Estimating the costs of overlapping tenure constraints: a case study in Northern Alberta, Canada

The main objectives of this study were to: (i) incorporate the types of constraints implied by overlapping tenures into a timber supply model; and (ii) estimate the costs associated with various constraints implied by overlapping tenures in Alberta, Canada. This was achieved through a linear programming formulation of the timber supply problem over a 100-year planning horizon, which resulted in more than 5 million decision variables and approximately 118,000 constraints. Given the size of the model, a dual-decomposition procedure to solving large-scale linear programming problems was applied. The results showed that, in general, constraints imposed by overlapping tenures led to inefficiencies in wood allocation and substantial increases in the marginal costs of production. Secondly, the effect of the overlapping tenure constraints was unevenly distributed among mills. The costs to individual tenure holders are highly dependent on how far the mills are from their allowed harvest locations and how far the constraints shift mill harvest areas away from their optimal wood procurement zones. Removal of the constraints leads to a 7% increase in the net present value of the forest. For mills that are located within short distances of their allowed harvest locations, removal of constraints do not significantly lower marginal costs. The results show that overlapping tenure constraints are inefficient and therefore should be removed and better ways of allocating land for harvest should be sought. Although such policies would be efficient, tenure holders who derive an economic advantage from existing arrangements will oppose them. In these cases, some means of compensating mills that lose as a result of more efficient wood allocation may have to be arranged.