areas of central Canada and the U.S. is not an easy project, and can be a very time consuming and expensive undertaking. For a recovery company to begin to recover the sunken logs at the bottom of very deep lakes and rivers, large cruiser boats equipped with mechanical grasping arms must be utilized and can be very expensive. In addition to the boats, a successful log recovery operation must have a team of cold water equipped divers because of the extreme depths and cold temperatures of the water that the logs are being recovered from, and these extreme conditions have actually preserved the wood for over a century. Once a log recovery operation has been developed by a company, and the company begins to earn a profit, it can streamline its operations in the manner that Superior Lumber has. In approximately a year, the Superior Lumber Company plans to begin raising the sunken logs with airbags and will utilize a robotically directed crane to raise 30,000 logs and mill them in its own sawmill in nearby Ashland, Wisconsin.(2) By processing the wood in their own mill, the Superior Lumber Company will gain large profits because the old slow growth trees are virtually depleted from the world market, due to the fact that there is no current supply of hardwoods with such great quality. An example of the wood■s value is, a good-sized red oak log cut from today■s forest might be worth as much as U.S. $400, but when it is milled into raw lumber it could sell for U.S. $1,000, and when it is shaved into veneer the value climbs to U.S. $4,000.(3) The older and better quality logs in Lake Superior will be worth much more than current prices suggest due to the high demand from craftsmen "who build everything from furniture to violins, that have told Mitchen they are willing to pay anything for," the recovered wood in Lake Superior.(4) Therefore, the Superior Lumber Company can earn large amounts of money from the wood, but there have been numerous questions raised by the State of Wisconsin as to how the recovered wood will be taxed. In 1992, the Wisconsin State legislature agreed to allow anyone who wished to recover sunken logs that belonged to the State of Wisconsin, to do so by permit only. In return for the recovery and sale for profit of the logs, the state would receive a percentage cut of the revenue the company generates of approximately 2%. Since the recovery does not involve the cutting of any old-growth forests, the state has looked upon the recovery efforts as not only being profitable, but also environmentally sound. The market for the wood has become increasingly large and companies such as the "Bacon Veneer Ltd. of Calgary, Alberta, have already processed nearly 200 logs, including an order of red oak used for paneling in a recent renovation of the Saddledome, where the Calgary Flames ice hockey team plays."(5) Other backlogged orders from corporations and contractors that are coming into Superior Lumber include orders from a project at the Getty museum in Los Angeles, Boeing Co. in Seattle, and the architects that are designing Bill Gates's house on Puget Sound in Washington. The contractors and architects are fascinated by the new supply of old- growth trees that once grew in the upper Midwest among the hard rocky soils, through very short growing seasons. As Robert "Buzz" Holland who is a lumberman from New Glarus, Wisconsin explains, "for the most part, they■re (i.e.; the sunken old-growth logs) not really any bigger than hardwoods we might cut today. But they are quite different. They grew in a twilight world, beneath the canopy of pines, and they grew very, very slowly and for a very long time."(6) The result of the slow growth of the trees is a wood with an extremely fine grain that is "highly prized by artisans, custom furniture builders and makers of musical instruments," who along with the Japanese, are willing to pay almost any price to obtain the wood.(7) Ashland, Wisconsin's Past During the period between 1890 and 1905, Ahland, Wisconsin, was among the busiest ports on the Great Lakes. Because of the port's location, it was easily accessible for lumber companies from Minnesota, Wisconsin, Michigan and Canada to float their yields to the port to be processed and then shipped to areas across the United States. As the timber industry continually grew at the turn of the century, large 400 room hotels were built, and on any given day, Ashland was filled with vacationers and businessmen from across the Northwest. However, the logging companies in the areas quickly clearcut and processed much of the forests across Wisconsin, Minnesota and Michigan, and at its peak, it is estimated that the logging operations in Ashland had processed approximately 500 million feet of logs. As large amounts of logs were cut, and floated down to Ashland to be processed, an estimated 10% to 30% of them sank because they were saturated with water, and as the mills began to close from 1910 to 1930, a vast reserve of prime wood was forgotten in Lake Superior.(8) But retrieving the sunken logs is not a new idea devised by Mitchen and his company. In fact, the retrieving of sunken lumber was occurring in the rivers and lakes of the Pacific Northwest and in Canada for years, and one lumber company in Minnesota has been pulling out sunken logs from the Mississippi river since the 1930s, with very little media coverage. Mitchen and the town of Ashland have foreseen the retrieval of the sunken logs in lake Superior as a chance for a revival for the community, and a chance to bring back part of the logging history to the small town. He has raised more than U.S. $1 million from a group of private investors in the Ashland region to begin to renovate Superior Lumber's newly acquired headquarters near the Lake Superior waterfront.(9) The building is a massive 125,000 square foot plant, purchased from the city of Ashland for $1, and at one time was owned by the Louisiana Pacific Corporation, but will house a sawmill for Mitchen's company, and will lease space to woodworking craftsman and artisans, along with a retail restaurant complex and a logging museum.(10) The plan calls for Ashland to become a ■destination city■ and not a city that people will pass through on their way to vacation somewhere else. Harvesting the Treasure of the Lake Scott Mitchen, is a native of Milwaukee, Wisconsin, and has taken upon himself some risk in developing his Superior Lumber Company, but it seems that it will be a risk that will be financially rewarding for himself, and will help to give an economic boost to the town of Ashland. Mitchen started his scuba diving career at the age of 12, and proved at an early age that he was adept at locating old shipwrecks in the Caribbean. He and his treasure finding company "have located many important shipwrecks in Venezuela, Brazil, the Virgin Islands and the Bahamas, and are now working with those governments to arrange to bring up artifacts from the sunken ships."(11) But Mitchen's most valuable discovery could be the slow growth logs at the bottom of Lake Superior. He explains that "some of the best logs may have yet to be found [as he] works to [get at] the bottom of the piles in the lake."(12) That is because approximately 60% of the logs he has found are softwoods like pine and basswood that are worth only a couple of hundred dollars per log, and the majority of the hardwoods such as the red oak are still sitting at the bottom of the lake. As the slow growth lumber is continually brought to the surface of the lake, processed and sold by the Superior Lumber Company for large profits, there are benefits taking place for Wisconsin both environmentally and economically. The first benefit is that with the processing of the wood, no damage is being done to the biodiversity of any forest in the world, and with the current rates of global deforestation, that is good. Another benefit from the raising of the timber is that it will provide a new economic boost for the town of Ashland, Wisconsin, if the Superior Lumber Corporation can succeed in the remodeling of the new sawmill and the development of a logging museum, so that the town can become a destination stop for tourists that have become curious in the sunken log story. The final benefit that the recovery effort might have is, it may spark the interest of other treasure hunters in the northern Midwest to attempt their own recovery efforts. That would help to clean out the rivers and lakes of the areas, and also provide the state governments of Wisconsin, Minnesota and Michigan with a much needed excuse to generate revenue through levying a 2% tax on all of the logs that are recovered.

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4. Draft Author:

Jason R. Miller, 3/1/97

II. Legal Clusters

5. Discourse and Status:

AGReement and INPROGress The Wisconsin State Legislature imposed a mandatory 2% tax on all companies engaged in the salvaging of sunken logs in its lakes and rivers. The tax is a small amount compared to the enormous profit potential that the Superior Lumber Company stands to earn from it■s recovery efforts. But the state of Wisconsin and the city of Ashland see the salvaging efforts as a means to revitalize the extinct timber industry, and use the industry to revitalize a slumping tourist industry. Therefore, the state and the city are willing to provide incentives for Superior Lumber to ensure their business will profit, and be successful in the future.

6. Forum and Scope:

USA and UNILateral The case is taking place in the state of Wisconsin in the United States of America. There are other areas throughout the pacific northwest where the recycling of logs has been taking place. However, the Superior Lumber Company has engaged in one of the largest salvaging efforts in the region, with the latest technology that can be utilized. When the salvaging companies like Superior Lumber wish to begin the recovery of sunken logs in Wisconsin's rivers and streams, they must first apply for a permit from the Wisconsin State Government so the government will be able to impose its 2% tax on the recovered logs.

7. Decision Breadth:

1 (USA) This case involves the USA and the state of Wisconsin. Even though many of the logs were harvested over 100 years ago in Canada, Minnesota, and Michigan, once they sank in Wisconsin■s Checaumegon Bay, they became Wisconsin State property. There are also efforts underway in the provinces of British Columbia and Alberta, in Canada, to recover sunken logs. However, most of the media attention has not been focussed on Canadian recovery efforts.

8. Legal Standing:

SUBLAW The laws that have been made regarding the salvaging of sunken logs in Lake Superior have been made at the state level. At the present time, there has not been any reason for a treaty or national law because the logs at the bottom of Checaumegon Bay have been ruled to be the property of the state of Wisconsin.

III. Geographic Clusters

9. Geographic Locations

a. Geographic Domain: NORTH AMERICA

b. Geographic Site: NORTHERN NORTH AMERICA

c. Geographic Impact: USA

10. Sub-National Factors:

NO

11. Type of Habitat:

TEMPERATE The old slow growth logs that are recovered are from the temperate forests of Wisconsin, Minnesota, Michigan and Canada. They were cut approximately 100 years ago when the timber industry of the central northern areas of the US and Canada was prosperous. After the wood was cut, it was rafted down rivers and streams where it could be processed in the sawmills of tiny towns like Ashland Wisconsin. But as the timber was floating through the rivers, streams and lakes, a significant amount sank and has remained there until today.

IV. Trade Clusters

12. Type of Measure:

Licensing[LICEN] Wisconsin has required all of the timber salvaging companies in the state to apply for a license to recover the sunken timber that is legally the property of the state of Wisconsin. Once the timber is recovered, a 2% tax is imposed upon the company for each log that is processed and then sold. Other than the recovery license that the state has imposed on companies like Superior Lumber, the recovery efforts remain virtually unregulated. The state of Wisconsin hopes that the lack of regulations will provide economic boosts for small towns like Ashland, and will lead to subsequent economic growth throughout Wisconsin.

13. Direct v. Indirect Impacts:

DIRect As the state of Wisconsin continues to allow companies to salvage sunken logs in its waters, there has been a revitalization of economies of some of the small logging towns in the state. That is because there has been a great demand for the old slow growth timber from craftsmen, instrument makers, contractors and architects that has increased the curiosity of people throughout the world to come to the small town of Ashland Wisconsin to see what the recovery efforts are about.

14. Relation of Trade Measure to Environmental Impact

a. Directly Related to Product: YES WOOD

b. Indirectly Related to Product:NO

c. Not Related to Product: NO

d. Related to Process: YES DEFORestation

15. Trade Product Identification:

WOOD The logs that are brought up from the bottom of Lake Superior include red oak, walnut, pines and basswoods. While the logs have great value unprocessed, their value can quadruple once they are processed into veneer, furniture or instruments, to be sold on the open market.

16. Economic Data

The exact prices the Superior Lumber Company will receive for the recovered lumber are not clear. Current prices for logs of red oak are U.S. $400 unprocessed, U.S. $1,000 processed and U.S. $4,000 when the logs are shaved into veneer. The red oak that has been recovered from Lake Superior is of significantly greater quality than any logs that are harvested today. Therefore, experts are unsure of the exact prices that craftsmen, artisans, instrument makers and contractors are willing to pay, but the prices are expected to be very high. The Superior Lumber Company estimates that there are approximately one million old growth logs at the bottom of Lake Superior, and the state of Wisconsin has levied a small 2% tax on each log recovered. That is because the state government is hoping the Superior Lumber Company, and its million dollar investors, will cause an increase in the tourism industry for eastern Wisconsin. At the present, the curiosity of the public, along with the increased publicity of the recovery effort has caused an increase in tourism, and a growth in the economy of the city of Ashland Wisconsin.

17. Impact of Trade Restriction:

LOW

18. Industry Sector:

Lumber and Products [WOOD]

19. Exporters and Importers:

USA and MANY The Superior Lumber Company in the State of Wisconsin is the primary exporter of the recovered wood in Lake Superior. Once the wood is recovered and processed, it is exported to craftsman, artisans, architects and contractors throughout the world for use in many different items that require a wood with a very fine grain.

V. Environment Clusters

20. Environmental Problem Type:

[DEFOR] During the late 1800s and early 1900s, the trees at the bottom of Lake Superior were clearcut to the point of extinction. The species of trees that were cut include the red oak, white pine, walnut and basswood and were taken for their superior texture and quality for the manufacture of instruments and furniture. The old slow growth hardwoods grew in conditions with very little sunlight, cold temperatures and in rocky and rich soils. The recovery effort of the Superior Lumber Company has not been damaging to the forests of the region, since there are no longer any hardwoods left to harvest. In actuality, the efforts of Superior Lumber could be labeled a recycling effort because they are simply recovering and processing well preserved ancient hardwoods, rather than cutting them down. At the present, the old slow growth forests have been replaced by fast growing conifers in Canada, Minnesota, Wisconsin and Michigan. The conifers are not the same quality wood that the old growth hardwoods were, but their growth cycles are quick which makes them very profitable to harvest.

21. Name, Type, and Diversity of Species

Name:RED-OAK, WHITE PINE, BASSWOOD, WALNUT

Type:TREE

Diversity:Almost completely extinct in North America, and not enough to sustain a considerable harvest

22. Resource Impact and Effect:

LOW and PRODUCT The timber that Superior Lumber is processing and selling for large profits was cut approximately 100 years ago, and in the areas of Wisconsin, Minnesota, Michigan and Canada there is no longer a sustainable harvest to cut for profit. The state of Wisconsin is hoping that Scott Mitchen■s estimate of 1 million logs in Lake Superior is an accurate one, so the recycling efforts will be viable for more than two or three years. If there are approximately 1 million logs in the lake, the industry will be maintained for enough time, that small towns such as Ashland Wisconsin will feel the benefits of increased tourism that will help to boost its economy. But there is also the fear that the estimates are too optimistic, and what happened with the hardwood■s depletion sixty years ago will repeat itself in the future.

23. Urgency and Lifetime:

LOW and lifetime is unsure The reason the urgency is low is because there is no damage being inflicted upon the environment by raising the logs, because the damage was already done 100 years ago. Most of the old slow growth forest in the north has already been deforested and was replaced by fast growing coniferous trees.

24. Substitutes:

NO The recovery of the sunken logs is a substitute for deforestation and even though recovery will not last forever, it does help to alleviate some of the worldwide demand for walnut, red oak, white pine and basswood. But one problem with the wood being utilized as a substitute, is that it will be very expensive and only the very wealthy will be able to afford it, and many people who have legitimate uses for the recycled wood in Lake Superior as a substitute will most likely be priced out of the market.

VI. Other Factors

25. Culture:

NO As Scott Mitchen's Superior Lumber Company recovers and processes the sunken logs, it serves as a reminder to the people of Wisconsin of their rich logging heritage. Until the early 1930s, the timber industry was king in Wisconsin, and it helped the state become one of the chief suppliers of lumber for the continental United Sates. The lumber industry allowed the state's economy to grow enormously, and made the ports in Lake Superior some of the busiest in North America. Also, many lumberjacks lost their lives with the old and unsafe extraction procedures of the past, and as Superior Lumber raises each log from the depths of Lake Superior, they stand as a testament to the men who harvested them until the time of the forest■s near extinction.

26. Trans-Boundary Issues:

NO Most of the trans-boundary issues were settled due to the law of the sea treaty, that codifies a state■s ownership of a body of water and the land below that water. Therefore, the state of Wisconsin justly and fairly owns the property at the bottom of Checaumegon Bay in Lake Superior, which happens to be approximately one million old slow growth logs.

27. Rights:

NO

28. Relevant Literature

Souder, William. "30,000 Log Under the Sea." The Washington Post, 14 August 1996, A1, 12. WWW.envirolink:org/orgs/;Envirolink Library WWW.intranet.ca/~foe/forestry.html;Friends of the Earth WWW.wcmc.org.uk/;World Conservation Monitoring Centre References 1. William Souder, "30,000 Log Under the Sea." The Washington Post, 14 August 1996, A12. 2. William Souder, "30,000 Log Under the Sea." The Washington Post, 14 August 1996, A12. 3. William Souder, "30,000 Log Under the Sea." The Washington Post, 14 August 1996, A12. 4. William Souder, "30,000 Log Under the Sea." The Washington Post, 14 August 1996, A12. 5. William Souder, "30,000 Log Under the Sea." The Washington Post, 14 August 1996, A12. 6. William Souder, "30,000 Log Under the Sea." The Washington Post, 14 August 1996, A12. 7. William Souder, "30,000 Log Under the Sea." The Washington Post, 14 August 1996, A12. 8. William Souder, "30,000 Log Under the Sea." The Washington Post, 14 August 1996, A12. 9. William Souder, "30,000 Log Under the Sea." The Washington Post, 14 August 1996, A12. 10. William Souder, "30,000 Log Under the Sea." The Washington Post, 14 August 1996, A12. 11. William Souder, "30,000 Log Under the Sea." The Washington Post, 14 August 1996, A12. 12. William Souder, "30,000 Log Under the Sea." The Washington Post, 14 August 1996, A12.

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May, 1997