How to calculate plantation fire damage
So you have had a fire in your plantation and you need to value the extent of the damage in order to institute a claim for the damages. What needs to be done?
By Dave Dobson
Your lawyer will require a Quantum report (or an estimate of the extent of the loss). The objective of such a report is to value the loss in such a manner as to place you in the same position after the fire as before the incident occurred. The Faustmann formula is the accepted method for valuing trees for insurance purposes (fire) as well as for expropriation, but there are other factors that need to be taken into consideration:-
• Plantation yields in terms of species, growth and site.
• Tree value.
• Debris removal costs.
• In the case of large fires, loss of growth if it is not going to be possible to re-establish the planted area in one season.
Growth conditions across a plantation are unlikely to be uniform and it will be necessary to group your burnt compartments into yield classes. To achieve this will require an enumeration of the burnt trees. A 2% enumeration should suffice. Trees too young to be measured should be grouped with older compartments growing in the same area or on similar sites. The enumeration exercise will also make it possible to identify potential problems. This will help explain variances in stocking, diameter and height growth.
Site Index is another metric that will be required. Site Index is defined as the dominant stand height at a certain reference age. As height is independent of stocking, it serves as a good indicator of the growth on a particular site. You will need to calculate site indices for the burnt trees.
To conduct a meaningful financial analysis of the burnt trees, detailed estimates of the products are required. To achieve this, knowledge of heights, diameters and stocking is necessary. In pine, thinning regimes may differ from the norm, so predictions of the diameter before thinning, the diameter of the thinnings and the diameters of the remaining trees are required. Growth and yield models are necessary to calculate the products to be valued.
The value of the trees both mature and immature is determined by applying the Faustmann formula. Justice Friedman, in the case Hill v Mercrowe Forestry in 1977 found that “the Faustmann formula properly used affords the most accurate starting point in the difficult task of placing a valuation on standing trees as they were before a fire.” When developing costs for the calculation, the timber grower’s actual costs, if available, should be used. Only resort to bench marking costs if reliable figures are not available.
Depending on the age of the trees, some salvage should be possible. In pine it would be sawlogs and in gum and wattle generally charcoal - or maybe poles.
In young pine with a small percentage of ‘A’ class sawlogs, many of the trees to be felled will be undersized and a differentiation will be required between the harvesting of the salvageable logs and the waste.
The pulpwood buyers do not want logs with soot on them, hence the charcoal option with hardwood (wattle and gum). Gum pole material might be an option where the damage to the trees has not been too severe.
In most cases the cost of the charcoal salvage operation will not be fully recovered in the final price for the charcoal. However, it must be considered since it helps to mitigate the cost of the debris removal.
Felling burnt timber is more expensive than a normal harvesting operation since the presence of soot contributes to excessive chainsaw wear. The additional cost of felling and clearing in preparation for the re-establishment of the compartment needs to be carefully assessed.
Finally, in the case of a large fire the plantation owner might not be able to clear the burnt trees and re-establish the plantation in a single season. The growth loss attributable to the unproductive forest land needs to be estimated and a value ascribed to the loss.
In conclusion, calculating the Quantum resulting from a plantation fire is complicated and time consuming. However, as losses often run into many millions of Rands it is worth having the assessment done properly. The benefit - if you are a successful claimant - is that the legal costs associated with the claim are ultimately recoverable as a cost of suit.
*Related article: Ponsse forwarders conversion to fire fighting units