The future of Hawai'i's nascent timber industry is starting to clear.

Hawai'i has thousands of acres of land chock full of ready-to-harvest hardwood trees that were planted over several decades. The trees, which contain enough wood to build and panel thousands of homes, are ready for businesses willing and able to turn them into veneer, lumber, flooring and other high-value products.

Efforts to jump-start a timber industry were boosted last month when the Board of Land and Natural Resources agreed to allow a startup sawmill operation to harvest 1,100 acres of non-native timber on government land near Hilo. The five-year agreement with Hawaii Island Hardwoods LLC is just the second license allowing large scale harvests of state-owned timber. Another company, Tradewinds Forest Products, already owns rights to harvest 8,000 acres of eucalyptus and maple in the state's Waiakea Timber Management Area, which is comprised of three Big Island forest reserves.

If successful, a local timber industry could diversify Hawai'i's economy, create jobs, relieve the need to import lumber and provide a source for renewable energy. If all goes well, the Hawaii Island Hardwoods and Tradewinds licenses alone could generate $5 million in revenues for the state within 10 years, which can be used for reforestation and other conservation efforts.

"If we can develop this industry, we can create a lot of jobs and replace some of the lost sugar cane jobs," said Kent Untermann, a principal with Hawaii Island Hardwoods, which plans to build a $10 million to $15 million sawmill in Hilo that would employ about 30 people.

INDUSTRY FORECAST

Overall the state Department of Land and Natural Resources manages about 20,000 acres of timber statewide, which comprises the bulk of state-owned timber inventory. In addition, Hancock Timber Resource Group owns about 20,000 acres of eucalyptus, which is grown on former Hamakua Sugar land leased from the Kamehameha Schools.

Together, Tradewinds and Hawaii Island Hardwoods will harvest timber for wood veneer, hardwood flooring and other applications depending on the quality of the trees. Ultimately, industry hopes for the development of a wood chip and biomass energy plants that can utilize leftover wood and timber not suitable for high-value products. That will allow the state and private landowners to get the highest value for its trees, said Michael Constantinides, forestry program manager at the state Department of Land and Natural Resources.

"That's the idea," he said. "We are pretty happy with the signs we are seeing.

"It just seems like we are at a point where everything is evolving in a kind of cohesive way."

However, state and industry leaders remain cautious about the industry's future.

That's because projects such as Tradewinds have suffered financial setbacks that caused substantial delays. Tradewinds, which plans to build a $40 million veneer mill and electricity plant in 'O'okala, signed a 10-year agreement with the state in August 2001; however, difficulties obtaining financing set the project back substantially. Now state officials think the project may be on track to meet a July 2008 completion date.

Meanwhile, Hawaii Island Hardwoods plans to have its sawmill producing at least 3 million board feet of lumber annually within two years. That could alleviate current estimated import demand for 7 million to 10 million board feet of hardwood a year, according to a 2004 DLNR study.

"We believe there's demand for the wood; it's just that nobody has been able to efficiently process it," Untermann said. "If we can be competitive, and we think we can, it will replace imports, which is good for the economy and use less fuel, which is good for the environment."

In addition to financial issues, forestry projects also have collided with environmental interests. Although the state-owned timber sold to Tradewinds and Hawaii Island Hardwoods was planted with plans to harvest, the areas have become habitats for native plants and animals. There's also concern that commercial logging will result in increased noise, traffic, insecticide use and runoff.

STRONG POTENTIAL

In 1997 public opposition scuttled a state plan to lease 5,000 acres in Honoka'a to Oji Paper Co. of Japan to set up pulp tree plantations. Part of the concern was that a pulp paper operation would result in less revenues and fewer jobs than other types of timber processing operations.

While the current value of the state's forest sector is unknown, Hawai'i's forest industry generated $30.7 million in annual sales and employed about 900 full-time workers, according to a 2001 report conducted for the Hawai'i Forest Industry Association. Most of that revenue — $23.9 million — came from retail sales of wood products.

Industry experts predict a fully mature industry that provides wood products for local use and export that could be worth millions more.

"The potential is really strong," said Stephen Smith, a board member for the Hawai'i Forest Industry Association. "We're all quite excited to see Hawai'i-grown product made available for Hawai'i to use."

Hawai'i's forest industry dates back to the 1800s when demand for sandlewood and a lack of conservation eliminated vast sandlewood forests. Today, state plans include replanting trees in areas scheduled for harvesting. Although koa remains Hawai'i's most prized and valuable wood, Hawai'i is also home to eucalyptus, maple, cedar, mahogany and other non-native woods that were planted on state and private land over several decades.

"It's been a lot of work to build this wood basket," said Peter Simmons, Regional Asset Manager for Kamehameha Schools. "It's taken several generations to create this opportunity, and it's still not over."

Reach Sean Hao at shao@honoluluadvertiser.com.