Economic Sustainability of Payments for Water Yield in Slash Pine Plantations in Florida

Forests play an important role with respect to water resources, and can be managed to increase surface- and groundwater recharge. With the creation of a forest water yield payment system, privately-owned forests, which comprise the majority of forest area in the Southeastern US, could become an important potential source of additional water supply. The economic tradeoffs between timber revenues and water yield are not well understood. To address this, we use the example case of slash pine production in Florida, and employ a forest stand-level optimal rotation model that incorporates forest management, and assessed a range of feasible water yield prices on forest profitability. Our analysis was limited to a range of water yield prices ($0.03, $0.07, and $0.30 kL(-1)) that would make water yield from slash pine economically competitive with water supply alternatives (e.g., reservoir construction). Even at relatively low water prices, we found that managing slash pine forests for both timber and water yield was preferred to managing just for timber when assuming an initial tree density less than 2200 treesha(-1). However, with higher levels of initial tree planting density and low water prices, managing slash pine for timber production alone was more profitable unless stands are heavily-thinned, suggesting that even mid-rotation stands could be included in a forest water yield payments program. Compared to low-tree planting density and lightly thinned slash pine forests, an intensive approach of planting a lot of trees and then heavily thinning them generated 8% to 33% higher profits, and 11% more ($192 ha(-1)) on average. We conclude that payments for water yield are economically feasible for slash pine stands in Florida, and would benefit forest landowners, particularly with higher prices for water yield.