Timber age verification using historical satellite image analysis Joon Heo a, * , Jong Hong Kim a , Ji Sang Park b , Hong-Gyoo Sohn a a School of Civil and Environmental Engineering, Yonsei University, 134 Shinchon-dong, Seodaemun-gu, Seoul 120-749, Republic of Korea b Electronics and Telecommunications Research Institute, 161 Gajeong-dong, Yuseong-gu, Daejeon 305-700, Republic of Korea Received 1 July 2005; received in revised form 19 September 2006; accepted 20 September 2006 Abstract Timber inventory data is important for estimating the net present value (NPV) of timberland sales among paper companies, timber investment and management organizations (TIMO), institutional investors, and individual investors. Timber age in an inventory GIS database can be quickly verified through a series of historical satellite image analyses based on image differencing techniques. The normalized difference vegetation index (NDVI), tassel-cap greenness, wetness, simple differencing of band 5, and a vegetation conditions index were used collectively as an individual change detection index, and simple averaging was employed in the integration of individual results. With respect to timberlands of more than 200,000 acres in the states of Washington and Oregon, harvest years from satellite image analysis and timber ages in the inventory GIS database were compared, and the areas of age mismatch were summarized for field verification. This practice is not a complete solution for inventory verification, but it can reduce significant time in on-site verification by effectively offering a list of potential age-discrepancy tracts. With the support of fieldwork confirmation, the proposed practice can be a very effective and efficient means of practicing due diligence for timberlands in the forestry industry. # 2006 Elsevier B.V. All rights reserved. Keywords: Timber inventory; Historical satellite image; Change detection; GIS 1. Introduction Traditionally, a large percentage of non-governmental timberlands have been owned by large forest product companies or non-industrialized private forestland owners. Over the past three decades, a fundamental change has occurred in the ownership of a significant portion of these commercial timberlands. Since 1974, when the US Congress passed the Employee Retirement Income Security Act (ERISA), institu- tional investors (e.g., pension plans, endowments, or founda- tions) have periodically bought and sold their timberlands to invest and liquidate their assets through diversified portfolios and hedge inflations (Block and Sample, 2001). As a consequence, sales of timberlands have become very active, and valuation of those timberlands is frequently requested prior to price negotiation. There are several types of value: stumpage value, forest holding value, forest liquidation value, market value, and investor’s value (Klemperer, 1996). Stumpage value, for example, is what buyers pay for standing timber ready for harvest, with emphasis on immediate cutting. For timber investment, forested property needs to be valued not for the current harvest but to determine the investor’s value, which is known as net present value (NPV). The NPV reflects an investor’s willingness to pay for an asset based on estimated benefits, cost, and the desired rate of return. In practice, a number of factors (e.g., projection of future harvest revenue, taxation, and the risk-adjusted discount rate) should be included in valuation (Klemperer, 1996). In reality, the most fundamental factor in timber valuation is volume (Clark et al., 2006). However, difficulties in regularly updating timber volume have made age information the primary element of forest inventory, since the two are highly correlated with each other. Unfortunately, a forest inventory database is not always updated properly and/or timely after harvests (Heo et al., 2006). Thus, timber stands with the attribute of old growth in forest inventory could in fact be new growth or already harvested. For this reason, verification of timber age in forest inventory is a must before valuation. For small and local transactions, fieldwork by local foresters or investors would be a good choice to ensure quick and accurate timber evaluation. For large and nationwide business transac- tions of up to several hundred thousand acres, however, www.elsevier.com/locate/foreco Forest Ecology and Management 236 (2006) 315–323 * Corresponding author. Tel.: +82 2 2123 5797; fax: +82 2 364 5300. E-mail address: jheo@yonsei.ac.kr (J. Heo). 0378-1127/$ – see front matter # 2006 Elsevier B.V. All rights reserved. doi:10.1016/j.foreco.2006.09.023