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Molalla is located in the foothills of the Cascade Range , near the Mount Hood National Forest , 15 miles (24 km) south of Oregon City and 13 miles from Interstate 5 . Molalla is surrounded by farms and rural residential development. There are many rock quarries, and thousands of acres of private timberlands, that feed natural resource materials into the economy. Several of the tree farms are managed for totally maintained and sustained forest.