Forest Management Improvement Act of 2017 This bill makes categorical exclusions, from requirements under the National Environmental Policy Act of 1969 (NEPA) to conduct environmental assessment and environmental impact statements, available to the Forest Service to conduct forest management activities on up to 10,000 acres of National Forest System land for each exclusion to: create early seral habitat forests; improve wildlife habitats; commercially thin forest stands on suited timberlands; and salvage trees that are dead and/or dying and were damaged by such events as wind, fire, or construction. For a forest management activity, the Forest Service: in an NEPA-prepared environmental impact statement, shall study, develop, and describe only the activity and the alternative of no action; and in an NEPA-prepared environmental assessment, shall not be required to study, develop, and describe the alternative of no action. The bill makes permanent the authority to designate, at state request, treatment areas in national forests that are experiencing an insect or disease epidemic. The bill revises authorities for watershed restoration and protection services. The Department of Agriculture shall establish a pilot arbitration program under which specified forest management projects challenged in a civil action may be designated for an alternative dispute resolution procedure instead of judicial review.