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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q

( X )

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2007

( )	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-9035

POPE RESOURCES,

A DELAWARE LIMITED PARTNERSHIP

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of

incorporation or organization)

91-1313292

(IRS Employer

Identification Number)

19245 10th Avenue NE, Poulsbo, WA 98370

Telephone: (360) 697-6626

(Address of principal executive offices including zip code)

(Registrant's telephone number including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No_____

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in rule 12b-2 of the Securities and Exchange Act of 1934).

Large Accelerated Filer

Accelerated Filer

Non Accelerated Filer

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12-2 of the Exchange Act Yes____ No__X_

Partnership units outstanding at November 1, 2007: 4,688,277

Pope Resources

Index to Form 10-Q Filing

For the Quarter Ended September 30, 2007

Description		Page Number
Part I. Financial Information

Item 1 Financial Statements (unaudited)
Condensed Consolidated Balance Sheets		4
Condensed Consolidated Statements of Earnings		5
Condensed Consolidated Statements of Cash Flows		6
Notes to Condensed Consolidated Financial Statements		7–10

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		11–28

Item 3. Quantitative and Qualitative Disclosures about Risk		28

Item 4. Controls and Procedures		28-29

Part II. Other Information

Item 1. Legal Proceedings		29

Item 1A. Risk Factors		29-31

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		31

Item 3. Defaults Upon Senior Securities		31

Item 4. Submission of Matters to a Vote of Security Holders		31

Item 5. Other Information		31

Item 6. Exhibits		32

Signatures		33

PART I – FINANCIAL INFORMATION

ITEM 1

Pope Resources
Condensed Consolidated Balance Sheets
(unaudited, in thousands)

	September 30,		December 31,
	2007		2006
Assets
Current assets:
Cash and cash equivalents	$	3,940	$	7,194
Short-term investments		27,000		25,000
Accounts receivable		2,133		1,074
Land held for sale at cost		4,624		2,813
Current portion of contracts receivable		4,571		4,547
Prepaid expenses and other		486		499
Total current assets		42,754		41,127
Properties and equipment at cost:
Land held for development		16,716		13,294
Land and land improvements		22,324		22,327
Roads and timber (net of accumulated
depletion of $47,787 and $43,461)		94,483		98,110
Buildings and equipment (net of accumulated
depreciation of $7,086 and $6,748)		3,622		3,405
		137,145		137,136
Other assets:
Contracts receivable, net of current portion		1,275		1,161
Other		244		858
		1,519		2,019

Total assets	$	181,418	$	180,282

Liabilities and Partners' Capital
Current liabilities:
Accounts payable	$	1,479	$	1,114
Accrued liabilities		1,438		3,083
Current portion of long-term debt		1,342		1,342
Deferred revenue		7,747		8,838
Environmental remediation		158		236
Minority interest - IPMB		3		77
Other current liabilities		97		85
Total current liabilities		12,264		14,775

Long-term debt, net of current portion		29,490		30,866
Other long term liabilities		282		351

Minority interest - ORM Timber Fund I, LP		45,969		46,685

Partners' capital (units outstanding 4,688 and 4,647)		93,413		87,605

Total liabilities and partners' capital	$	181,418	$	180,282

See accompanying notes to condensed consolidated financial statements.

Pope Resources
Condensed Consolidated Statements of Earnings
(thousands, except per unit data)
(unaudited)


	Three Months Ended Sept 30,						Nine Months Ended Sept 30,
	2007			2006			2007			2006

Revenues	$	12,171		$	18,024		$	34,284		$	49,717
Cost of timber and land sold		(5,171	)		(6,198	)		(14,302	)		(21,037	)
Operating expenses		(2,815	)		(2,448	)		(7,426	)		(7,476	)
Environmental remediation		-			(114	)		-			(114	)
General and administrative expenses		(957	)		(861	)		(3,688	)		(2,767	)
Income from operations		3,228			8,403			8,868			18,323

Other income (expense):
Interest expense		(637	)		(667	)		(1,939	)		(2,026	)
Capitalized interest		294			218			812			580
Interest income		453			334			1,264			805
		110			(115	)		137			(641	)

Income before income taxes and minority interest		3,338			8,288			9,005			17,682

Income tax provision		(5	)		(16	)		(22	)		(453	)

Income before minority interest		3,333			8,272			8,983			17,229

Minority interest - IPMB		-			7			-			(112	)
Minority interest - ORM Timber Fund I, LP		218			-			237			-

Net income	$	3,551		$	8,279		$	9,220		$	17,117


Allocable to general partners	$	45		$	107		$	118		$	221
Allocable to limited partners		3,506			8,172			9,102			16,896

Earnings per unit:
Basic	$	0.76		$	1.78		$	1.97		$	3.69
Diluted	$	0.74		$	1.74		$	1.91		$	3.60

Weighted average units outstanding:
Basic		4,687			4,645			4,679			4,641
Diluted		4,831			4,769			4,823			4,760


See accompanying notes to condensed consolidated financial statements.

Pope Resources
Condensed Consolidated Statements of Cash Flows
(unauduted, in thousands)
	Nine months ended September 30,
	2007			2006
Cash flows provided by operating activities
Net income	$	9,220		$	17,117
Add back (deduct) non-cash charges (credits):
Deferred revenue		(1,091	)		1,032
Depletion		4,179			5,970
Equity based compensation		492			346
Depreciation and amortization		604			534
Deferred taxes		45			(11	)
Minority interest		(237	)		112
Cost of land sold		532			4,837
Change in working capital accounts:
Accounts receivable		(1,059	)		-
Contracts receivable		(138	)		(683	)
Other current assets		13			(241	)
Accounts payable		365			72
Accrued liabilities		(1,338	)		(678	)
Deposits		12			10
Environmental remediation		(78	)		(23	)
Other long term liabilities		(69	)		106
Other long term assets		547			-
Other		(5	)		2
Net cash flows provided by operating activities		11,994			28,502

Cash flows from investing activities:
Capital expenditures		(7,413	)		(8,999	)
Purchase of short-term investments		(2,000	)		(14,000	)

Net cash used in investing activities		(9,413	)		(22,999	)

Cash flows from financing activities:
Option exercises		649			248
Excess tax benefit from equity based compensation		-			42
Minority interest distribution		(75	)		(166	)
Repayment of long-term debt		(1,377	)		(1,675	)
Unitholder distribution		(5,032	)		(3,650	)

Net cash used in financing activities		(5,835	)		(5,201	)

Net increase (decrease) in cash and cash equivalents		(3,254	)		302
Cash and cash equivalents at beginning of year		7,194			3,361

Cash and cash equivalents at end of the period	$	3,940		$	3,663

See accompanying notes to condensed consolidated financial statements.

Pope Resources

Notes to Condensed Consolidated Financial Statements

(Unaudited)

September 30, 2007

The condensed consolidated financial statements as of September 30, 2007 and December 31, 2006 and for the three months (quarter) and nine-month periods ended September 30, 2007 and September 30, 2006 have been prepared by Pope Resources, A Delaware Limited Partnership (“the Partnership”) pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). The condensed consolidated financial statements are unaudited, but, in the opinion of management, reflect all adjustments (consisting only of normal recurring adjustments and accruals) necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods. The financial information as of December 31, 2006, is derived from the Partnership’s audited consolidated financial statements and notes thereto for the year ended December 31, 2006, and should be read in conjunction with such financial statements. The results of operations for the 2007 interim periods are not necessarily indicative of the results of operations that may be achieved for the entire fiscal year ending December 31, 2007.

2.	The financial statements in the Partnership's 2006 Annual Report on Form 10-K include a summary of significant accounting policies of the Partnership and this Quarterly Report on Form 10-Q should be read in conjunction with those policies.

3.	Basic net earnings per unit are based on the weighted average number of units outstanding during the period. Diluted net earnings per unit are based on the weighted average number of units and dilutive unit options outstanding at the end of the period.

	Quarter Ended September 30,				Nine Months Ended September 30,
	2007		2006		2007		2006
Weighted average units outstanding (in thousands):
Basic		4,687		4,645		4,679		4,641
Dilutive effect of unit options		144		124		144		119
Diluted		4,831		4,769		4,823		4,760

Options to purchase 212,000 units at prices ranging from $9.30 to $37.73 per unit were outstanding as of September 30, 2007. For computing the dilutive effect of unit options for the quarter and nine months ended September 30, 2007, no options were anti-dilutive and thus all options were included in the calculation.

Options to purchase 254,000 units at prices ranging from $9.30 to $37.73 per unit were outstanding as of September 30, 2006. For computing the dilutive effect of unit options for the quarter and nine months ended September 30, 2006, options to purchase 1,100 units at prices ranging from $33.15 to $37.73 were not included in the calculation as they were anti-dilutive.

4.	In 2005, we adopted the 2005 Unit Incentive Plan. Following adoption of this new plan the Board of Directors began issuing restricted units instead of unit options as its primary method of granting equity based compensation.

Restricted Units

The Partnership issues new units to those exercising partnership unit options and when granting partnership restricted units. As of September 30, 2007, total compensation expense related to non-vested restricted unit awards not yet recognized was $1.3 million with a weighted average 31 months remaining to vest. At September 30, 2007, there were 55,750 restricted units outstanding having an aggregate intrinsic value of approximately $2.4 million.

Unit Options

Unit options have not been granted since December 2005. Units options granted prior to January 1, 2006 were non-qualified options granted at an exercise price not less than 100% of the fair value on the grant date. Unit options granted to employees vested over four or five years. Board members had the option of receiving their annual retainer in the form of unit options and those options vested immediately as they were granted monthly for services rendered during the month. Options granted generally have a life of ten years from the date of the grant. As of September 30, 2007 there was $12,000 of unrecognized compensation cost related to unit options granted.

The Partnership maintains a liability on its balance sheet to reflect our estimate of remaining costs to complete the environmental remediation at the Port Gamble townsite. The clean up activities at this site have been shared with Pope & Talbot, Inc. (“P&T”) under a contribution agreement. On August 6, 2007 P&T announced that it had entered into a forbearance agreement with its senior lenders.

Following this announcement management believes there is a possibility that all or some portion of P&T’s liability under the contribution agreement will not be fulfilled, as a result of which the Partnership my be required to meet all or a portion of P&T’s unsatisfied obligations. Management does not currently have enough information to estimate the amount of this liability, but notes that P&T has a $1.2 million liability accrual on its books as reported in its June 30, 2007 Form 10-Q related to environmental liabilities at Port Gamble.

Subsequent to the period covered by this report, on October 28, 2007 P&T filed a petition under Canadian bankruptcy laws seeking protection from creditors in connection with restructuring its business. P&T has announced that it intends to continue limited operations during its insolvency proceedings but has given no assurance when or if it will exit bankruptcy or whether it will be able to satisfy its unsecured obligations.

Supplemental disclosure of cash flow information: For the nine months ended September 30, 2007 and 2006, interest paid net of amounts capitalized amounted to $1.1 million and $1.5 million, respectively. Income taxes paid for the nine months ended September 30, 2007 and 2006 amounted to $353,000 and $234,000, respectively.

Revenue, operating income, and EBITDDA, which management uses as a measure of segment profit or loss, for the quarters and nine-month periods ended September 30, 2007 and 2006, by segment, including amounts relating to ORM Timber Fund I, LP, which is part of the Fee Timber segment, are as set forth below.

	Fee Timber									Timberland
Three Months Ended	Pope Resources						Total			Management &			Real
September 30 (Thousands)	Timber			Timberfund			Fee Timber			Consulting			Estate			Other			Consolidated
2007
Revenue internal	$	8,697		$	1,180		$	9,877		$	612		$	1,979		$	-		$	12,468
Eliminations		(41	)		-			(41	)		(246	)		(10	)		-			(297	)
Revenue external		8,656			1,180			9,836			366			1,969			-			12,171

Cost of sales		(3,522	)		(1,106	)		(4,628	)		-			(543	)		-			(5,171	)

Operating expenses internal		(1,231	)		(347	)		(1,578	)		(667	)		(867	)		(957	)		(4,069	)
Eliminations		27			232			259			57			(19	)		-			297
Operating expenses external		(1,204	)		(115	)		(1,319	)		(610	)		(886	)		(957	)		(3,772	)

Income (loss) from operations internal		3,944			(273	)		3,671			(55	)		569			(957	)		3,228
Eliminations		(14	)		232			218			(189	)		(29	)		-			-
Income (loss) from operations external	$	3,930		$	(41	)	$	3,889		$	(244	)	$	540		$	(957	)	$	3,228

EBITDDA reconciliation:
Minority interest		-			218			218			-			-			-			218
Depletion		908			522			1,430			-			-			-			1,430
Depreciation and amortization		61			26			87			21			49			48			205
EBITDDA	$	4,899		$	725		$	5,624		$	(223	)	$	589		$	(909	)	$	5,081

2006
Revenue internal	$	8,749		$	-		$	8,749		$	581		$	9,341		$	-		$	18,671
Eliminations		(635	)		-			(635	)		(3	)		(9	)		-			(647	)
Revenue external		8,114			-			8,114			578			9,332			-			18,024

Cost of sales		(3,416	)		-			(3,416	)		-			(2,782	)		-			(6,198	)

Operating expenses internal		(1,139	)		-			(1,139	)		(546	)		(1,524	)		(861	)		(4,070	)
Eliminations		4			-			4			1			642			-			647
Operating expenses external		(1,135	)		-			(1,135	)		(545	)		(882	)		(861	)		(3,423	)

Income (loss) from operations internal		4,194			-			4,194			35			5,035			(861	)		8,403
Eliminations		(631	)		-			(631	)		(2	)		633			-			-
Income (loss) from operations external	$	3,563		$	-		$	3,563		$	33		$	5,668		$	(861	)	$	8,403

EBITDDA reconciliation:
Minority interest		-			-			-			7			-			-			7
Depletion		1,058			-			1,058			-			220			-			1,278
Depreciation and amortization		65			-			65			18			25			67			175
EBITDDA	$	4,686		$	-		$	4,686		$	58		$	5,913		$	(794	)	$	9,863

	Fee Timber									Timberland
Nine Months Ended	Pope Resources						Total			Management &			Real
September 30 (Thousands)	Timber			Timberfund			Fee Timber			Consulting			Estate			Other			Consolidated
2007
Revenue internal	$	28,039		$	2,726		$	30,765		$	1,763		$	2,598		$	-		$	35,126
Eliminations		(123	)		-			(123	)		(689	)		(30	)		-			(842	)
Revenue external		27,916			2,726			30,642			1,074			2,568			-			34,284

Cost of sales		(11,556	)		(2,150	)		(13,706	)		-			(596	)		-			(14,302	)

Operating expenses internal		(3,206	)		(872	)		(4,078	)		(1,757	)		(2,433	)		(3,688	)		(11,956	)
Eliminations		50			675			725			139			(22	)		-			842
Operating expenses external		(3,156	)		(197	)		(3,353	)		(1,618	)		(2,455	)		(3,688	)		(11,114	)

Income (loss) from operations internal		13,277			(296	)		12,981			6			(431	)		(3,688	)		8,868
Eliminations		(73	)		675			602			(550	)		(52	)		-			-
Income (loss) from operations external	$	13,204		$	379		$	13,583		$	(544	)	$	(483	)	$	(3,688	)	$	8,868

EBITDDA reconciliation:
Minority interest		-			237			237			-			-			-			237
Depletion		3,223			956			4,179			-			-			-			4,179
Depreciation and amortization		193			61			254			62			136			152			604
EBITDDA	$	16,620		$	1,633		$	18,253		$	(482	)	$	(347	)	$	(3,536	)	$	13,888


2006
Revenue internal	$	32,924		$	-		$	32,924		$	3,168		$	14,311		$	-		$	50,403
Eliminations		(637	)		-			(637	)		(22	)		(27	)		-			(686	)
Revenue external		32,287			-			32,287			3,146			14,284			-			49,717

Cost of sales		(15,194	)		-			(15,194	)		-			(5,843	)		-			(21,037	)

Operating expenses internal		(3,304	)		-			(3,304	)		(1,803	)		(3,169	)		(2,767	)		(11,043	)
Eliminations		20			-			20			23			643			-			686
Operating expenses external		(3,284	)		-			(3,284	)		(1,780	)		(2,526	)		(2,767	)		(10,357	)

Income (loss) from operations internal		14,426			-			14,426			1,365			5,299			(2,767	)		18,323
Eliminations		(617	)		-			(617	)		1			616			-			-
Income (loss) from operations external	$	13,809		$	-		$	13,809		$	1,366		$	5,915		$	(2,767	)	$	18,323

EBITDDA reconciliation:
Minority interest		-			-			-			(112	)		-			-			(112	)
Depletion		5,750			-			5,750			-			220			-			5,970
Depreciation and amortization		198			-			198			54			102			180			534
EBITDDA	$	19,757		$	-		$	19,757		$	1,308		$	6,237		$	(2,587	)	$	24,715

ITEM 2

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This report contains a number of projections and statements about our expected financial condition, operating results, and business plans and objectives. These statements reflect our management's estimates based on our current goals, in light of currently known circumstances and management's expectations about future developments. Statements about expectations and future performance are “forward looking statements” within the meaning of federal and state securities laws. Because these statements describe our goals, objectives and anticipated performance, they are inherently uncertain, and some or all of these statements may not come to pass. Accordingly, you should not interpret these statements as promises that we will perform at a given level or that we will take any or all of the actions we currently expect to take. Our future actions, as well as our actual performance, will vary from our current expectations, and under various circumstances these variations may be material and adverse. Some of the factors that may cause our actual operating results and financial condition to fall short of our expectations are set forth in the part of this report entitled “Item 1A: Risk Factors ” below and other factors discussed elsewhere in this report or in our annual report on Form 10-K for the fiscal year ended December 31, 2006. The forward-looking statements in this report reflect our estimates as of the date of the report, and we cannot undertake to update these statements as our business operations and environment change. References in this report to first-person pronouns such as “we,” “our,” and “us” refer to the Partnership or, when used to express intentions or expectations, to the Partnership’s management and managing general partner.

This discussion should be read in conjunction with the financial statements and related notes included with this report.

EXECUTIVE OVERVIEW

Pope Resources, A Delaware Limited Partnership (“we” or the “Partnership”), was organized in late 1985 as a result of a spin-off by Pope & Talbot, Inc. (“P&T”). We are engaged in three primary businesses. The first, and by far most significant, segment in terms of owned assets and operations is the Fee Timber segment. Operations in this segment consist of growing timber to be harvested as logs for sale to domestic and to a lesser extent export manufacturers. The second most significant business in terms of total assets owned is the development and sale of real estate. Real Estate activities primarily take the form of securing permits, entitlements and, in some cases, installing infrastructure for raw land development, and then realizing that land’s value through the sale of larger parcels to buyers who may take the land further up the value chain to home buyers, residential developers, or to developers, operators and lessors of commercial property. Since these land projects ordinarily span multiple years, the Real Estate segment may incur losses for multiple years while a project is developed until that project is sold, which results in operating income to the extent the sale proceeds exceed our basis in the project. Our third business is providing timberland-related services to third parties and raising investment capital from third parties for private equity timber funds , including a fund we established and manage, ORM Timber Fund I, LP (the “Fund”).

In late 2006, the Fund purchased 24,000 acres of timberland in two transactions using 95% of the Fund’s committed capital, or $58.5 million, of the $61.8 million committed overall. As a result of these acquisitions, the Timberland Management & Consulting segment generates fees associated with management of the Fund. The Fund is consolidated into our financial statements with the 80% third-party Fund interest reported as minority interest. The fees associated with management of the Fund are eliminated in consolidation.

Management’s major opportunity and challenge is to profitably grow our revenue base. For our Fee Timber and Timberland Management & Consulting segments, the revenue base is typically thought of in terms of acres owned or under management. Our Real Estate opportunities and challenges center on identifying properties in our portfolio of owned assets with potential development value. Once identified, we attempt to maximize that value through securing entitlements and, in some cases installing infrastructure, prior to selling the property.

RESULTS OF OPERATIONS

The following table reconciles and compares key revenue and cost elements that impact our net income for each of the quarter and nine-month periods ended September 30, 2007 and , 2006. In addition to the table’s detailed numeric analysis, the explanatory text that follows the table describes many of these changes by business segment:

QUARTER TO QUARTER COMPARISONS
(Amounts in $000's except per unit data)

	Q3 2007 vs. Q3 2006			Q3 2007 vs. Q2 2007

	Total			Total

Net income:
3rd Quarter 2007	$	3,551		$	3,551
2nd Quarter 2007					4,815
3rd Quarter 2006		8,279
Variance	$	(4,728	)	$	(1,264	)

Detail of earnings variance:
Fee Timber
Log price realizations (A)	$	(183	)	$	(228	)
Log volumes (B)		1,920			(4,618	)
Depletion		(152	)		608
Production costs		(1,059	)		1,040
Other Fee Timber		(201	)		(220	)
Timberland Management & Consulting
Management fee changes		69			147
Disposition fee changes		-			-
Other Timberland Mgmnt & Consulting		(346	)		(222	)
Real Estate
Environmental remediation liability		114			-
Land sales		(5,050	)		1,218
Other Real Estate		(192	)		(216	)
General & administrative costs		(96	)		749
Interest net		225			110
Minority interest		211			363
Income taxes		12			5
Total change in earnings	$	(4,728	)	$	(1,264	)


(A) Price variance calculated by extending the change in average realized price by current period volume.
(B) Volume variance calculated by extending change in sales volume by the average log sales price for the comparison period.

Fee Timber

Fee Timber revenue is earned primarily from the harvest and sale of logs from the Partnership’s nearly 114,000 acres of fee timberland located in western Washington. We also recognize Fee Timber revenue from sales of timber harvested from the 24,000 acres of timberland owned by the Fund. Other revenue includes lease revenue generated from cell tower sites and sand and gravel pits located on our tree farms. Revenue from the sales of timberland tracts will also appear periodically in results for this segment. Our Fee Timber revenue is driven primarily by the volume of timber harvested, which we ordinarily express in terms of millions of board feet, or “MMBF”, and by the average prices realized on log sales, which we express in dollars per thousand board feet, or “MBF”.

The Fund harvested 2.3 MMBF and 4.9 MMBF during the three and nine month periods ended September 30, 2007, respectively, with an average price realized of $510/MBF and $558/MBF. We plan to harvest a total of 5.5 MMBF from the Fund’s timberlands in 2007. The Fund is consolidated into our financial statements and as a result the Fund’s harvest is included in the Fee Timber discussion.

When discussing our Fee Timber operations, we compare current results to both the previous quarter and the corresponding quarter of the prior year. Both of these comparisons are made to help the reader gain an understanding of the trends in market price and harvest volumes that affect Fee Timber results of operations. Revenue and operating income for the Fee Timber segment for the quarters ended September 30, 2007, June 30, 2007, and September 30, 2006 are as follows:


($ Million) Quarter Ended:	Log Sale Revenue		Mineral, Cell Tower & Other Revenue		Total Fee Timber Revenue		Operating Income		Harvest volume (MMBF)
September 30, 2007	$	9.3	$	0.5	$	9.8	$	3.9		15.2
June 30, 2007		14.1		0.5		14.6		7.3		22.6
September 30, 2006		7.6		0.5		8.1		3.6		12.1

The decrease in revenue and operating income for the current quarter relative to the preceding quarter of 2007 is attributable to a 7.4 MMBF decrease in harvest volume combined with a $15/MBF decrease in average price realized. This decline in harvest volume is principally due to the acceleration of logging from the Columbia tree farm into the first two quarters of this year. Fee Timber revenue in the current quarter is $1.7 million higher than the comparable period in 2006 due to a 3.1 MMBF increase in harvest volume netted against a $12/MBF decrease in average price realized. Harvest volume has increased in the current quarter compared to 2006’s third quarter due to inclusion of a higher proportion of the Hood Canal tree farm’s annual harvest in 2007 results and 2.3 MMBF of Fund volume not available for harvest in 2006.

Revenue and operating income for the Fee Timber segment for the nine-month periods ended September 30, 2007 and 2006 were as follows:


($ Million) Nine months Ended:	Log Sale Revenue		Mineral, Cell Tower & Other Revenue		Total Fee Timber Revenue		Operating Income		Harvest volume (MMBF)
September 30, 2007	$	29.2	$	1.4	$	30.6	$	13.6		47.9
September 30, 2006		31.0		1.3		32.3		13.8		50.8

The decrease in revenue and operating income in 2007 relative to 2006 is due primarily to a 2.9 MMBF decrease in volume harvested. Through the first nine months of 2007, we have harvested approximately 87% of our expected annual volume. Harvest volume during the first nine months of 2007 also includes 4.9 MMBF of Fund volume. Through September 30, 2006, we had harvested over 90% of our full-year harvest.

Log Volume

The Partnership harvested the following log volumes by species from its timberlands for the quarters ended September 30, 2007, June 30, 2007, and September 30, 2006 and the nine-month periods ended September 30, 2007 and 2006:

Log volumes (MBF):		Quarter Ended
Sawlogs		30-Sep-07		% Total			30-Jun-07		% Total			30-Sep-06		% Total
	Douglas-fir		7,602		50	%		15,991		71	%		8,626		71	%
	Whitewood		2,272		15	%		2,922		13	%		483		4	%
	Cedar		931		6	%		575		2	%		188		2	%
	Hardwood		1,297		8	%		878		4	%		1,464		12	%
Pulp
	All Species		3,127		21	%		2,241		10	%		1,386		11	%
Total			15,229		100	%		22,607		100	%		12,147		100	%

Log volumes (MBF):		Nine Months Ended
Sawlogs		30-Sep-07		% Total			30-Sep-06		% Total
	Douglas-fir		30,708		64	%		36,908		73	%
	Whitewood		5,985		13	%		3,628		7	%
	Cedar		1,566		3	%		774		2	%
	Hardwood		2,304		5	%		3,170		6	%
Pulp
	All Species		7,312		15	%		6,350		12	%
Total			47,875		100	%		50,830		100	%

Through September 30, 2007, we have harvested 48 MMBF of our targeted 55 MMBF annual harvest for this year. In 2007, we have moderated the front loading of our annual harvest resulting in a greater proportion of our annual harvest volume falling in the third quarter. Through September, 30, 2007 our production of whitewood sawlogs as a percentage of total harvest nearly doubled from the comparable period in 2006, in part because the Fund’s timberlands contain a higher proportion of whitewood inventory than our other tree farms.

Log Prices

While harvest volume is largely within management’s control, one additional factor that impacts our Fee Timber income is the price we realize upon selling our logs into the market. We try to maximize Fee Timber revenue by adjusting the timing and mix of our harvest to take advantage of current market conditions where possible. However, log prices are a result of a broader range of economic and political factors and are largely beyond our ability to control, except at the margins. We realized the following log prices for the quarters ended September 30, 2007, June 30, 2007 and September 30, 2006 and the nine-month periods ended September 30, 2007 and 2006:

Average price realizations (per MBF):

Quarter Ended

Nine Months Ended