TONGASS TIMBER REFORM ACT
HEARING
L| ^ C^ "2^ I JO^. BEFORE THE
COMMITTEE ON RESOURCES
J ^tr\ AND THE
• *'^ SUBCOMxMITTEE ON RESOURCE CONSERVATION,
RESEARCH, AND FORESTRY
OF THE
COMMITTEE ON AGRICULTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTH CONGRESS
SECOND SESSION
ON
H.R. 3659
A BILL TO AMEND THE TONGASS TIMBER REFORM ACT TO ENSURE
THE PROPER STEWARDSHIP OF PUBLICLY OWNED ASSETS IN THE
TONGASS NATIONAL FOREST IN THE STATE OF ALASKA, A FAIR
RETURN TO THE UNITED STATES FOR PUBLIC TIMBER IN THE
TONGASS, AND A PROPER BALANCE AMONG MULTIPLE USE IN-
TERESTS IN THE TONGASS TO ENHANCE FOREST HEALTH, SUS-
TAINABLE HARVEST, AND THE GENERAL ECONOMIC HEALTH AND
GROWTH IN SOUTHEAST ALASKA AND THE UNITED STATES
JULY 11, 1996— WASHINGTON, DC
m^
Serial No. 104-92 '-Lfuy^
(Committee on Resources)
Serial No. 104-38
(Committee on Agriculture)p f Q 1 0 1QQ7
Printed for the use of the Committee on Resources
U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 1996
For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 20402
ISBN 0-16-053778-9
TONGASS TIMBER REFORM ACT
HEARING
L| R "2^ I AZj". BEFORE THE
COMMITTEE ON RESOURCES
J q^ AND THE
'"^ ' SUBCOMxMITTEE OX RESOURCE CONSERVATION,
RESEARCH, AND FORESTRY
OF THE
COMMITTEE ON AGRICULTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTH CONGRESS
SECOND SESSION
ON
H.R. 3659
A BILL TO AMEND THE TONGASS TIMBER REFORM ACT TO ENSURE
THE PROPER STEWARDSHIP OF PUBLICLY OWNED ASSETS IN THE
TONGASS NATIONAL FOREST IN THE STATE OF ALASKA, A FAIR
RETURN TO THE UNITED STATES FOR PUBLIC TIMBER IN THE
TONGASS, AND A PROPER BALANCE AMONG MULTIPLE USE IN-
TERESTS IN THE TONGASS TO ENHANCE FOREST HEALTH, SUS-
TAINABLE HARVEST, AND THE GENERAL ECONOMIC HEALTH AND
GROWTH IN SOUTHEAST ALASKA AND THE UNITED STATES
JULY 11, 1996— WASHINGTON, DC
Serial No. 104-92
(Committee on Resources)
Serial No. 104-38
(Committee on Agriculture)p f Q 1 0 IQQ7
Printed for the use of the Committee on Resources
»*WC
U.S. GOVERNMENT PRINTING OFFICE
26-689CC WASHINGTON : 1996
For sale by the U.S. Government Printing OtTice
Superintendent of Document.s, Congressional Sales OfTice, Washington, DC 20402
ISBN 0-16-053778-9
COMMITTEE ON RESOURCES
DON YOUNG, Alaska, Chairman
W.J. (BILLY) TAUZIN, Louisiana
JAMES V. HANSEN, Utah
JIM SAXTON, New Jersey
ELTON GALLEGLY, California
JOHN L. DUNCAN, Jr., Tennessee
JOEL HEFLEY, Colorado
JOHN T. DOOLITTLE, California
WAYNE ALLARD, Colorado
WAYNE T. GILCHREST, Maryland
KEN CALVERT, California
RICHARD W. POMBO, California
PETER G. TORKILDSEN, Massachusetts
J.D. HAYWORTH, Arizona
FRANK A. CREMEANS, Ohio
BARBARA CUBIN, Wyoming
WES COOLEY, Oregon
HELEN CHENOWETH, Idaho
LINDA SMITH, Washington
GEORGE P. RADANOVICH, Cahfornia
WALTER B. JONES, Jr., North Carohna
WILLLyVI M. (MAC) THORNBERRY, Texas
RICHARD (DOC) HASTINGS, Washington
JACK METCALF, Washington
JAMES B. LONGLEY, Jr., Maine
JOHN B. SHADEGG, Arizona
JOHN E. ENSIGN, Nevada
GEORGE MILLER, Cahfornia
EDWARD J. MARKEY, Massachusetts
NICK J. RAHALL II, West Virginia
BRUCE F. VENTO, Minnesota
DALE E. KILDEE, Michigan
PAT WILLL\MS, Montana
SAM GEJDENSON, Connecticut
BILL RICHARDSON, New Mexico
PETER A. DeFAZIO, Oregon
ENI F.H. FALEOMAVAEGA, American
Samoa
TIM JOHNSON, South Dakota
NEIL ABERCROMBIE, Hawaii
GERRY E. STUDDS, Massachusetts
SOLOMON P. ORTIZ, Texas
OWEN B. PICICETT, Virginia
FRANK PALLONE, Jr., New Jersey
CALVIN M. DOOLEY, Cahfornia
CARLOS A. ROMERO-BARCELO, Puerto
Rico
MAURICE D. HINCHEY, New York
ROBERT A. UNDERWOOD, Guam
SAM FARR, California
PATRICK J. KENNEDY, Rhode Island
Daniel Val Kish, Chief of Staff
David Dye, Chief Counsel
Christine Kennedy, Chief Clerk /Administrator
John Lawrence, Democratic Staff Director
(II)
COMMITTEE ON AGRICULTURE
PAT ROBERTS, Kansas, Chairman
STEVE GUNDERSON, Wisconsin
Vice Chairman
LARRY COMBEST, Texas
WAYNE ALLARD, Colorado
BILL BARRETT, Nebraska
JOHN A. BOEHNER, Ohio
THOMAS W. EWING, Illinois
JOHN T. DOOLITTLE, California
BOB GOODLATTE, Virginia
RICHARD W. POMBO, California
CHARLES T. CANADY, Florida
NICK SMITH, Michigan
TERRY EVERETT, Alabama
FRANK D. LUCAS, Oklahoma
RON LEWIS, Kentucky
RICHARD H. BAKER, Louisiana
MICHAEL D. CRAPO, Idaho
KEN CALVERT, California
HELEN CHENOWETH, Idaho
JOHN N. HOSTETTLER, Indiana
ED BRYANT, Tennessee
TOM LATHAM, Iowa
WES COOLEY, Oregon
MARK ADAM FOLEY, Florida
SAXBY CHAMBLISS, Georgia
RAY LaHOOD, Illinois
E (KIKA) DE LA GARZA, Texas,
Ranking Minority Member
GEORGE E. BROWN, Jr., California
CHARLIE ROSE, North Carohna
CHARLES W. STENHOLM, Texas
HAROLD L. VOLKMER, Missouri
TIM JOHNSON, South Dakota
GARY A, CONDIT, California
COLLIN C. PETERSON, Minnesota
CALVIN M. DOOLEY, Cahfornia
EVA M. CLAYTON, North Carolina
DAVID MINGE, Minnesota
EARL F. HILLIARD, Alabama
EARL POMEROY, North Dakota
TIM HOLDEN, Pennsylvania
SCOTTY BAESLER, Kentucky
KAREN L. THURMAN, Florida
SANFORD D. BISHOP, Jr., Georgia
BENNIE G. THOMPSON, Mississippi
SAM FARR, California
ED PASTOR, Arizona
JOHN ELIAS BALDACCI, Maine
Professional Staff
Gary R. Mitchell, Chief of Staff
John E. Hogan, Chief Counsel
Vernie Hubert, Minority Staff Director / Counsel
Jackie Cottrell, Press Secretary
Subcommittee on Resource Conservation, Research, and Forestry
WAYNE ALLARD, Colorado, Chairman
STEVE GUNDERSON, Wisconsin
Vice Chairman
BILL BARRETT, Nebraska
JOHN T. DOOLITTLE, California
RICHARD W. POMBO, Cahfornia
NICK SMITH, Michigan
FRANK D. LUCAS, Oklahoma
RON LEWIS, Kentucky
MICHAEL D. CRAPO, Idaho
HELEN CHENOWETH, Idaho
JOHN N. HOSTETTLER, Indiana
RAY LaHOOD, Illinois
TIM JOHNSON. South Dakota
JOHN ELL^S BALDACCI, Maine
GEORGE E. BROWN, JR.Caalifornia
CHARLES W. STENHOLM, Texas
GARY A. CONDIT, Cahfornia
COLLIN C. PETERSON, Minnesota
EVA M. CLAYTON, North Carolina
DAVID MINGE, Minnesota
EARL POMEROY, North Dakota
TIM HOLDEN, Pennsylvania
(III)
CONTENTS
Page
Hearing held July 11, 1996 1
Text of H.R. 3659 61
Statements of Members:
Allard, Hon. Wayne, a U.S. Representative from Colorado 1
Johnson, Hon. Tim, a U.S. Representative from South Dakota 4
Miller, Hon. George, a U.S. Representative from California 5
Young, Hon. Don, a U.S. Representative from Alaska; and Chairman,
Committee on Resources 2
Statements of witnesses:
Ballard, Ernesta, Environmental Consultant, Barnes and Associates 31
Prepared statement 164
Cohen, Gershon, Alaska Clean Water Alliance, Haines, AK 51
Prepared statement 245
Estey, J. Scott, Vice President of Corporate and Investment Analysis,
Jaakko Pojoy Consultants, Tarrytown, NY 43
Prepared statement 167
Graham, Owen, Timberlands Manager, Ketchikan Pulp Company 30
Hartley, Mark F., D.B.A., Associate Professor of Business Administration,
College of Charleston, SC (prepared statement) 252
Horngren, Scott W., law firm of Haglund and Kirtley, Portland, OR 21
Prepared statement 78
Knapp, Al, The Industrial Company, Steamboat Springs, CO 45
Leonard, George, U.S. Forest Service [retired], Virginia 20
Lewis, Ralph, President, Ketchikan Pulp Company 29
Prepared statement 89
Lindekugel, Robert, Southeast Alaska Consei^ation Council, Juneau,
AK ; 48
Prepared statement 171
Lyons, James R., Under Secretary, Natural Resources and the Environ-
ment, U.S. Department of Agriculture 8
Prepared statement 71
Marby, Samuel A., Vice President of Government Affairs, Hercules, Incor-
porated, Washington, DC 45
Munson, Mary, Public Lands Associate, Defenders of Wildlife, Washing-
ton, DC 55
Prepared statement 248
O'Donnell, Brian, Executive Director, Alaska Wilderness League, Wash-
ington, DC 56
Roets, David L., Southeast Regional Sales Manager, Graseby STI,
Waldron, AR 45
Weihing, Wayne, Tongass Conservation Society, Ketchikan, AK 50
Additional material supplied:
Lewis, Ralph D. (KPC):
Attachment A — Excerpts from consideration of the Tongass Timber
Reform Act 112
Attachment B — Supplementary testimony 119
Attachment C — Ketchikan Pulp Company Permits and Reporting
Procedures 160
Lindekugel, Robert:
Attachments to statement 193
Resolutions and petitions 203
Communications submitted:
Leonard, George M.: Letter of July 25, 1996, to Hon. Don Young 270
(V)
VI
Page
Communications submitted — Continued
Lindekugel, Buck, and Bart Koehler (Southeast Alaska Conservation
Council): Letter with attachment of July 15, 1996, to Katie McGinty
(CEQ) 2fift
Lindekugel, Buck, (Southeast Alaska Conservation Council): Letter with
attachment of July 23, 1996, to Hon Don Young 272
TONGASS TIMBER REFORM ACT
THURSDAY, JULY 11, 1996
House of Representatives, Committee on Re-
sources, JOINT WITH the Subcommittee on Re-
source Conservation, Research, and Forestry of
THE Committee on Agriculture,
Washington, DC.
The committees met, pursuant to call, at 1:03 p.m., in room 1324,
Longworth House Office Building, Hon. Don Young (Chairman of
the Committee on Resources) presiding.
The Chairman. I want to welcome you to this joint hearing today
for the Agriculture Committee and the Resources Committee on the
Contract Extension Act of 1996. I'd like to introduce, representing
the Agriculture Committee in Congress from the State of Colorado,
Wayne Allard.
STATEMENT OF HON. WAYNE ALLARD, A U.S.
REPRESENTATIVE FROM COLORADO
Mr. Allard. Thank you, Mr. Chairman. It is a pleasure to hold
this joint hearing with you. Today's hearing should be interesting
and informative to those who have never had the opportunity to
visit the Tongass National Forest.
As the largest national forest in the United States, it is unique
in its natural diversity and beauty. However, with most issues in-
volving our national forests, tensions exist between those who
value that diversity and beauty and those whose livelihood is de-
pendent on the wise use of its resources. However, between Under
Secretary Lyons and Chairman Young, I am sure a solution to
these tensions can be quickly found.
The specific subject of today's hearing is Chairman Young's legis-
lation to extend by 15 years the contract between the pulp com-
pany and the Forest Service for timber from the Tongass. The leg-
islation would also make several modifications of the contract that
are designed to make it more economically viable for the pulp com-
pany. The larger question surrounding the details of today's hear-
ing are jobs and environment and is there a nexus between the
two. Of course there'll be questions that we have all been strug-
gling with for some time, but maybe today we can move closer to
achieving that goal.
Thank you, Mr. Chairman. I look forward to today's hearing.
The Chairman. I want to thank the gentleman from Colorado.
(1)
STATEMENT OF HON. DON YOUNG, A U.S. REPRESENTATIVE
FROM ALASKA; AND CHAIRMAN, COMMITTEE ON RESOURCES
The Chairman. July 13, 1989, and October 26, 1990. I remember
those dates. I still hear the echoes of what was said on the Floor
of the House on those sad days.
Unfortunately Members who are not here but are still on this
committee puffed as they plunged the Federal dagger into the
hearts of the working people in the Tongass timber industry. They
would not admit their actions, but I knew the fate of the working
men and women in the Tongass after the votes on those days. They
also said that timber would be there to meet industry needs. They
said timber would be there for industry in double the amounts.
They said they did not intend to drive the timber industry out of
Southeast Alaska. I am talking about statements on the days when
the House passed the Tongass Timber Reform Act.
Groups that will be testifying today also made their views known
about that legislation. They said the bill would have no impact on
existing Tongass-dependent timber jobs. They said they did not in-
tend to close the pulp mills and timber jobs would not be lost.
I remember what was said on July 13, 1989, and October 26,
1990, and in prior hearings as the Federal Government in Federal
process with a Federal hand plunged the Federal dagger into the
renewable resource timber economy and into hundreds of families
in Southeast Alaska. It has taken almost six years to bleed the in-
dustry and the timber families. The industry is almost dead, but
the hearts of families still beat faintly for yet another Federal hear-
ing about the Tongass.
This hearing is about H.R. 3659, a bill that extends by 15 years
the only remaining long-term contract for timber from the Tongass
National Forest. The Ketchikan Pulp Corporation holds that con-
tract, the contract that was changed unilaterally under the
Tongass Timber — changed unilaterally under the Tongass Timber
Reform Act. I want to stress that, because the new Supreme Court
ruling makes this a far-reaching legal liability of every taxpayer
and this Congress.
This bill does undo unfair, one-sided changes and saves the gov-
ernment at least 357 million. It also adds 15 years to the term of
the contract. It does nothing more.
All of the wilderness areas Mr. Miller agreed to in 1990 are still
there. The mandatory 100-foot fish stream buffers are left alone.
The LUD II set-asides are left alone. The Tongass Timber Supply
Fund so strongly opposed by Mr. Miller in 1989 is not reinstated
by this bill. The 1980 wilderness set-asides are left alone. None of
this is touched, even though I disagreed with the changes at that
time and did not sign the conference report. Everything that was
put in and signed by Mr. Miller, agreed to by Mr. Miller, agreed
to by environmental groups, agreed by the environmental commu-
nity, it is all there. It is still the same.
This bill does not increase the timber harvest in the Tongass.
Only areas open for harvest under the land plan are open for har-
vest under the contract.
Today we are not here to discuss where harvesting will occur.
The team of Congress and the Administration have already done
that. This bill and this hearing is not about harvesting practices on
the Tongass, nor are we here to discuss the harvest level. The Fed-
eral land-planning process is doing that. We are not here to discuss
the conditions of the harvest. This bill concerns none of these is-
sues. This is not the usual Tongass debate. I suggest that if you
want to debate any of these issues, save your breath for TLMP.
I want to be very clear on that point, because testimony address-
ing any Tongass issues other than the contract extensions are not
relevant. I hope that witnesses do not waste their time or my time
on irrelevant testimony. It does not serve the process. It does not
serve the committee's needs. It is irrelevant testimony that wastes
time that Ketchikan doesn't have the time to waste.
To me this is a moral issue. People said in 1989 and 1990 that
the situation we face today in Tongass would not occur. When I
look around this room, I see subjects in this room today that told
me, sat down in my office and said this would not occur. I happen
to know there are a few old-fashioned people who believe their
word is their word is their word and a commitment is a commit-
ment is a commitment. But now that I'm older it shows me very
little. And that includes this Administration and those people with-
in the Administration.
KPC is the only large mill in the Tongass. It is responsible for
employing 1200-plus ifSaskans. KPC's new management has come
to the Congress with a request. They want to improve their mill
by building a chlorine free pulp process, the second such system in
the nation. I want to stress the second such system in the nation.
They want to make the facility more energy efficient. Doing so will
cost about $175 to $200 million. They need a reasonably secure
timber supply for 23 years to get financing for the mill improve-
ments. Their only viable timber supply comes from Federal
Tongass forest. Their timber request is well within the maximum
sustainable harvest level for the Tongass, even the maximum al-
lowed by the pending Tongass Land Plan Revision. Even with the
extension, the independent timber program would still have to
have an adequate supply for its needs. The Governor of Alaska and
the State legislature support this extension.
Frankly, my friends, this is a no-brainer. Unless someone does
really want — does not want timber harvested in the Tongass, and
I know all of those that do not want it harvested at all, we should
pass this bill.
This hearing is to address the contract changes in the bill. I en-
courage witnesses to keep their testimony and answers on the
point. The contract changes ordered by the 1990 Tongass Timber
Reform Act are in a large part responsible for the closure of the
Alaska pulp mill. They are responsible for a 42 percent decline in
Southeast Alaska timber jobs. I don't want to see that repeated by
the performance at KPC mill.
The unfair, unilateral contract changes ordered by TTRA still
plague the Ketchikan Pulp Company. They are addressed in my
bill and my intent is to make sure the contract is commercially via-
ble and fair.
Imagine if you owned a house backed by a Federal loan. What
would you think if the government said we are going to change the
terms of your loan, instead of six percent your interest rate is now
eight, it will never go down but we can increase it again when we
want to, and, oh, by the way, your payment is now $1500 per
month not $900 a month? What would you think if the government
said tough luck if you do not like it, we are changing our contract
to say that we can call your loan at any moment, even if you make
all of your payments on time? What would you think? Is that fair?
Would that help you plan for your family's future? Would that give
you security?
Well, that is exactly what the Federal Government, this commit-
tee, did to the Ketchikan Pulp Corporation. It is unfair and it is
unjust. And under the U.S. Supreme Court doctrine, it is illegal for
the government to change a contract without paying for damages
caused by the breach. This type of action is precisely why the Unit-
ed States Congress and the Federal Department of Agriculture
should not be making the decision on extending the KPC contract.
The State of Alaska should do it, be here we are again airing this
issue in the Federal arena.
My other Tongass bill would give the State the power to control
the Tongass, but we will talk about that bill another day in this
committee.
I want to stress one thing. If Ketchikan Pulp decides not to rein-
vest and shuts down their mill and will go to court and is in court
now, and receives a payment, it is in the billions of dollars, dollars
the taxpayers will pay, but it doesn't help the city of Ketchikan. It
doesn't help the working families that reside in Ketchikan because
it did not help them in Sitka. It will kill the industry. There will
be no more logging in Southeast Alaska.
And those that would like that, at least I wish they would be
honest about it. At least the Sierra Club is honest. They don't want
any more trees cut on the national forest and they have said that.
They have finally come to the front and said what they want. Let
us not play the charade that we are for a timber industry but we
don't like this con. We are for added value, but we don't like pulp,
the highest added-value product we have in the Tongass.
I think it is very important that my colleagues, even to have the
problem we have today in the Tongass. Mr. Miller and I have sat
through this, I don't know how many years. Mr. Miller has made
comments to me, as I said — you were not here, Mr. Miller, about
not losing any jobs, about not having any mills shut down, about
not having deletion of the timber supply. Yet the Forest Service
keeps cutting back, back and back to where the mill no longer is
a viable industry.
In an area where I flew the other day 45 minutes out of the city
of Sitka on my way to Ketchikan, all I saw was 45 standing min-
utes of flying at 105 miles an hour of dead trees, just dead trees.
No live trees, dead trees. People forget that is what we want the
pulp mill to do. People forget that is what we were told we would
have an industry in 1989 and 1990. Both times people have said
that. In fact, they have lied to us.
The gentleman from South Dakota.
STATEMENT OF HON. TIM JOHNSON, A U.S. REPRESENTATIVE
FROM SOUTH DAKOTA
Mr. Johnson. Thank you, Mr. Chairman. I simply have a state-
ment that I would to submit for the record. And I suspect that the
ranking member, Mr. Miller, has a more extensive statement, but
I will submit my opening statement for the record to expedite this
hearing. Thank you, Mr. Chairman.
[Statement of Hon. Tim Johnson follows:]
Statement of Hon. Tim Johnson, a U.S. Representative from South Dakota
Mr. Chairman, I appreciate your calling today's hearing, which will give the Mem-
bers of the committees with jurisdiction over the Tongass National Forest the oppor-
tunity to examine the legislation that has been introduced by Congressman Young.
I can understand the urgency and earnestness shown by the Chairman of the Re-
sources Committee as well as the rest of the Alaska delegation and Governor
Knowles regarding the future of the Ketchikan Pulp Company. KPC is an integral
part of the economy of southeastern Alaska, and the company is facing some impor-
tant decisions about how to modernize their plant and construct facilities to meet
environmental requirements.
While I believe that an extension of the current contract is a legitimate issue for
discussion in regard to the future of the plant, I'm concerned about some of the
other modifications to the contract contained in H.R. 3659. I look forward to a full
airing of these issues today with the witnesses in attendance.
Again, thank you for convening the hearing. I look forward to the testimony of
the various witnesses and to working with Chairman Young on this issue.
STATEMENT OF HON. GEORGE MILLER, A U.S.
REPRESENTATIVE FROM CALIFORNIA
Mr. Miller. Mr. Chairman, let me just be somewhat brief as I
am late, but let us see whether or not there is some opportunity
in this hearing to sort of pull this issue and separate this issue
apart.
Currently this issue is being presented on its own, and that may
be the situation, but I think that those who would suggest that it
is this legislation or KPC shuts down, that may not be doing justice
to the underlying issues.
I also suggest that there needs to be some demonstration that in
fact that this bill represents the margin of difference on whether
or not that decision would or would not be made. And I don't know
that that is the case.
Thirdly, I would also suggest that we should not underestimate —
some members were not here in the Congress, but I think clearly
the issue continues to resound. We should not underestimate the
feelings of this Congress who were overwhelmingly bipartisanly ex-
pressed time and again about uncertainties over these initial con-
tracts throughout the '80's and into the '90's when in fact the
House voted numerous times within excess of 300 votes to cancel
these contracts.
We then arrived at a negotiated agreement, yourself and Senator
Stevens and myself and the other supporters in the House that
were supporters for the cancellation of those contracts during this
process, that substantially changed the manner and method of op-
eration on the Tongass Forest because there was a strong feeling
in the Congress and among many in Southeast Alaska that in fact
that the current practices were not sustainable.
Louisiana Pacific, in my meetings with them last week, sug-
gested that they believe that those practices were sustainable and
they are sustainable today. That is a difference of opinion.
Let us also remember what we did at that time. At that time
there was — if you will remember, there was a very large national
organization around the Tongass that was engaged in bringing this
to the attention of Congress, working to bring it to the attention
of Members of Congress back home in their districts. And their po-
sition was flat out cancellation. And we made a decision at that
time that what we would do is we would work with the people in
Southeast Alaska, with the varied interests, and we would try to
come to some kind of an agreement for the reform of the timbering
practices on the Tongass. And that was in fact accomplished. That
was accomplished with a great deal of input by yourself and by the
senators from Alaska.
What we have been handed in this legislation is an essential —
a dual track, here. I won't reclaim that which they have sued for
or force them to reclaim that which they lost in the Acts of Con-
gress with the Tongass Reform Act. And what we don't know, what
is not answered in this legislation is whether or not in fact this is
all necessary for the economic viability of KPC. I would suggest
that in fact this legislation — and I think some people suggested
this also in the hearings yesterday in the Senate. In fact, this legis-
lation substantially overreaches if it is to address that problem.
But I think it is also very clear that this legislation as it is cur-
rently written, I would believe, is going to be not only unacceptable
to a bipartisan majority in this House, but I think clearly already
we have strong indications that this is strongly opposed at this
stage by the Administration. And so I think that not only do we
have to look at the contents of this legislation and the claims and
the merits of those claims, I think you also better be careful about
the process.
If people believe for the moment that they can use the claims of
the imminent shutdown as a reason by which we will slam dunk
this legislation or somehow add this in conference committee to the
Parks Bill or to some other vehicle, I think at that point you are
probably just inviting a veto, and we would be no further along
after these deliberations than we were before they began.
And so with that, I look forward to the hearing, but I do so with
a rather skeptical frame of mind at this point that this is the only
legislation or this is the only means by which this company has the
ability to stay in business. I have to tell you as one who represents
a district — and I am sure many other Congressmen and Members
of Congress share this. A lot of companies in this country have
made some very difficult choices about whether or not they can
continue to stay in business or not, and they didn't have the luxury
and their workers didn't have the luxury of somehow believing that
they could simply get the Federal Government to hand over the re-
sources and to let them run in a manner that they would be able
to run in a competitive economic atmosphere.
And so I think that this bill is going to be measured and the
claims here are going to be measured by what many Members have
experienced in their own districts with respect to difficult and
tough economic choices that companies have had to make and com-
munities have had to make. Thank you.
The Chairman. Thank the gentleman. I might suggest one thing.
At least you are not shutting the door completely. I would like to
see some suggestions on legislation. I know my goal is to keep the
city viable, not a dying city like other cities in Southeast Alaska.
Regardless of what testimony we heard, I can read the reports of
businesses. I can read the reports of what is happening. We are los-
ing the young society in Southeast Alaska, and that is not healthy.
Now the company no doubt, they will walk away and gain,
through the courts at your cost and my cost, the taxpayers, a tre-
mendous amount of money, but that doesn't keep the town viable
and the people employed, and that is our main goal here.
I wish people would understand one thing. If there was a short-
age of trees, I would be the first one to say shut it down, but you
and I know that there is not a shortage of trees. There is a tremen-
dous abundance of trees in every forest; I don't have to tell you
this.
The gentleman from Oregon.
Mr. COOLEY. I have no comments.
The Chairman. Anybody else? We should get on. Mr. Janik has
an important appointment.
Mr. CooLEY. I have no comments at this time, Mr. Chair. I just
wondered if we were going to put the witnesses under oath.
The Chairman. I had not planned on doing that. It doesn't do a
whole lot of good.
Mr. CoOLEY. It sure does. When you review it after one makes
a statement here and at another hearing one turns around and
makes another statement
The Chairman. I understand, and I know what this is pointed
at, but my thought at this time is we will not do that unless the
gentleman from California has no objection.
Mr. Miller. Pardon?
The Chairman. Do you have any objections?
Mr. Miller. To what?
The Chairman. To putting them under oath.
Mr. Miller. I do have objection, because
The Chairman. Nothing too violently or I will do it.
Mr. Miller. No, you are entitled. They are just entitled to notice
prior to the hearing that that would be the situation. I think that
would be unfair to the witnesses.
The Chairman. I understand that.
Mr. Cooley. Mr. Chair, please, does that imply that they may
have not prepared to tell the truth when they got ready?
The Chairman. I would be
Mr. Miller. No, that same kind of notice that you would request
if you were going to be put under oath or any other situation like
that.
The Chairman. Well, I
Mr. Miller. People are entitled to notice in this society.
The Chairman. Well, the one thing about it, I have notified them
before, everybody from this Administration, through this committee
as I have said at times I will put them under oath. I just want you
to know that.
My first two witnesses are Mr. Lyons, the Under Secretary, and
Mr. Janik, Regional Forester. And I would definitely like to thank
Mr. Phil Janik for being here. I mean, I have had two hearings in
the State of Alaska, but unfortunately one time he had a heart
problem. The second time it may have been a heart problem, too.
I am not exactly sure what it was, but it is nice to see him in
Washington.
8
Mr. Janik. Thank you.
The Chairman. Mr. Lyons, you are first up.
STATEMENT OF JAMES R. LYONS, UNDER SECRETARY, NATU-
RAL RESOURCES AND THE ENVIRONMENT, U.S. DEPART-
MENT OF AGRICULTURE; ACCOMPANIED BY PHIL JANIK, RE-
GIONAL FORESTER, ALASKA REGION FOREST SERVICE; JIM
PERRY, ASSOCIATE GENERAL COUNSEL; AND FRED WALK,
ALASKA REGION TIMBER MANAGEMENT DIRECTOR AND
CONTRACT OFFICER FOR KPC
Mr. Lyons. Thank you very much, Mr. Chairman. Chairman
Young, Chairman Allard, and members of the committee, I appre-
ciate this opportunity to appear before you this afternoon. If I could
beg the committee's indulgence, there is a memorial service begin-
ning shortly for Mollie Beattie, Director of the Fish and Wildlife
Service, who passed away recently. And I would like to be able to
attend that, so I will present my testimony and then hopefully an-
swer some questions, but if I could, I would ask I be able to depart
soon afterwards.
I am joined today by Phil Janik, who of course is the regional for-
ester for the Alaska Region Forest Service; by Jim Perry to my
right, who is the Assistant — excuse me. Associate General Counsel
in the Department of Agriculture for Natural Resources; Brad Pow-
ell next to Phil, who is Forest Supervisor of the Ketchikan area of
the Tongass; and Fred Walk, who is the Alaska Region Timber
Management Director and Contract Officer for KPC.
Let me State at the outset, Mr. Chairman, that the Administra-
tion strongly opposes Senate bill 1877, and they are concerned the
bill unilaterally modifies provisions of the long-term timber sale
contract with KPC and that it extends it for 15 years until the year
2019. In so doing, the bill undermines the Secretary of Agri-
culture's authority to manage the resources of the Tongass Na-
tional Forest, restricts the Secretary's ability to adapt to changing
environmental information, provides special benefits to a private
corporation and conflicts with certain existing law, including the
National Forest Management Act and the Tongass Timber Reform
Act. Of course, the same applies to H.R. 3659.
Secretary Glickman has committed the Department to maintain-
ing a sustainable timber flow to KPC in accordance with the terms
of the existing contract, TTRA, and other relevant statutes. I would
submit, Mr. Chairman, that we have and we will stand by our con-
tractual commitments to KPC.
We object to specific provisions of the bill. We object to the statu-
tory modification of the existing long-term timber sale contract
with KPC. The contract is almost 50 years old and is the subject
of substantial litigation. In addition, a number of significant envi-
ronmental laws have been enacted since the contract was signed.
Section 2(b)(1) of the bill states that the contract acknowledges
an intention on the part of the Forest Service to supply adequate
timber after the completion of the contract for permanent operation
of the purchaser's facilities. However, neither the original 1951 con-
tract nor the post-Tongass Timber Reform Act contract obligate the
Forest Service to grant or approve an extension of the long-term
contract.
Language in Section 2(b)(3) states that KPC plans to make envi-
ronmental and operational improvements to its facility. Language
in Section 2(b)(4) states that 15 years is the minimum reasonable
contract extension period necessary to allow for amortization of
these improvements. The bill requires that the government con-
tinue a contractual relationship with KPC in order to assure that
investments made by KPC can be amortized. An arrangement of
this kind between the government and a private corporation to sub-
stantially reduce business risk associated with improvements made
to a private facility is, to say the least, unusual. We are concerned
that this may create a precedent.
The bill contains provisions that are unclear, problematic, or sub-
ject to ongoing litigation. Section 2(a) contains problematic defini-
tions, such as definitions of the contract, the term mid-market and
proportionality. Language in Section 2(c)(2) concerning the sale of-
fering plan would effectively put the contract above the land man-
agement plan. Language in Section 2(c)(3) and 2(e) would put into
law volume requirements currently disputed in litigation. Lan-
guage in Section 2(c)(4) requiring that contract stumpage rates not
place the purchasers at a "competitive disadvantage to similar en-
terprises in the Pacific Northwest" is legally inexact and certainly
would lead to extensive litigation. Language in Section 2(c)(7)
would compromise the Chiefs ability to terminate the contract to
prevent serious environmental damage, serious damage to cultural
resources or should the contract be significantly inconsistent with
land management plans adopted or advised. These are provisions
that are common to all timber sale contracts.
I would submit, Mr. Chairman, that through the revision of the
land management plan, we believe we will be better equipped to
assure the sustainability of resources reflecting sound scientific in-
formation and extensive public input once the revision process is
completed. We believe we will have better information on which to
base decisions about future long-term commitments to the timber-
related industries in Southeast once the negotiation process is com-
pleted.
One of the significant factors to be taken into consideration in
any discussion with KPC related to contract extension is the pend-
ing litigation against the United States. KPC is currently pursuing
four claims against the United States, claiming approximately $350
million in damages. While KPC is suing the United States over the
interpretation of the provisions of the original contract and the
changes brought about in the Tongass Timber Reform Act, it is dif-
ficult for the Administration to consider entering into any new ar-
rangement with them.
We would welcome a broad-based discussion of future timber in-
dustry opportunities in Southeast Alaska, as well as discussion
with KPC, but we object to the bill's attempt to circumvent the
planning process, the conflicts it creates with Tongass Timber Re-
form Act, and the manner in which it obligates the resources of the
Tongass to one company for one purpose only without a thorough
analysis and additional discussion of options.
This concludes my testimony, Mr. Chairman. We would be
pleased to attempt to answer questions. Thank you.
[Statement of James Lyons may be found at end of hearing.]
10
The Chairman. I know you are under a time restraint, Mr.
Lyons, but I want to ask one question. You served here as a com-
mittee staff in Agriculture, did you not?
Mr. Lyons. Yes, sir.
The Chairman. Did you work on the TTRA?
Mr. Lyons. Yes, sir.
The Chairman. In your statement you object to Congress making
unilateral changes in this bill. What is the difference from what
you did in the TTRA and now?
Mr. Lyons. Well, I believe, Mr. Chairman, that the cir-
cumstances
The Chairman. Now you are the Under Secretary, and you were
the staff at that time, but there is little difference. It is exactly the
same thing.
Mr. Lyons. I was staff to the House Agriculture Committee at
that time, as you indicated, Mr. Chairman. At that time there were
various and sundry attempts to do different things to the contracts,
everything from termination to modification.
The Chairman. But the Congress did it, didn't it?
Mr. Lyons. That is correct.
The Chairman. The Congress did it.
Mr. Lyons. However, under the circumstances, Mr. Chairman,
the Secretary of Agriculture has administrative authority to re-
scind the contracts. For ten years it would have
The Chairman. You are running out of time, but this is not a bit
of difference. This is the difference between, you know, where you
are sitting now and where you were before. You were assisted in
those changes. You said there would be no attack on the timber in-
dustry. You said there would be no attack on — we'd have no loss
of jobs. You were an instigator on the Agriculture Committee. You
were the majority. Now you are on the executive side of it. There
is not a bit of difference.
I have no questions at this time. Anybody else have any ques-
tions? The gentleman from Idaho.
Mr. Crapo. Mr. Chairman, and Mr. Lyons, in your written testi-
mony on page 2, you indicate Secretary Glickman has committed
the Department to maintaining a suitable timber flow to Ketchikan
Pulp Company in accordance with the terms of the existing con-
tract and other relevant statutes. Does that mean you have com-
mitted beyond the term — that Secretary Glickman has committed
beyond the term of the existing contract, or is this just saying he
has committed to honor the current contract?
Mr. Lyons. It would seem to me to indicate. Congressman, that
we intend to fulfill our commitments under the existing contract.
We have not addressed the issue of any commitments beyond the
current term contract.
Mr. Crapo. So you are not saying — this legislation would extend
for 15 years. You are not saying in this testimony that Secretary
Glickman has committed to that part of this legislation?
Mr. Lyons. He has not committed to an extension.
Mr. Crapo. But he does have — did I hear you just say earlier
that he does have administrative authority to do so if he chooses
to?
Mr. Lyons. That is correct.
11
Mr. Crapo. Do you have any information you can give the com-
mittee as to whether he is or the Department is looking at the im-
pact on not only the pulp company but the economy of the region
if the company is not allowed to continue to have a contractual re-
lationship in this area?
Mr. Lyons. Congressman, the contract as it currently stands ex-
pires in the year 2004. Our focus immediately is on completing the
Tongass land management planning process, which will allow us to
understand what constitutes a sustainable level of timber harvest
on the Tongass. We feel, in fact, seven of the ten alternatives iden-
tified in that land management plan would provide adequate vol-
ume to meet what we understand to be the current contract obliga-
tions for timber to KPC — and that is in dispute. It is litigation with
KPC — as well as a substantial volume of timber to address the
independent sale program, the small business program on the
Tongass. So we feel we can and we will meet our contract obliga-
tions. That option is open.
Mr. Crapo. And that would extend beyond the contract term if
one of those documents were to work out to be acceptable volume?
Mr. Lyons. Our view is there is sufficient volume that that could
in fact be the case.
Mr. Crapo. All right, thank you.
The Chairman. Any questions on this side?
Mr. COOLEY. I have one, Mr. Chair.
The Chairman. Mr. Cooley.
Mr. Cooley. Yes, can you tell us what the maximum harvest
level is for Tongass right now?
Mr. Lyons. If I could, Congressman, I would defer to Mr. Janik,
who would be in better position to address that.
Mr. Janik. I will have to answer that in two parts. The current
forest plan, the one we are operating under now, has a calculated
allowable sale quantity of 450 million board feet. Over the past sev-
eral years, we have been offering up approximately 300 to 320 to
330 million board feet. That is the maximum we have been able to
move forward through the system based on the additional require-
ments that we have been facing.
The draft environmental impact statement that is out for public
review right now as part of the revision identifies a calculated al-
lowable sale quantity of about 357 million board feet, but that is
qualified in the document in terms of what we believe will be eco-
nomic to the timber industry, and that estimate, which is the more
pertinent one in terms of the interest of the industry, is 300 million
board feet. I believe the actual figure is 297.
And it is based on that number that there is a statement in the
environmental impact statement basically saying that that is
enough timber to satisfy what we believe to be the contract obliga-
tion of the Ketchikan Pulp Company as well as provide about 100
million board feet for the independent operators.
The Chairman. The gentleman from Oregon, out of a little re-
spect, Mr. Lyons has to leave. And he is excused.
Mr. Miller. Mr. Chairman, if we just might reserve to send
some questions in writing to Mr. Lyons.
The Chairman. And then — but you have Mr. Janik. He is the re-
gional forester.
12
Mr. Lyons. Thank you very much, Mr. Chairman.
Mr. COOLEY. Can you provide for the committee what is the re-
quirement of the contract right now by KPC?
Mr. Janik. As Under Secretary Lyons stated, that number is ac-
tually in dispute. It is in litigation, but our contracting officer, who
is Mr. Walk to my far left, has calculated that to be 154 million
board feet as the minimum obligation to the Ketchikan Pulp Com-
pany. There is a maximum harvest limit identified in the contract
for the Ketchikan Pulp Company of 192 million board feet. And the
dispute, sir, is between those two numbers.
Mr. CoOLEY. OK, but under your new marvelous harvest under
the alternative program, the Tongass land — plan revision — you're
telling me now that you want to get 300 to 357 million board feet?
Mr. Janik. Even though that is not yet a decision, it is out for
public review. The preferred alternative says that we are confident
we can economically deliver right at about 300 million board feet
a year. And that is the total for the obligation to Ketchikan Pulp
Company and for the independent operators. The portion of that
highlighted for the independents, and we do have a formal small
business association agreement, is 100 million.
Mr. CoOLEY. But you are presently harvesting between 320 and
330 board feet?
Mr. Janik. We are offering out about that much per year to the
timber industry, yes. That is what they've been able to do over
about the past three or four years.
Mr. CoOLEY. OK, any higher than that?
Mr. Janik. This year with the prices having gone down, there are
a couple of sales that have been offered up that have not been bid
on, but prior to that, yes, that timber has been purchased or ac-
cepted by KPC in case of the contract and the release to them,
Mr. CoOLEY. That is all the questions I have, Mr. Chairman.
The Chairman. The gentleman from California. Let me make an
interruption here. Did you — Phil, you are not going to make a
statement, are you? You are just open for questions?
Mr. Janik. I have no statement to make, if that
The Chairman. No, that is fine.
Mr. Janik. Thank you.
The Chairman. But you are on the witness panel as one to tes-
tify. So go ahead, Mr. Miller.
Mr. Miller. Following onto Mr. Cooley's question, the 154 and
the 192, this legislation would do what to those figures?
Mr. Janik. As I understand the legislation, it would establish the
192 as the required minimum.
Mr. Miller. And that is a matter that is being currently liti-
gated?
Mr. Janik. That is correct, sir.
Mr. Miller. As part of the litigation brought by the manufactur-
ers of
Mr. Janik. That is correct.
Mr. Miller. That is one of the determinations as to what is the
requirement, whether it is 154 or 192.
Mr. Janik. That is correct, sir.
Mr. Miller. As I have had this problem somewhat described to
me, and we go back to what Mr. Cooley said, Secretary Lyons'
13
statement was that the Secretary has the full intent to comply with
the existing contract over the, you know, the remaining term of
that contract. And your figures suggest that you are in compliance
with that contract, but representatives of the other side — I hope I
am framing this correctly. Obviously somebody can correct me in
later panels. That is that it is really not happening because you are
making it more difficult or more expensive to get the timber, your
requirements on roads and other requirements — I don't know if I
could enumerate, but roads seem to stand out as strong — that in
fact you are simply making it impossible to extract and to bid on
these sales, so the actual number is below that. How do you re-
spond to that? I hope I've framed it.
Mr. Janik. I will attempt to do that. And if I may, sir, I may ask
Brad Powell, the forest supervisor, to elaborate further. But as I
understand what went on during the Tongass Timber Reform Act
with regard to the changes that occurred there, it was in fact to
look at those long-term contracts, two existing at that time, and
make that situation more competitive with the independent opera-
tor kind of situation. So therefore, if one does ask if it is more dif-
ficult or costly for the folks involved in the long-term contract to
operate their timber program, I would say yes, as compared to
prior to TTRA.
Mr. Miller. Is there any way to quantify what that has meant?
Mr. Janik. I think we have some stumpage rate figures and
those kinds of things which do identify that. For instance, and
please help me here. Brad or Fred, prior to TTRA, I believe, the
rates were about two to two and a half dollars a thousand board
feet. Now Ketchikan Pulp, I believe, is paying closer to about $48
per thousand board feet. Is that a correct comparison?
Mr. Miller. That was the parenthetically accurate. It was also
the intent of the legislation.
Mr. Janik. As I understood it, yes.
Mr. Miller. Widespread concern in the Congress that this re-
source was simply being essentially given away.
Mr. Janik. And the further comparison then is I believe that $48,
as we calculate the rates, is attempting to make those rates com-
parable to what our independent operators would be looking at in
terms of bid offerings. Is that also correct?
Mr. Miller. And that is why and how. You do comparable bids
or sales to arrive at that?
Mr. Janik. May I defer that to Mr. Walk?
Mr. Miller. Sure.
Mr. Janik. Fred, would you please take that question.
Mr. Walk. Congressman
Mr. Allard. Fred, would you identify your name for the record,
please.
Mr. Walk. My name is Fred Walk. I am the Director of Forest
Management in the Alaska Region. The process that was imple-
mented as part of the Tongass Timber Reform Act to meet the re-
quirement that prices paid by the long-term contract holders be
comparable to the independent purchasers
Mr. Miller. That is the law.
Mr. Walk. Pardon me?
Mr. Miller. That is the law, you are saying?
14
Mr. Walk. Yes.
Mr. Miller. Yes, sir.
Mr. Walk. The process that was implemented is to calculate an
average of the prices paid by independent purchasers and then
make periodic adjustments to the rates being paid by the long-term
contract to become more comparable to independent prices. And
those comparable price adjustments are made as we do the calcula-
tions periodically through the course of the year.
Mr. Miller. What would be the impact of the legislation under
consideration? Have you had a chance to review that?
Mr. Walk. We have looked at that. It is our view that the termi-
nology in the proposed legislation would remove the periodic — the
comparable price adjustment from the process. There would be no
comparable price adjustments.
Mr. Miller. There is language that is on page 8 that says the
rate shall be designated at a level that places the purchaser at a
competitive disadvantage with similar enterprise in the Pacific
Northwest and those rates should be the sole charges the pur-
chaser shall be required to pay for timber provided. Do we know
what that means?
Mr. Janik. We have examined that section very thoroughly.
Again, if I may defer, I think Mr. Perry from the Office of General
Counsel, in that we have received major advice from them on this
particular section — Jim, would you please respond.
Mr. Perry. James Perry, Associate General Counsel. We have
some real concerns regarding the comparison between the Pacific
Northwest stumpage rates and those of Alaska. While we under-
stand the purpose of the clause is to develop some equitability, we
believe the clause would result in extensive litigation because the
only way to determine some equitability would be to establish some
panel of experts and then attempt — have to use a most equitable
rate. So based on the past history of similar clauses in the current
contract, we view that language as being a guarantee of litigation.
Mr. Miller. What — well, let us assume — do you have any indica-
tion or have you looked at this if you could meet the requirements
of the language on page 8, would that take us closer to $2 or closer
to $48?
Mr. Perry. I don't think I can evaluate that. There would be a
number of variables in trying to measure equitability between the
market in the Pacific Northwest and the Tongass, the type of tim-
ber, the type of product that was derived and then the market in
which the product would be sold. So I am unable to give a prognos-
tication about what the effect on price would be, but the only effect
it could have would be a downward adjustment.
Mr. Miller. Mr. Chairman, if I just might — I know the light is
on, but I just would like Mr. Walk to testify or to respond to that
if he could, what the impact of that — have you looked at that to de-
termine what the impact might be, approximately, on price and
stumpage?
Mr. Walk. Well, as Mr. Perry indicated, it would be very difficult
to identify precisely a number. We see three parts of that particu-
lar section. One is doing the normal appraisal. The second is a com-
parison with the Pacific Northwest, similar enterprises in the Pa-
15
cific Northwest. And that could have a dampening effect on the ap-
praised rates. But the other part of that provision that would
Mr. Miller. Why would that be?
Mr. Walk. The other part is that the rates shall be — similar
charges the purchaser shall be required to pay would be the part
that would go to the comparable price adjustments, so if the com-
parable rates for the Pacific Northwest similar enterprise was less
than our appraised rates, then the stumpage charge would be lower
than would be normally indicated by Alaska Region appraisals.
Mr. Miller. So you wouldn't be factoring in the cost of doing
business in Alaska, is that what you are saying? Am I wrong? Why
would that bring down that comparable price when you compare
the Pacific Northwest?
Mr. Walk. If the analysis between the similar enterprises in the
Pacific Northwest indicated that the prices generated in Alaska
would place the contract broker at a competitive disadvantage, we
would have to reduce the rates to where that competitive disadvan-
tage was
Mr. Miller. That clause says — I am sorry for belaboring the
point, Mr. Chairman, but that clause says you take the cost of
doing business in Alaska, you compare that to the cost of doing
business in some facility in the Pacific Northwest. If that would
place that facility at a disadvantage against others in the Pacific
Northwest, you would have to reduce that price?
Mr. Walk. You would reduce the price
Mr. Miller. Neither firm is doing business in Alaska?
Mr. Walk. That is dotfe^ct.
Mr. Miller. Or possibly getting the logs? OK.
Mr. Walk. Delivered log price.
Mr. Miller. OK.
The Chairman. Thank you, gentleman. I just have one question.
Why in the world — all we are seeking in this legislation is to ex-
tend the contract. It was written up the things that you object to.
You have legal counsel. I heard some questions not quite answered
here. Can you give us language back so we can get the years we
need? Why can't you do that?
Mr. Janik. I believe our Under Secretary was asked that very
question in yesterday's hearing in terms of
The Chairman. Weii, it is not yesterday's hearing. I am asking
you now. Why can't that be done?
Mr. Janik. And I am going to respond, Mr. Chairman. The prob-
lematic parts of this bill as we understand it deal with the provi-
sions of the Tongass Timber Reform Act. And the Under Secretary
and I myself will answer right here, sir, that if once we get past
the completion of TLMP provision so we understand how big the
woodpile is and how much flexibility we have to talk about any
contractual relationship that might go beyond 2004, as well as any
other conditions or provisions, we have stated already that we
would be willing to entertain those considerations.
The Chairman. Entertaining does not allow this company to in-
vest. It goes back to the independent sales that you just said a mo-
ment ago, if this company shuts down, you will not have any inde-
pendent sales unless you're high-grading.
Mr. Janik. Well, sir, we're
16
The Chairman. Congress tried to avoid that. What we are doing
is set up a high-grade system.
Mr. Janik. Well, sir, we are doing a complete Tongass revision
in September. That is the target for signing a record of decision.
And again, it has been stated clearly that the bill as written is un-
acceptable.
The Chairman. Well, let me interrupt you a minute, though, be-
cause you said how big the TLMP pile of wood is going to be. You
stated it is going to be 297 million board feet.
Mr. Janik. That is currently what is under public review. That
is not yet a decision.
The Chairman. Are the woods going to grow smaller or larger?
Mr. Janik. I have no idea, sir. That was
The Chairman. Who makes that decision?
Mr. Janik. I will make the ultimate decision.
The Chairman. You will make that?
Mr. Janik. With recommendations from the forest supervisors
after we review public comment.
The Chairman. It gives you an awful lot of God power, doesn't
it?
Mr. Janik. It gives me power I take seriously, sir.
The Chairman. OK, the second thing is who — you control the
cost of sales, do you not, the Forest Service?
Mr. Janik. Within certain parameters, sir. We have our ap-
praisal system that we must comply with. Mr. Walk can address
that.
The Chairman. The company has nothing to do with it.
Mr. Janik. I am sorry?
The Chairman. The company has nothing to do with it.
Mr. Janik. Fred, do you want to address that, or Brad?
The Chairman. The company has nothing to do with it. You set
the price. That is it.
Mr. Walk. We determine the advertised price of the timber sale.
On the independent program it is put out for competitive bidding
and then the bidders determine the final price. We establish the
minimum accepted bid. All of our timber sale appraisals in the
Alaska region are developed using the residual value process
whereby we collect costs and selling value data from participating
industries, including the Ketchikan Pulp Company, and do analysis
of their records.
The Chairman. What I am trying to stress here is the companies
and those biddings do not set the price. They bid or in the contract
you set the price for the timber, is that correct?
Mr. Walk. We set the price using data we collect from
The Chairman. Now under the present contract, the price can
only be adjusted upward, but not downward, is that correct?
Mr. Walk. The long-term contract provides for an upward or
downward emergency rate determination.
The Chairman. Has it ever gone downward?
Mr. Walk. Yes, sir.
The Chairman. It has?
Mr. Walk. Yes, sir.
The Chairman. All right, what I am suggesting to you, Mr.
Janik, is that you ought to be offering some suggestions to this leg-
17
islation, not just criticism, as I told Mr. Lyons, suggestions on how
to improve. The same thing for the gentleman from California. If
there is a way we can improve this act, because all I am trying to
do is keep the city alive — the company, with all due respects, as
they did in Sitka — Mr. Miller, your friend George, you know quite
well, Ishiama walked away. It didn't cost him a nickel. The com-
pany didn't — they just walked away from the town. Now it is slow-
ly becoming an old city.
Mr. Miller. Would the Chairman yield?
The Chairman. That is right. I will even give you a minute. I
know you won't admit it.
Mr. Miller. Well, I just — on this point, because I think maybe
it goes to the crux of the problem, and I think the reason that the
Administration is having a problem responding here is, as I think
Secretary Lyons pointed out, what are the ground rules. If the
ground rules are that you are going to have consideration or enter-
tainment, or whatever the words are you want to use, of contract
extension, if the ground rules are it is going to be done within the
Tongass Reform Act, that is one thing. If it is going to be done in
the context of this legislation, it then starts providing rather sub-
stantial rewrites of the Tongass, that is a different thing.
And that, as I understand it, the Administration is opposed to.
And the question at some point, I think, that maybe will not be re-
solved at this hearing, but has to be resolved. The point is what
are those ground rules. Is KPC prepared to live within the Tongass
Reform Act? And does the Tongass Reform Act allow you to meet
your contractual obligations? The fact that the cost is somewhat
higher may or may not be relevant. It may or may not be, because
it may go to the issue of whether we can operate in that business
environment.
But by the same token, we have some obligation as the trustees
here not to simply give away the public's resources when in fact at
one time or another — it may not be in this volime, but including
the market from time to time generates a substantial amount of
revenues from these very same resources. That is the problem we
are grappling with here.
I think what is suggested by Mr. Lj^ons and what is suggested
by myself and some others that are concerned is that this bill isn't
about a simple extension of that contract so you could amortize
your investment over some known period. It is more than that. And
if those are crucial to the extension, then I don't know that the ex-
tension can be had from the testimony of Mr. Lyons or from what
I understand the position is of the Administration. And that is
the — at some point it has got to be sorted out.
The Chairman. Mr. Miller, I can say one thing. If I thought for
a moment this Administration was serious, really woula consider
and offer me some advice, I would be greatly pleased. Very frankly,
my bill was started as any piece of legislature. You see something
wrong with it, but I have yet to hear from the Administration what
will make this work to keep that city alive. Now if they want to
kill the city, tell me. That is all I am saying. If you want that city
to go down, if you want the timber — don't tell me, Mr. Janik — I
watched Sitka go down and it is down.
18
Now, which reminds me, what are you going to tell the Sitka
sales that were canceled by the Forest Service? Is that ever going
to be put up again?
Mr. Janik. Those sales, sir, have been retrofitted and offered up
to the independent operators. And some of that buy has also gone
to Ketchikan Pulp Company.
The Chairman. But without the pulp mill, independent operators
cannot exist.
Mr. Janik. We have always acknowledged the importance of a
secondary facility in Southeast Alaska.
The Chairman. That is where the pulp
Mr. Janik. That is something — it could be the existing pulp mill.
Yes, sir.
The Chairman. No, what I am
Mr. Janik. And we recognize that importance, the Ketchikan
Pulp Company.
The Chairman. We agree it supports jobs. You know, I can take
37 people and ship all the timber that is going to be cut under 297
base board feet. I could ship that with 37 people and ship it to
Japan. That is not a value-added. Or I could ship it to the North-
west, which they have lost it because of the spotted owl. I can do
that, but that isn't board feet.
Mr. Miller. If the gentleman would yield one second, I think
maybe we are establishing some parameters.
The Chairman. They didn't deny a ten-year contract with Sea
Alaska. That is one thing I didn't understand.
Mr. Miller. You know, when we did the negotiations on this for-
est and we were living in the midst of the storm that was brewing
around the administration of this forest under the contract, the
reason those negotiations worked was because we sort of rejected
the extremes. You can keep talking about people who want to kill
this town or what have you, but the history of these negotiations
and our participation is that we have rejected that notion.
The Chairman. You and I have a
Mr. Miller. And that is how you got the Tongass reform, but I
don't — I am not prepared to accept that you have got to gut the
Tongass reform to get at viable profits on this forest that is both
sustainable and economically viable to the mill.
The Chairman. And you can
Mr. Miller. And I haven't seen the show-me yet that that is the
case. And that is all I point out, because, you know, you and I have
been around this both privately and publicly, that I believe that the
Reform Act also didn't apply to the commitment that we would pro-
vide the timber. That was the dual part of this arrangement. Oth-
erwise, we could have just gone off and canceled the contracts or
had you had the most votes, whatever, you could have just said we
want to do business the way we were doing it in 1950. That didn't
survive the Congressional process.
This was a deliberate process and this was an intentional deci-
sion that the practices would be different and with the full knowl-
edge that in many instances they would be more extensive but they
would hopefully lead to this evaluation process and we would deter-
mine what in fact this would sustain.
19
The Chairman. Will the gentleman yield? We agree on that. One
thing, remember, in my bill I do nothing about the Tongass Reform
Act that you put in there.
Mr. Miller. Well, page 8
The Chairman. Now I
Mr. Miller, [continuing] — if that is not the old comparable
sale
The Chairman. I am not talking about that. I am talking about
the buffer zones and all the rest of the stuff. We didn't change that.
We didn't change any of the wilderness areas. We did not touch
any of that. Now I am suggesting where you see what is wrong
with the bill, give me some ideas to keep my town alive, you know.
Mr. Miller. And we will.
The Chairman. Does anybody else have any questions?
Mr. Baldacci. If I had any time, I was going to yield it.
The Chairman. No, I have already done that. Anybody on this
side? I want to — Mr. Janik.
Mr. Janik. I just want to reemphasize, Mr. Chairman, that the
Administration is willing to sit down and talk options. We say that
here today. We said it yesterday. And the opposition is strongly
based on the bill as written.
The Chairman. My bill — what I am telling you is I want — ^you've
got to live with high prices, not high prices, you work for the gov-
ernment I'll tell you that right now. Give us some ideas as quick
as possible. Just don't snowball us on this. If you can get it today,
I would love it today. If you can get it tomorrow, that would be bet-
ter, but as far as I am concerned, that is about as long as we have
got on this, because we have to have some suggestions.
I want to say one thing. As I told Brad, you know, you have got
a good man there.
Mr. Janik. He is a good man.
The Chairman. At least he shows up at the hearings. It was a
nice arrow in your back, but I will tell you up front the Forest
Service this last week were sued by the environmental community
again over the Tongass Reform Act. I mean, you guys are caught
betwixt and between. We are upset because I want to keep my peo-
ple employed. They are upset because you are keeping too many
people employed. I am upset because we don't have a viable econ-
omy. They have got their economy and it is — you know, you are
caught right between, and I have great sympathy.
You heard me say the other day if I had my way, Mr. Janik
would make all the decisions in Alaska, then we could really ham-
mer him. Not by Dean Woods, not by Mr. Lyons, not by Jack Ward
Thomas, not by Katie McGinty or Leon Panetta or Mr. Glickman,
it would be made by you, but that is maybe yesteryear. But some-
day that is going to change and we are going to fix it so you will
make the decisions. Then we can discuss it as we did in the past.
You are excused.
Mr. Janik. Thank you, Mr. Chairman.
The Chairman. Panel two: Mr. Leonard, George Leonard, United
States Forest Service, retired; and Mr. Scott Horngren, the law
firm of Haglund and Kirtley in Portland, Oregon, you two are up.
George, you are up first.
20
STATEMENT OF GEORGE LEONARD, UNITED STATES FOREST
SERVICE [RETIRED], VIRGINIA
Mr. Leonard. Thank you, Mr. Chairman. I am pleased to be be-
fore this committee once again to talk about the Tongass Forest.
I would like to make just a few simple background statements with
regard to the Tongass and then respond to any questions you or
other members of the committee may have.
I think it is important for this committee to be aware of the fact
that the Tongass contains some of the most productive timberland
in the world. The area of productive timberland planned for timber
harvest on the Tongass is relatively small, only about five percent
of the forest, 1.2 million acres, but that portion of the Tongass is
particularly well suited for sustained-yield management of the tim-
ber and related resources. And for those members of the Agri-
culture Committee that are here, you know that if you are going
to manage agricultural lands, you manage your best lands for agri-
culture, not your poorest. In this case, we ought to be managing
the best land for timber production, and they are represented well
on that 1.2 million acres on the Tongass.
The productive nature of the Tongass has been recognized for a
long time and the fact that there needs to be a market for that por-
tion of the timber on the Tongass that is not suitable for the manu-
facture of lumber. In fact, there were proposals dating clear back
to the '20's and '30's for the development of pulp mills. A major ra-
tionale for the timber sales that were made in the '50's, the two
long-term timber sales that we are talking about here today, was
employment. In the depression years of the '30's the mines in those
small towns closed and also by the end of the late '30's there was
a significant decline in the salmon fishery. Many of the small can-
neries had closed and there was substantial concern about the fate
of the small towns in Southeast Alaska.
The use of the available timber resource was the obvious answer.
You had a very rich, productive timber resource. In fact, studies
showed that you had a timber resource capable of supporting about
five pulp mills at the time. In fact, four large pulp sales were of-
ifered over the years in the early '50's, and ultimately two pulp
mills, the Ketchikan Pulp Mill at Ward Cove, just outside of Ketch-
ikan, and the Alaska Lumber and Pulp Mill at Sitka.
One other contractor was unable to build a pulp mill and that
sale was substantially modified and reduced and was operated by
Alaska Lumber and Pulp Company. And the fourth contract got
tied up almost endlessly in environmental litigation and ultimately
the purchaser concluded that it was not economical to go ahead, so
that contract was canceled.
Operations of the two pulp mills in Alaska did contribute signifi-
cantly to the economy and stability of Ketchikan and Sitka and
many of the other smaller towns in Southeast Alaska where log-
ging camps or other subsidiary facilities were built. The operation
of a pulp mill in Southeast Alaska is still essential to the economic
stability of those communities. It is true, as Mr. Lyons said in his
statement, that the recreation developments in Southeast have in-
creased substantially. And fortunately the salmon fishery has re-
covered.
21
In fact, over the last decade we have had record harvests of
salmon in Southeast, but both recreation and the salmon fishery
are very much seasonal industries. You have two and a half to
three months of employment in the summer season from those two
industries. The only long-term, year-round employment, has been
offered by the timber industry and particularly by the pulp mills;
and I think that stability and continued operation of the pulp mills
is essential.
Mr. Chairman, I have several suggestions to make about changes
that I believe should be made in this legislation to improve it, to
be made more workable from a technical standpoint, but I strongly
believe it should be done.
The Chairman. George, I am going to tell you, you are about
ready to run out of time. And I was going to ask you that first
question, what would you suggest. And when I come back to you,
be ready for me.
Mr. Leonard. Yes, sir.
The Chairman. If you don't mind. Scott, you are up next.
STATEMENT OF SCOTT W. HORNGREN, LAW FIRM OF
HAGLUND AND KIRTLEY, PORTLAND, OREGON
Mr. HoRNGREN. OK, my name is Scott Horngren. I am a partner
in the law firm of Haglund and Kirtley in Portland, Oregon. I am
testifying on behalf of the Northwest Forest Resource Council, a co-
alition of timber trade associations in the Pacific Northwest. Our
firm has represented timber sale contractors in Federal contract
claims cases.
I am here today to discuss the implications of a recent Supreme
Court decision decided July 1 entitled the United States versus
Winstar Corporation as it relates to Forest Service contracts and
the issues here. The Winstar case is a culmination of over half a
decade of litigation over government contract liability for statutory
and regulatory changes to minimum capital requirements for sav-
ings and loans. The Winstar decision has implications for contracts
throughout the Federal Government and particularly for timber
sale contracts.
Federal timber purchasers are being bombarded by regulatory
and policy changes like those that were at issue in Winstar, and
these changes include adoption of the President's Forest Plan,
adoption of PACFISH, INFISH, California spotted owl, Mexican
spotted owl and Northern goshawk protection standards.
The Winstar decision should leave little doubt that the govern-
ment will be contractually liable to the timber purchasers for re-
duction or elimination of timber sold under the contract. I would
first like to summarize the Supreme Court's decision in Winstar
and then apply those principles to timber sale contracts.
The Winstar Decision: During the savings and loan crisis in the
mid-'80's, Congress enacted the Financial Institution Reform Re-
covery and Enforcement Act, FIRREA. The Act forbid thrifts from
counting goodwill capital — good will as capital credits in computing
the required minimum capital reserves. The plaintiffs in the case
were three Federal thrifts, two of which were seized and liquidated
by the Federal regulators for failing to meet the new capital re-
quirements. The thrifts sued the Federal Government contending
22
that the Federal Home Loan Bank and the Federal Savings and
Loan Insurance Corporation had breached their contract, promising
that the thrifts could count this supervisory good will toward the
regulatory capital requirements.
The government raised many defenses, but the one I would like
to focus on this afternoon is that the regulatory change was merely
a public and general act that was a sovereign act, insulating the
government from liability. The court rejected the sovereign act de-
fense. Under the sovereign acts doctrine, so long as the govern-
ment's legislative or executive acts are public and general, they
cannot be deemed to violate contracts between the government and
private parties. The government maintained that the imposition of
more stringent regulatory requirements under FIRREA was a pub-
lic and general act and that the changes couldn't be considered a
breach of the government's contract.
However, the Supreme Court found it significant that the regu-
latory legislation was motivated by government self interest and
that it was impossible to attribute a public and general character
to FIRREA when the legislation had the substantial effect of help-
ing the government out of improvident agreements. The court em-
phasized that the government may not force some people alone to
bear the public burdens which should be born by the public as a
whole.
I believe the sovereign acts defense also does not apply to timber
sale regulation. The actions of the Forest Service in screening exist-
ing timber sales and imposing these additional wildlife standards
cannot occur as public and general acts, specifically the Winstar de-
cision— given the Winstar decision, any past statements by Con-
gress to assert the sovereign acts doctrine to avoid contract dam-
ages in timber sale cases is likely to fail.
For example, regarding the Alaska Pulp and Ketchikan Pulp con-
tracts, the House Committee on Insular Affairs wrote, "the commit-
tee considers termination of the long-term contracts to be an appro-
priate exercise of the Federal Government's power to protect the
public interests and that, pursuant to sovereign act immunity, no
damages will be paid to APC or KPC."
Well, ultimately the contracts were unilaterally modified rather
than terminated. The assertion of the sovereign acts doctrine is
likewise ineffective. This is particularly true when the statute is di-
rected at individual contracts despite self-serving legislative pro-
nouncements to the contrary that the legislation is public and gen-
eral.
The Winstar decision holds that unless contracts explicitly pro-
vide otherwise, the government bears the risk of statutory and reg-
ulatory changes that preclude completion of the contract. This is
the case with the majority of timber sale contracts in the West and
will strengthen timber purchasers' arguments in their contract
claims against the government.
And I am not alone in my analysis of Winstar and how it relates
to Federal contracts. The Forest Service's own analysis of the con-
tract, the National Forest Management Act, and some contract
cases dealing with timber sales support this conclusion. In an April
27, '92, memo to the regional foresters, the Forest Service Chief in-
terpreted the agency's timber sale contract to require compensation
23
for the difference between the contract price of timber and the mar-
ket value regardless of whether the contract is modified, canceled
or partially canceled for environmental reasons.
The Chiefs interpretation is consistent with the regulation gov-
erning compensation for cancellation of contracts. And although
later contract clauses have attempted to limit the compensation,
those clauses aren't consistent with the governing regulation, so
the Department of Agriculture has attempted to change the regula-
tion. And, several years ago they proposed to change the regulation
governing the compensation of timber purchasers for protection of
threatened, endangered species and the environment. The U.S.D.A
wrote that the difference between the government's liability under
the current regulation and its liability calculated using the method
in their proposed regulation is approximately $300 million.
Consistent with the regulation
The Chairman. Scott, how much more time do you need?
Mr. HORNGREN. I am — I can wrap up here. All Ineed
The Chairman. Wrap it up and then Mr. Crapo is going to ask
some questions.
Mr. HoRNGREN. OK. Just to summarize, there has been Claims
Court and Board of Contract appeals cases that are consistent with
those regulations. And in conclusion, Federal timber purchasers
will successfully rely on this new Supreme Court Winstar case in
their claims against the government for breach of contract when
the government's regulatory actions reduce or eliminate timber
from their sales. And I would be happy to answer any questions.
[Statement of Scott Horngren may be found at end of hearing.]
The Chairman. Mr. Crapo, you are up to ask him a question. I
will be right back.
Mr. Crapo. Thank you, Mr. Chairman. Mr. Horngren, can you
first tell me, have you ever worked for the Alaska Pulp Corpora-
tion?
Mr. Horngren. No, I have not.
Mr. Crapo. Have you ever worked for the Ketchikan Pulp Cor-
poration?
Mr. Horngren. No, I have not.
Mr. Crapo. And I assume that means you are not working for
either of them now?
Mr. Horngren. That is correct
Mr. Crapo. And I know that you have gotten through with us
what you think the Winstar case held. How is that applicable to
the contract changes ordered by the Tongass Timber Reform Act?
Mr. Horngren. I think it is applicable here because the Supreme
Court held that an act will not be a public and general sovereign
act if it has the substantial effect of releasing the government from
its contractual obligations. And we heard testimony and discussion
earlier today at this hearing that one of the major motivations and
effects of the Act was to get the government out of a contract that
they thought wasn't financially attractive. And if that in fact is the
substantial effect of the legislation, which is clearly what TTRA
was designed to do, then it will not survive the sovereign acts de-
fense.
24
Mr. Crapo. I assume, then, you agree that the Winstar precedent
would apply to timber sale contracts as well as other types of gov-
ernment contracts?
Mr. HORNGREN. That is correct.
Mr. Crapo. And does the case distinguish whether the claim of
the sovereign act has to be an act by Congress or an act by the Ad-
ministration, the Executive Branch or otherwise?
Mr. HORNGREN. It doesn't matter. As long as it is in the legisla-
tion or the regulation, the effect is the same.
Mr. Crapo. Now C clause provisions are contained in most tim-
ber sales contracts, and these are provisions that justify the can-
cellation of the contract and certain prescribed damages to the re-
placement value of the timber and certain other facts, is that fair?
Mr. HORNGREN. That is correct.
Mr. Crapo. And given the Winstar decision, if Congress or the
Executive Branch terminates or unilaterally changes the terms of
the contract outside the terms of the C clause provisions, do I un-
derstand correctly that the government would then, in your opin-
ion, be in violation of the contract as held in Winstar?
Mr. HORNGREN. Well, it would be more than that, because they
would be acting outside the contract and some of the timber cases,
most notably the Davidson case recently, have held that if the ac-
tion occurs outside the contract, then the purchaser wouldn't be
just limited to the contract remedies and would be entitled to all
common law remedies for breach.
Mr. Crapo. And again, I realize that you have addressed this,
but does Winstar speak to whether the government can breach the
contract or whether it would simply pay for breaches in contract?
Mr. HORNGREN. It does not preclude the government from enact-
ing new regulations and enacting laws, but it does require that the
government pay for those changes.
Mr. Crapo. So how would a breach outside the C clause by the
government affect the damages that — the assessment of damages
that the courts would impose following the Winstar case?
Mr. HORNGREN. I think it would increase the exposure to the
government for damages by millions of dollars.
Mr. Crapo. And you mentioned the unilateral contract changes
made in the TTRA, 1990 TTRA, and you cite the claim of sovereign
act authority in the House committee report as a legal rationale of-
fered as justification for termination of the contracts based upon a
case called the Hedstrom case. What are the differences between
Hedstrom, Winstar and TTRA contract payments?
Mr. HORNGREN. I think the Hedstrom case was the basis for the
conclusion in TTRA that they could unilaterally modify or cancel
the contracts without any contract liability. And the Supreme
Court in the Winstar case doesn't discuss the Hedstrom case, but
it is unlikely that Hedstrom is still good law following the Winstar
decision.
Mr. Crapo. Hedstrom was preceding Winstar?
Mr. HORNGREN. Yes, it was a 1984 case, significantly a District
Court case not a Federal Circuit case, and certainly not a Supreme
Court case. Like Winstar, Hedstrom involved numerous contracts
and parties and the substantial effect of the boundary waters canoe
legislation in that case was to abrogate the contract. So it is very
25
possible that Hedstrom would not be good law after the Supreme
Court. But even if Hedstrom still is good law, there are several sig-
nificant distinctions between the TTRA and the Hedstrom case that
make Hedstrom inapplicable, we believe.
And that would concern first — in Hedstrom it involved creation
of the boundary waters canoe area, and it was a wilderness act,
general, didn't specifically cite any of the contracts. In contrast,
TTRA singled out the APC and KPC contracts and were the basic —
those contracts were the basic motivation for the TTRA, and di-
rected— the legislation was directed at those contracts.
And under Winstar, the sovereign acts defense wouldn't be appli-
cable.
Mr. Crapo. Are you familiar with the CRS report on which the
analysis of the House report that I referred to earlier was made?
Mr. HORNGREN. Yes.
Mr. Crapo. And how would the Courts holding in Winstar affect
the CRS report's analysis?
Mr. HoRNGREN. I think it invalidates it. And I think it does that
because particularly the CRS assumption was based in part on the
Hedstrom case. And the underlying assumption was just an act
that had a public and general purpose could — you know, the gov-
ernment could invoke the sovereign acts doctrine and avoid con-
tract liability. But the Winstar case changes that and says the act
will not be public and general if it has a substantial effect on the
contracts. And that is the case with TTRA.
Mr. Crapo. Thank you. Mr. Chairman, if I could ask just one
more quick question of Mr. Leonard.
The Chairman. You have got all the time you want.
Mr. Crapo. Thank you. Mr. Leonard, I am just curious. I come
from Idaho and I know how long it takes to grow a tree to harvest-
able size in Idaho. How long does it take to grow a tree to a har-
vestable size in the Tongass area, if you know, and I am talking
about on a sustainable yield basis where the cut levels will not ex-
ceed the ability of the forest to continue to grow and be managed
properly.
Mr. Leonard. We have historically used rotation ages in Alaska,
which is the time it takes to grow a marketable tree, in the neigh-
borhood of 80 to 100 years.
Mr. Crapo. Thank you.
Mr. Leonard. But those are large trees.
Mr. Crapo. Thank you very much.
The Chairman. Thank you. I thank the gentleman. I appreciate
it. I know you may have another appointment, but don't leave until
you have to because you'll just get a phone call. I see Mr. LaHood
is trying to go; on behalf of the committee we deeply appreciate it.
I may ask you to take the chair a little while, if you don't mind.
Mr. LaHood. I would be honored to do whatever you guys want.
The Chairman. All right, thank you. Mr. Leonard, going to the
specifics of the bill, and that is what I want to say, can you give
me some of your recommendations. I know you said you had some
and they were sure orally but also give them to me in writing.
Mr. Leonard. I will be pleased to do that, Mr. Chairman. Let me
just go down some of the sections. Section 2(a)(1) is a definition,
and it applies the scribner log rule to utility log. The scribner log
26
rule was developed to indicate the portion of a log that is suitable
for the manufacture of lumber. And it is just not really applicable
to utility logs, which by definition are not suitable for lumber. A
better approach would be to define the volume requirements of the
section in Section 2(c)(3) and 2(e) as 192.5 million board feet. That
is the scribner per year. And this would make it clear that the For-
est Service could then use whatever log rule or method was appro-
priate for charging them for the utility logs. Historically they have
been charged on a gross basis.
The Chairman. The Forest Service charge isn't here, but the For-
est Service shouldn't object to that suggestion, would they?
Mr. Leonard. I would hope not, because it clearly gives them au-
thority to charge for the utility logs.
The Chairman. OK, go ahead.
Mr. Leonard. Section 2(a)(4) confuses the concept of mid-market
test with timber appraisal. In Alaska the mid-market test was de-
veloped to try to define that portion of the timber that is economi-
cally available and should be charged to the company. It is a test
of economic feasibility.
The question of appraisal is a separate issue when you appraise
to most current market where the mid-market test looks back over
a longer period of time. I think that the language in this section
should be clarified so that you apply the mid-market test to deter-
mine what timber may be released to the company and then you
separately apply a normal appraisal to appraising and establishing
the value that the company will pay — the price that the company
will pay for that timber.
As written. Section 2(c)(4) does not permit the Forest Service to
recognize the unique requirements associated with this long-term
sale. The requirement that they maintain and operate that pulp
mill has some implications that aren't applicable to an independent
sale. And I think the appraiser on that sale ought to be able to rec-
ognize those unique requirements. But also, it is important that
the language there be rewritten so that the Forest Service can con-
tinue to collect KV, Knudsen-Vandenburg Act, funds to do any nec-
essary reforestation work in the area or collect coop scaling depos-
its advise-its if that is requested by the government. Both these
funds contribute significantly to the acceptability of operations
under the contract and I believe they need to be maintained.
And finally. Section 2(c)(6) authorizes the company to replace the
existing pulp mill or convert it to other uses. I believe this is a de-
sirable section, but I think experience has shown that the law and
ultimately the contract need to be clear on what that process is.
How long does the company have to replace that mill? They can't
simply close the mill and say sometime 15 years from now we will
replace it. And the contract needs to be clear as to what obliga-
tions, what contractual operations are acceptable during the period
when the mill is being replaced. Is it permissible for them to con-
tinue logging? What happens to the utility logs?
And then finally, there has been several references to the claims
that are pending, potential claims coming out of the Tongass Tim-
ber Reform Act. In my judgment, most of the claims associated
with the Tongass Timber Reform Act are claims that will be proved
in the future sometime. I believe that there should be language re-
27
quiring Ketchikan — assuming that this bill is passed — that would
require Ketchikan Pulp to waive claims arising out of future oper-
ations or the future Tongass Timber Reform Act claims that
haven't already been perfected.
The Chairman. You heard testimony of the Forest Service. They
oppose the contract extension. It does not allow them to preserve
management options. Are you familiar with those terms? What do
they mean?
Mr. Leonard. The concept of maintaining options is an impor-
tant concept. I think when we do things, we want to preserve the
option — as many options as we can. We can't, however, maintain
options to the extent that you don't do anything. For too many peo-
ple maintaining options has become a code word for don't do any-
thing, leave the world like it is. And I think it is important that
we go ahead and take the actions necessary to maintain these pulp
mills.
It is important to understand that if these pulp mills close, we
lose some major options, major alternative actions in Alaska, the
economics of operation, the employment that is associated with the
pulp mills. If they are lost, then we lose some important options
in Alaska that we shouldn't lose.
The Chairman. Referring to the history of the long-term con-
tracts, a lot of people don't understand it, but the reason for grant-
ing them in the first place — why was there a long-term contract?
Mr. Leonard. The major purpose in long-term contracts was rec-
ognition that if you are going to provide a facility that is equipped
to produce pulp, that we are talking about major investments. We
were talking about $100 million investments then. We are probably
talking about $500 million investments today. And there must sim-
ply be stability of supply in order for that to happen.
I think it is well to look at history elsewhere in the country. All
of the pulp mills that have been built in this country outside of
Alaska, with only one exception that I am aware of, have been built
on the basis of a private timber supply or with an extremely di-
verse supply tied to the operation. The two timber sales based on
long-term contracts in Alaska resulted in construction of both pulp
mills, and one pulp mill at Snowflake in Arizona was built based
on a relatively long, 25-year contract with the Forest Service in Ar-
izona. All of the rest have been based on private timber supply.
But private timber supplies don't exist in Alaska. At the time the
long-term sales were made, all of the timber supply belonged to the
public. There was a substantial transfer of some of that timber to
the natives, but virtually all of that has gone into the export mar-
ket and has not contributed to the economy there.
The Chairman. George, they have stated — Mr. Miller may be
aware of this, but most other people — and he and I don't agree on
it necessarily, but most other people don't understand that if we
hadn't had the long-term contracts, there would have been no pulp
mills. Is that correct?
Mr. Leonard. I am certain of that.
The Chairman. OK, if we hadn't had the pulp mills, none of
those trees that are on saw logs would ever have been brought out
of the woods; they would have been left laying on the ground like
26-689 - 96 - 2
28
we did in the past. In fact, they probably wouldn't have harvested
an area like that, would they?
Mr. Leonard. I think that what you would have seen is what
you had prior to those long-term sales pulp mills. Some small high-
grade operations that went out for the very high quality spruce.
And I think you probably could still have a little, but you are not
going to see a general timber sale program. You are not going to
see maintenance of the small, independent mills in Alaska without
that big mill.
The Chairman. Realistically, George, as you have been a Forest
Service retiree, how can the Forest Service even think about hav-
ing a sale now if there isn't a processing plant? How could anyone
bid on a project or on a sale without using the pulp wood trees, too?
I mean, would they just go in and take out the good trees?
Mr. Leonard. Well, in theory you could require that they be re-
moved and they could go into the chip market, but putting those
into the chip market not only doesn't meet your employment objec-
tives, but it is going to return less value to the stump in that area
and therefore make much of the area uneconomical.
The Chairman. OK, I am bidding. I am the bidder. I am an inde-
pendent entrepreneur. I'll hear later on from this group; I want to
have an entrepreneur in the — logging investor. I am bidding on a
stand of relatively good timber. The stumpage rate goes up, but I
also have to take out the pulp wood trees to have them chipped.
I don't get any money for that, so that means I have to bid awfully
high and it makes it uneconomical, would that be correct?
Mr. Leonard. Well, you will get some revenue from the sale of
the chips.
The Chairman. But very little, not to pay the cost of
Mr. Leonard. Historically chips have not paid for removal from
those remote market locations.
The Chairman. I just — one last question and then I want to ask
you if you have any questions. One of the things — they'll say — I
want for the record. Do you think the long-term contract is good
for the government?
Mr. Leonard. I think so. I think so. It permits utilization of a
very valuable resource in Alaska. It meets the needs of those com-
munities for year-round emplojrment which is not supplied by the
recreation or the fisheries industry. I think the two long-term sales
did provide and have provided stability to those communities in
Alaska and I think that is the public interest.
The Chairman. The gentleman from California. He has no ques-
tions. The gentleman — Mr. LaHood. I want to thank — Scott, I want
to thank you for bringing up the legal aspect of it. Mr. Crapo did
cover it pretty well. I still don't think Congress recognizes the li-
ability that was imposed upon it by the Tongass Reform Act, re-
gardless of the language written in there.
Mr. HORNGREN. Let me put it this way. After the Winstar case
a week and a half ago, I now take those cases on a contingency be-
cause I think the company is going to
The Chairman. And believe me, if lawyers take it on a contin-
gency, there is a pretty good chance of winning.
Mr. HoRNGREN. Yes.
29
The Chairman. All right, I want to thank both of you for being
here today.
The next panel, panel three: Mr. Lewis, Ralph Lewis, Ketchikan
Pulp Company; Mr. Owen Graham, Timberlands Manager, Ketch-
ikan Pulp Company; Ernesta Ballard, Environmental Consultant,
please take the stand. We will go right down the line. Mr. Lewis,
you are up first.
STATEMENT OF RALPH LEWIS, PRESIDENT, KETCHIKAN PULP
COMPANY
Mr. Lewis. Very good. Thank you. I want to thank the Chairman
and the committee members for the opportunity to present our
case. I would like to start off a little bit just by introducing myself.
My name is Ralph D. Lewis. I have resided and worked for Ketch-
ikan Pulp Company for the last 30 years. I started down in the
labor pool and worked my way up and was made president of the
corporation two years ago. I am one that believes in safety of the
environment and doing the absolute very best you can and looking
forward and trying to — and in trying to look forward, trying to an-
, ticipate what the next turns are and try to meet them.
The contract, as just stated before, was basically started up there
to put some stability in Southeast Alaska. It has done — it has per-
formed that job. It is still needed to continue that stability. It is
the only year-round job, basically, that Ketchikan has. Also it
would be helpful throughout Southeast Alaska on Prince of Wales
Island and certainly Annette, where we have the only year-round
employment on Annette Island, which is the only Indian reserve in
Alaska. We have a lease with them. We lease that sawmill.
We believe in the renewable resource that trees are that; that if
properly managed, that you can be there forever and it's sustain-
able. We have seen the fish at an all-time high. The tourism has
grown substantially, even with the lobbying that has gone on. A lot
of people have said the tourism would be destroyed. It has not. It
has grown. It will continue to grow. We fit together very well and
always have. We have the local tourist groups and everybody else
support us right along with the fishing groups. Unlike what was
said back in the late '80's, that it was going to devastate that area,
it has not done that. It hadn't done it at that time. I think that
time has proven that it is a good fit. And we hope that the commit-
tee and the Chairman can see that, can see that we do have a place
and would like to continue.
I guess the main reason is to talk about the contract extension
and those corrections. We are not contending nor have we intended
to change any of the land use designations. We haven't changed
any of the wilderness that was put in the TTRA. We haven't
touched any of the other items. What had happened was after the
TTRA was put into place, the Forest Service made unilateral con-
tract changes. Those changes have already put APC out, who de-
cided they could not operate under that contract change. It has
done the same thing to us. Since 1991 we basically are a break-
even operation.
I do not believe that that was the intention of the committee
back in 1990, was to put us out of business, but they need to un-
derstand that those changes that were made is in fact putting us
30
out of business. We have come forth to try to have this operation
continue. Part of that request is the 15-year extension which will
allow us to make the capital and expenditures necessary to stay up
with the marketplace. Our competitors are doing that. We must
also do that. And, you know, other than saying that we have sup-
port of the governor and the rest of the town and the committee,
that we hope the committee is listening to us and will help us con-
tinue, because we want it to operate. I want it to operate and we
want the town to have some year-round employment. It will dev-
astate it if we are gone.
The Chairman. Are you through?
Mr. Lewis. I am through, sir.
[Statement of Ralph Lewis may be found at end of hearing.]
The Chairman. Thank you, Ralph.
Mr. Lewis. I am here for questions.
The Chairman. Thank you for keeping within your time. I am
going to go through the other witnesses. Then we will ask ques-
tions. Owen, you are up.
STATEMENT OF OWEN GRAHAM, TIMBERLANDS MANAGER,
KETCHIKAN PULP COMPANY
Mr. Graham. Thank you. I am Owen Graham, the Timber Divi-
sion Manager for Ketchikan Pulp Company. I have got a brief
statement. I came primarily to answer questions.
We have been short of timber volume since TTRA was enacted.
And as a result, our mills have operated intermittently. This un-
even, inadequate supply delivery of timber volumes harms the gov-
ernment also. The cost of preparing timber sales and administering
those sales is higher because of the contract changes that were im-
posed. The Forest Service also has admitted that to me recently.
Further, the cost of producing lumber and pulp in the mills has
risen dramatically as a result of this intermittent operation. And
as a consequence stumpage rates are down more than they would
have been otherwise.
I can't quite reach this.
The Chairman. We can hear you.
Mr. Graham. You can hear me all right? The volume issues that
we would like to see corrected include the amount of timber, the
volume itself, the timing of that volume and the criteria for select-
ing that timber. For the first 40 years, the Forest Service agreed
with us that the volume on our contract was 8-1/4 billion board
feet overall and 192 million board feet per year. Only in the last
two years has the Forest Service developed a new position that the
contract volume is only 154. In addition, prior to the Tongass Tim-
ber Reform Act, we received fixed volumes at fixed dates, certain
dates that we could rely on. Since then, the Forest Service has pro-
vided timber at random times and at random volumes, ranging
anjrwhere from around 40 million per year to over 200 million per
year.
In addition, since the long-term sale was not marked on the
ground ahead of time as is normally done for independent sales,
the contract has selection criteria to assure that KPC receives eco-
nomically viable timber. That is not a guarantee of profit, but a
guarantee of an opportunity for profit. Similarly, the pricing of the
31
timber was intended to ensure an opportunity for profit. Since
KPC's long-term sale contract has an upward rate redetermination
clause that's not in any other contracts, any profit potential above
the level allowed by the Forest Service becomes stumpage for the
government.
These changes we have asked for are going to benefit the govern-
ment as well as allow KPC to continue. Thank you.
The Chairman. Thank you, Owen. Ernesta. By the way, you used
to sit at that table and testify many, many years ago.
Ms. Ballard. That was under a different name.
The Chairman. Under a different name but welcome.
STATEMENT OF ERNESTA BALLARD, ENVIRONMENTAL
CONSULTANT, BARNES AND ASSOCLVTES
Ms. Ballard. Thank you, Mr. Chairman. My name is Ernesta
Ballard. I am an environmental consultant and the former admin-
istrator of Region 10 of the Environmental Protection Agency.
Mr. Chairman, passage of this bill will allow KPC to continue to
make improvements that are already underway to protect the envi-
ronment. The public/private partnership which will be achieved by
contract extension will enable KPC to continue building an im-
proved outflow infuser, a chlorine-free bleaching process, a rebuilt
power plant, which reduces the use of fuel and burns waste more
efficiently, computer controls to conserve resources and chemicals,
and increased waste water treatment.
I would like to use the rest of my time this morning to address
some of the allegations that have been made by opponents of this
bill.
The Superfund allegation: This is not true. KPC is not under
Superfund review and does not appear on any Superfund list. Sug-
gestions that KPC has applied political pressure in this regard are
preposterous.
The RCRA allegation, this is not true. Since the law's passage in
1980, KPC has had no RCRA enforcement actions.
The TSCA allegation, this is not true. KPC has properly man-
aged and disposed of all PCB materials and as of this year will
have no remaining PCBs on-site.
The water quality allegations, these are not true. They are the
contention of adversaries and are vigorously disputed by KPC.
They have not been substantiated by regulators or the courts.
The fish kill allegations; these are not true. The only fish kill for
which KPC was responsible occurred 15 years ago, and it resulted
from an accidental release of cleaning chemicals downstream of the
water reservoir at Krile Lake and not at the pulp processing facil-
ity.
The allegation that KPC is on the top of the Alaska Hazard
Ranking Model, this is not true. The State recently concluded that
KPC should probably be excluded from the ranked list because per-
mits and review programs already in place adequately manage pol-
lution control.
The allegation that KPC has failed to properly study the health
effect of air emissions on local residents, this is not true. KPC com-
pleted a comprehensive study of dozens of chemicals including
32
dioxin and showed that all were below the State's regulatory risk
level. I will explain the boxes in a minute.
The allegation that KPC is the worst polluter of the Northwest,
this is not true. The allegation is based on KPC's response to the
toxic release inventory, which quantifies discharges in a simplified
chemical report. Adversaries have taken data out of context to
make this comparison. EPA does not use the report in this way.
The allegation that there is a dangerous buildup of dioxin in ani-
mals in Ward Cove, this is not true. KPC monitors for dioxin as
well as metals and many organic compounds. Almost all are at lev-
els below action thresholds and sediment standards. Dioxin is 20
times below the low risk level.
The alarm raised by KPC's opponents is unsupported and unwar-
ranted. State and Federal regulators are knowledgeable of the most
minute details of KPC's operations. Those operations are conformed
to 75 permits, emergency response plans and procedures. I have a
copy here in the boxes on the table for the committee's review. In
addition to these boxes are a dozen studies that are underway, in-
cluding pollution preventions, silver mask balance, standard oper-
ating procedures and a Ward Cove settlement remediation plan.
Further discussion of these materials is in the written testimony
which is supplementary to Mr. Lewis' testimony and further sup-
port for the rebuttal of the allegations appears in Mr. Allyn Hayes'
testimony, which we are submitting today.
Thank you for this opportunity, Mr. Chairman.
[Statement of Ernesta Ballard may be found at end of hearing.]
The Chairman. Thank you, Ernesta. Those boxes are what?
Ms. Ballard. In the boxes are the 75 permits, operating proce-
dures, emergency response plans which govern the operations of
Ketchikan Pulp and the additional documents describing pollution
prevention measures, spill response, spill retainment and Ward
Cove remediation.
The Chairman. And these are all government documents?
Ms. Ballard. They are already in the public domain.
The Chairman. Public domain, so that refutes a lot of the accu-
sations, a lot of — I call them rhetoric that comes from certain
groups I have heard in the last three or four meetings on different
legislative packages. These have already been reviewed. They have
been submitted by the government and all parties concerned know
they exist?
Ms. Ballard. That is true.
The Chairman. OK, which reminds me. Let us see, you are five
foot tall and weigh about 120 pounds. Those boxes, if you put them
all together, are about five foot tall and weigh 520 pounds, you
know. I would say this. In all due respects, you are probably more
effective than they are with your testimony. I want you to know
that, because you did work for EPA. You have been dealing with
this project for many years, have you not?
Ms. Ballard. Some of those documents have my name on them.
The Chairman. It might be better later — I will probably be call-
ing on you after some of the testimony given to maybe respond to
some of those comments.
Ralph, what happens if we don't get the extension through — leg-
islate
33
Mr. Lewis. If we can't get this bill passed and the way things
have gone on and the way things are continuing, we will probably
in the very, very near future have to announce some kind of shut-
down, permanent closure.
The Chairman. OK, what would it take — and I am going to fol-
low this through, be a manager. Let us say we don't change any-
thing, but just adopt the present contract language that you are op-
erating under till the year 2000 — how long is the present contract?
Mr. Lewis. 2004.
The Chairman. 2004. If we were extending existing language,
what would be your position?
Mr. Lewis. The problem with the existing language is, as I have
stated before, basically we have made zero money since TTRA. The
changes that were put into that contract have severely damaged
our ability to be able to make a just small return. We have not
done that. And that is why we are here and trying to get that cor-
rected. We are trying to put back the contract and the words that
were in the contract, not everjrthing, but those that gave us the
ability of being able to survive and make a small profit.
That has never been a large profit-making facility. A steady one,
but not a large one. You know, I think it has averaged ten percent
or less than ten percent from the very beginning. That goes on high
and low years, so from something that you would have built in
1954, that is not a large, huge money maker. It never has been.
It wasn't produced to do that. It wasn't made to do that.
The Chairman. What about the management changes in your
parent company? I heard the testimony from Ernesta talking about
chlorine-free pulp process. You have been operating without that
and now you have decided to put that — is that a requirement of the
government or is that something that you need to be competitive
or what is the reason behind it?
Mr. Lewis. No, I think it is — number one, it is the direction the
United States and following the whole of Eastern Europe is to go
chlorine free. I think that our parent company our Samoa mill
went chlorine free. They did that not having to do that, but know-
ing that that is the direction they wanted to do. We are the other
mill and that was also a direction. We do have the new NPDS per-
mits and the new permitting and the items are ahead of us that
are telling us that we need to be chlorine free or somewhere at
least certainly to be elementary chlorine free.
The Chairman. Well, you have been under attack, your company,
for a long time, especially by the Daily News and a few other news-
papers that report on how dastardly you are. How does — what hap-
pens to the community when these attacks occur?
Mr. Lewis. Well, it is devastating. I mean, going back to the late
'80's, you know, you have to be living on a small island. You have
no other way off the island except by air. There are no road sys-
tems. You do have the ferry. Everything takes time. And to have
in the halls of Congress bills passed to cancel your contract and to
virtually put you out of business, when that starts, I guess the fear
of all of that starts, the anxieties. You start wondering whether you
should stay there or you should leave, whether you should make
investments in your house, whether you should put a fence on,
whether your kids are going to be able to go to college. And that
34
has been going on for a very, very long time and it is tough to live
with.
The Chairman. But I see four boxes of permits issued there and
you have met most all of those requirements, have you not?
Mr. Lewis. Yes, and
The Chairman. At what cost?
Mr. Lewis. Hundreds of thousands, millions of dollars.
The Chairman. That might help. I have one more question.
Owen, you said something I didn't ask the Forest Service about,
supply of timber and how short you have been since TTRA.
Mr. Graham. Yeah.
The Chairman. Are we — ^you are not receiving what was really
intended in there? What is the problem?
Mr. Graham. No, we have been short, I don't know, an average
of — it would depend on how far back you go, anywhere from 30 to
50 million board feet per year from what our contract volume is.
We have been getting 80 percent of the volume, but that other 20
percent we need to operate those mills. And as a result of not hav-
ing it, the mills have been forced to operate intermittently. We
have had pulp mill closures and sawmill closures both.
The Chairman. I keep hearing from the Forest Service they are
putting it up, they are offering it. Why isn't it getting to the mill?
Mr. Graham. Well, they have been offering quite a bit less than
what the contract allows for. 30 to 50 million feet, that is how
much below the contract level their offer has been. In addition, be-
cause of changes the courts are making in the way they design
their timber sales, it takes two to three years to harvest a timber
sale. When they release timber to us, all we get is a piece of paper
that says you can go into some remote area and move men and
equipment in and build a campsite, place for the men to live, and
then build roads and then harvest timber. All that takes two to
three years.
Consequently, we can only harvest each year about half of what-
ever our pipeline of timber is. Right now we have just under 300
million feet of timber, but 250 of that 300 we received in less than
a year, and so we can't harvest it at a rate greater than about 150
million a year, which is 40 million below our contract level. The
Forest Service
The Chairman. What about lawsuits?
Mr. Graham. Pardon? Lawsuits are another concern. That is part
of the reason why the Forest Service is unable to provide us with
our full contract volume. Of the 300 million in the pipeline there
is 105 million, I think, right now that is under a pending injunc-
tion. We are waiting to see what happens later this month.
The Chairman. It is my — Mr. Miller, I am going to suggest that
we are going to recess and go on with these three witnesses — when
we come back, we will still be on the panel and Mr. Miller will be
asking questions. We will recess now until approximately five min-
utes after three.
[Recess.]
The Chairman. The meeting will come back to order. Mr. Miller.
Mr. Miller. Thank you, Mr. Chairman. Mr. Lewis, in your testi-
mony on page 2 you say that this legislation is crucial to the long-
term survival of KPC. The first one is allow you to invest up to
35
$200 million in environmental, energy efficient and operational up-
grades. How does that break down? Some of the environmental
work you are already undertaking, is that correct, pursuant to the
court decisions
Mr. Lewis. That is correct.
Mr. Miller, [continuing] — and your agreements with the Justice
Department and others?
Mr. Lewis. Yes, that is correct. That is a small part of the dollar
part of this, but those are some of them that we are doing.
Mr. Miller. And that is
Mr. Lewis. The spill containment.
Mr. Miller. That is financed how?
Mr. Lewis. That is financed through Louisiana Pacific Corpora-
tion, who is our parent.
Mr. Miller. In your lOQ file that you refer to. Exhibit C refers
to the pollution control related measures estimated costs up to $20
million. That is encompassing possible cleanup at Ward Cove and
compliance with Justice Department and what else?
Mr. Lewis. Yeah, that was the spill containment and basically
taking all of our tanks that we have and building and lifting them
all up and putting concrete foundations under them and putting
concrete barriers around all of them in case there would be an
earthquake and one of those tanks would split, that they would
have been totally contained.
Mr. Miller. But that $20 million is a
Mr. Lewis. Combination economics.
Mr Miller. That is the environmental package?
Mr. Lewis. No. No, that is just the small part that we kind of
call a consent decree. Some of those items we were doing already
when we went through those negotiations. We were doing some of
those and upon negotiations and with the Justice Department that
we finish and complete those packages. But the rest of the environ-
mental is doing the ECF, which is elementary chlorine free. That
is not part of the consent decree. That project we are probably
maybe 75 percent completed on, not tied together. We have outfall
that is yet to be approved by the State. We have — and there is also
a mixing zone. We have a lot of some of the other small items. We
have — what we need to do is to upgrade all of our computerization
for the ECF, which is
Mr. Miller. Just let me — I don't mean to cut you off, but there
is
Mr. Lewis. Sure.
Mr. Miller. In terms of, like, chlorine free, the decision to do
that was made some time ago, right? That part you sent away.
Mr. Lewis. Yeah, that part
Mr. Miller. '93?
Mr. Lewis. That was started — the project was started, I believe,
in '94, late '94, and being spent during '95. It will be kind of set
aside. And that is a part
Mr. Miller. I guess the question I sort of have is if the figure
is $200 million, and I assume that is the environmental and the
modernization.
Mr. Lewis. Uh-huh.
36
Mr. Miller. And the boilers and so forth. But in accordance —
you made those decisions in '93, '92/'93, engineered them and start-
ed to make miniatures in '94/'95, I guess. What is the change here?
Mr. Lewis. The managing, I guess, of our long-term contract and
the unilateral clauses that were changed and the, you know, prom-
ises that we thought that were made to be able to have a wood sup-
ply in front of us to be able to manage the timber base and to be
able to go forward. That has not worked. And with that not work-
ing, has just made it more and more difficult to operate. And that
is why we are in here. Number one, to secure the completion of all
that money to go forward and also get a correction to the contract
clauses.
Mr. Miller. But that — this $200 million would be financed how?
Mr. Lewis. How will it be financed? Well, basically it will be fi-
nanced through banks through LP, who will have to go out and
borrow the money. We still have to stand alone as an operation and
be profitable or there will be no financing. You know, it is like any
segment of a business, you have got to be able to stand on your
own and pay your way or there is no financing.
Mr. Miller. Have you asked the State of Alaska for help?
Mr. Lewis. Yes, we have, and we have been working with the
State through ADA and what we really got down to was the
amount of money that we were needing. I think jointly we recog-
nized that we needed an extension to that contract to be able to
borrow those funds from the State.
Mr. Miller. So you will borrow what part of the
Mr. Lewis. There was about 50 million. About 50 million from
the State, I think, was identified that the State could loan to us.
Mr. Miller. Have you gone to the legislature to get it to
Mr. Lewis. Oh, yeah, we have done that.
Mr. Miller. What happened?
Mr. Lewis. Well, number one, the period of time in which to pay
it back and with the other expenditures, we needed more than the
eight years. ADA was extremely uncomfortable with that eight
years. It didn't look like we had the ability of being able to pay that
money back.
Mr. Miller. Have you gone to Ketchikan?
Mr. Lewis. I am sorry?
Mr. Miller. Have you gone to the city for help in this financing
or other packages?
Mr. Lewis. We haven't gone to the city at this time or anyone
else. Again, you have to have the ability to be able to pay it back.
I mean, they are not going to loan you money if you don't have the
ability to pay it back.
Mr. Miller. Well, here is — I guess I am maybe not following this
correctly, though, but apparently at some point, I haven't seen the
date of it, at some point you penciled these transactions out over
the remainder of this contract and said this doesn't work?
Mr. Lewis. Correct.
Mr. Miller. And I am just trying to figure out how we appor-
tioned a lease. I mean, I want to know, kind of, what the State of
Alaska is prepared to do, what would they be prepared to do be-
yond what they are currently authorized to do. Ketchikan just got
$25 million of Federal money . If this is an important resource,
37
why isn't Ketchikan trying to pony up some money to help an em-
ployer and receive — you know, the state of Baltimore spent $200
million to try to attract 400 jobs in the baseball park. Why is this
a Federal problem? I mean, because this bill goes beyond an exten-
sion. It goes to — the suggestion is that we have got to provide
cheaper timber. We have got to provide other relief in this oper-
ation and we have got to take it out of the Federal treasury, if you
will, however that translates into the Federal treasury. I want to
know what the other beneficiaries are seeking to do here.
Mr. Lewis. Well, it's
Mr. Young. Will the gentleman yield?
Mr. Miller. One of the things — I think the Interior Department
wouldn't force it because they can't commit to a local big city or
even the State. I am surprised you got it out of either in a period
of eight years. That is just not good business.
Mr. Lewis. We don't have
Mr. Miller. Well, nobody can, but you want us to commit to a
23-year-old contract.
The Chairman. We want an extension of 15 years so that they
can go out and raise some money.
Mr. Miller. Well, I think — but I think that also brings the ques-
tion as to what are others prepared to do. Why is all of a sudden
a Federal
Mr. Lewis. It is the timber supply that is the problem.
Mr. Miller. Well, that is your contention, but that is based upon
the fact that you have to go out and go to market rates and you
have to borrow all this money from the bank. I am saying there
are some rich cousins here. You have got $19 billion in the State
fund. You have got $25 million grant. Mind you, $110 million to
Southeast Alaska that was given when the original clause language
changes were given and the bill — the consolation part of it Senator
Stevens got $110 million a region. Does the region think this is im-
portant?
The Chairman. We don't get into this argument
Mr. Miller. No, it is on my time and I want a better reason
The Chairman. The Federal Government owns the timber.
Mr. Miller. I understand that.
The Chairman. The Federal Government owns the timber and no
one can participate until they know the Federal Government is
willing to participate in the process. You can't go out and simply
make wood. It is impossible. And by the way, I just got handed a
little Associated Press deal, Jack Ward Thomas, that famous for-
ester, says that the Federal Government at the minimum will be
probably liable for $1.41 billion in Alaska because of negated tim-
ber contracts. That is the Chief of the Forest Service talking about
the obligation of this government thanks to the Thomas Reform Act
that you and I worked on.
Mr. Miller. Well, the response would be then to cut our losses
rather than extend it 15 years. We got to cut our losses and let this
contract run out and be on our merry little way.
The Chairman. But you cut your losses and the company does
all that, but you do not maintain the employment in that city, and
I thought that is
38
Mr. Miller. You know, if the threat of 1.4 billion or whatever
the threat is, you know, that that is somehow going to drive this
legislation or the threat to go out of business, I think the first thing
we have to know as policymakers is kind of why is this taking
place. You said it is a difference in the volume of timber being of-
fered and what you could have previously had. The Secretary was
here saying we are going to meet our contractual commitments
under the contract. You are suing suggesting they are not. Some-
body else is suing suggesting they are going too far. And so in the
middle of all this, we are told that but for this legislation, this mill
is going to close down. I say, well, how can that be if there are
other people who have a vital interest, supposedly, in this city of
Ketchikan, the region of Southeast Alaska and the State of Alaska?
Where are they?
Mr. Lewis. And I guess the answer to that would be with the ex-
tension and having a timber base, they would be more than willing
to probably loan us that money.
Mr. Miller. And that is what the Secretary is telling you, you
are going to have the timber base. They just sat here an hour and
a half
Mr. Lewis. No, they — what has happened is, you know, you have
got to know one thing. There really wasn't any claims and there
wasn't any filings in the court. This 1.4 billion came about through
the contract changes that were unilaterally made to the contracts.
That is where the 1.4 billion came from. It was from the arbitrary
change in those contracts. And that is why we are in court. What
we are trying to do here is to stop that. We only — all we have tried
to do with this language is to put back those changes that were
made in the unilateral contract, only on our contract, not on the
lands, to stop those claims and at the same time show that what
we need is a 15-year extension to be able to become modern, to be
able to go forward.
Mr. Miller. With all due respect, that contract was reprehen-
sible to the — repugnant to the American people. That is what I am
saying. That is the only terms and conditions under which this bill
can operate. As you saw in previous Congresses, the decision was
that price was too high. Now maybe if there is a case here about
unilateral alteration of the contract, maybe we have to just let this
contract run out in 2004 and cut our losses in terms of public re-
source.
Mr. Lewis. You know, that doesn't help the people that are up
there. That doesn't help anything else. The return to the govern-
ment is in the hands of the Forest Service. The return in the gov-
ernment dictates the type of operation, sale operation that they are
going to have, what the costs are going to be in removing that tim-
ber. Their choice has been
Mr. Miller. But you are pitting that against what you say is re-
quired in terms of your investment. If you have to make this in-
vestment, you cannot do so under the current rules and regula-
tions.
Mr. Lewis. Under the
Mr. Miller. And the suggestion that — and all I am asking is are
there other people that can chip into this in terms of the State, the
region or the city, that can allow that to take place?
39
Mr. Lewis. I mean, I don't know of anybody that is going to give
you money without asking for it to be returned. I mean, who
thinks
Mr. Miller. The government
Mr. Lewis. No, they get a return. They get $7 billion out of
Mr. Miller. Not
The Chairman. The gentleman's time has run out.
Mr. Miller. That is not sound economics.
The Chairman. I am not going to discuss that economics right
now, because that has been argued over and over and over.
Mr. Lewis. That is the basis of
Mr. Miller. It's not that I'm going to demand you raise
The Chairman. The public's own demand with all due respect is
to extend the contract so in fact the city can survive. And the com-
pany, very frankly, with their stockholders chose to pick up and
walk away now, they could do so. I have said this time and time
again, but what we are trying to do is figure a way out where we
can extend the contract.
Mr. Miller. With all due respect, that is what the owner of the
Cleveland Browns said.
The Chairman. Well
Mr. Miller. What I am saying is so then I want to know if this
is so vital to the city of Ketchikan, they get $25 million from the
Federal Government, the first thing they do is hire a consultant.
Why don't they come to Louisiana Pacific and say is there some-
thing we can do in terms of community development, in terms of
economic development, to help you?
Mr. Lewis. The contract
Mr. Miller. If they give you Federal money they'll have no op-
tions.
The Chairman. I am going to tell you one thing right off the bat.
I don't care what they did with that money. I was never excited
about that. I mean, that's welfare money. That is not work money.
Everybody tells us we are going to start new businesses; we're
going to go out and diversify the economy. And I keep saying where
are you going to diversify? Unless there's timber there is no diver-
sification. I don't care what they say. Unless you let us mine and
they are not going to let us mine it. There is no other economic
base in those communities. It does not exist today. You talk about
fishing. Fishing cannot expand; it's exactly stable. That is State
law and Federal law. You can't expand in any other arena. They
talk about tourism. Right now tried it in Ketchikan we have seven
boats and there during the summertime you can hardly walk the
streets. You can't expand that. You have got a point here, but
somewhere along the line we have to recognize that timber plays
a vital role and we have to figure — if we can extend this contract,
keep that town viable, that is what we are trying to do.
Aiid by the way, all due respect, you are a lawyer. You would
never come to me and expect me to lend you money. I know you
would never do that, but lend me money without some guarantee
you are able to pay me back. You can't do it. You can't ask — the
city of Ketchikan would do it in a second if
Mr. Miller. Mr. Chairman, with all due respect, I don't want to
lend you the forest unless I know it is absolutely necessary. And
40
I have a company here that has a lower debt ratio than most of
the people in their industry. I appreciate that this bill may be mar-
ginal, but the question is are there other concessions that can be
made by others to increase the marginal capability of this bill. And
if in fact there is a problem within the Tongass reform, that will
be discussed too. But what we are stating — what we are being told
here is it is a full rewrite of the Tongass, but I appreciate the buff-
er zones and not emasculating the fish. I mean, you have to try to
keep some local base. It is this rewrite — we have to go back to $2
timber or you guys can't play. Well, then we have got to ask our-
selves is that a subsidy that the people of the United States desire
to engage in. The answer may be yes from your perspective, and
I don't know what my perspective is. It sounds a little rich to me
when there are other people that can diwy up. This is how you end
up with Federal deficits. It somehow becomes our problem.
The Chairman. Well, you have got my bill. It will solve the whole
problem.
Mr. Lewis. One thing, the 300 million that Mr. Janik had talked
about earlier as being available or potential on the Tongass Land
Management Plan, • that produces and should produce approxi-
mately a minimum of maybe $70 million into the Federal coffers.
That is through income tax of the workers. That is through other
taxes. That doesn't take the product and take it on and on and on
in through the system. That just takes your very first vendors.
That more than pays for the Forest Service's budget on handling
the timber. Any stumpage that comes after that is a bonus.
And the Forest Service can manage that number to the point
that they want to. They can manage at the base rates. They can
manage it to $100. They can manage it to $200. That is their
choice. Their choice has been in the past to manage it to base rates,
to management to minimums, because they have put as much pro-
tection into the environment as they can, as much protection out
there as they can. They would rather take the stumpage money
and put it back into the land. And all of us thought that was the
way to go. We thought that is the way it should be managed. But
instead, all of a sudden we get groups that came up that said that
is not the way it should be managed. And it has confused all of us.
It has confused every one of us, not to understand exactly what's
wanted or needed.
Mr. Miller. And that is why we have gone through the process
to determine.
Mr. Lewis. Yeah, but what you guys did was turn around and
assume that the $2 at base rate was something that we had some-
thing to do with, that we chose to do that, and turned around and
unilaterally changed our contract. And that was wrong, because
that is not what was happening. It was not in our power to do that.
That wasn't something that we were doing. It was what the Forest
Service was doing. And so we got blamed for it and we got turned
around and you took away any profit that — any chance for us to
make a dollar and have a return. And all we have asked to do so
that we can continue to operate is to come forward and make those
changes back so we can survive and have an industry. And right
now the way it is going, it is very difficult. We can't survive with-
41
out these changes. That is why we are here. We have no place else
to go.
Congress is the one that interfered with our contract, not us. The
Forest Service and us had agreements. We made contracts. We
made changes. We did this all along and it was only Congress that
came in and made that change.
Mr. Miller. The bottom line, then, is that you cannot do busi-
ness unless we give you 1951 prices 23 years from now?
Mr. Lewis. That is what you say 1951. I will go back and say
the Forest Service can make that $50 or $100.
Mr. Miller. And there was an end to that contract.
Mr. Lewis. But they can go back and make that rate. They can
make whatever rate they want. It is not a '54 contract. Those
changes — we made, I don't know, 20 changes or something like that
to the life of that contract. George Leonard was one that we used
to go in and negotiate changes. And he was a tough negotiator. He
would sit in there and say we need this and this and this changed
and we would sit down and negotiate those changes. We need to
meet NFDA. We would go down and meet those. We would make
those changes all along.
Somewhere along the line this thing got blown out of hand. We
were told we never did this. We were told that all these things
didn't happen. And all of a sudden, the next thing that you knew,
we were in trouble. And we are back here asking for help. That is
exactly what we are doing, because we need it. We have got our
backs against the wall. And I want the people to work. I want them
to have jobs and I want it to continue. That is my town. I have
been there 30 years. My family were born and raised there. That
is all we are trying to do. We are not trying to get any sweetheart
deal. We are not trying to cut a deal or anything. We are trying
to survive.
Mr. Miller. Well, I just — ^you know, it is like all the discussion
earlier in the panel about what a wonderful environmental record
you have, except, well, you know, the expenditures pursuant to con-
sent decrees and guilty pleas. Let us just understand something
here, that the question originally arose because people found, as I
said, the contract unacceptable. And we made those changes. You
can litigate those changes, but if what you are telling me is that
this is the only place that there is relief is to go back to those forest
practices and to go back to those prices, that that is the only place
there is relief, then the question may be whether or not you just
play this contract out in 2004. I mean, I don't understand that, but
I guess that is the case.
This is important to the town. This is important to everyone else
who can stand around with their hands in their pockets saying
what is the Federal Government going to do.
Mr. Lewis. I am saying we are not going to make it to 2004
under the contract changes you made. We are not even going to
make it. We are not going to make it there. That is why we are
here. We are not going to make it.
The Chairman. You know, and I might say to the gentleman
from California, Ketchikan is doing everything in its power so that
they can divest and get this $25 million they get a substantial
economy, but they can't — there is nothing they can do until the
42
supplier of the timber can say listen, we can extend this contract
and give you some stipulation, we are telling you what is wrong
with this bill and say all right, can you live with this, this and this.
That is all I am asking you. This is the starting point and I have
yet to find out any — other than the fact that it can't work. Tell me
what will work and then let us sit down and negotiate with Ketch-
ikan Pulp and see if there is something that can work unless you
want to kill the industry.
Those of you who want to kill the industry — I don't, and I wish —
and frankly, I wish people would tell me and I would be glad to —
we could save a lot of time, but this gentleman, these gentlemen
and this lady has a problem and that is to keep those people work-
ing, to keep the town viable.
I could ask another question but we're about — afraid we'll run
out of time here.
Mr. Miller. Well, I just — let me just ask you, in terms of the
production of this facility over the last — go back a year from today,
this quarter. What has been the production at the facility?
Mr. Lewis. Our production? About 480, 490.
Mr. Miller. But in terms of your capacity, mill capacity, that is
what that translates to?
Mr. Lewis. We believe our mill
Mr. Miller. Fifty percent, 90 percent?
Mr. Lewis. Probably about 85, 90 percent.
The Chairman. And that is in pulp?
Mr. Lewis. That is in pulp. Our sawmill, KSM, was down, I
think, almost all of last year. Hemlock, our sawmill, was running,
I think it was, one shift not all of last year. We — I think that has
been the same for a couple years. In 1993 we were down almost
100 days for lack of wood. And we would have been down another
50 or 60 days except that APC went down and we bought wood
from them. And basically that all came from the change in the
wood supply and how we got our wood and where it was released.
The Chairman. And these are added value projects you are talk-
ing about? This is your sawmill?
Mr. Lewis. Yeah, these are the sawmills that take the higher
value. KSM produces lumber.
Mr. Miller. The sawmill was down 100 days?
Mr. Lewis. Down, if I remember — the pulp mill was down 100
days, and I believe that when APC went down, the whole area was
short of wood. APC went down and we bought some of their pulp
logs. It kept us running or we would have been down another 60
days or something like that, except the wood that we bought al-
lowed us to work. And that is
Mr. Miller. And then how many other days due to reasons
not
Mr. Lewis. Lack of wood? Well, the sawmills have been down —
I bet you the sawmills have only run — I am just guessing, but prob-
ably 40 percent, 50 percent of the time in the last three years. They
never literally with wood, out of wood. Right now KSM just got
started back up and went back down. It has been pretty rough on
everybody.
Mr. Miller. The mill — how much of the time has the pulp been
down due to lack of material and/or maintenance?
43
Mr. Lewis. OK, the lack of material was what I just talked
about. And maintenance, I would say, we usually average any-
where from 15 to 25 days, so I would say we were somewhere in
that area.
Mr. Miller. They are your scheduled
Mr. Lewis. That is a year, yeah. That is scheduled maintenance.
Mr. Miller. Scheduled. Were you down more than you were
scheduled for?
Mr. Lewis. Yes. We have had some upsets where we went down.
We had some areas that we went down for four or five days and
started back up. I mean, things like that.
The Chairman. I want to thank the panel. You know, this is a
hard nut to crack here, and I hope we can get some suggestions,
as I told the Forest Service and even yourselves, so we can come
to some solution to this problem. I happen to agree with you. I
would not invest if I didn't have a supply in a chicken picking plant
or any other kind of plant — if I knew they were short of a supply.
If there was some private timber there, we wouldn't have a prob-
lem. We would have timber, not as convenient as — by the way, the
mills in New York — if you want to have some fun sometime, go
visit those 37 mills in New York and see what kind of contract they
have, what kind of environmental qualities they have, too. This
mill is ten times cleaner than that because we are a clean area.
That is unfortunate.
You are excused. I want to thank each one of you for traveling
so far to testify to the committee.
The next panel up is panel four: Mr. Scott Estey, Vice President
of Corporate and Investment Analysis; Mr. David Roets, Southeast
Regional Sales Manager from Arkansas; Mr. Al Knapp, The Indus-
trial Company, Steamboat Springs, Colorado; and Mr. Samuel
Mabry, Vice President of Government Affairs, Hercules, Incor-
porated, Washington, D.C. Would you gentlemen please take the
witness stand.
Mr. Scott Estey, you are up. I apologize for the long wait, by the
way, but this is one of the problems we have when we have these
hearings. It takes a long period of time.
STATEMENT OF J. SCOTT ESTEY, VICE PRESIDENT OF COR-
PORATE AND INVESTMENT ANALYSIS, JAAKKO POYRY CON-
SULTING, TARRYTOWN, NEW YORK
Mr. Estey. Thank you, Mr. Chairman. My name is Scott Estey.
I am Vice President of Corporate and Investment Analysis with
Jaakko Poyry Consulting North America. Jaakko Poyry provides
management consulting and investment advisory services to the
pulp and paper and forest products industry, as well to suppliers
of equipment, raw materials, or capital to the industry.
I have been retained by Ketchikan Pulp Company to provide tes-
timony regarding typical financial return and project life require-
ments for capital expenditure within the pulp and paper industry.
This testimony is made in light of KPC's request for an extension
of its timber supply contract with the U.S. Forest Service, stating
that the extension is required in order to ensure that fiber supply
is available for a sufficient period of time to allow KPC to earn an
adequate return on capital expenditures at its mill in Ketchikan.
44
As general background on the industry, pulp and paper is a cap-
ital intensive industry which requires not only large initial invest-
ments, but also significant on-going investments for the purposes
of maintenance, environmental compliance and facility improve-
ments. Additionally, the pulp and paper industry is commodity ori-
ented, highly cyclical and typically realizes relatively low profit
margins as a result of this.
Expected rate of return, and the life of an investment project
that is required in order for a company to earn that return, can
vary significantly within the industry. In my experience, it is not
uncommon to observe project returns ranging from negative to
positive 30 or so percent and project life requirements ranging from
five to 25 to 30 years. These are wide ranges, I know, and of the
many factors that can potentially influence these measures, those
having the most significant impact include; the timing of the ex-
penditure relative to the industry cycle, the magnitude of the ex-
penditure in terms of dollar volume, and the purpose or nature of
the expenditure.
Within my written testimony I have provided a rough categoriza-
tion of investments within the industry based on the purpose of ex-
penditure, and I have also provided ranges for expected rate of re-
turn, as well as for required project life or investment term that
are typically experienced within the industry. I have used this as
a reference in formulating my opinion as to the reasonableness of
KPC's request.
My knowledge of the capital program being considered by KPC
is limited to the estimated aggregate value of the expenditure, ap-
proximately $200 million, the estimated completion of the expendi-
ture, which is five to eight years hence, and a general description
as provided by the company which described the expenditure as in-
cluding bleach plant modifications necessary to allow the facility to
produce elemental chlorine-free pulp, environmental equipment
and facilities modifications, an upgrade of the power generation fa-
cilities and improvements in the mill's chemical recovery systems.
Given the general description and magnitude of the investment
project, it appears that the majority of the investment could be
classified best as a major replacement and environmental expendi-
ture. Based on my review of rate of return and project life require-
ments in the industry, it is within the range of expectations to re-
quire 15 to 25 years to allow for an adequate return on an invest-
ment program of this nature and magnitude.
That concludes my testimony. Thank you.
[Statement of Mr. Estey may be found at end of hearing.]
The Chairman. Thank you. Jay. And I will move to David at this
time, and I see the other two gentlemen probably will say we were
going too late and they probably left or they'd be here.
45
STATEMENT OF DAVID L. ROETS, SOUTHEAST REGIONAL
SALES MANAGER, GRASEBY STI, WALDRON, ARKANSAS; AL
KNAPP, THE INDUSTRIAL COMPANY, STEAMBOAT SPRINGS,
COLORADO; AND SAMUEL A. MABRY, VICE PRESIDENT OF
GOVERNMENT AFFAIRS, HERCULES, INCORPORATED, WASH-
INGTON, DC
Mr. RoETS. Thank you, sir. My name is David Roets. I am the
Southeast Regional Sales Manager for Graseby STI. Graseby STI
is an Arkansas based company. We manufacture continuous emis-
sions monitoring systems for the various industries which require
them. The largest industry which we serve or play a major role in
is the pulp and paper industry. We have a business relationship
with the Ketchikan Pulp Company and its parent company, Louisi-
ana Pacific Corporation.
The pulp and paper industry represents 85 percent of our compa-
ny's income per year. With the down turn in the paper prices, it
has been a very difficult past few years for the paper industry. This
in turn has resulted in a reduced business flow for Graseby STI.
Over the past three years, we turned our focus on the utility
market, which resulted in a lot of work with very little return on
investment.
There are approximately seven major suppliers of CEMS in the
United States. This represents a variable of approximately $100
million a year industry which is very little known. With the delays
of the enhanced monitoring rules and other environmental regula-
tions, there is just not enough business left to keep these compa-
nies afloat.
Every CEM which we sell makes a difference to our bottom line.
The effects of a paper mill closing down are felt not just by the di-
rect employees of that facility, but also by families all over the
United States.
Recently, Graseby STI has been exploring the possibilities in the
Asian countries. What we discovered is that the rest of the world
is beginning to follow the environmental standards that were set
in the United States. This means that the environmental issues
which are put forth in situations such as the one presented before
you today can and will be stepping stones to the way future issues
of similar nature are addressed.
The importance of continuing to improve on the control of our en-
vironment is vital to our future and therefore should be pursued.
Environmental regulations need to be implemented when nec-
essary. However, they do not have to be so strenuous on the facility
that it will cause them to virtually close down.
The Ketchikan Pulp Company, to my company's knowledge, has
always been an environmentally aware company and has taken
measures to meet or exceed the environmental regulations govern-
ing their facility. I believe that the request for an extension of the
Tongass timber contract by KPC should be granted for the 15-year
period in order to allow them the financial resources necessary to
bring their mill up to the environmental standards which we as a
nation have set and continue to set. I further believe that in doing
so, our government will make a statement to the rest of the world
that they are willing to work with industry to meet the future envi-
ronmental goals.
46
Thank you, Mr. Chairman.
The Chairman. Thank you, David. If you have any connections,
I have a gentleman from Arkansas that'll help us out. I will tell
you that right now, because he is the one that is always saying he
is going to veto things. It makes it very, very — an unlevel playing
field.
Scott, in your testimony now your investment — ^you have been
asked to be — you were hired by Ketchikan Pulp. How many years
do you think — 15 years, is that unusual for an amortization of a
loan such as $200 million? Is that short, long or in between?
Mr. ESTEY. Again, it depends on where and how the funds have
been invested, but it is not atypical at all. As I mentioned, I think,
15 to 25 years, given the general description that I have of this
project, is more than reasonable in terms of expectations of time re-
quired to not only repay, pay back, recoup investment, but also to
earn an adequate return on that investment.
The Chairman. That is — does that gear in the rates of borrowed
money or is it usually borrowed at a fixed rate?
Mr. ESTEY. Excuse me?
The Chairman. Do they borrow at a fixed rate for that $200 mil-
lion so that's geared into it so they have to pay the interest?
Mr. ESTEY. Correct, yes, including your total cost of capital
whether it is debt or equity.
The Chairman. Is it usual for a pulp company to seek long-term
contracts for investments?
Mr. ESTEY. I would say it is usual — from the standpoint of fiber
supplies, this is a particularly, you know, fairly unusual case from
the standpoint that it is government lands that all or most of the
timber would be coming off of. Fiber supply is a critical issue when
companies are attempting to finance large projects, and it is typical
that they need to show or prove security of that resource.
The Chairman. How many new pulp mills are you aware that
have been built in the last ten years?
Mr. EsTEY. Pulp mills built? If we are talking about wood-based
Kraft pulp mills, none in the United States.
The Chairman. Most of our fiber — if these pulp mills continue to
shut down it goes to David's company, they continue to shut down,
most of our paper and fiber products will be coming from overseas
such as our aut
Mr. ESTEY. I missed the first part of the question.
The Chairman. I am saying if there is no new plants being built.
Mr. ESTEY. Correct.
The Chairman. There are plants being shut down, according to
David, is that correct?
Mr. ROETS. That is correct.
The Chairman. If we continue to shut those plants down, it
means we become more dependent on our overseas fiber.
Mr. EsTEY. That is correct. And I think what you are seeing is
large pulp mills being built in places like Indonesia. Asia Pacific
in general is a huge growth region, and they are beginning to be-
come a dominant player in the world industry.
The Chairman. Are they meeting the same standards required of
Ketchikan Pulp?
47
Mr. ESTEY. I cannot speak in specifics on that, but generally no,
the environmental restrictions and conditions they need to meet
are not as stringent as in the U.S.
The Chairman. I see David shaking his head. Is that correct?
Mr. ROETS. That is correct. They are about 15 years behind us
on environmental issues.
The Chairman. So what we are saying in reality, because we
have become more dependent, is we can pollute the rest of the
world.
Mr. RoETS. That is correct.
The Chairman. But we can't improve upon our own, because my
understanding is the mill is looking to put in over $200 million to
upgrade the mill to make it viable. And $200 million at, let us say
ten percent interest, that is a large interest payment. And yet
we're backing this industry — for the oil industry, everybody sup-
ports the oil industry, too, you know. They want to send it overseas
where we have to be dependent upon it and they can pollute every-
thing out there before we can have the requirements here. But we
know what will happen, just — maybe tell them we do things about
that.
David, how many plants do you serve?
Mr. ROETS. We serve about 365 mills.
The Chairman. Where are they mostly?
Mr. RoETS. Most of them are in the Southeast.
The Chairman. Southeast.
Mr. RoETS. The majority of the mills, probably 70 percent, are
in the Southeast part of the United States. There is probably — the
remaining portion, basically, is on the West Coast, along the West
Coast, and then the remaining mill in Alaska.
The Chairman. One thing I just think I should ask you, both of
you men. When I go into Arkansas and Georgia and Alabama, why
do I smell that mill 24 miles away but Ketchikan I can't smell it
down the street?
Mr. RoETS. Because they haven't made all the environmental
changes yet that Ketchikan has made. Ketchikan is a very environ-
mentally aware mill. They strive very hard to keep a clean environ-
ment and not be emitting everything that some of the other mills
typically emit. I mean, most of these mills are meeting the stand-
ards that are set forth for their State.
The Chairman. For their State.
Mr. ROETS. For their State. State of limitations
The Chairman. And our mill is meeting the standards of the
State and the Federal Government, is that correct?
Mr. ROETS. That is correct, sir.
The Chairman. And that means really this mill up here — to
judge this mill compared to any other mill, like I have heard testi-
mony about the mills in Canada, are much better. How would you
rate the Ketchikan mill?
Mr. RoETS. I would say the Ketchikan mill is far more advanced
environmentally than the mills in Canada. The regulations in Can-
ada are not as stringent as the regulations in the United States.
The Chairman. What would — Scott, you are a lender now?
Mr. ESTEY. I am not a lender, actually. We consult.
The Chairman. I am putting the lender's hat on your head.
48
Mr. ESTEY. All right.
The Chairman. It makes you feel good and now you are lending
man too, but is there any way at all for — you heard Mr. Miller talk
about the city being involved, the State being involved, is there any
way as an investor you would invest without an extension of con-
tract?
Mr. ESTEY. I guess no. To me the security of that resource is val-
uable to the long-term viability of the mill, and therefore the ability
to pay back loans.
The Chairman. If you were advising the State permanent fund,
for instance, you wouldn't advise to take that any of that money.
In fact, there would probably be a lawsuit. I am surprised ADA got
away with it. By a stockholder in the State fund, saying this is not
a viable option here because there is no collateral.
Mr. ESTEY. Right, I would advise no, essentially since there is no
other source of fiber.
The Chairman. OK. Anything you want to add?
Mr. ROETS. No.
The Chairman. I want to thank both of you for waiting very pa-
tiently. I do appreciate it. These things take a long time, but it is
very, very valuable. Thank you, David. Thank you, Scott.
Next we have panel four. Take your seats and I will be back in
a minute. We have Robert, Wayne, Gershon, Mary and Brian. Rob-
ert, you are up first.
STATEMENT OF ROBERT LINDEKUGEL, SOUTHEAST ALASKA
CONSERVATION COUNCIL, JUNEAU, ALASKA
Mr. Lindekugel. Thank you. My name is Buck Lindekugel and
I am the Conservation Director for the Southeast Alaska Conserva-
tion Council. Dave Katz, our Forest Plan Coordinator, is behind me
to answer some — help answer some questions.
I fell in love with Southeast Alaska when I was a commercial
fisherman in 1980. I have been a grassroots conservation lawyer
working on Tongass issues since 1988.
SEACC strongly opposes this latest assault on the 1990 Tongass
Timber Reform Act. Since the fall of '94, and counting this month's
scheduled hearings, the Alaska delegation has held an incredible
14 hearings and pushed 11 separate pieces of legislation on the
Tongass, all of them aimed at rolling back the Tongass Timber Re-
form Act and other conservation laws.
Chairman Young, your footprints are over the bill to give away
the Tongass and begin dismantling our national forest. You also
want to hand over 200,000 acres of the Tongass to five new native
corporations.
The Chairman. Robert, I am going to stop you there. Now we are
talking about extension of the contract. Let us talk about extension
of the contract. This is not about the Landless people or anything
else but the extension of the contract. If you don't want to stick to
that script, I want to take questions.
Mr. Lindekugel. Well, sir, you know, I — if I may, sir, I respect-
fully disagree. Earlier in your statement you mentioned that
The Chairman. We never talked about the Landless.
Mr. Lindekugel. No, you didn't talk about the Lan
The Chairman. And that's what you
49
Mr. LiNDEKUGEL. You talked about
The Chairman. This bill — well, we'll leave it at that. Just con-
tinue, but you leave the Landless out. That is a separate piece of
legislation. Is that agreed?
Mr. LiNDEKUGEL. I will go on, sir. This KPC extension bill is one
of the most outrageous pieces of special interest, corporate welfare
legislation we have ever seen and one of the most damaging pieces
of legislation ever proposed on the Tongass. This bill embodies the
attitudes and arrogance of the land skinners and robber barons
that Teddy Roosevelt fought so well. This bill is also opposed by
many Southeast Alaskans.
I have got some resolutions from different organizations, commu-
nities and businesses opposing this bill that I would like to intro-
duce into the record.
[The information may be found at end of hearing.]
Mr. LiNDEKUGEL. You claim that Governor Knowles supports this
bill, but the Governor is not supporting this bill. This bill does not
even come close to fulfilling the conditions the Governor laid down
for supporting a KPC contract extension.
Your bill would reward a major corporate polluter for violating
pollution laws. KPC has a long history of violating laws, clean air,
clean water, labor, health, antitrust, you name it, they violate it.
They've pocketed years of profits from breaking the law and now
they want the American people to pay to clean up their act.
Your bill would hammer away at the Tongass. It mandates 4.4
billion board feet of new KPC clearcuts or a line of football-field-
sized clearcuts from Juneau, Alaska, to Washington, D.C., and
back. This includes such places like Cleveland Peninsula, Honker
Divide, Port Houghton, Ushk Bay. This cutting would occur regard-
less of the impacts to hunting, fishing, tourism, subsistence and
other resources.
This bill would place Louisiana Pacific's corporate needs above
the needs of any other forest user; it will give L-P rights that it
never had before; and, threaten jobs in other Tongass-dependent
industries.
Your bill would guarantee KPC 23 years of timber worth nearly
$1-174 billion and price that timber at a fraction of its real value.
It would hamstring the Forest Service's ability to protect the public
interest by removing its authority to terminate this new contract
because of environmental damage, and the contract would override
the Tongass planning process.
You said this bill is necessary to allow KPC to obtain financing,
clean up its pulp mill. But after KPC gets the contract, your bill
allows them to walk away from this albatross and replace it with
a facility that provides fewer jobs.
You said that KPC needs this contract because the Forest Service
hasn't given them enough timber. The Forest Service has released
plenty of timber to KPC. You have blamed the Tongass Timber Re-
form Act for the volatile business cycles that have driven timber
employment down since 1990. What you haven't said is that L-P
lost $22 million on pulp in the first quarter of 1996. L-P's pulp divi-
sion lost money three out of the last four years. L-P's real problem
is very weak international pulp markets. That is what L-P told its
50
shareholders. That is why L-P wants a new deal, and that is why
it is holding Ketchikan hostage.
You said the Ketchikan region is economically dependent on KPC
and timber, but this isn't the 1950's. Today K^PC directly provides
just three percent of the region's jobs and less than eight percent
of Ketchikan's jobs. Ketchikan is far less dependent on this pulp
mill than Sitka was on the APC mill before it closed. Yet today,
Sitka is doing fine.
Southeast Alaska needs a new deal and a new direction, not L-
P. Our region needs a modern, high-value added timber industry
that cuts less but produces more jobs for Southeast Alaska. Steve
Seley's newly proposed remanufacturing plant and dry kiln on
Prince of Wales Island is one of the kinds of businesses that we
would like to see thrive.
Finally, your bill is a misguided and heavy-handed government
subsidized program. It deprives us of one of this country's greatest
strengths, the free enterprise system. Instead of proposing policies
that would bring the Tongass into the 21st century, you want to
take us back to the 1950's. We urge you to stop this bill right here
and right now.
I have finished my statement.
[Statement of Robert Lindekugel may be found at end of hear-
ing.]
The Chairman. Wayne, you are up.
STATEMENT OF WAYNE WEIHING, TONGASS CONSERVATION
SOCIETY, KETCHIKAN, ALASKA
Mr. Weihing. Thank you. My name is Wayne Weihing. I am
President of the Tongass Conservation Society of Ketchikan. I am
a 28-year resident of Alaska and a former 21-year employee of
Ketchikan Pulp Company. During my employment at Ketchikan
Pulp Company, I was union representative — union president rep-
resenting approximately 300 members.
On Monday, July 1, Ketchikan Gateway Borough Assembly
passed a motion to earmark $1 million from its Southeast Alaska
Economic Disaster Fund to be used for efforts to extend Ketchikan
Pulp Company's timber contract for 15 years and to influence the
TLMP process and to send people to testify at hearings here in
D.C. to support Ketchikan Pulp Company and to allow the radical
so-called wise use movement in Ketchikan a free hand to use what-
ever tactics necessary to obtain those goals.
It is amazing to me to see those tax dollars from this economic
fund now ricocheting back to Congress to be used to support a cor-
poration, Ketchikan Pulp Company. Ketchikan Pulp Company
wants a contract extension. Meanwhile, the pulp workers at the
pulp mill have not had a labor agreement with a contract since
1984, that is 12 years ago, and are currently working for less
wages than they made in the spring of 1984.
Once again, Ketchikan Pulp Company is threatening to shut
down their mill if they don't get their way. There have been a se-
ries of threats — of shutting down and leaving Ketchikan high and
dry from KPC over the last 20 years. I really feel bad for the cur-
rent employees to have that same threat held over their heads now
as in years past. I will give you some examples.
51
In 1973, following the first attempts to implement basic environ-
mental impact statement requirements, C.L. Cloudy of Alaska
Loggers Association warned that the requirements would cause
complete pulp mill shutdowns and shutdowns of the remaining
sawmills in Southeastern Alaska. That was Ketchikan Daily News,
April 19, 1973.
On May 4, 1976 the Ketchikan Daily News headline screamed
KPC will close July 1, 1977. But as the paper explained the next
day, the announcement wasn't news, it was part of a publicity
stunt. The paper then criticized the pulp mill for issuing false
alarms one week before EPA pollution hearings and shortly before
employee negotiations were due to start. One editorial concluded
Ketchikan Pulp Company is crying wolf and playing with the faith
of thousands of people. God help it. That was Ketchikan Daily
News, May 5, 1976.
During the 1983 EPA hearings, officials from KPC said the cost
of installing water pollution control equipment would force them to
shut down. KPC said it would consider both legal recourse and mill
closure if the variance requests were denied. That was Southeast-
ern Log, December 1983.
In 1984, KPC's comptroller, later president Martin Pihl, claimed
that if Forest Service didn't reduce the price of timber and allow
larger clearcuts, we are all going to pack up and leave. That was
reported in the Juneau Empire,March 29, 1984.
In 1992, EPA proposed tighter pollution controls for KPC's pulp
mill. KPC's president, Martin Pihl, claimed the new pollution con-
trols would seriously threaten the survival of the mill or any pulp
mill anywhere. That is Ketchikan Daily News, April 17, '92.
On March 12, 1996, Ketchikan Daily News reported KPC would
close its sawmills in Ketchikan and Metlakatla from late March
until after Memorial Day because of a shortage of timber. In the
same article, the Ketchikan area forest supervisor expressed his
personal opinion that the current shutdown had more to do with
market conditions than supply of logs.
Ketchikan Pulp Company has a track record of not being a good
corporate citizen. Their latest effort and threats to get a 15-year ex-
tension or else they will shut down and leave town, this is the lat-
est in a long line of abusive actions on KPC's part. And the exten-
sion of KPC's monopoly would continue the chronic environmental
problems in my home area and prohibit any real possibility of hav-
ing a viable secondary processing and manufacturing of finished
wood products, which could be sustainable over the long run. It
would also result in the heavy-handed clearcutting of important
hunting and fishing areas that I depend on, like the Cleveland Pe-
ninsula.
In closing, I strongly oppose your legislation.
The Chairman. Thank you, Wayne, for keeping within the five
minutes. Mr. Cohen, you are next.
STATEMENT OF GERSHON COHEN, ALASKA CLEAN WATER
ALLLANCE, HAINES, ALASKA
Mr. Cohen. My name is Gershon Cohen. I am the Executive Di-
rector of the Alaska Clean Water Alliance. The Alaska Clean Water
Alliance is a statewide nonprofit organization dedicated to the con-
52
servation of Alaska's waters. ACWA works to ensure that activities
in Alaska's rivers, lakes, estuaries, and marine waters protect pub-
lic health, support the use of the ecosystem for food harvesting, and
foster environmental and economic stability. ACWA tracks NPDES
permits in Alaska to assure that discharges comply with State,
Federal, and legal requirements and works to build alliances with
fishing, subsistence, tourism, public health, and native groups
across the State.
Sir, you have my written testimony, and I will provide that for
the record. I would like to instead use my time to respond to com-
ments that were made by earlier testifiers.
Mr. Chairman, I am not an attorney and I wouldn't want to at
this time
The Chairman. May I say that is probably the best thing you
have got going for you.
Mr. Cohen. Thank you, sir. I wouldn't want to testify as to what
permit compliance means, but I am looking at the four bankers'
boxes here of permits. And we have been told that Ketchikan Pulp
Company has always operated in compliance with their permits. I
am not sure how that statement can be made. There are many no-
tices of violation, fines, consent decrees that they are operating
under that in plain language, sir, to a non-attorney would say that
they have not indeed operated within their permits.
The Chairman. Could I ask you a question?
Mr. Cohen. Yes, sir.
The Chairman. Within the permits limits or in fact as a change
took place, how much was the results of Federal regulations and
other stipulations put into place that they were to be in compli-
ance?
Mr. Cohen. Sir, do you mean changes in law after the
The Chairman. As a result of regulation.
Mr. Cohen. Well, in the four years that I have been working for
ACWA, the water quality standards for the State have in fact, in
my estimation, become less tight, not more tight.
The Chairman. Not State, Federal.
Mr. Cohen. Well, sir, there have been changes to the Clean
Water Act since that permit came into being for the mill. And they
are in violation now of Clean Water Act requirements that every-
one else in the country is having to follow.
The Chairman. What type of mill — can I ask you this now? If we
did a testimony — have you been around any pulp mills?
Mr. Cohen. Pardon me?
The Chairman. Have you been around any pulp mills?
Mr Cohen. Yes.
The Chairman. Now if this mill compared to the one in Georgia,
of the many that they have, compared to that, do they — is it clean-
er or dirtier?
Mr. Cohen. I couldn't answer that.
The Chairman. I think we ought to find that out. Go ahead.
Mr. Cohen. To directly
The Chairman. Go on with your testimony now, because you are
supposed to be on open time. Go ahead.
Mr. Cohen. OK. To directly address some of those comments
made earlier, sir, with respect to Superfund, it is true that KPC
53
is not a Superfund facility at this time. However, the survey that
was done in 1991 showed that they had a high enough ranking to
be considered for Superfund. At the point when the numerical
ranking is completed, it becomes a question that is brought to a
committee that brings in other factors, some of them political, as
to whether or not a site will actually be listed as a Superfund site.
With respect to the talks of Substance Control Act, there were
two PCB inspections in 1988 and in 1993. EPA complaints were is-
sued as a result of each inspection.
With regard to the Resource Conservation Recovery Act, there
have been four State inspections in the past ten years, in '88, '91,
'93 and '94. All have documented numerous violations.
With respect to the State solid waste regulations, there have
been four State inspections in '87, '90, '95 and '96. Three resulted
in notices of violations.
According to the Rivers and Harbors Act, in 1993 the Army
Corps of Engineers issued a notice of noncompliance. They found
that KPC knowingly violated the permit conditions by significantly
exceeding authorized dredge amounts and failing to submit water
quality reports.
With regards to State water quality standards, they have been
exceeded at least 94 times in the last year for color, chronic tox-
icity, manganese, copper, sulphur, residual chlorine and oil and
grease. For the Clean Water Act, in 1994 there were unpermitted
discharges of pollutants that occurred 19 times, totaling over a mil-
lion gallons. Requirements for pH, fecal coliform, biological oxygen
demand and total suspended solids are exceeded regularly. Ward
Cove is on the State's list of impaired water bodies for accumula-
tion of sediment, dissolved oxygen violations, color violations and
elevated levels of toxic compounds.
With regards to the Clean Air Act, there was a statement made
in the hearing in Juneau a month ago; Senator Murkowski asked
Mr. Sowyn, the CEO for Louisiana Pacific, to try to identify the
contents of a vapor from some photographs, not unlike this photo-
graph here, sir, that were taken of the mill site. And his reply was
that the air emissions were steam. Well, in 1995 Ketchikan Pulp
Company admitted emitting 25 million pounds of air pollutants.
This included the following: sulfur dioxide, 8,100,000 pounds; sul-
furic acid, 120,800 pounds; sulfur trioxide, 210,000 pounds; total re-
duced sulfur, 9 million pounds; formaldehyde, 11,000 pounds; hy-
drochloric acid, 569,000 pounds; chloroform, 68,000 pounds.
The Chairman. Mr. Cohen.
Mr. Cohen. And I could go on, sir.
The Chairman. That's already in the record as part of your testi-
mony. I've read it.
Mr. Cohen. OK.
The Chairman. You are out of time.
Mr. Cohen. Can I make a closing statement, sir?
The Chairman. You can make a closing statement.
Mr. Cohen. Thank you. I would like to say that ACWA does not
work, sir, on timber allocation issues, and we would defer to other
individuals or organizations on such matters. However, we could
not begin to consider supporting extensions to the timber contract
unless four conditions were met. Number one, suspension of KPC's
54
opposition to the 1994 EPA permit; two, a complete cessation of
KPC's discharge of toxic materials to the waters of Southeast Alas-
ka; three, the timely completion and implementation of a site reme-
diation plan for Ward Cove; and four, an immediate initiation of
the refitting of the facility to allow the company to operate in com-
pliance with all State and Federal pollution laws.
Thank you for this opportunity.
[Statement of Gershon Cohen may be found at end of hearing.]
The Chairman. Would you — ^you are the one that first offered a
suggestion on how to solve the problem. If we met all those require-
ments, then you would support it?
Mr. Cohen. Well, I would consider supporting, sir. I would have
to see.
The Chairman. You know, that is sort of like, you know, kind of
walking to the door. The truth of the matter is you would have no
problem with the allegation if we met all those requirements. You
shouldn't have.
Mr. Cohen. Well, sir, that is true. If they were ready to meet all
water quality standards. State and Federal, at the end of pipe
The Chairman. So what if we wrote into this law all the stand-
ards and gave them 15 years so they could borrow the money to
doit?
Mr. Cohen. Well, unfortunately, sir, what I have heard so far is
that
The Chairman. I am not saying what you have heard. I am say-
ing we have the authority to do that. We have the capability of
doing that.
Mr. Cohen. Sir, would they be meeting these standards imme-
diately or would they be meeting these standards three years down
the line, five years down the line, ten years down the line? Would
they be able to get consent decrees that would allow them to
The Chairman. I would grant them three years. You can't do it
overnight. It would take a tremendous amount of money. It would
take a tremendous amount of time. You just don't do it all over-
night. You know, it took them awhile to get that plant
Mr. Cohen. Yes.
The Chairman, [continuing] — if you check the record. So I am
just curious. You would support it, then, if we had met your re-
quirements for the extension of the contract? I am going to ask the
rest of them the same question, you know, because that solves the
environmental problem, does it not?
Mr. Cohen. Well, yes, sir. Please keep in mind that my — that
number two is a complete cessation of KPC's discharge of toxic ma-
terials to the waters of Southeast Alaska. And we don't mean three
years in the future or we don't mean with consent decrees that will
allow it to continue.
The Chairman. Oh, I understand.
Mr. Cohen. OK.
The Chairman. OK.
Mr. Cohen. If they stop polluting the water, we would — ^you
know, that is our concern, sir, is pollution of the waters of the
State.
The Chairman. Mary, you are up.
55
STATEMENT OF MARY MUNSON, PUBLIC LANDS ASSOCIATE,
DEFENDERS OF WILDLIFE, WASHINGTON, D.C.
Ms. MuNSON. Thank you. My name is Mary Munson, Public
Lands Associate for Defenders of Wildlife. We are a national orga-
nization with over 150,000 members nationwide. I thank you for
the opportunity to comment, and in the interest of time I will sum-
marize my comments and ask that my full testimony be
The Chairman. Without objection.
[Statement of Mary Munson may be found at end of hearing.]
Ms. Munson. The Tongass is owned not only by Alaskans but by
all Americans, and the issues involved with Ketchikan Pulp Com-
pany's performance are of national significance and not simply pa-
rochial economic or jobs issues. The Tongass is one of the world's
largest intact temperate rainforest, home to over 300 wildlife spe-
cies, many of which depend on old-growth forests. All Americans
have an interest in ensuring that present and future generations
will benefit from recreation, beauty, and resources there. Congress
has a duty to oversee its management by allowing only sustainable
logging consistent with habitat protection. Extending the KPC con-
tract on the terms of H.R. 3659 would be a violation of that duty.
The National Forest Management Act requires that the Forest
Service provide for the diversity of plant and animal communities.
The Tongass Land Management Plan, which is now undergoing re-
vision, is an attempt to create a blueprint for ensuring that logging
activities in the Tongass are consistent with those legal require-
ments.
Activities taking place under the KPC contract, including the an-
nual volume of timber to be supplied, should be covered by a forest
plan. So why isn't this proposed contract renewal taking place
within the context of the TLMP provision? This bill would ride
roughshod over the TLMP process and force the Forest Service to
provide a high volume of trees regardless of the environmental,
economic, recreational, social, and ecological costs.
We believe the Forest Service simply cannot guarantee KPC the
contractual volume, provide timber for independent contractors and
still meet the requirements of NFMA to maintain viable popu-
lations. Significantly the definition of viable populations means
only that there are enough individuals for that population to exist.
It does not mean there will be enough individuals that will be left
for subsistence, hunting, viewing, and other types of uses on which
Alaskans and the rest of the country depend. As long as the KPC
contract is in existence, timber will be the first priority and wild-
life, along with the other forest resources, will take a back seat.
The area yielding much of KPC's supply is the Prince of Wales
Island. One of the last remaining unprotected wildlife habitats on
the island is the region of Honker Divide. Pressure to fulfill the
high-volume requirements of the extended contract would surely
open these areas up to KPC logging. This would require building
many roads into it to reach the denser, more economically worth-
while stands. Examples of wildlife whose viability could be affected
include the Alexander Archipelago wolf, river otter, Franklin's
spruce grouse, flying squirrel, and Vancouver Canada goose. I could
go on.
56
The wolf provides a good example of how the contract threatens
viability. Although hunting and trapping occurs in the Tongass,
logging and road building provide major threats. The wolf survives
by eating deer, which in turn depend on the diverse plant commu-
nity of old-growth forests. Stands with large trees are critical in
hard winters because the crowns intercept snow, making travel and
feeding easier. Clearcuts not only hinder deer movement in the
winter, but also eventually destroys the forage because even aged
trees grow completely shading the forest floor. It takes 200 to 250
years for old-growth forests to reestablish themselves, and in the
interim the deer slowly disappear, and so does its predator, the
wolf.
Defenders has sympathy for anyone whose livelihood would be
affected by the non-extension of the KPC contract, but there are
thousands of employers throughout the country which also depend
on timber supplies that don't get this special deal. And many of
these employers are dependent upon resources that don't have a
fraction of the ecological importance and national significance that
the Tongass has. As discussed by the panelists, there are alter-
natives which would be much less resource-intensive and run by
companies without abysmal records of pollution and contract viola-
tions.
The argument that the company needs this contract in order to
make necessary improvements to comply with environmental laws
is outrageous. KPC has had years to make the necessary changes
and declined to do so. So for this they shouldn't be rewarded by a
bail-out, as represented by this bill.
Logging in one of the ifVmerican people's most important and val-
uable forests is a privilege, and it is important that it be done
through the accepted forest planning and management process.
The KPC contract must be considered as part of TLMP, not as a
separate initiative which ignores the scientific analysis, ecological
effects, and years of public input. For that reason, as well as the
incalculable adverse effects on wildlife and wildlife habitat, we
strongly oppose H.R. 3659.
Thank you.
The Chairman. Brian, you are up.
STATEMENT OF BRIAN O'DONNELL, EXECUTIVE DIRECTOR,
ALASKA WILDERNESS LEAGUE, WASHINGTON, D.C.
Mr. O'DONNELL. Hello, my name is Brian O'Donnell. I am the
Executive Director of the Alaska Wilderness League. Mr. Chair-
man, thank you for the opportunity to share the views of the Alas-
ka Wilderness League regarding the proposed extension of the con-
tract between Ketchikan Pulp Company and the U.S. Forest Serv-
ice.
The Alaska Wilderness League is a nonprofit organization found-
ed in 1993 to further the protection of Alaska's incomparable natu-
ral endowment. One of our primary concerns is the sustainable fu-
ture of Alaska's rainforest.
The current legislation is of great concern to the Alaska Wilder-
ness League. We believe that H.R. 3659 will cause irreparable
damage to the wilderness values of the Tongass National Forest.
Congress should not only refuse to grant a 15-year contract exten-
57
sion, it should seriously consider immediately terminating the cur-
rent 50-year contract.
The future of the Tongass National Forest is of national impor-
tance. All Americans have a stake in its sound management. This
national treasure, established in 1907 by President Teddy Roo-
sevelt, contains some of the last expanses of pristine temperate
rainforest in North America. As you know, the Tongass is home to
the world's largest concentration of grizzly bears, bald eagles, and
Sitka black-tailed deer. The Tongass is our nation's largest, wettest
and wildest national forest.
As some have stated here today, KPC has demonstrated little re-
spect for the environment in Southeast Alaska. The Environmental
Protection Agency's 1991 and 1992 Toxic Release Inventory Report
ranked the Ketchikan Pulp mill as the number one toxic water pol-
luter in the entire Pacific Northwest. KPC has chronically violated
State and Federal environmental laws, and is violating these laws
today.
H.R. 3659 is of great concern to every American taxpayer. Over
the past few decades, Tongass clearcutting has cost the American
taxpayers hundreds of millions of dollars in subsidies. Extending
KPC's monopoly contract for 15 years could dramatically increase
the amount of taxpayer money being spent to subsidize the
clearcutting of this national treasure.
KPC's dismal environmental record and the cost to the American
taxpayers are reasons enough to oppose H.R. 3659, however, the
Alaska Wilderness League is most deeply concerned with the per-
manent loss of some magnificent, truly wild areas that would be
sacrificed by fulfilling the existing KPC contract and by the pos-
sible extension by virtue of this bill. Several of these unprotected
areas were designated as wilderness in the yersion of the Tongass
Timber Reform Act which passed the House of Representatives in
1989. These areas will be clearcut either during the remainder of
the KPC 50-year contract or during the proposed 15-year extension.
Ketchikan Pulp Company's bulldozers and chainsaws directly
threaten the following areas. These special places deserve to be
permanently protected. They include the Cleveland Peninsula,
which supports highly productive populations of deer, brown bear,
mountain goats and other wildlife. It is a favorite area for Ketch-
ikan hunters and recreational users.
East Kuiu, an area important to wilderness tourism operators as
well as the communities of Kake, Point Baker, and Port Protection.
Honker Divide, this critical wildlife area is the largest block of
old-growth left on North Prince of Wales Island. Its canoe route of-
fers spectacular recreational opportunities and is important to
hunting and sport fishermen.
Port Houghton, this bay located on the mainland north of Peters-
burg is of great importance to local commercial fishermen. One of
its drainages, Sanborn Creek, produces large amounts of pink
salmon. The undeveloped character of this area is essential to the
livelihoods of local tourism operators.
Ushk Bay, Deep Bay and Poison Cove, these bays contain impor-
tant brown bear habitat and are visible to ferry travelers in Peril
Strait. They are important to local hunters and recreational users.
58
Chicken Creek, this watershed near Hoonah is highly visible to
cruise ship passengers and wilderness tourists who watch whales
off Point Adolphus. It is also important to local subsistence users.
And finally, Upper Tenakee Inlet, this area is important to local
subsistence hunters as well as kayakers and other recreational
users. It is also important brown bear habitat.
The recreation, subsistence, wildlife, and wilderness values of
these areas far outweigh their value as a short-lived source of pulp
for KPC. AWL's Honorary Chairman, Former President Jimmy
Carter, recently said this is a critical time for Alaska's wild lands
and the American people must reaffirm our commitment to their
protection.
With this firmly in mind, AWL strongly opposes H.R. 3659.
Thank you.
The Chairman. Brian, in your testimony you mentioned Jimmy
Carter. Just out of curiosity, Mary, have you been to the Tongass?
Ms. MUNSON. Yes, I have.
The Chairman. How long did you spend there?
Ms. MuNSON. I spent several days there. I was
The Chairman. Days. When?
Ms. Munson. Well, actually it was a couple weeks.
The Chairman. When?
Ms. Munson. Eight years ago.
The Chairman. Eight years ago.
Ms. Munson. Yes, it was being clear cut then.
The Chairman. Do you-
Ms. Munson. I was taken by the Forest Service out
The Chairman. Have you read the TLMP proposal?
Ms. Munson. Yes, I have — well, I have — it is quite thick, but I
looked through it.
The Chairman. Have you read it, though? Both times I heard
about Honker Divide. Do you know that is in the TLMP proposal?
Does that mean that you are going to file lawsuits against the For-
est Service under TLMP?
Ms. Munson. No, the TLMP — that is just a proposal right now.
It is not
The Chairman. Under TLMP, that is part of the timber base
which they are recommending.
Ms. Munson. Right, recommending. We are still able to submit
our comments about it. That is
The Chairman. If they make the decision, what are you going to
do?
Ms. Munson. Well, when they make the decision, hopefully they
will incorporate our comments in it.
The Chairman. Oh, comments?
Ms. Munson. Yes, our comments will suggest-
The Chairman. Comments don't mean a thing because
Ms. Munson. Comments can make changes
The Chairman, [continuing] — they could cut that — if they make
a decision to cut the area, what are you going to do?
Ms. Munson. Well, hopefully we are going to be asking in our
comments for them to change the preferred alternative, so it is
The Chairman. If they haven't changed it and they put it in, now
what are you going to do?
59
Ms. MUNSON. Well, then I would deal with it if it happens.
The Chairman. How would you deal with it? Just like you dealt
with Poison Cove, Brian?
Mr. O'DONNELL. I am sorry?
The Chairman. Just like you dealt with Poison Cove?
Mr. O'DoNNELL. We have not — our organization has not filed any
lawsuits on the Tongass.
The Chairman. But someone has filed a lawsuit on the Poison
Cove.
Mr. O'DoNNELL. That is another organization.
The Chairman. That organization — how many organizations do
you think would file lawsuits in Southeast Alaska?
Mr. O'DONNELL. I can only speak for our organization, and we
haven't filed any lawsuits.
The Chairman. Poison Cove has already had a lawsuit filed last
week against them.
Mr. O'DONNELL. But not by our organization.
The Chairman. OK, but what if your organization did file that
lawsuit
■ Mr. LiNDEKUGEL. Mr. Chairman.
The Chairman. Yes.
Mr. LiNDEKUGEL. For the record, that lawsuit was filed by resi-
dents from Sitka.
The Chairman. Oh, the — then it was organized.
Mr. LiNDEKUGEL. Friends of
The Chairman. Robert, don't kid me. I know who it's filed by, but
it's filed. That means that it can go forward. What I am concerned
with is that every time the Forest Service comes up with a pro-
posal. Defenders of Wildlife, Wilderness — Brian, you have been to
Tongass, haven't you?
Mr. O'DONNELL. Yes, I have.
The Chairman. Do you live there?
Mr. O'DONNELL. No, I don't.
The Chairman. When did you go there?
Mr. O'DONNELL. I was there in August.
The Chairman. August, last August?
Mr. O'DONNELL. Last August.
The Chairman. For how long?
Mr. O'DONNELL. For about a week or so.
The Chairman. A week or so. OK, just — I like to find out if these
expert witnesses have been there or not. One thing about it, Rob-
ert, you said the governor doesn't support this bill.
Mr. LiNDEKUGEL. Correct.
The Chairman. He doesn't even support the extension?
Mr. LiNDEKUGEL. I didn't say that.
The Chairman. Oh, well, you said he didn't
Mr. LiNDEKUGEL. I said he
The Chairman. It says here I have — it says I have sent a letter
to Mark Splining CEO Blue Tip System regarding extension of
KPC's contract. I support a contract extension subject to the five
principles offered in this letter and lists all those principles. Would
you support it if you had the Governor support it, if we adopt these
five principles?
Mr. LiNDEKUGEL. I am sorry, sir?
26-689 - 96 - 3
60
The Chairman. Would you support it if we adopt the five prin-
ciples that
Mr. LiNDEKUGEL. No.
The Chairman. You wouldn't?
Mr. LiNDEKUGEL. No.
The Chairman. Now does the Governor support it or not? I have
got to get this in the record, because the Governor has gone to
Ketchikan — wore this little yellow ribbon that said I am supporting
this.
Mr. LiNDEKUGEL. Well, if the Governor is supporting a bill, that
is his job to come and tell you that.
The Chairman. Well, I mean
Mr. LiNDEKUGEL. I don't want to speak
The Chairman. Are you speaking for him?
Mr. LiNDEKUGEL. Certainly not.
The Chairman. Well, you said that the Governor didn't sup-
port
Mr. LiNDEKUGEL. No.
The Chairman. I have that letter signed on July 5 saying he sup-
ports it. It says in fact in line with these principles $700 million
invested in KPC, I believe the sound and reasonable business prin-
ciple is to provide an opportunity to amortize the investment, in-
cluding the extension of contract to protect our area's water re-
gional mills provide. So apparently he does support it. If he doesn't
support it, I would just like to know it and I would like the people
in Ketchikan to know that. So, I guess you're speaking — are you
working for him now?
Mr. LiNDEKUGEL. No, sir. All I can say is that that letter does
not say he supports this bill.
The Chairman. It is as clear — if that is changed, why did he
send it to the President? It says right here I'd support it. It says
the Vice — ^Al Gore, Dan Wicksman, myself — where I got it. I mean,
if he doesn't support it, I just want everybody to know that. I don't
have any further questions. You guys are excused. And this hear-
ing is adjourned.
[Whereupon, at 4:30 p.m., the Subcommittee was adjourned; and
the following was submitted for the record:]
61
104th congress
2d Session
H. R. 3659
To amend the Tongass Timber Reform Act to ensure the prof)er stewardship
of publicly owned assets in the Tongass National Forest in the State
of Alaska, a fair return to the United States for ptiblic timber in
the Tongass, and a proper balance among multiple use interests in
the Tongass to enhance forest health, sustainable harvest, and the gen-
eral economic health and growth in southeast Alaska and the United
States.
IN THE HOUSE OF REPRESENTATIVES
June 13, 1996
Mr. Young of Alaska introduced the following bill; which was referred to the
Committee on Agriculture, and in addition to the Committee on Re-
sources, for a period to be subsequently determined by the Speaker, in
each case for consideration of such provisions as fall within the jurisdic-
tion of the committee concerned
A BILL
To amend the Tongass Timber Reform Act to ensure the
proper stewardship of pubHcly owned assets in the
Tongass National Forest in the State of Alaska, a fair
return to the United States for public timber in the
Tongass, and a proper balance among multiple use inter-
ests in the Tongass to enhance forest health, sustainable
harvest, and the general economic health and growth
in southeast Alaska and the United States.
1 Be it enacted hy the Senate and House of Representa-
2 tives of the United States of America in Congress assembled,
62
2
1 SECTION 1. SHORT TITLE.
2 This Act may be cited as the "Environmental Im-
3 provement Timber Contract Extension Act of 1996".
4 SEC. 2. MODIFICATION OF LONG-TERM CONTRACT RE-
5 CARDING TONGASS NATIONAL FOREST.
6 Title III of the Tongass Timber Reform Act (Public
7 Law 101-626; 104 Stat. 4430) is amended by adding at
8 the end the following new section:
9 "SEC. 302. 1996 CONTRACT MODIFICATIONS.
10 "(a) Definitions. — In this section:
11 "(1) The term 'board feet' means net scribner
12 long-log scale for all sawlogs and all hemlock and
13 spruce utility grade logs.
14 "(2) The term 'contract' means the timber sale
15 contract numbered AlOfs-1042 between the United
16 States and the Ketchikan Pulp Company.
17 "(3) The term 'contracting officer' means the
18 Regional Forester of Region 10 of the United States
19 Forest Service.
20 "(4) The term 'mid-market criteria' means an
21 appraisal that ensures an average timber operator
22 will have a weighted average profit and risk margin
23 of at least 60 percent of normal in a mid-market sit-
24 nation, representative of the most recent 10 years of
25 actual market data.
•HR 3659 IH
63
3
1 "(5) The term 'proportionality' means the pro-
2 portion of high volume stands (stands of 30,000 or
3 more board feet per acre) to low volume stands
4 (stands of 8,000 to 30,000 board feet per acre).
5 "(6) The term 'purchaser' means the Ketchikan
6 Pulp Company.
7 "(b) Findings. — Congress finds the following:
8 "(1) On July 26, 1951, the Forest Service, on
9 behalf of the United States, and the purchaser en-
10 tered into a contract to harvest 8,250,000,000 board
11 feet of timber from the Tongass National Forest in
12 the State of Alaska. While the contract is scheduled
13 to end June 30, 2004, it acknowledges an intention
14 on the part of the Forest Service to supply adequate
15 timber thereafter for permanent operation of the
16 purchaser's facihties on a commercially sound and
17 permanently economical basis. This legislation is
18 necessary to effectuate that intent.
19 "(2) A pulp mill or similar facility is necessary
20 in southeast Alaska to optimize the level of year-
21 round, high-paying jobs in the area, to pro\ide high
22 value added use of low-grade wood and by-product
23 material from sawmilling operations, and to main-
24 tain a stable regional economy.
•HR 3659 ra
64
4
1 "(3) The purchaser plans to make environ-
2 mental and operational improvements to its pulp
3 mill, including conversion to an elementally chlorine
4 free bleaching process, expansion of wastewater
5 treatment facilities, relocation of the existing
6 wastewater outfall, and improvements to chemical
7 recovery and power generation equipment. Total
8 capital expenditures are estimated to be
9 $200,000,000, $25,000,000 of which the purchaser
10 has already invested.
11 "(4) Extension of the contract for 15 years is
12 the minimum reasonable extension period to allow
13 amortization of these environmental improvement
14 and energy efficiency projects.
15 "(5) Ketchikan is the fourth largest city in
16 Alaska. Its economic and job base are extremely de-
17 pendent upon the continuation of the contract, which
18 provides the principal source of year-round employ-
19 ment in the area. The purchaser has stated among
20 its goals and objectives the following:
21 "(A) Continuation of a long-term commit-
22 ment to Ketchikan and southeast Alaska, in-
23 eluding maintenance of a stable Alaskan
24 workforce, utilization of Alaskan contractors.
•HR 3659 IH
65
5
1 vendors, and suppliers to permit those busi-
2 nesses to hire and maintain Alaskan employees.
3 "(B) Participation in the Forest Service's
4 land management planning process with other
5 users so that the process may be completed ex-
6 peditiously with maximum information.
7 "(C) Adherence to sound principles of mul-
8 tiple-use and sustained yield of forest resources
9 providing for the production of sustainable con-
10 tract volumes for the purchaser and the other
11 timber operators in southeast Alaska and the
12 protection and promotion of other forest uses,
13 including tourism, fishing, subsistence, hunting,
14 mining, and recreation.
15 "(D) Protection of air, water, and land, in-
16 eluding fish and wildlife habitat, through com-
17 pliance with applicable Federal, State, and local
18 laws.
19 "(E) Commitment to continue to explore
20 new processes and technology to maximize the
21 use of timber harvested and increase the value
22 of products manufactured in southeast Alaska.
23 "(6) The national interest is served by a policy
24 that accomplishes the proper stewardship of publicly
25 owned assets in the Tongass National Forest, a fair
•HR 3659 IH
66
6
1 return to the United States for public timber in the
2 Tongass National Forest, and a proper balance
3 among multiple use interests in the Tongass Na-
4 tional Forest to enhance forest health, sustainable
5 harvest, and the general economic health and growth
6 in southeast Alaska and the United States in order
7 to improve national economic benefits. The national
8 interest is best achieved by fostering domestic forest
9 product markets and by modifying the terms of the
10 contract pursuant to subsection (c).
11 "(c) Contract Fairness Changes. — The contract
12 is hereby modified as follows:
13 "(1) Extension. — The term of the contract is
14 extended by 15 years from June 30, 2004.
15 "(2) Sale Offering plan. — The contract
16 shall include a plan describing the amount of vol-
17 ume, location, and the schedule by which the pur-
18 chaser shall receive the timber required by para-
19 graph (3) for the remainder of the contract term.
20 The plan shall be coordinated with the Tongass
21 Land Management Plan.
22 "(3) Volume requirements. — The volume of
23 timber required under the contract shall be provided
24 in 5-year increments of 962,500,000 board feet.
•HR 3669 fb
67
7
1 which the purchaser shall be obligated to harvest in
2 an orderly manner, subject to the following:
3 "(A) Until March 1, 1999, when the next
4 5-year increment is provided to the purchaser,
5 the Forest Service shall provide the purchaser
6 with at least 192,500,000 board feet per year
7 of available timber at a date certain each year
8 and shall maintain a supply of timber adequate
9 to insure the purchaser can reasonably harvest
10 192,500,000 board feet each year.
11 "(B) To ensure harvest in an orderly man-
12 ner, the contracting officer shall provide for the
13 construction by the purchaser of roads in por-
14 tions of the 5 -year increment area of timber in
15 advance of the 5 -year operating period by in-
16 eluding such roads in the environmental impact
17 statement prepared for the 5 -year operating pe-
18 riod.
19 "(C) Timber selected for inclusion in the
20 5-year increment shall meet the mid-market cri-
21 teria.
22 "(4) Appraisals and rates. — The contracting
23 officer shall perform appraisals using normal inde-
24 pendent national forest timber sale procedures and
25 designate rates for the increments of timber to be
•HR 3669 IH
68
1 provided. The rates shall not be designated at a level
2 that places the purchaser at a competitive disadvan-
3 tage to a similar enterprise in the Pacific Northwest
4 and those rates shall be the sole charges the pur-
5 chaser shall be required to pay for timber provided.
6 "(5) Measurement of proportionality. —
7 The Forest Service shall measure proportionality
8 using the following criteria:
9 "(A) Measure for groups of all contiguous
10 management areas.
11 "(B) Measure proportionality by acres.
12 "(C) Measure proportionality over the en-
13 tire rotation age.
14 "(6) Conversion or replacement op pulp
15 MILL. — The purchaser may convert or replace, in
16 part or in whole, its pulp mill with a facility the
17 manufactures any other value added product that
18 utilizes pulp logs as a raw material component.
19 "(7) Unilateral termination. — The unilat-
20 eral termination clause of the contract is ehminated.
21 "(8) Subsequent modifications. — ^Any
22 clause in the contract, as modified by this sub-
23 section, may be further modified only by mutual
24 agreement of the Forest Service and the purchaser
•HR 36^9*09
69
9
1 and may be so modified without further Act of Con-
2 gress.
3 "(d) EFP^ECTRTt] Date for Contract Modifica-
4 TION. —
5 "(1) Effective date. — The modifications
6 made by subsection (c) shall take effect 45 days
7 after the date of the enactment of the Environ-
8 mental Improvement Timber Contract Extension Act
9 of 1996.
10 "(2) Ministerial duty to modify the con-
11 tract. — Not later than such effective date, the con-
12 tracting: officer shall revise, as a ministerial function,
13 the text of the contract to conform with the modi-
14 fications made by subsection (c) and implement the
15 modified contract. The contracting officer shall
16 make conforming changes to provisions of the con-
17 tract that were not modified by subsection (c) in
18 order to ensure that the modifications made by such
19 subsection are implemented.
20 "(e) Transition Timber Supply. — Timber volume
21 available or scheduled to be offered to the purchaser under
22 the contract in effect on the day before the date of the
23 enactment of the Environmental Improvement Timber
24 Contract Extension Act of 1996 shall continue to be of-
25 fered and scheduled under the contract as modified by
•HR 3659 ra
70
10
1 subsection (c) along with such additional timber volume
2 as is necessary to satisfy the timber volume requirement
3 of 192,500,000 board feet per year.".
•HR 3659 IH
71
FINAL
STATEMENT OF
JAMES R. LYONS, UNDER SECRETARY
NATURAL RESOURCES AND THE ENVIRONMENT
UNITED STATES DEPARTMENT OF AGRICULTURE
Before the
Committee on Resources
and the
Subcommittee on Resource Conservation, Research and Forestry
Committee on Agriculture
United States House of Representatives
Concerning H.R. 3659, the Ketchikan Pulp Company
Timber Contract Extension Act
July 11, 1996
MR. CHAIRMAN AND MEMBERS OF THE COMMITTEE:
Thank you for the opportunity to present the Administration's views
on H.R. 3659, the Ketchikan Pulp Company Timber Contract Extension
Act. I am accompanied today by: Phil Janik, Regional Forester of
the Alaska Region; Jim Perry, Associate General Counsel of the
Department of Agriculture; Brad Powell, Forest Supervisor of the
Ketchikan Area of the Tongass National Forest; and Fred Walk,
Alaska Region Timber Management Director and contracting officer
for the Ketchikan Pulp Company contract.
The Administration strongly opposes H.R. 3659. The bill would
amend the Tongass Timber Reform Act to unilaterally modify the
provisions of the long-term timber sale contract with Ketchikan
Pulp Company (KPC) and extend it for 15 years until 2019. In so
72
doing, the bill undermines the Secretary of Agriculture's authority
to manage the resources of the Tongass National Forest; restricts
the Secretary's ability to adapt to changing environmental
information; provides special benefits to a private corporation;
and conflicts with certain existing laws, including the National
Forest Management Act and other provisions of the Tongass Timber
Reform Act.
Secretary Glickman has committed the Department to maintaining a
sustainable timber flow to Ketchikan Pulp Company in accordance
with the terms of the existing contract, the Tongass Timber Reform
Act, and other relevant statutes. If the United States decides to
continue a contractual relationship beyond the year 2004 with KPC,
we believe that the appropriate vehicle would be a new contract in
accordance with the Tongass Timber Reform Act -- not the one
provided in H.R. 3659.
While the Department would welcome a discussion of timber-related
opportunities for southeast Alaska, we strongly object to
legislating an extension of the current KPC contract as provided
for in H.R. 3659. Should the bill come to the President for
signature in its present form or as an amendment to other
legislation, we would recommend that he veto it.
What the Bill Does
We object to the statutory modification of the existing long-term
timber sale contract with Ketchikan Pulp Company in H.R. 3659. The
73
contract is almost 50 years old and is the subject of substantial
litigation. In addition, a number of significant environmental
laws have been enacted since the contract was signed.
Section 2(b)(1) of H.R. 3659 states that the "contract"
acknowledges an intention on the part of the Forest Service to
supply adequate timber after the completion of the contract "for
permanent operation of the purchaser's facilities." However,
neither the original 1951 contract nor the post-Tongass Timber
Reform Act contract obligate the Forest Service to grant or approve
an extension of the long-term contract.
Language in Section 2(b)(3) states that KPC plans to make
"environmental and operational" improvements to its facility.
Language in Section 2(b)(4) states that 15 years is the minimum
reasonable contract extension period necessary to allow for the
amortization of these improvements. H.R. 3659 requires that the
Government continue a contractual relationship with KPC in order to
assure that investments made by KPC may be amortized. An
arrangement of this kind between the Government and a private
corporation -- to substantially reduce business risk associated
with improvements made to a private facility -- is unusual. We are
concerned that this may create a precedent.
The bill contains provisions that are unclear, problematic, or the
subject of ongoing litigation: Section 2(a) contains problematic
definitions, such as definitions of the contract, mid-market
criteria, and proportionality. Language in section 2(c)(2)
74
concerning the sale offering plan could effectively put the
contract above the land management plan. Language in Section
2(c)(3) and 2(e) would put into law volume requirements currently
disputed in litigation. Language in Section 2(c)(4) requiring that
contract stumpage rates not place the purchases at a "competitive
disadvantage to similar enterprises in the Pacific Northwest" is
legally inexact and would likely generate extensive litigation.
Language in Section 2(c)(7) would compromise the Chief's ability to
terminate the contract to prevent "serious environmental damage,
serious damage to cultural resources" or should the contract be
"significantly inconsistent with land management plans adopted or
revised. "
Background
Several fifty-year timber sale contracts were used in Alaska to
promote rural development and economic stability. We believe that
the long-term contracts in Alaska accomplished their objectives in
facilitating the establishment of a timber industry in Southeast
Alaska and contributing to the early growth and development of
Southeast Alaska's economy.
The economic climate has changed dramatically since Ketchikan Pulp
Company's contract was signed in 1951. Recreation and tourism now
draw over 600,000 visitors a year to Southeast Alaska -- more than
double the visitation in the past 15 years. Sport and commercial
fishing are also significant elements of the economy of Southeast
Alaska and one of the top producers of jobs and revenues.
75
statutory direction has also changed since Ketchikan Pulp Company's
contract was signed in 1951: the Multiple-Use Sustained-Yield Act,
the National Forest Management Act, the National Environmental
Policy Act, the Alaska National Interest Lands Conservation Act,
the Alaska Native Claims Settlement Act, and the Endangered Species
Act, as well as specific legislative direction in the Tongass
Timber Reform Act (TTRA) have been enacted. These laws have
affected the way that we manage the Tongass and require the
protection of certain resources and the sustainability of other
resources and multiple uses of the forest.
In addition, Mr. Chairman, public concern about natural resources
has grown since KPC's contract was signed in 1951. More people in
Alaska and around the nation are concerned about the sustainability
of resources of the Tongass National Forest. They expect timber,
recreation, fish and wildlife, as well as the other commodity and
non-commodity resources to flow from the Tongass National Forest.
Changes in the economy, in the law, and in public expectations make
it increasingly difficult to reach consensus on how to manage the
Tongass and find the balance between commodity and non-commodity
uses. Committing resources through a legislated extension of the
KPC contract as provided in H.R. 3659 would further limit
management options on the Tongass and undermine our ability to
balance these competing interests.
Through the revision of the land management plan, the Forest
76
Service has been working tirelessly over the last several years to
build consensus on how to manage the Tongass National Forest. We
are committed to completing the revision of the Tongass Land
Management Plan in the near future. We believe that we will be
better equipped to make decisions about future long-term
commitments to timber-related industries in Southeast -- reflecting
sound scientific information and extensive public input -- once the
revision process is completed.
Mr. Chairman, let me provide you updated information about the
Forest Service's ability to meet their timber volume commitment to
Ketchikan Pulp Company's existing contract. From 1989 to 1994, the
Forest Service offered KPC 935.6 MMBF of timber. In that same time
period, KPC harvested 926.9 MMBF. In 1995 the Forest Service
offered KPC 157 MMBF and we are targeting 217 MMBF for 1996. Most
of the 1996 program for KPC has been offered already -- indicating
Forest Service efforts to meet KPC's concerns about early
delivery. Forest Service figures indicate KPC currently has 295
MMBF under contract, although as always, litigation may affect the
availability of some of this timber volume to KPC.
One of the significant factors to be taken into consideration in
any discussion with KPC is the pending litigation against the
United States. KPC is currently pursuing four claims against the
United States claiming hundreds of millions of dollars in damages.
While KPC is suing the United States over the interpretation of the
provisions of the original contract and the changes that the
Tongass Timber Reform Act made to the contract in 1991, it is
77
difficult for the Administration to consider entering into any new
arrangement with them.
Conclusion
Mr. Chairman, for the last half century, the Forest Service has
worked with private companies in many ways to develop a stable
economy in Southeast Alaska and to promote the long-term
sustainability of natural resources. We believe that the mission
of the contract -- developing an industry base and providing
year-round employment to support socio-economic development -- has
been accomplished.
We would welcome a broad-based discussion of future timber- industry
opportunities in Southeast Alaska, but we object to H.R. 3659 that
circumvents the planning process, conflicts with the Tongass Timber
Reform Act, and obligates the resources of the nation to one
company for one purpose only, without a thorough analysis and
discussion of options.
This concludes my testimony. We would be pleased to answer any
questions you may have.
78
TESTIMONY OF
SCOTT W. HORNGREN
BEFORE A JOINT HEARING OF THE
HOUSE COMMITTEE ON AGRICULTURE
AND
COMMITTEE OF RESOURCES
REGARDING H.R. 3659
July 11, 1996
79
My name is Scott Horngren. I am a partner in the law
firm of Haglund & Kirtley of Portland, Oregon. Our firm
represents timber sale purchasers throughout the west who hold
Forest Service timber sale contracts. I am testifying on behalf
of the Northwest Forest Resource Council, a coalition of timber
trade associations comprised of over 90% of federal timber
purchasers in the Pacific Northwest. Our firm has represented
timber sale contractors in the United States Court of Federal
Claims, the Federal Circuit Court of Appeals, and the
Agricultural Board of Contract Appeals.
I am here today to discuss the implications of the
recent Supreme Court decision in United States v. Winstar
Corporation. No. 95-865, 1996 U.S. LEXIS 4266 (July 1, 1996), as
it relates to Forest Service timber sale contacts. The Winstar
case is a culmination of over a half decade of litigation over
government contract liability for statutory and regulatory
changes to minimum capital standards for saving and loan
associations. These changes effectively caused the demise of
numerous savings and loan associations including two of the
plaintiffs in Winstar . The Winstar decision has implications
throughout the government contracting field, and for federal
timber sale contracts in particular.
Federal timber purchasers are being boTibarded by
regulatory and policy changes. These changes include adoption of
the President's Northwest Forest Plan that essentially prohibits
harvest in late successional reserves, establishes vast buffer
- 1 - SKK\Swh)f7796
80
zones along fish and non-fish bearing streams, and imposes severe
restrictiona on the seasons in which logging can occur.
Similarly, the Forest Service in the inland west has adopted the
Inland Native Fish Strategy (INFISH) , and the Pacific Anadromous
Fish Strategy (PACFISH) . A screening process for timber sales
has been adopted, as well as California spotted owl, Mexican
spotted owl, and northern goshawk protection standards.
The Winstar decision should leave little doubt that the
government will be contractually liable to the timber purchasers
for the reduction or elimination of timber sold under the
contract. I'd first like to summarize the Supreme Court's
decision in Winstar and then apply those principles to federal
timber sale contracts.
I. THE WINSTAR DECISION.
During the savings and loan crisis in the mid-1980s,
Congress enacted the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 (FIRREA) . The Act forbid thrifts from
counting good will as capital credits in computing the required
minimum capital reserves. The plaintiffs in the case were three
federal thrifts, two of which were seized and liquidated by
federal regulators for failing to meet the new capital
requirements. The thrifts sued the government contending that,
the Federal Home Loan Bank Board and the Federal Savings and Loan
Insurance Corporation (FSLIC) had breached the contractual
promise that the thrifts could count supejrvlsory good will
towards the regulatory capital requirements. The government
-2- SWB\auh)cTT96
81
argued tlrsc that it was not liable because it had not
"unmistakably" promised to refrain from regulatory changes on the
face of its contracts with the thrifts. The government believed
that to hold in favor of the thrifts would essentially exempt the
thrifts from the regulatory authority. Second, the government
maintained that the regulatory change was merely a public and
general "sovereign act" insulating the government from liability.
The Supreme Court rejected both these defenses.
First, the Court held that the "unmistakability
doctrine" did not insulate the government from liability.
Interpreting the government's contractual obligation to allow the
thrifts to consider supervisory good will, essentially did not
preclude the government's exercise of authority to modify its
regulation. Awarding the thrifts' damages for bz-each would not
amount to a limitation on the government's authority to regulate
the institutions. The Supreme Court held that to apply the
unmistakability doctrine to the thrifts would essentially
compromise the government's capacity to make contracts.
Second, the Court held that the sovereign acts doctrine
was not a valid defense. Under the sovereign acts doctrine, so
long as the government's legislative or executwe acts are public
and general, they cannot be deemed to violate c-;ritracts between
the government and private parties. The gov-arrment maintained
that the imposition o£ r.iore stringent reouL.t.jry capital
requirementa under FI^R^A was a "public and general act" and that
the changes could nor b*^ considered a ■.■.each of the government's
-3- StlM\»wh)c7796
82
contract . The Supreme Court disagreed and held that the
particular facts did not even warrant the application of the
doctrine and even if the doctrine did apply, it was not
sufficient to absolve the government of liability in a contract
that allocated risks of the regulatory change to the government
in a highly regulated industry.
The Court rejected the government's distinction that
its actions were regulatory rather than non- regulatory . The
Court saw little clear distinction between the two and held that
the government cannot avoid contractual liability merely by
passing a "regulatory statute." The Court found it significant
that the regulatory legislation was motivated by government self
interest, and that it was impossible to attribute a "public and
general" character to FIRREA when the legislation had the
substantial affect of helping the government out of improvident
agreements. The government was not permitted to shift the costs
of meeting legitimate public responsibilities to private parties.
The Court emphasized that the government may not force some
people alone to bear public burdens which should be borne by the
public as a whole.
II. APPLICATIOW TO PBOBRAL TIMBER SAIiB CONTRACTS.
Like the thrift industry, the timber industry,
particularly during the last two decades, has been a highly
regulated industry. The Supreme courts notes that thrift
programs were a federally conceived and assisted system to
provide citizens with aCCordable housing £unds through savings
-4- sim\swhk7T9S
83
and loans. Similarly, the federal timber sale program was
designed to supply the raw material for domestic housing needs
through the timber purchasers.
while the Forest Service has not, to my knowledge, used
Che unmistakability doctrine as a defense in any pending timber
sale contract dispute, the Winstar decision should dispel any
thoughts of doing so. Clearly, compensating timber purchasers
for the reduction or elimination of its contracted for timber
would not preclude the government from exercising its authority
to regulate activities on the national forests. Such regulation
does not implicate the exercise of the taxing power or other
unique governmental power. Rather, regulation of timber sales is
more akin to supply contracts and as the Supreme Court stated,
"no one would seriously contend that enforcement of humdrum
supply contracts might be subject to the unmistakability
doctrine." Id. at *71. As in Winstar, awarding damages for
breach would not limit the government's regulatory power, albeit,
it would require the government to pay for the consequences of
its regulation.
Likewise, the sovereign acts doctrine also does not
apply to timber salee reg-ulation. The actions of the Forest
Service in "screening" existing timber sales or imposing buffer
Strips in which harvest cannot occur are not "public and general"
acts. Specifically, given the Winataj: decision, any past
statements by Congress to assert the sovereign acts doctrine co
avoid contract damages in timber sale cases Is likely to fail.
-5- S»H\swhk7796
84
For example, regarding the Alaska Pulp and Ketchikan Pulp
contracts, the House Committee on Interior and Insular Affairs
wrote :
The Committee considers termination of the
long-term contracts to be an appropriate
exercise of the federal government's power to
protect the public interest and that,
pursuant to 'sovereign act' immunity, no
damages shall be paid to an PC or KPC.
H.R. Rep. No. 101-84, 101st Cong., Sess. at 24 (June 13, 1989).
While ultimately the contracts were unilaterally modified by
Congress rather than terminated, the assertion of the sovereign
acts doctrine is likewise ineffective. This is particularly true
when the statute is directed at an individual contract despite
self-serving legislative pronouncements to the contrary that the
legislation is "public and general."
The Winstar decision holds that unless contracts
explicitly provide otherwise, the government bears the risk of
statutory and regulatory changes that preclude completion of the
contract. This is the case for the majority of timber sale
contracts in the West and will strengthen timber purchaser's
contract claims against the government.
I am not alone in concluding that the Winstar case will
strengthen, rather than weaken the timber contractors' arguments
that regulatory changes affecting its contracts amount to a
breach. This position is supported by the Forest Service's own
analysis of its contract, by the National Forest Management Act,
and by Federal Court of Federal Claims and Board of Contract
-6- smi\iiwhk7l96
85
Appeals decisions in timber contract cases which refused to apply
the sovereign acts doctrine.
The Forest Service Chief has interpreted the agency's
timber sale contract to require compensation for the difference
between the contract price of the timber and its market value,
regardless of whether a contract is modified, canceled, or
partially canceled for environmental reasons. In an April 27,
1992 memorandum to Regional Foresters, the Chief noted that:
Recently several Regions have had a need to
modify, partially cancel, or cancel sales
because of species listed under the
Endangered Species Act or because of possible
impacts to species considered sensitive
within that Region. Questions have arisen
concerning procedures in contract
modification, cancellation, and the
calculation of purchaser compensation. The
following provides information and direction
in these areas .
The Chief noted that -.
In determining compensation, the plain
meaning of the WO-C(T)9.5 (10/77) timber sale
contract provision must be followed. This
provision provides, in part, damages for the
difference between the contract value for the
deleted/uncut volume of timber and the value
of comparable timber sold within the six
months preceding cancellation.
Id.
This government interpretation is consistent with the
regulation at 36 C.F.R. § 223.116 governing compensation for
cancellation of contracts. Although later contract clauses have
attempted to limit compensation, those clauses are inconsistent
with the governing regulation. Thus, more recently, the United
States Department of Agriculture has requested a change to 3 6
-7- suBV«whkn9s
86
C.F.R. § 223.116, which still is the regulation governing timber
sale contract termination for cancellations of timber sales to
protect threatened and endangered species and the environment.
In the President's Unified Regulatory Agenda, the U.S.D.A
explained;
It is not the Department's policy to prepare
and offer timber sales which would jeopardize
the survival of threatened or endangered
wildlife species or which would cause a
sensitive species to be listed. However, as
more scientific data is gathered, it is
possible that some timber sales which were
consistent with planning guidance at the time
they were offered must be canceled in the
light of new knowledge. During the 1993-1996
period, this may happen with timber sales
located in the habitat of the Mexican spotted
owl, the northern goshawk, the marbled
murrelet, and northern spotted owl. In these
situations, the difference between the
Government's liability under the current
regulation and its liability calculated using
the method in the proposed regulation is
approximately $300 million. 59 Fed. Reg.
57003, 57026 (Nov. 14, 1994).
Regulatory changes affecting the management of national
forests must be incorporated through the land and resource
management plans. Congress gave the Secretary of Agriculture
authority to revise existing contracts to be consistent with such
plans. 16 U.S.C. § 1604(i). However, "any revision in present
or future permits, contracts, or other instruments made pursuant
to this section shall be subject to valid existing rights." Id.
Thus, even before Winstar, the Forest Service had a difficult
argument that it was not liable for regulatory changes affecting
timber sale contracts. After Winstar, the argument becomes
extremely difficult, if not impossible.
-8- Sim\swhk7 79t
87
Finally, the sovereign acts doctrine has had little
success as a defense to timber contractor's breach of contract
claims. Summit Contractors. AGBCA Nos . 81-252-1, 83-312-1, 86-1
BCA 1 18,632 held that deletion of timber to protect eagle and
osprey nests required the government to compensate the purchaser
and the sovereign acts doctrine did not apply. The board held
that although "the Forest Service had the power to modify the
contract to prevent harm to the osprey nest, [it] was the
nevertheless obligated to pay the contractor for any damages
occasioned by the modification". Summit at p. 93,629.
Similarly, in Everett Plywood v. United States. 227 Ct . CI. 425,
615 F.2d 723 (1981) the court held that:
" [E] ven where the Forest Service decided to
repudiate some of its contractual obligations
in order to protect the environment, it is
nevertheless liable to the contractor for
damages caused as a result of such
repudiation.
More recently, the Forest Service was held liable for a
deletion of timber from a sale to protect the marbled murrelet
following the regulatory change listing the murrelet as a
threatened and endangered species. The court in Davidson
Industries. AGBCA No. 95-166-1, 96-2, BCA 1 26.299 (1996) held
that the government was liable to Davidson for a deletion of
timber from its contract for the marbled murrelet on the Siuslaw
National Forest.
III. CONCLUSION.
In conclusion, federal timber purchasers will
successfully rely on the Winstar case in their claims against the
-9- SWH\»>(hk7T96
88
government for breach of contract when the government's
regulatory actions reduce or eliminate timber from their sales.
The existing contracts, regulations, and court
decisions already acknowledge the government's obligation to
compensate the purchasers when their contracts are abrogated.
The Winstar case only enhances the purchasers' position.
■ 10- SWH\a»hk"96
89
TESTIMONY BY
Ralph D Lewis
President
Ketchikan Pulp Company
BEFORE
The House Resources Committee and
The House Agriculture Committee
CONCERNING
The Contract Extension and Environment Improvement Act of 1996
Washington, DC
July 11. 1996
Mr. Chairman and members of the Committee:
Thank you for this opportunity to testify. My name is Ralph D Lewis, and I am
the President of Ketchikan Pulp Company (KPC). I have lived in Ketchikan, Alaska, and
have been a KPC employee for 30 years. KPC can employ over 1,000 workers in our
timber facilities, our Annette and Ketchikan sawmills, and our Ward Cove pulp mill and
administrative oflices. These workers produce a number of value-added timber
products, including sawn lumber and our high-quality Tongacell dissolving pulp. KPC
is the largest private employer in southeast Alaska.
As a long-time, permanent resident of southeast Alaska, I am sincerely concerned
about the economic health of the timber industry and the City of Ketchikan's socio-
economic stability. Since 1990. Alaskans have lost over 42 percent of the forest
products industry jobs in the Tongass National Forest. That is why we support passage
ofS. 1877 and H.R. 3659.
Page 1
90
The currently robust Ketchikan economy was built, in large part, by KPC
employees and long time Ketchikan residents. A strong KPC is absolutely critical to
maintaining the region's economic health. KPC is committed to continuing to provide
the well-paying, year-round employment it has supplied for over forty years. To
succeed, we need a stable timber supply. We depend on our long- term contract to
provide that stability. I come before you today to ask that you give favorable
consideration to a 15-year extension of our contract, as well as to fairness modifications
to our contract.
Accompanying me today eire a number of key members of our management and
environmental team. They include Troy Reinhart, Employee Affairs and Public
Relations Manager; Owen Graham, Timber Manager; Allyn Hayes, Pulp Mill Operations
Manager; Richard Leary, Controller; jind Emesta Ballard, an environmental consultant
to KPC and former EPA Region 10 Administrator
S. 1877 & H.R. 3659
S. 1877 and H.R. 3659 are crucial to the long-term survival and competitiveness
of KPC. This legislation will:
a. Allow us to invest up to $200 million in environmental, energy efTiciency
and operational upgrades;
Page 2
91
b. Make fairness modifications in the unilateral contract changes the Forest
Service implemented in 1991; and
c. Create a win - win situation where both the environment and jobs are
protected.
What this bill does not do is:
a. Make changes in land designations, stream buffers, other on-the-ground
management goals, or the management direction of the Tongass National
Forest.
b. Change the amount of timber made available to KPC each year for
harvest.
A Short History of Ketchikan and KPC
Consideration of this legislation requires an appreciation of the special
circumstances that led to the KPC long-term contract. In 1947, when President
Truman signed the Tongass Timber Act into law, Ketchikan, Alaska, had streets paved
with wooden planks. In the years since the early 1950's when the Ketchikan Chronicle
headline read "Pulp Contract Let." Ketchikan has changed a great deal. The vibrant,
modem community we live and work in today is the direct result of zm initial $54
million investment that Puget Sound Pulp and timber (PSPT) and American Viscose
Page 3
26-689 - 96
92
Corporation made to build the KPC pulp mill at Ward Cove. Since initial startup, KPC
has made additional capital investments in excess of $325 million. These companies
would not have made the investment were it not for the long-term contract signed with
the U.S. Forest Service. That contract guarauiteed KPC a stable, economic timber
supply at sufficient quantities to recoup the necessary investment and envisioned
perpetual operation of the facility on the basis of Tongass National Forest timber after
the initial 50 year term.
As f£ir back as 1920, the federal managers of the Tongass believed that pulp
production represented the best use of southeast Alaska's extensive timber resources.
Those forest managers recognized that a high percentage of Tongass timber consisted
of overmature and decaying trees, material useful only for pulp. In 1928, the Chief of
the U.S. Forest Service stated, "The establishment of new wood-using plants should be
fostered energeticcilly, as Alaska is badly in need of more industries."
As the Second World War wound down, the federal government ardently
broadened its efforts to attract a timber industry to southeast Alaska, in order to
provide stable, high-paying, year-round employment to an economically
underdeveloped territory. Despite its abundant resources, southeast Alaska was at that
time a land of boom amd bust. Before the war. the economy depended on mining and
fishing. After the war, fishing was in decline, and the mining base was depleted. In an
effort to establish a stable economy and bring added population to America's "Northern
Ramparts," the Forest Service ofliered long-term (50 year) timber hcirvest contracts to
entice investors to the area. Regional Forester B. Frank Heintzelman wrote that the
Page 4
93
Forest Service's "timber management policies provide that the timber resources of the
Tongass National Forest shall be used for the upbuilding euid the support of permanent,
modem communities throughout Southeastern Alaska."
In 1948, in response to this federal effort. PSPT incorporated Ketchikan Pulp and
Paper Company, which submitted a bid to the Forest Service for the Ketchikan
Pulptimber Unit. The government accepted the bid. Under its terms, the Forest
Service would provide a 50-year timber contract, and Ketchikan Pulp and Paper would
be obligated to build a pulp mill at Ward Cove. In 1951, Ketchikan Pulp and Paper
Company became Ketchikan Pulp Company, a joint venture between PSPT and
American Viscose Corporation, and financing proceeded for the construction of a mill
to produce dissolving pulp. The mill was the first of Its kind to be designed and built
in the United States. It used a state of the art pollution control and chemical recycling
process.
This was a risky venture; one embarked upon only because of the guarantees
provided by a long-term contract. The federal government requires primary domestic
manufacturing of all but a very small part of the timber we harvest. Because of this
and in order to support the financing necessary to build a pulp mill in an isolated region
separated from the nearest state by 600 miles of foreign border (Canada), the Forest
Service promised to supply KPC 8 1/4 billion board feet of economic timber over the
50-year term. Construction began in May 1952; logging began on Prince of Wales
Island in July 1953; and the mill dedication took place on July 14, 1954. After 30
Page 5
94
years of a concerted federal effort aind an initial $54 million private investment, the
modem Ketchikan economy began.
KPC has met its end of the bargain with the federal government to provide a
stable job base for the Ketchikan area. We are now asking you to ensure that the
government meets its part of the bargain, and makes available the economic timber
supply necessary for us to continue to provide the employment which is the cornerstone
of our economy.
KPC Products and the Ketchiktm Economy
In the years since the pulp mill began operating, KPC has expanded its job base
by operating sawmills in addition to the pulp operation. The original contract
anticipated that sawmills would be added after the pulp mill was running. Sawmills
allow better use of the resource by recovering high- quality logs for uses other than
pulp. KPC currently operates two sawmills, Ketchikan Sawmill (KSM) at Ward Cove,
and Annette Hemlock Mill (AHM) on Annette Islcuid, which we run pursuant to a lease
with the Metlakatla Indicin Community. Assuming an adequate supply of raw
materials, the sawmills have the capacity to process 130 million board feet of lumber
annually on a two-shift basis. Both mills could run three-shift operations, if there
existed a sufHcient timber supply.
AHM produces rough-sawn spruce emd hemlock cants and flitches which are sold
and subsequently processed to form such Items as decorative doors, window frames.
Page 6
95
8ind staircases. KSM is a high speed log merchandizing facility which manufactures
logs ofsmziller diameters into high-quality, metric-dimension, planed lumber products.
Approximately 90 percent of KSM sawn products enter the worldwide structural lumber
market as finished merchandise. The balance of the sawn material from KSM is used
for tight-grain cut stock or studs, sold in domestic markets.
Throughout its history, the primary product of KPC's pulp mill has been
ultra-pure dissolving sulfite "Tongacell" pulp, produced principally from hemlock fiber.
Our customers process "TongaceH" into viscose and cellulose for use in the manufacture
of a vciriety of products including rayon fabric, carpets, draperies, sponges, cellophane
packaging, pheuTnaceutical goods, food additives, rope, brush and broom bristles,
insulation, cosmetic products, rayon cord tires, peiint, and furniture lacquers.
The pulp mill has an annual production capacity of over 190,000 tons of 90-plus
percent pure cellulose pulp. Our pulp is sold both domestically and to foreign buyers.
KPC is one of only eight stable suppliers of dissolving pulp worldwide.
When the Forest Service provides a dependable supply of raw materials, we
employ over 1,000 people to harvest, transport and manufacture these lumber and pulp
products. Throughout the Ketchikan-Metlakatla-Prince of Wales area of southeast
Alaska, our pulp, sawmill, and timber operations directly support the employment of
an additional 1,500 people outside our company: contract loggers, road builders,
longshoremen, and tugboat operators, cunong others. Overall, approximately 25
Page 7
96
percent of the region's payroll is involved, directly or indirectly, with KPC operations.
The bulk of the service and support industry depends on KPC's continued viability.
In 1995, the average full-time KPC employee earned approximately $45,000 in
wages, not including benefits. In that year, KPC paid wages totaling over $40,000,000,
again, not including benefits. Benefits include full health coverage and retirement. We
have enjoyed a very stable work force, with the average duration of an individual's
employment being close to ten years. We hire over 90 percent of our employees locally,
£ind the KPC work force reflects southeast Alaska's population diversity. Approximately
one-third of our employees are Alaska Natives.
KPC puts more than $5,000,000 monthly into the Ketchikan-Metlakatla-Prince
of Wales economy. Our operations Eire the cornerstone of southeast Alaska's timber
industry in general, providing an assured outlet for residual chips and pulp-grade logs
from independent sawmill and logging operations, when those companies themselves
have sufficient timber to operate.
KPC's manufacturing operations are as essenticd, if not more so, to southeast
Alaska's economy today as they were in the 1950s. Again, we have fulfilled our end
of the bairgzun we made with the Forest Service to provide year-round employment and
bring prosperity to the Ketchikan area. KPC is the foundation of our local economy.
If KPC collapses, southern southeast Alaska collapses along with us.
Page
97
The timber manufacturing facilities in Southeast Alaska face a unique set of
circumstances that require unique solutions. First, the only major source of available
timber for our facilities is federal timber from the Tongass National Forest. The Forest
Service holds monopoly power over the timber supply. The smeill amount of private
timber is normally exported as round logs to countries that have job protective pricing
that favors raw materials over finished products. Timber harvested from Federal lands
in Alaska, and in Alaska alone among the states, must receive primary manufacture in
Alaska, and is subject to additional export restrictions. Second, the nearest domestic
mairket for timber products is 600 miles away with a foreign country (Canada) in
between. This puts Alaska meinufacturing at an extreme competitive disadvantage to
forest products manufacturers in the Pacific Northwest. Third, the cost of
manufacturing In Alaska is much higher than in other parts of the world, in part
because many of those other regions outside the United States have much less stringent
environmental standards for msmufacturing facilities. These economic circumstainces
are similar to those that existed in the 1940s when the Ketchikan long-term sale was
first proposed.
Unilateral Contract Changes
The 1990 Tongass Timber Reform Act (TTRA) drastically and adversely affected
the long-term agreement with the Forest Service which forms the basis for KPC
operations. Not only did TTRA further reduce the available commercial timberland
base which underpins the Forest Service's long-term volume commitment to KPC, it
unilaterally altered a bilaterally £igreed-to contract. The unilaterally modified timber
Page 9
98
delivery system has resulted In a continuing failure of the Forest Service to meet its
timber volume commitment to KPC. TTRA also irrationally altered the contract's
pricing structure.
It is extremely costly to operate our pulp mill on an intermittent basis, which is
why we require a steady, certain supply of raw material. Since the passage of TTRA,
the Forest Service has repeatedly failed to meet its contractual requirement to make
timber available in a timely fashion. Delays at every step of the timber-delivery process
are now the rule rather than the exception. During calendar year 1993, the Forest
Service released only 45 million board feet (MMBF) of new timber to KPC (147.5 MMBF
below the contract standard). In calendar year 1994. the Forest Service released 176
MMBF to KPC, but 40 MMBF was held up by an Injunction in litigation brought by the
Sierra Club Legal Defense Fund. Shortly after the Forest Service canceled Alaska Pulp's
contract in April 1994, it presented KPC with a revised timber release schedule. The
Forest Service agciin revised the KPC timber offering schedule a year later. These
changes are causing major problems for our operations. We have been forced from our
Primary Sale Area, and the planned release volume has been substantially below that
called for in the contract.
New harvest restrictions imposed since the passage of TTRA have slowed and
disrupted our rate of harvest. It now takes us at least an additional year to build access
roads and harvest the timber on a typical offering. The pipeline of timber made
aveiilable has averaged far less than that mandated by the contract. As a result of this
failure by the Forest Service to meet its contractual obligations, we have experienced
Page 10
99
a cumulative shortfall in excess of 120 MMBF in the last two years, which has resulted
in periodic shutdowns of the pulp mill and both sawmills. To make matters worse,
these shutdowns have occurred during periods of high market demand for our products,
and we were therefore unable to take advantage of high selling prices. We have been
unable to make up the shortfall through independent Tongass National Forest sales or
other timber purchases.
Prior to TTRA, the Forest Service presented us with specific 5-yecir timber
offerings and with general plans outlining the location and volumes of the timber to be
supplied throughout the remaining period of the long-term sale. We were able to
formulate rational, efiicient operating plans based on a predictable timber supply. Now,
the Forest Service provides timber in smcill individual oflerings, revises their offering
schedule at least once a year, and consistently fails to meet its own deadlines set forth
in the offering schedules. We cannot plan and operate efiiciently under this erratic
system.
We must relocate families, logging camps and related facilities much more
frequently than in the past. These costly, time-consuming moves further delay timber
harvest, and greatly increase its cost. This reduces the return to the federal treasury.
Worse, this erratic system has a human cost. Many of our employees are no longer able
to commute dally to work, but instead must live in remote bunkhouses separated from
their families for extended periods.
Page 11
100
Some of the most troublesome changes the Forest Service has implemented in
response to TTRA involve unilateral modification of our pricing structure. First, the
Forest Service excised from the contract all of the price mechanisms which formed the
bargain under which KPC expended enormous sums of money to build its facilities eis
required by the long-term sale agreement. Again, all predictability and stability was
eliminated. Second, the Forest Service imposed a system requiring a qucirterly upward
rate adjustment, purportedly based on rates paid on smaller independent timber sales
in the Tongass National Forest, which is paid on top of the Forest Service's appraised
value of the timber. Since its implementation, the Forest Service has frequently added
this premium even at times when the market has collapsed as it did in 1991 and
recently. This premium guarantees that our cost of timber will not be economic in
relation to the market in which we must compete.
These changes run directly counter to the original bilateral contract. The
government agreed to supply economically viable timber for the contract term. Based
on this promise, we have spent, and continue to spend, vast sums of capital on our
facilities. All of our capital investment decisions have relied on this contractual
promise. Protections included in the contract (the "Puget Sound" clause and the test
for equitable and competitive rates vis-a-vis other long-term pulpwood sales on the
Tongass) were important to the original investors, and continue to be important.
The recent pricing changes not only violate our contract, they are irrational
because, among other things, they compare KPC, with its enormous capital
requirements, to small independent operators with far smaller capital requirements.
Page 12
101
To meet its contractual obligations, KPC had to spend tremendous amounts of money
to construct a pulp mill. SBA and independent operators have no such obligation.
This brings me to the specific terms of the legislation being considered. Why is
this legislation needed? I will try to explain why.
Why a 15-Year Extension?
Fifteen years plus the remaining term of the contract is the minimum time
required to recoup the planned investments alluded to earlier. KPC plans to invest up
to $200 million over the next 5-8 years to continue to be environmental leaders and
remain competitive in the world pulp market. To make these investments, the
assurance of an adequate, economic supply of timber as well as a fifteen-year extension
are needed. Changes necessary to enable the Forest Service to honor and extend the
contract must come through the legislative process. Such changes need to be
accomplished in 1996; otherwise investment plans must be reviewed and the viability
of KPC may be threatened. Strong, state-wide bipartisan support exists to maintain
KPC as the cornerstone of a responsibly managed and diversified Alaskan forest
products industry.
KPC has begun an aggressive investment program that will total up to $200
million to upgrade its facilities to ensure not only that it meets evolving environmental
requirements into the next century but that it remains competitive in the world pulp
market. Specifically those investments include: ,
Page 13
102
»■ construction and start up of an Elemental Chlorine Free (ECF) bleaching process
to eliminate the use of elemental chlorine at the mill;
► equipment and process modifications to further reduce the toxicity level of the
efiluent and to relocate the discharge point to improve dispersion;
► expansion of wastewater treatment facilities;
► upgrade electrical power generation facilities to improve combustion efficiency
and reduce costs; £ind
»• modernize chemical recovery systems for greater efTiciencies.
Why Contract Fairness Modifications?
Those who enacted TTRA, and the environmentalists who supported it,
expressed the belief that a viable, healthy timber industry would continue following its
enactment. They said there was no intent to harm or destabilize the timber industry
dependent on the Tongass. (A summary of those remarks is included with this
testimony as Attachment A.) However, as explained earlier, TTRA and the unilateral
modifications to KPC's long-term sale agreement that followed in its wake have had a
devastating impact. At a minimum a few contract fairness modifications are necesssiry
to restore the basic economic underpinnings of the long-term sale. In addition, a
reaffirmation of the Forest Services's timber supply commitment is needed. Together
Page 14
103
these actions will lend stability to our operations by assuring timber supply at a fciir cind
reasonable price which is readily determined and not subject to manipulation.
Sale Offering Plan
The sale ofTering plan will allow KPC to efTiciently plem harvest operations
(remote logging camp installations, road construction, etc.). Further, the plan will
provide a frjunework for the Forest Service to plan and manage completion of the NEPA
process in a timely manner. Section 2(c)(2) of the legislation will make these
modifications.
Volume Requirements
KPC's current contract allows for the harvest of 962.5 million board feet (MMBF)
every five years, which amount, on an annual basis, comes to 192.5 MMBF. S. 1877
and H.R. 3659 continue that same volume level for the term of the 15-yecir extension.
The 192.5 MMBF volume level was Intended to provide adequate supply for the
pulpmill plus additional volume for associated sawmill operations. At the present time,
the Forest Service appraises at least half of the volume supplied on the basis of
processing at the sawmills. Section 2(c)(3) of this legislation maintains these volume
supplies to KPC.
Page 15
104
Appraisals and Rates
Prior to the Forest Service implementation of TTRA in 1991, the KPC long-term
sale agreement provided for both upward and downward stumpage rate adjustments,
whereas independent sales have only downward adjustments. The upward adjustment
mechanism in the long-term sale contract put a ceiling on the amount of profit that KPC
was allowed to make. Any excess profit margin was returned to the Forest Service as
Increased stumpage. Independent sales have no such ceiling.
After the Forest Service Imposed changes to the long-term sale contract, the
Forest Service begem charging what was termed "Comparability Charges". These
charges are derived from an inaccurate and inappropriate analysis of what the
independent sales stumpage charges were from a prior time period (not the period
during which KPC was harvesting or processing timber).
Further, the charges are greatly affected by speculation, skewed bidding,
variations in the species mix the Independents harvest from time to time, and
differences between the actual species mix and the Forest Service appraised species mix
for both the long term and Independent sales. In addition, the Forest Service maikes
only upward charges. The stimipage rates are never lowered even when the peculiar
"comparability" formula indicated adownward adjustment is warranted. These charges
have greatly reduced KPC's profitability to a point where its future is now in jeopardy.
Section 2(c)(4) of this legislation corrects these problems. It allows KPC to remain
Page 16
105
profitable, gives the federal government a fair economic return, and creates a long-term
sale more like cin independent timber sale.
Proportionality
The proportionality provision of TTRA was intended to insure that a
disproportionate harvest of high volume timber stands was not harvested over a
rotation for einy group of contiguous management areas. In other words, it was to
address congressional concerns over potential highgrading. The Forest Service has
chosen to disregard the "over the rotation" direction and the "contiguous management
area" direction. Further, the 9th Circuit Court of Appeals has decided that
proportionality must be measured by volume rather than by acre. Consequently, the
Forest Service must now spend millions of dollars each year to satisfy their own
internal procedures as well as the 9th Circuit's rule for a provision that applies to only
a portion of the annual harvests and accomplishes nothing other than to "assure" that
which the Forest Service testified during hearings preceding TTRA was being
accomplished amyway. These new guidelines could cost the Forest Service up to.
$400,000 per timber sale to implement. Section 2(c)(5) of this legislation would correct
this problem, ensure that the remaining 10% of the Tongass National Forest open to
commercial harvest is managed using sound, state-of-the-art on-the-ground
management tools, and save the federal government millions of dollars, while reducing
litigation.
Page 17
106
Conversion or Replacement
This provision is intended to clarify KPC's right to accomplish the pulpwood
processing and related employment goals with a more competitive and sustainable
facility should that opportunity present itself in the future. Section 2(c)(6) of this
legislation would make a clear congressional statement in support of allowing full and
state-of-the-art manufacturing processes on the Tongass National Forest.
Unilateral Termination
Our bilateral contract with the Forest Service contained no clause dealing with
unilateral contract termination at the whim of the Forest Service. Any right to
terminate was governed by federal common law and, if invoked, would be dependent
on the peuticulcu- facts eind circumstances involved. TTRA did nol direct the Forest
Service to include a unilateral termination clause, but in drafting the Unilateral Terms
the Forest Service included a unilateral termination clause (Section B0.7). Section
2(c)(7) of this legislation would correct this overreaching and return the contract to its
origincil status while maintaining consistency with TTRA.
KPC's long-term sale is not a federal procurement contract; hence there is no
need for a clause paralleling the familiar termination-for-convenience-of-the-govemment
clause in typical government contracting. While the Forest Service since the 1970's has
included language in stcindard timber sales reserving the right to cancel for
environmental reasons, no such reservation is necessary here because of the particular
Page 18
107
nature of this transaction. A standard Forest Service timber sale is a sale of specifically
identified timber. The KPC long-term sale is not; instead, it is a sale of a quantity of
timber, not yet specifically identified on the ground, which can be selected from a broad
area. If environmental concerns arise in a particular location, selection can be steered
away from that area or, if timber has already been selected in that area, substitutions
can be made. Our mutually agreed-to contract provided ample authority and flexibility
for the Forest Service to address the concerns which the unilateral termination clause
purportedly seeks to meet. The unilateral termination clause is simply unnecessary.
Were the Forest Service to invoke it, the practical effect of doing so would be a
declaration that no timber whatsoever was to be sold from the Tongass National Forest.
Needless to say. Section 2(c)(7) of the legislation is important to us because we are
reluctant to expend $200 million only to then have the Forest Service invoke the
unilateral termination clause of the Unilateral Terms.
KPC and the Environment
Our opponents have raised the subject of our environmentcil record. It is true we
have had problems in the past and for those we apologize: However, KPC has new
management and we are excited about the future and are ready to move forward.
I would be remiss if I did not address the many and exaggerated claims of the
extreme environmentalists who have expounded repeatedly concerning KPC's
environmental record. I have attached a detailed analysis of KPC's comprehensive
environmental program (see Attachment B).
Page 19
108
Ketchikan Pulp Company complies with Federal and State laws governing
environmental protection. Our operations aire fully regulated and covered by
approximately 75 different permits, plans, response procedures and mandatory reports.
A list of these is attached to my testimony as Attachment C, and a copy of each is
available here for committee review. These documents cover everything from logging
camp stormwater control, to air emissions permits for our boilers and pulp mill waste
water disposal permits. Some of these are permits to operate -- without a permit there
can be no production. Also available for the Committee to review are twelve studies
and workplans which are underway right now. These new programs are the measures
agreed to in an enforcement action taken by the EPA, and settled in 1995. Part of that
settlement was our plea to one felony and thirteen misdemeanor violations of the Clean
Water Act. The information contained in the plans and reports offered here today
details our environmental compliance results and is available for your review.
The claims made by individuals and groups opposed to our continued operation
are based on our own reported information. Their claims attack our performance, vilify
our people, distort our record, and support their assault bv presenting our own data out
of the context in which it was originallv reported. Our data is interpreted by our
opponents without regard for the strict scientific methods which are mandated bv
regulation. Conclusions are reached which are based on the subjective values of the
presenter instead of the objective measures which are established bv law. Data are
separated from regulatory reports, and rearranged without regard to the purpose for
which thev are collected. Information which is reported by KPC in the normal course
of environmentcil complijince is manipulated and distorted by those who wish to shut
Page 20
109
us down, in order to illustrate theories which are intentionally designed to raise public
alarm.
I believe this Committee should have the opportunity to learn of the strict and
comprehensive regulatory context in which resource protection is actually achieved at
KPC. The supplemental testimony on Environmental Compliance at Ketchikan Pulp
which is before you presents the full scope of regulatory control over our operations and
waste management. You will see from reading the entire testimony that all
containments of concern to State and Federal regulators are monitored, measured, and
reported according to schedules set by the government. Reported quantities are
regulcu-ly checked against the levels established by environmental law. Enforcement
action is taken by regulatory agencies when appropriate. The reports which we
provide, along with inspections by regulatory staff, provide the basis which
demonstrates compliance, or, alternatively, on which enforcement action may be taken.
Enforcement actions, too, are a matter of public record.
The alarm raised by our opponents is unwarranted. State and Federal regulators
are knowledgeable of the smallest details of our operation. They have available,
through law, a full array of compliance and enforcement measures. KPC works
cooperatively with our regulators to achieve the results expected by law.
Our compliance and enforcement history is already a matter of public record.
We are proud of our achievements, and accept responsibility for our shortcomings and
Page 21
no
frilsi;ik(!s. Wc have iKjthliiji lo hide (rorri Ihe regulators, this CommiUee, or our
coniiiiunlly.
Conclusion
A 15-y(;ar exleiislori with the revisions outlined herein and at the current average
aiiiMial ()llriliij» level of 192.5 MMBF per year, should be sufficient for us lo properly
amortize our caiillal rcrqulrerrients and allow us to continue to provide a reasonable
rchirn on invcslmciil lo our shareholders and to provide economic stability for the
Ketchikan ar(;a. This exleiislon period Is well wllhln industry norms for borrowing the
$200 Miilllon wc will need. The need for an extension was recognized In the terms of
(he original (ontracl. which stal(!d the Forest Service Intention lo establish "the
opuralloM ol the Industry on a commercially sound and permanently economical basis"
and "lo aflord an opportunity lo purchase supplies of limber for permanent operation
..." riic existing long-term contract, therefore, presupposes a perpetual arrangement
between Kl'C and the Foresl Service for limber supply.
The holloMi line is: if S. 1877 and II. R. 3G59 do not become law. KPC and its
(•mi)l()yces are at risk and lac e an uncertain future. We face decisions in 1996 that
cannot he put oil inlo the future. These decisions must be made this year.
Kl'C has met Us contractual obligation to develop the economy and provide
perui.uu-nl. year round emijloyment for southern southeast Alaska. We want the
government lo meet Its contractual obligation lo provide a sufficient volume of
Page 22
Ill
economically viable timber in a timely fashion. This is the only way that KPC can
continue to operate its production facilities and continue to provide jobs and economic
stability for the communities of this isolated region beyond 2004.
In summary, the KPC operations (pulp mill, sawmills and harvesting operations)
are vital to the economic well-being of Ketchikan, the forest products industry in
southeast Alaska, and the overall economy of Alaska. The manufacturing operations
and the related Jobs require an assured supply of economic timber. The contract
extension and fairness modifications are needed to effectuate that timber supply
assurance.
Thank you again for this opportunity to testify. I would be happy to answer any
questions.
Page 23
112
ATTACHMENT A
Excerpts from consideration of the Tongass Timber Reform Act and predecessor
legislation (emphasis added):
• 136 Cong. Rec. S17, 995-999 (daily ed. October 24, 1990).
The conference agreement on H.R. 987 "protects kev fisheries and wildlife
habitat. And, importantly, the conference aigreement retains a viable,
healthy timber industry." SI 7, 996 (statement of Sen. Johnston).
• 136 Cong. Rec. S7729-S7819 (daily ed. June 12, 1990).
"On March 7, Mr. President, the Committee on Energy and Natural
Resources came to a compromise solution for this, which I believe is fair
to all interests, and serves well both the environment and the jobs left in
Alaska." S7730 (statement of Sen. Johnston).
"This proposal sought to provide for a better balance between the
commodity and noncommodity resources of the forest while protecting the
loccd economy from economic disruption." 87730 (statement of Sen.
Johnston).
113
"I think we reached a very reasonable compromise on this piece of
legislation . . . One would not weint it to appear that somehow this
legislation runs counter to the economic needs or desires of Southeast
Alaska." S7735 (statement of Sen. Wirth).
"I believe this is a balanced bill that will adequately protect this majestic
national forest in Alaska while assuring a sustainable supply of timber for
current and future needs." S7754 (statement of Sen. Bingaman).
• Act to Amend the Alaska National Interest Land Conservation
Act. to Designate Certain Lands in the Tongass National Forest
as Wilderness, and for Other Purposes: Hearings on H. R. 987
Before the Subcomm. on Public Lands, National Parks and
Forests of the Senate Comm. on Energy and Natural Resources
(pt. 3), 101st Cong., 2d Sess. (1990).
"I think it is important to state that H. R. 987 does not mean loss of
Tongass timber jobs." Id. At 119 (statement of K. J. Metcalf, Southeast
Alaska Conservation Council).
"No existing Tongass dependent timber jobs would be lost bv
comprehensive legislation." Id. at 119 (statement of K. J. Metcalf,
Southeast Alaska Conservation Council).
114
"It has never been our intention to close the pulp mill through H. R. 987.
and I do not think that thev would be closed." Id. at 309 (statement of K.
J. Metcalf, Southeast Alaska Conservation Council).
Based on Forest Service figures, "SEACC believes H. R. 987 would have
no impact on existing Tongass dependent timber jobs." Id. at 348
(statement of Bart Koehler, Southeast Alaska Conservation Council).
• 135 Cong. Rec. H3689-H3705 (daily ed. July 13, 1989).
"The new wilderness areas will not alTect the ability to meet industry
demand in the Tongass." H3684 (statement Rep. Miller).
"... certainly it is not the intention, my intention as the original sponsor
of the Tongass Timber Reform Act, to drive the timber industry out of
Southeast Alaska." H3684 (statement of Rep. Mrazek).
• House Rules Committee Transcript (undated excerpt)
"I am very much aware it is very easy to roll over the Representative from
Alaska, because it is a throwaway vote for everybody else in the lower 48.
This isn't about closing mills. This isn't about locking up the timber so
they can't have it. This is simply saying we ought to engage in modem
practices." Id. at 50 (statement of Rep. Miller).
115
• Senate Comm. on Energy and Natural Resources, Tongass Timber
Reform Act, S. Rep. No. 261, 101st Cong., 2d Sess. (1990),
reprinted in 1990 U.S.C.C.A.N 6232.
". . . the Committee has adopted an amendment in the nature of a
substitute to H. R. 987, which seeks to improve management of the
Tongass by balancing the commodity and noncommodity resources of the
forest in a manner which will not harm nor destabilize the local
economy." S. Rep. No. 261, at 31 (additional views of Senators
Metzenbaum eind Bradley).
• Acts to Reform the Tongass Timber Supply Fund, and to Amend
the Alaska National Interest Lands Conservation Act and for
Other Purposes: Hearings on S.237 and S. 346 Before the
Subcomm. on Public Lands. National Parks and Forests of the
Senate Comm. on Energy and Natural Resources (pt.2), 101st
Cong. 1st Sess. (1989).
"It is not mv intent to stop timber harvest on the Tongass National Forest,
or to close the mills in Ketchikan and Sitka, nor do I think that will
happen." Id. at 3 (statement of Sen. Wirth).
"Senate Bill 346 would not weaken the timber industry, but rather
provides the best for all. The legislation provides protection for areas
116
valuable to the wilderness recreation and visitor industry but it still
provides latitude for increased timber harvest." Id. at 131 (state of Dale
Philman. Alaska Department of Fish eind Game).
"I Cein sav that the Tongass Timber Reform Act will not effect Tongass
timber dependent employment." Id. at 208 (statement of Joseph R.
Mehrken, Southeast Alaska Natural Resources Center).
"Senator Wirth's bill would remove fifty million board feet a year from the
Tongass timber base for the protection of other forest values such eis
tourism, commercial fishing, and subsistence. The bill would also leave
the forest products industry with 400 million board feet a vear to harvest
-- enough to preserve all current logging-related jobs based on past cutting
levels." Id. at 410 (statement of Mark Kirchhoff, Port Alexander).
• Act to Amend the Alaska National Interest Lands Conservation
Act, to Designate Certain Lands in the Tongass National Forest
as Wilderness, and for Other Purposes: Hearings on H. R. 987
Before the Subcomm. on Water. Power, and Offshore Energy
Resources of the House Comm. on Interior and Insular Affairs,
lOlst Cong.. 1st Sess. (1989).
"If all 22 areas in H. R. 987 are permanently protected, the legislation
would reduce the scheduled timber hcu^est by only 1 1 percent. That still
117
provides enough timber for the Tongass dependent timber industry Lo
continue at current levels and even to expand." Id. at 23 (statement of
Larry Edwards. Southeast Alaska Conservation Council).
"H.R. 987 IS JOB NEUTRAL. Passage of H. R. 987 will have no effect on
the number of jobs in the Tongass dependent timber industry of
Southeast Alaska." Id. at 56 (statement of Larry Edwards, Southeast
Alaska Conservation Council).
Rep. Young: "What happens if the Sitka mill shuts down?"
Larry Edwards, "It's not going to. I mean, we're not going to affect the
timber base." Id. at 77.
• Acts to Reform the Tongass Timber Supply Fund, and to Am.end
the Alaska National Interest Lands Conservation Act and for
Other Purposes; Hearings on S. 237 and S. 346 Before the
Subcomm. on Public Lands, National Parks and Forests of the
Senate Comm. on Energy and Natural Resources (pt.l), 101st
Cong., IstSess. (1989).
"S. 346 IS JOB NEUTRAL. Passage of S. 346 will have no effect on the
number of jobs in the Tongass dependent timber industry in Southeast
118
Alaska." Id. at 150 (statement of Larry Edwards, Southeast Alaska
Conservation Council).
• Act to Require Annual Appropriations of Funds Necessary to
Support Timber Management and Resource Conservation on the
Tongass National Forest: Hearings on H. R. 1516 Before the
Subcomm. on Energy and the Environment of the House Comm.
on Interior and Insular Affairs. 100th Cong., 1st Sess. (1987).
"We believe that a reasonable timber harvest program on the Tongass,
coupled with adequate Investments in fish, wildlife and scenic resources,
will build and support business ventures in Southeast Alaska that can
mainteiin regional employment at current levels." Id. at 675 (statement
of Lonnie L. Williamson, Wildlife Management Institute).
119
ATTACHMENT B
Supplementary Testimony of Ralph D Lewis
Environmental Compliance at Ketchikan Pulp Company
Senate Energy Committee, July 10, 1996
House Resources and Agriculture Committee, July 1 1, 1996
This testimony is offered to inform the Committee of environmental protection and
compliance related programs, projects, activities and controls at the Ketchikan Pulp
Company While the testimony itself offers only a summary of each point raised, I am
providing for the Committee copies of many documents which detail the compliance
related activities at Ketchikan Pulp Company
Ketchikan Pulp Company complies with Federal and State laws governing environmental
protection. These laws require the company to secure, from Federal and State agencies, a
number of operating permits. Each permit requires the company to submit periodic
reports, monitoring and measurement results and inspection reports to the issuing agency
AJl of these reports and data are pan of the environmental compliance record of
Ketchikan Pulp Company and are available for public review
Testimony has been offered in this and related proceedings by groups and individuals
which is based on Ketchikan Pulp Company Company's reported information. Some of
that testimony presents the information out of the context in which it was originally
reported. Data have been interpreted without regard for scientific method, and
conclusions have been reached based on subjective values rather than objective measures
Data have been separated from regulatory reports and rearranged without regard to the
purpose for which they are collected KPC's opponents have often manipulated and
distorted data in order to illustrate theories which are designed to raise public alarm
Ketchikan Pulp Company and State and Federal regulators cannot similarly choose the
method of interpretation that best accomplishes their goals. I believe that the Committee
should have the opportunity to learn of the strict and comprehensive regulatory context in
which resource protection is actually achieved at Ketchikan Pulp Company
My testimony today presents an overview of the full scope of regulatory control over
operations and waste management at Ketchikan Pulp Company You will see from
reading the entire testimony that all contaminants of concern to State and Federal
regulators are monitored, measured, and reported according to guidelines and schedules
set by the government. Reported quantities are regularly checked against the action levels
established by environmental law. Action is taken when appropriate These reports along
with inspections by regulatory staff provide the basis which demonstrates compliance, or,
alternatively, on which enforcement action may be taken. Enforcement actions, too , are a
matter of public record.
I welcome the opportunity to offer this summary for the public record. The compliance
and enforcement history of the Ketchikan Pulp Company is already a matter of that
record. We are proud of our achievements, and accept responsibility for our shortcomings
120
and mistakes We have nothing to hide from the regulators, this Committee, or our
community.
History
Ketchikan Pulp Company (KPC) began operations in 1954 producing high quality
dissolving pulp using a magnesium bisulfite pulping process that fully recovers cooking
liquor chemicals. Most dissolving pulp mills of the era utilized the calcium based bisulfite
process which did not allow recovery and reuse of cooking chemicals
The magnesium base process was chosen to meet the pollution control requirements of
KPC's Timber Sale Agreement with the US Forest Service The initial stage of water
pollution control at the Ward Cove mill was accomplished through spent cooking liquor
capture, evaporation and incineration in specially designed chemical recovery boilers.
The mill was designed to operate continuously, twenty four hours per day, with
shutdowns for scheduled and unscheduled maintenance
Wood fiber is supplied from logs that are generally unsuitable for lumber production,
purchased wood chips and sawmill residues Logs are debarked, chipped and then
screened together with purchased chips and sawmill residues.
Wood chips are cooked under pressure in nine batch digesters using cooking liquor made
in the acid plant. Each cook takes about four hours The cooked pulp is then processed
in de-knotters and screening systems to remove uncooked chips and knots The pulp fiber
is separated from the spent inorganic pulping chemicals and dissolved organic material in a
four-stage countercurrent rotary drum vacuum washing system
Bleaching of the washed and screened pulp is accomplished in six different stages using
chlorine, caustic, hypochlorite and sulfurous acid Pulp is to be washed on rotary drum
vacuum washers after each stage of bleaching Bleach plant effluent streams that are not
recycled are discharged either to a secondary treatment facility or an effluent
neutralization system.
The fully bleached pulp receives final removal of fine dirt in centrifijgal cleaners prior to
dewatering and drying on a conventional pulp machine The final product is cut and baled
or wound into mini rolls and wrapped for shipment to customers worldwide.
Collected spent cooking liquor is fed to multiple effect evaporator systems where water is
removed to a degree that allows the material to sustain combustion Condensates from
the evaporation process are sent to a secondary treatment facility and the concentrated
cooking liquor is burned in four chemical recovery boilers
Combustion of spent cooking liquor results in the generation of energy that is converted to
steam, recovery of sulfur dioxide and magnesium oxide Flue gases from the recovery
121
boilers first undergo particulate removal to collect magnesium from the fly ash in the form
of magnesium oxide (MgO). A small percentage of makeup MgO is combined with
recovered MgO and is used as a base to recover sulfur dioxide from cooled flue gas in a
series of absorption towers
The recovered chemicals, which have been convened to magnesium bisulfite in this
process, become a weak raw acid from which cooking liquor is made by fortification with
sulfur dioxide Primary fortification is accomplished by burning molten sulfur to produce
sulfur dioxide and absorbing it into weak acid in a packed tower Final strengthening of
the cooking liquor is accomplished through absorption of sulfijr dioxide under pressure in
an accumulator system using relief gases from the digesters The entire recovery process
is essentially a closed loop system with only water and make up chemicals being added.
In addition to the steam produced by the recovery boilers, steam is supplied to the process
by two multi-fuel power boilers and one oil fired boiler Bark, sawdust, knots, primary
and secondary sludges and oil are combusted in the multi-fliel boilers which are equipped
with electrostatic precipitators to control air emissions The oil-fired package boiler has a
wet scrubber for sulfur dioxide removal and a low NOx combustion system
Steam produced from the boilers is used throughout the manufacturing process and is also
used to generate electricity for the operation A peak total of 38 megawatts of electricity
can be produced fi^om three turbine generators. Which, typically generate 28 megawatts
of electricity for process needs.
Dissolving-grade sulfite pulp is a very specialized, high value product. It is an extremely
pure form of cellulose fiber that has special properties because of the wood species used
and the purification provided by the processes employed at the mill The product is used
throughout the world to manufacture a wide variety of high- value products including the
following.
Viscose Rayon—Clothing, upholstery, curtains, carpeting, cellophane/packaging and
sponges.
Cuprammonium Rayon—Artificial kidneys, high-fashion clothing, women's
undergarments, suit lining and non-wovens such as disposable protective clothing.
Nitro Cellulose— Dice, encapsulated electronic equipment and other moldable products,
high-quality high-speed printing inks, explosives and high quality lacquers.
Microcrystalline Cellulose— Pill and caplets, dietary bakery goods, emulsifiers such as
sandwich spreads and salad dressings, low-calorie ice creams and cosmetics
Carboxymethyl and Ethyl Cellulose-Emulsifiers Tor paints and coatings
122
specialties—Formica, artificial leathers, molded luggage and laminates, tissue and specialty
papers
Wastewater Management
Wastewater treatment facilities at Ketchikan Pulp Company Company's Ward Cove
facility consist of the following:
(a) A 1 90 foot diameter primary clarifier that handles waste streams containing settleable
solids
(b) A secondary biological treatment system consisting of a 9 million gallon aeration basin
and two secondary clarifiers of 90 and 160 foot diameters. This system treats high strength
dissolved organic waste streams.
(c) A 5 chamber effluent neutralization system that neutralizes high and low pH waste
streams.
(d) Two large steam injected screw presses that handle dewatering of combined primary
and secondary waste sludges prior to burning in the multi-fuel power boilers.
NPDES Permit
Wastewater discharge at Ketchikan Pulp Company (KPC) is regulated under National
Pollution Discharge Elimination System (NPDES) permit No AK-000092-2 issued by the
USEPA for industrial discharges to Ward Cove, Alaska This permit, issued in August
1994, was issued for a period of 5 years and is due to expire August 6, 1999.
KPC's current permit regulates two separate industrial discharges, as well as intermittent
stormwater outfalls originating from within the pulp mill complex, Ketchikan Sawmill, and
the solid waste landfill
This NPDES Permit contains monitoring requirements for the following parameters at the
indicated frequency:
Parameter
Frequency
Temperature
Continuous
Flow
Continuous
pH
Continuous
BOD5
Daily
Dissolved Oxygen
Daily
TSS
Daily
Manganese
Weekly
Copper
Weekly
123
Chlorine
Weekly
Color
Weekly
Cadmium
Weekly
Chromium
Weekly
Nickel
Weekly
Zinc
Weekly
Total Hydrocarbons
Weekly
Sulfide
Weekly
Mercury
Weekly
Manganese
Weekly
Chronic Toxicity
Monthly
Production
Monthly
AOX
Quarterly
2,3,7,8,TCDF
Quarterly
2,3.7,8,TCDD
Quarterly
Acute Toxicity
Quarteriy
Resin Acids
Quarterly
Fatty Acids
Annually
Chlorophenols
Quarterly
Guaiacols
Quarterly
6-chlorovanillin
Quarterly
a-terpineol
Quarterly
5,6-dichlorovanillin
Quarteriy
2-methyl-2-
cycIopenten-1-one
Quarteriy
3,4,5-
trichlorosyringol
Quarterly
3-methyl-2-
cyclopenten-1-one
Quarteriy
Chloroform
Quarterly
Acetone
Quarterly
Methyl Ethyl Ketone
Quarterly
Methylene Chloride
Quarteriy
Annual
chlorphenolic
biocide nonuse
certification
Annually
In addition to the above , KPC is also required to monitor an internal sanitary waste
stream on a biweekly basis for BOD5, TSS, and Fecal coliform bacteria.
Compliance with the above NPDES requirements at KPC involves a number of monitoring
programs specified in the permit The Clean Water Act specifies that monitoring is to be
26-689 - 96
124
done by the permittee and reported to the regulatory agency. For all monitoring required
by the NPDES permit, Ketchikan Pulp Company has developed Standard Operating
Procedures (SOPs) which are in use and on file with EPA Region 10 The SOP's are
developed from EPA approved testing and sampling protocols EPA Region 10 conducts
an annual inspection of the KPC facility, and adherence to these SOP's is evaluated by
EPA at this time. The mill produces a chlorinated organics report on a quarterly basis as
required by the NPDES permit The first report was produced during the fourth quarter
of 1994. The report provides test results for a specific list of chlorinated organics for
eight sample locations. Sample locations include the combined outfall (001), chlorination
stage effluent, caustic soak stage effluent, hot caustic extract effluent, combined
hypochlorite stage effluent, sulfijr dioxide stage effluent, bleached pulp from the bleach
plant, and sludge from the rotary screen thickeners which are directly ahead of the sludge
screw presses.
Annual stormwater reports are required by the mill NPDES permit Samples from three
stormwater events are collected and tested for polycyclic aromatic hydrocarbons (PAHs)
and benzene, toluene, ethylbenzene, and xylene (BTEX) in addition to conventional
pollutants. The results for all sampling locations are averaged and presented in a summary
table.
The mill's NPDES permit. No. AK-000092-2, requires routine monitoring and monthly
reporting for federally established standards on biochemical oxygen demand (BOD), total
suspended solids (TSS), temperature, and pH. Many of the wastewater constituents, such
as chronic and acute toxicity, AOX, chlorinated organics, metals, color, residual chlorine,
sulfide, and total petroleum hydrocarbons, are routinely tested for and reported according
to established frequencies. Other information such as production, effluent flow rate, and
stormwater runoff information are also submitted
For those parameters for which KPC is required to monitor continuously, appropriate
monitoring equipment is installed and is operated according to the manufacturers'
specifications with appropriate calibration Backup apparatus are also installed to ensure
continuous monitoring should the primary equipment fail.
For those parameters for which KPC is required to monitor daily, appropriate sampling is
performed using a one time "grab" or 24 hour composites, and these samples are analyzed
daily at KPC and/or contract laboratories for the required parameters Some parameters
are analyzed by KPC in-house following the approved Standard Procedures For the
majority of parameters, however, the analyses are performed by Columbia Analytical
Services of Kelso, WA. These samples are collected on Monday mornings, and shipped
for analysis to CAS under proper chain-of-custody control . The results are provided to
KPC monthly for regulatory reporting purposes
All quarterly required parameters are monitored during intensive quarterly sampling events
as required by the NPDES permit. This includes sampling of various bleach plant waste
streams, outfall 001, sludge, and fully bleached pulp. The purpose of this program is to
125
document current rates of formation of 2,3,7, 8-TCDD and TCDF, AOX, and to
characterize the final effluent in terms of TSS, and 2,3,7,8-TCDD and TCDF
During this sampling, concurrent monitoring for both acute and chronic toxicity is also
required. Acute testing is performed using a specified protocol for a 96 hour static
renewal testing with inland silversides as the test species. This testing is performed for
KPC by Northwestern Aquatic Sciences (NAS) of Newport, Oregon
Chronic testing is required to be performed using either an echinoderm sperm cell
fertilization test (Dinnel, 1987), or a bivalve embryo larval development test (ASTM E
724-89) KPC is actively pursuing measures to reduce the chronic toxicity of the mill
effluents. For this reason, KPC typically conducts both tests on all effluent samples. All
of this testing is performed for KPC by Telonicher Marine Laboratories of Trinidad
California To date for NPDES Permit No AK000092-2, KPC has spent approximately
$250,000 dollars for chronic toxicity testing
In addition to permit specific monitoring and reporting, the National Pollutant Discharge
Elimination System (NPDES) Form 2C provides a listing of conventional pollutants,
metals, cyanide, phenols, volatiles, acid compounds, basic compounds, and other
substances present in KPC's waste streams The form is completed during the NPDES
permit application period and is a matter of public record
Finally, KPC is required to implement several other programs to demonstrate compliance
with NPDES Permit No. AK-000092-2.
The first of these is the Best Management Practices (BMP) Plan. This was a new
requirement for KPC and was made a requirement of the 1994 permit. The intended
purpose of the plan is to minimize the generation and potential for the release of pollutants
from the facility to the waters of the United States through normal operations and ancillary
activities. This plan is being implemented by KPC. Additional employees have been hired
to assure that BMP incident reporting, follow-up analysis and appropriate action occur
The second of these is KPC's stormwater monitoring program. Since KPC applied for
federally required stormwater permits for all of its facilities, stormwater permits for both
the KPC facility and the KSM facility are incorporated into NPDES Permit No. AK-
000092-2. Under this program, KPC is required to monitor COD, TSS, pH, oil and
grease, PAH's, total hydrocarbons, benzene, ethylbenzene, toluene, and xylene three times
per year at each respective stormwater outfall. Also, during the summer months, KPC is
required to monitor the BOD and dissolved oxygen content of each outfall twice per
calendar month. Since the inception of NPDES Permit No. AK-000092-2 in 1994, KPC
has installed a comprehensive stormwater collection system designed to both reduce the
number of outfalls and to increase the quality of the discharge from the KPC facility. This
system is nearly complete and 1996 will be the first year in which monitoring of these new
outfalls is to occur.
126
The third of these programs is the receiving water monitoring program The purpose of
this program is to monitor the water quality of Ward Cove, which is the direct receiving
water for KPC's two discharge pipes This program is conducted every two weeks at
twelve stations throughout Ward Cove and Tongass Narrows Monitored parameters
include sulfite waste liquor, dissolved oxygen, pH, salinity, temperature, Secchi disk
depth, turbidity, and color Dissolved oxygen, temperature , pH, salinity, and turbidity are
monitored every meter for the first five meters from the surface of Ward Cove and then
every five meters to the bottom This profile is then repeated for each station from the
bottom to the surface For sulfite waste liquor and color, samples are collected from both
1 and 5 meters fi"om the surface and analyzed R&M Engineering of Ketchikan performs
all of the sample collection and testing for KPC with the exception of the analysis of the
color samples. This testing is performed by KPC's internal compliance laboratory utilizing
SOP's developed under the guidance of Standard Methods 2120B
The fourth of these programs is the annual sediment monitoring studies carried out at the
same twelve stations throughout Ward Cove and Tongass Narrows KPC is required to
analyze appropriate sediment samples from each of these sites for all congeners of TCDD
and TCDF, total organic carbon, PAH's, cadmium, arsenic, zinc, phenol, 4-methylphenol,
benzoic acid, acid volatile sulfides, EOX, methyl mercury, and toxicity using marine
amphipods, larval sanddollars and purple sea urchins Procedures for this testing have
been mandated by EPA guidance. Reports, which include thorough discussions of
sampling and analytical methodologies and QA/QC procedures, are submitted to the EPA
on an annual basis. To date, two such studies have been conducted and submitted as
required to EPA.
The fifth of these programs is the annual bioaccumulation monitoring program conducted
in the vicinity of the discharge KPC's NPDES permit provides specific direction on how
this sampling is to be done Due to the absence of the specified organisms in Ward Cove,
an alternative bioaccumulation monitoring program has been established by agreement
between EPA and KPC. This involves the use of established protocols for
bioaccumulation monitoring of both the sediment and the water column in the vicinity of
the outfall Reports, which include detailed presentation of sampling and analytical
methodologies and QA/QC procedures, are submitted to the EPA on an annual basis To
date, two such studies have been conducted in Ward Cove and submitted to EPA
The final program is a comprehensive study of solids deposition. This program is
designed to provide information about the nature and extent of solids deposition in the
receiving water originating fi-om KPC's discharge This study has been completed and has
been accepted by the EPA EPA advised Ketchikan Pulp Company that the report
provides a level of effort and information far beyond that which was required by the
permit Through this study, KPC has shown that with respect to the company's current
waste streams, very little deposition of solids occurs in Ward Cove This is due to the
effluent treatment systems installed in past years
127
Recent Enrorcement
Wastewater management at Ketchikan Pulp Company was the subject of a lengthy
investigation by the United States Environmental Protection Agency which began in 1991
In the spring of 1995 Ketchikan Pulp Company and the United States of America reached
agreement and settlement of issues that arose from this investigation and which concerned
environmental compliance The agreement resulted in criminal, civil and administrative
proceedings, and defined projects and related undertakings that are now being
accomplished by Ketchikan Pulp Company
The Government charged Ketchikan Pulp Company with discharging pollutants in
violation of the terms of its wastewater discharge permit and for discharging pollutants
without a permit Ketchikan Pulp Company entered a guilty plea to one felony and
thirteen misdemeanor violations of the Clean Water Act.
The felony violation occurred in April 1990 when Ketchikan Pulp Company shut down for
scheduled maintenance to its primary clarifier During this shutdown, a ponion of
collected solids from the primary clarifier were discharged into Ward Cove. The
wastewater system in place at that time could not effectively remove all collected solids
from the wastewater. The discharge of water containing any collected solids from the
clarifier is prohibited per se, even if the solids discharged do not exceed any applicable
total suspended solids effluent limitations in the permit
The misdemeanor violations occurred on thirteen days during a period from January, 1991
through December, 1993 when Ketchikan Pulp Company negligently allowed wastewater
containing magnesium oxide to overflow from two sewer manholes The overflows
occurred because the sewer piping from the powerhouse to the main sewer was too small
to handle the volume of powerhouse wastewater, particulariy during periods when high
tides exerted pressure on the sewer. The overflow flowed downhill into the waters of
Ward Cove. Under normal operating conditions, effluent from the powerhouse is
discharged through the permitted outfall "001"
The conditions that gave rise to both felony and misdemeanor charges have been changed
with new designs, installations, and programs which KPC believes have eliminated the
potential for reoccurrence.
Ketchikan Pulp Company was fined and placed on probation for five years with an
opportunity for early termination after one year
Ketchikan Pulp Company obligations under the criminal proceeding include:
Implement a program to improve the quality of wastewater discharges.
There are presently three components elimination of the use of elemental
chlorine in the pulp process, evaluation of toxicity parameters, and
128
improvement of the discharge characteristics of the Company's wastewater
outfalls.
• Implement an environmental policy that sets forth the individual responsibilities
of employees with respect to the environment
Ketchikan Pulp Company has instituted employee training that will provide
employees at all levels with information about State and Federal environmental
laws. More specific training in the monitoring, reporting and control required
by law and permit will be provided for those with specific job responsibilities
which include environmental compliance.
• Prevent unpennitted discharges and implement management practices to
prevent spills.
KPC has developed an unpermitted discharge program to minimize the
potential for non routine discharges These issues are also addressed by several
of the elements of the civil Consent Decree described below
• Implement components of the Consent Decree as it relates to wastewater
For a description of all Consent Decree components, see below.
• Implement the Environmental Compliance Program described in the pre-
sentencing report.
This document is titled "Corporate Responsibility Program" and is attached.
• Fine: $3 million, $1.75 million to be offset by expenditures for the projects
described above.
• Provide quarterly reports to the Court, Office of Probation, and the
Department of Justice on the status of the implementation of the
Environinental Compliance Program
The Company and the Government entered into a Consent Decree in order to settle the
claims brought by the Government under the civil enforcement provisions of the Clean Air
and Clean Water Acts. The Consent Decree provides for a substantial penalty, as well as
the implementation of injunctive measures designed to remedy Ketchikan Pulp Company
Company's noncompliance with the two Acts and to improve its compliance with State
and Federal environmental laws
Ketchikan Pulp Company obligations under the Consent Decree:
Develop and implement the following:
10
129
• Wastewater treatment operator certification treatment plant operators must be
State-certified, and documentation maintained
• Spill containment program study the potential for spills, and design systems
for preventing and containing spills, evaluate the feasibility of recycling
treatment and non-wastewater disposal of spilled materials Containment of
spills will reduce the toxicity of Ketchikan Pulp Company Company's effluent
• Water treatment plant discharge elimination define, describe and plan for the
steps which are necessary to prevent the direct discharge of filter backwash or
basin drawdowns to the filter plant outfall
• Laboratory monitoring and improvement program: develop a standard
operating procedure for testing BOD, and describe in detail the steps for
laboratory analysis, identify a single seed source for conducting all BOD
analyses, develop a standard operating procedure for data entry review.
• Ward Cove sediment project develop a technical studies work plan to
characterize sediments in Ward Cove, evaluate results, identify alternatives for
remediation, if necessary; and implement a remediation plan. This project is
not to exceed S6 million
• Source test emissions from the recovery boilers: test for particulate matter and
sulfur dioxide and take all steps necessary to correct if violations of the Clean
Air Act are discovered by the testing
• Mass balance study for sulfijr: conduct a facility wide mass balance study in
order to reduce the discharge and emission of sulfur
• Environmental audit: retain an independent environmental audit firm to
develop and conduct an audit that will focus on both compliance and
effectiveness of compliance assurance systems and management structure.
• Operations and maintenance program design a program of operations and
maintenance procedures that will minimize pollution at the mill.
• Pollution prevention study identify areas where discharges or emissions of
pollutants, especially toxics, can be reduced including fijgitive emissions,
stormwater and plant processes.
• Civil Penalty: $3,111 million
The Company entered into a Compliance Agreement with EPA which achieves a
settlement of any potential suspension and debarment issues with respect to Federal
procurement and non-procurement activities which could have resulted from the entry of a
guilty plea to the felony and misdemeanor charges The agreement reflects EPA's
130
determination that the conditions that gave rise to the criminal convictions will be
corrected by the many activities described in the Compliance Agreement and the related
legal orders, and therefore, suspension or debarment is not necessary to protect the public
interest.
The term of the agreement is five years with an opportunity for early termination after
three years.
Ketchikan Pulp Company obligations under the Compliance Agreement:
Develop and implement the following:
• Statement of environmental commitment: includes all managers who will be
required to sign a commitment to avoid illegal environmental acts
• Non-reprisal policy: protects those who report environmental problems from
reprisal of any kind
• Ethics policy: contains a commitment to comply with environmental laws,
ethical guidelines for daily business; policy governing conflict of interest, and a
commitment to appropriate disciplinary action for violations of environmental
laws.
• Corporate disclosure policy: requires an anonymous and protected
communication system by which environmental problems may be reported to
the company president, investigation and follow-up actions must be
documented
• Pollution prevention policies: references the studies to be performed under the
Consent Decree, as well as the Best Management Practices plan required by
the NPDES permit
• Corporate Responsibility Program: this is identical to the Environmental
Compliance program developed in conjunction with the criminal proceedings.
• Environmental management and engineering plan: describes the Best
Management Practices plan which is mentioned also in connection with
pollution prevention policy development
• Internal compliance audit schedule sets a schedule of audits to be conducted
over the term of the agreement
• Environmental compliance: reaffirms Ketchikan Pulp Company Company's
commitment to full compliance.
12
131
• Training: requires extensive training in environmental compliance, ethics, and
management practices
Ketchikan Pulp Company is currently on schedule to satisfy all requirements of the
criminal, civil and administrative proceedings described in the previous paragraphs.
Future Wastewater Management
Ketchikan Pulp Company has planned for several years to relocate the discharge outfall to
Tongass Narrows. EPA has issued a draft NPDES permit for the new location This
extended outfall is designed to provide improved dispersion of KPC's discharge and to
reduce the impact of mill operation on Ward Cove, which is currently listed as an impaired
water body and has a Total Maximum Daily Limit (TMDL) for Biochemical Oxygen
Demand (BOD) The permit must be certified by the State of Alaska under Section 401 of
the Clean Water Act. The purpose of the State certification is to assure that the discharge
will meet all State Water Quality Standards In the past, discharge permits were
technology-based so KPC is now taking a giant step to meeting water quality standards in
the receiving waters Standards are designed to protect water use and establish
parameters and controls for fecal coliform bacteria, dissolved gas, pH, turbidity,
temperature, dissolved inorganic substances, sediment loads, toxics and other deleterious
organic substances, color, petroleum hydrocarbons, oils and grease, radioactivity, total
residual chlorine, and whole effluent toxicity. State water quality regulations contain
provisions (under very strict guidance) for a mixing zone in which water quality standards
may be exceeded. This permit, once certified, will be in effect for five years
ADEC has requested comprehensive technical and analytical information to support this
new outfall describe how its discharge will affect water quality in Tongass Narrows KPC
and ADEC are working cooperatively with EPA to finish this certification and have set a
schedule which contemplates certification in early 1997
Information provided to ADEC by KPC includes Human Health and Ecological Risk
assessments of the impact of the new outfall to Tongass Narrows (2 versions), a baseline
biological study of the new Tongass Narrows outfall location (2 versions), a baseline
sediment study of the new Tongass Narrows outfall location (2 versions), Tongass
Narrows outfall design and oceanographic conditions (2 versions), as well as responses to
90 specific questions generated by ADEC
The Tongass Narrows permit is essentially the same as the current Ward Cove permit
(AK-000092-2). Water column and sediment monitoring will be expanded to include
coverage of Tongass Narrows. The State certification of the Tongass Narrows permit is
planned to include a mixing zone. The Ward Cove permit was issued without a mixing
zone because of a decision made by the State not to certify it under Section 401, but to
concentrate on certification of the Tongass Narrows discharge
13
132
In addition to this specific program for quarterly monitoring, KPC will continue to be
required to maintain the following additional programs which were implemented with the
present permit.
• Best Management Practices (BMP) Plan This plan has been implemented by KPC and
will continue to be in force after final certification of the Tongass Narrows permit
• Stonmwater Monitoring Program. Under this program, KPC will continue to monitor
COD, TSS, pH, Oil and Grease, PAH's, Total Petroleum Hydrocarbons, Benzene,
Ethylbenzene, Toluene, and Xylene three times per year at each respective stormwater
outfall. Also, during the summer months, KPC will continue to monitor the BOD and
dissolved oxygen content of each outfall twice per calendar month
• Receiving Water Monitoring Program The original purpose of this program was to
monitor the water quality of Ward Cove, which is the direct receiving water of KPC's
discharge. This program will continue to monitor Ward Cove after the certification of
the Tongass Narrows Permit and after the relocation of the outfall
• Annual Sediment Monitoring Studies. The annual sediment monitoring studies carried
out at the same specific twelve stations throughout Ward Cove and Tongass Narrows
Currently, KPC is required to analyze appropriate sediment samples from each of these
sites for all congeners of TCDD and TCDF, total organic carbon, PAH's, cadmium,
arsenic, zinc, phenol, 4-methylphenol, benzoic acid, acid volatile sulfides, EOX, methyl
mercury, and toxicity using marine amphipods, larval sanddollars and purple sea
urchins. KPC is anticipating that this requirement will continue after certification of
the Tongass Narrows permit. Procedures for this testing will continue to follow strict
USEPA guidance. Reports, which will include thorough discussions of sampling and
analytical methodologies and QA/QC procedures, will continue to be submitted to the
EPA on an annual basis, if required.
• Annual Bioaccumulation Monitoring Program The annual bioaccumulation
monitoring program is conducted in the vicinity of the discharge KPC is anticipating
that this requirement will change with the certification of the Tongass Narrows permit
Current negotiations with ADEC have indicated that ongoing monitoring of the
Tongass Narrows outfall location will occur, possibly including bioaccumulation
monitoring.
Air Emissions Control
Overview
Air quality issues at the KPC facility are governed primarily by the State of Alaska through the
Alaska Department of Environmental Conservation (ADEC). State statutes and regulations
are incorporated into the State Implementation Plan (SIP) Once approved by EPA, the SIP is
enforceable under Federal law The State does not yet have authorization to enforce all
14
133
applicable Federal Clean Air Act requirements In the absence of applicable State standards,
certain Federal air requirements (eg. New Source Pertbrmance Standards) are enforced
directly by the Environmental Protection Agency (EPA) in the absence of comparable State
law
KPC has seven boilers at its facility which are used to generate power and recover chemicals
from the pulping processes KPC's powerhouse produces steam for process heating and to
drive two 10,000 KWH turbine generators and one 18,000 KWH turbine generator These
boilers are the primary source of air emissions at the KPC facility Emissions also result from
the pulp production processes and the facility's wastewater conveyance system and treatment
facilities.
Regulatory Authority
KPC is currently operating under the authority of a consent decree entered into between it and
the State of Alaska in May 1995
In April 1995, KPC completed a study to satisfy 18 AAC 50 1 10 This section of the Alaska
Administrative Code provides that "No person may permit any emission which is injurious to
human health or welfare, animal or plant life, or property, or which would unreasonably
interfere with the enjoyment of life or property " The purpose of the study was twofold: (1)
model ambient concentrations of pollutants (2) determine the risk that these pollutants pose to
human health and the environment The study was conducted using computer dispersion
modeling and the most current information regarding health risks It is common in the air
quality field to attempt to predict the ambient concentration of pollutants using computer
generated models. The modeled concentrations of pollutants can then be assessed to determine
potential compliance with the National Ambient Air Quality Standards (NAAQS) or
alternatively, can be used to predict the risk posed to human and ecological receptors at the
modeled locations.
KPC's April 1995 study indicated that the facility had the potential, under certain worst case
operating and meteorological conditions, to exceed applicable ambient air standards for sulfur
dioxide and oxides of nitrogen. The study also indicated that the risk to human health posed by
chloroform emissions merited further analysis Based on these results, the State of Alaska was
unable to renew KPC's air operating permit upon its expiration in May 1995 A then existing
provision of State law required compliance with 1 8 AAC 50 1 10 as a condition for reissuance
of an existing air operating f)ermit
In May 1995, KPC entered into a consent decree with the State of Alaska to resolve ambient
air and human health issues raised by the April 1995 study The consent decree required KPC
to undertake a comprehensive modeling analysis for fine particulate matter, sulfijr dioxide,
carbon monoxide, total reduced sulfijr, nitrogen dioxide, lead, and chloroform Based on the
April 1995 study, ADEC preliminarily determined that these pollutants had the potential to
cause noncompliance with the NAAQS or posed unacceptable risks to human health. The
15
134
consent decree also required KPC to develop and implement a program to monitor the ambient
concentrations of sulfur dioxide and particulate matter
The follow-up modeling study was conducted during the summer of 1995 utilizing facility-
specific emissions data (as opposed to generic industry emissions factors) as well as a more
refined dispersion model and health risk assessment model
The follow-up modeling study indicated that KPC's emissions were in compliance for certain
standards but yielded inconclusive results with respect to sultur dioxide and particulate matter.
With respect to these pollutants, the follow-up modeling indicated that the facility had the
potential to exceed the NAAQS under certain worst case conditions Under most
circumstances, modeling is believed to be overly conservative in estimating ambient air
emissions. One way to test this hypothesis is through ambient monitoring.
KPC commenced its ambient monitoring program in February 1 996 at two locations near the
pulp mill facility. The monitors are programmed to assess ambient concentrations of
particulate matter and sulfijr dioxide Thus far, the monitors have recorded one exceedance of
the three hour standard for sulfijr dioxide in June 1 996 This exceedance occured in June
19%. It resulted fi^om an operational upset at the pulp mill which released approximately
twenty-five pounds of sulfiir dioxide into the ambient environment KPC recognizes that this
operational upset could recur and intends to install a scrubber to capture sulfijr dioxide
emissions at the source
The consent decree also required KPC to undertake a comprehensive modeling and health risk
assessment of chloroform emissions. KPC tested emission sources at its facility to detemiine
the concentration of chloroform emitted under typical operating scenarios This data was then
incorporated into a computer model to determine potential ambient concentrations of
chloroform resulting fi-om KPC's processes. From this, KPC conducted a refined health risk
assessment utilizing a range of probable receptor variables After extensive review by ADEC
and air toxicology consultants retained by KPC, the State of Alaska determined that the risk of
increased cancer posed by KPC's chloroform emissions was acceptable and within the State's
risk level of one in one hundred thousand (1/100,000) Moreover, anticipated process changes
to KPC's bleach plant (ECF conversion, discussed above under Recent Enforcement) are
expected to significantly reduce chloroform emissions (up to 40%) thereby fijrther lowering the
potential risk to human health posed by chloroform emissions.
The existing consent decree incorporates by reference numerous provisions fi^om the expired
air permit. In eflFect, it is the fiinctional and legal equivalent of an air operating permit and has
been treated by KPC and ADEC as such
Currently, ADEC is in the process of finalizing the most recent draft air operating permit. The
permit is expected to be issued in the summer of 1996
16
135
Sources and Emissions Controls
As discussed above, emissions from the KPC facility result primarily from two multi-fuel-fired
power boilers, one oil-fired package boiler, tour chemical recovery boilers, two acid plants,
nine digesters, bleach plant, wash plant, water treatment facility, miscellaneous storage and
process tanks, and associated equipment and activities These sources and the specific stacks
or vents through which emissions are released to the ambient environment have been approved
by ADEC and are subject to extensive and comprehensive monitoring and reporting
requirements.
Package Boiler. KPC's oil-fired package boiler was constructed in 1988 and is rated at 1 53
million Btu per hour. This source was constructed after the promulgation of applicable Federal
New Source Performance Standards (NSPS) and is regulated primarily by EPA under the
regulatory standards found in 40 C F R part 60 The NSPS impose limits for sulfijr dioxide,
nitrogen oxides, and opacity NOx is limited to 0 300 Ib/NlMBtu A Dynawave Scrubber was
installed to ensure compliance with a requirement to remove 90 percent of sulfijr dioxide. In
addition, the concentration of sulfijr dioxide is limited by regulation to 500 parts per million
(ppm)
The boiler has continuous emission monitors (CEMs) on the scrubber inlet which measure
nitrogen oxides, sulfijr dioxide, oxygen and opacity At the outlet, CEMs measure sulfijr
dioxide and oxygen. In the fijture, it will be a permit requirement to conduct visual readings
(using a "certified eye" aka Method 9) for opacity during certain maintenance procedures and
during startup scenarios when it is feasible to do so
Power Boilers. The two multi-fijel boilers (power boilers) are regulated primarily by ADEC.
They typically bum No 6 low sulfijr fijel oil, bark, sawdust, knots, waste treatment sludge,
paper, used sorbent pads, and used oil The power boilers have limitations on sulfijr dioxide,
nitrogen oxides and opacity. The sulfijr dioxide is limited to 500 ppm Nitrogen oxides are
limited under a facility wide limit of 863 tons per year calculated on a monthly rolling basis.
This limit was established to ensure compliance with Federal Prevention of Significant
Deterioration (PSD) requirements
Each power boiler is equipped with a mechanical fly ash collection device followed by an
electrostatic precipitator (ESP) for control of particulate emissions Each boiler has pressure
recovery staged combustion burners low to help control NOx burners and CEMs to monitor
nitrogen oxides, carixjn monoxide, sulfijr dioxide, oxygen, and opacity.
Recovery Boilers. KPC's four recovery boilers are used to recover chemicals from the pulping
process as well as generate power to operate the facility Emissions from KPC's four recovery
boilers are sent to two separate absorption systems to collect and recycle sulfiir dioxide. The
reclaimed sulfijr is used in the process To control particulate emissions, the recovery boilers
have multi-clones as well as sbc Brinks canisters Each Brinks canister contains 28 filter
elements which are packed with polyester fibers that trap and control particulate emissions.
17
136
KPC is in the process of conducting a trial to bum secondary sludge (generated in the waste
water treatment facilities) in the recovery boilers Although it is dewatered using a device
called a screw press, it is nonetheless quite moist and can be difficult to bum Currently,
primary and secondary sludge is mixed with wood waste and bumed in the power boilers The
high moisture content of sludge has the potential to cause emissions problems KPC believes
that burning sludge in the recovery boilers will obviate the need to dispose of it in the power
boilers and allow for a better lliel mixture in the power boilers. It is believed that these changes
will improve the power boilers' emissions characteristics.
KPC has extensive reporting requirements to ensure that governmental agencies and citizens
have comprehensive, up to date information on the facility's air emissions Under Federal law,
KPC is required to immediately report certain gas leaks to appropriate State, local, and national
authorities. KPC is also required to report sulfur dioxide and chlorine releases under its air
permit/consent decree ADEC also requires KPC to verbally report within 24 hours any
emission control equipment failure or emission control unit bypass, process upsets that may
cause exceedances of applicable air requirements, and opacity exceedances which last for more
than twenty minutes Under the proposed air operating permit, KPC will be required to report
any releases of mist or foam from the wastewater treatment systems which have the potential
to migrate oflf-site. KPC is implementing engineering measures which the Company believes
will eliminate the potential for off-site transport of foams and mists from the wastewater
treatment system
KPC submits quarterly reports to both EPA and ADEC These reports contain comprehensive
data on operations and air quality processes including:
• number of hours or operating days for emission sources,
• tons ofair-dried pulp produced,
• amount of steam produced by the boilers;
• amount of No. 6 low sulfur fuel oil used;
• amount of heavy red liquor solids bumed in the recovery boilers;
• type and quantity of any paper, charcoal, and used oil spill absorbent material
bumed in the multi-fuel boilers;
• sources test results for the power boilers and the package boilers;
• percent of the time the ESP fields are energized;
18
137
daily calculation of fuel-bound sulfur based on oil usage,
amount of nitrogen oxides produced in the package boiler, power boilers, and the
Komatsu log loader;
opacity results;
repairs that were undertaken which affect emissions,
sulfur dioxide emissions form the recovery system;
concentration of sulfur dioxide in the Brinks stack;
particulate emissions from the recovery system,
source test results for the Brinks stack,
reports of when diesei is burned in the package boiler,
nitrogen oxides emissions for the package boiler;
operating parameters for the ESP and Brinks systems;
a summary of all verbal and written excess emission reports;
opacity incidents that violate State standards,
instances where the three hour average for suifijr dioxide exceeds 500 ppm;
instances where the sulflir dioxide removal on the package boiler is less than ninety
percent for greater than three hours,
the total sulfur dioxide emitted as excess emissions,
instances where air pollution control equipment was bypassed;
Enforcement
When the package boiler was construaed in 1988, EPA determined that KPC did not follow
all the mandatory pre-construction requirements found in 40 C F R part 60. These allegations
were settled by consent decree. The consent decree was entered with the court in September
1995 and is discussed in greater detail above under NPDES Permit.
19
138
In March 1995, KPC received a NOV from the State of Alaska alleging that it exceeded
applicable opacity and particulate standards and associated reporting requirements. The
exceedances were determined to have been caused by Bnnks Canisters (emission control ur^its)
that, due to age and design problems, were no longer effective in ensuring compliance with
particulate emission limits applicable to the recovery boilers This matter was settled with
ADEC and resulted in the payment of a penalty of S2 1,908 to the State as well as a schedule to
install an additional (seventh) Brinks Canister KPC believes that the additional Brinks Canister
will give it more flexibility to perform maintenance and related activities on existing Brinks
Canisters) without compromising the pollution control effectiveness of the system
As discussed above, the existing consent decree was entered into by ADEC and KPC in May
1995. In addition to the projects, studies, and reporting requirements imposed upon KPC by
the decree, ADEC also has the authority to seek stipulated penalties for violations of consent
decree conditions ($5,000 per violation) and exceedances of opacity limits ($500 per violation)
ADEC has assessed stipulated penalties for opacity exceedances
KPC has retained an outside consulting/engineering firm to study its powerhouse and
determine ways to improve boiler performance and minimize opacity exceedances. In the
context of permit negotiations with ADEC, KPC proposed to incorporate a number of the
consultant's recommendations into the consent decree and/or permit as enforceable conditions
When the draft permit is finalized, KPC will be required to implement a number of the
recommended measures ranging from enhanced powerhouse employee training to engineering
and equipment improvements. These are designed to improve the operating performance of
the boilers and reduce the potential for opacity exceedances
Solid Waste Management
KPC currently operates two contiguous solid waste landfills located adjacent to the pulp
mill at approximately Mile 9, North Tongass Highway These two landfills, the Ash
Landfill, and the Wood waste Disposal Site, are regulated by the ADEC Solid Waste
Program and are thus subject to regulation under 1 8 AAC 60 Landfill leachate, as well as
stormwater, are also regulated under the existing KPC NPDES permit.
Both landfills are managed in a series of lifts, with impermeable membranes installed
between lifts. Both landfills also have a leachate collection system that routes landfill
leachate to the pulp mill secondary treatment system prior to discharge
The Ash landfill is permitted to accept solid wastes under Solid Waste Permit Number
9 1 1 3-B A005, issued by ADEC on April 13,1 995 The permit expires on December 3 1 ,
1998 The Ash Landfill permit restricts landfilled materials to boiler ash, flyash, calcium
filtrate, hogged fuel mixed with rock and dirt, and primary/secondary waste water
treatment sludge. Materials specifically restricted from the landfill by the permit include
waste oil, oily waste, domestic sewage sludge, material pumped from septic tanks, fish
processing waste, and hazardous and potentially hazardous materials.
20
139
In addition to leachate collection and treatment, the Ash Landfill permit requires monthly
visual monitoring of the site to ensure that permit requirements are not being violated, and
requires that records of waste volumes be maintained .AJl landfill leachate and stormwater
testing conforms to requirements specified in 18 A,A.C 70 020(c)
The Wood waste Disposal Site was previously permitted to accept wood waste under
Solid Waste Disposal Permit Number 9213-BAOOl This permit was issued on October
27, 1994, and expired on December 31, 1995 Although landfilling of wood waste at the
site has been discontinued, on May 17, 1996, KPC received authorization by ADEC to
temporarily dispose of 38,500 cubic yards of wood waste at the site.
Although landfilling wood waste at the site has been discontinued since expiration of the
permit, leachate and stormwater collection, monitoring, and treatment has continued
concurrently with the Ash Landfill
On March 5, 1996, KPC received a Notice of Violation (NOV) for the Wood waste
Disposal Site permit The NOV specifically requested the following action:
• investigate, and if necessary, extinguish waste combustion,
• completion of a Visual Monitoring Plan;
• completion of a Landfill Closure Plan,
• completion of a Surface Water Monitoring Plan,
• completion of a Surface Water Corrective Action Plan,
• final plans for the SWL6A leachate control structure,
• submission of as-built drawings for the SWL4 leachate control structure.
KPC has addressed, or is in the process of addressing, each item specified in the NOV
The landfill was investigated for evidence of combustion No evidence of combustion was
noted by KPC or ADEC personnel during a recent ADEC inspection.
The Visual Monitoring Plan has been completed and is currently being implemented The
Landfill Closure Plan is currently being completed and will be implemented upon approval
by ADEC. The Surface Waster Monitoring Plan is being revised to meet requirements of
the Solid Waste Permit, as well as requirements specified in KPC's NPDES permit. In
addition, KPC is addressing procedures for corrective action for any surface water stream
that may be impacted by a leachate release Final plans for the SWL6A and SWL4
leachate control structures have been submitted to ADEC. Construction of both
structures is complete.
21
140
As part of the requirements of the Solid Waste and NPDES permits, weekly monitoring of
streams in the vicinity of the landfill area is currently being conducted Currently, three
streams and one background location are being monitored for flow rate, temperature, pH,
conductivity, salinity, dissolved oxygen, turbidity, total suspended solids, BOD, COD,
tannin and lignin, oil and grease, benzene, ethylbenzene, toluene, and xylenes (BTEX),
BNAs, and dioxins and flirans. Weekly monitoring of these parameters has indicated
detectable concentrations of only one BTEX compound, toluene. Toluene was detected
in 16 of 23 samples collected since December 15, 1995 One dioxin/furan congener,
specifically 2,3,7,8-TCDD, was detected in only one of 23 samples collected since
December 15, 1995.
In addition to the requirements discussed above, KPC submits an annual volume and
leachate analysis report to ADEC. Included in this report are waste volumes and a
summary of analytical results of the leachate monitoring.
Ward Cove Maintenance Dredging
Periodic maintenance dredging within Ward Cove is required to ensure maritime access to
the KPC loading and unloading facilities. Pursuant to the Clean Water Act, the US Army
Corps of Engineers regulates dredging subject to a requirement that the Alaska
Department of Environmental Conservation (ADEC) provide a certification before permits
are issued. ADEC ensures that KPC's dredging will not create violations of State water
quality standards
KPC performs various marine activities in Ward Cove, including the transport of log rafts
using tug boats, delivery of wood chips using tugs and barges, and shipment of pulp using
large ocean-going ships. In order to perform these activities, it is necessary to maintain
sufficient water depths within Ward Cove to allow ship and barge traffic Even though
KPC has systems and equipment to minimize the loss of settleable solids in Ward Cove,
navigable depths are compromised over time by the build-up of settled materials generated
during the course of normal operations and from normal Ward Creek drainage It is
therefore necessary for KPC to dredge selected areas of Ward Cove as a means of
maintaining navigable water depths
In 1990, KPC applied to renew an expired dredging permit The application contemplated
the dredging of about 15,000 cubic yards of sediment from areas in front of the pulp mill
and sawmill. In response to the application, ADEC requested that KPC perform
extensive sampling of the sediments to evaluate their properties before it would certify the
permit. Due to the time required to develop and provide the data, the Corps of Engineers
did not issue the permit until September 1992 Pursuant to the permit, KPC dredged
about 38,000 cubic yards in the first part of 1993 The Corps of Engineers and ADEC
determined that KPC had exceeded the permitted annual dredging quantity. The Corps of
Engineers agreed to settle the matter without litigation in exchange for KPC contributing
22
141
$22,000 to the funding of a local fish hatchery The resolution of the State issues was
likewise achieved without litigation by the payment of a fine of $12,500.
Ketchikan Pulp Company spent approximately $70,000 during the 1995 dredge period on
a program to monitor water quality standards during dredging operations. The results of
the program were shared with ADEC and EPA and indicated that KPC's dredging does
not cause or contribute to violations of water quality standards
Authorization for KPC to perform maintenance dredging was received via a dredging
permit issued by the US Army Corps of Engineers District of Alaska. The current terms
allow KPC to dredge 1 5,000 cubic yard per year. Stipulations exist stating the dredged
material will be placed in a specified site for dewatering, then transported in covered
trucks to an upland landfill. The time limit for completing work under the current permit
is March 31, 1997
By Federal law, the final dredging permit cannot be issued until a State of Alaska Section
401 Water Quality Certification has been issued or waived, and a Coastal Zone
Management consistency determination has been completed KPC has currently stopped
the review clock for the determination issued by the Alaska Division of Government
Coordination to negotiate provisions with various State of Alaska resource agencies. The
401 Certification issued by the Alaska Department of Conservation, is pending resolution
of several issues:
1. Identification of a suitable disposal site for the dredged material.
2. Approval of a Ward Cove water sampling plan to assure compliance with
Alaska State Water Quality Standards, and
3. Definition of a practical time frame during which dredging will have a minimal
effect on migrating salmonids, which will likely be the month of January
KPC plans to conduct a maintenance dredging program af^er resolution of these issues. It
is expected that this will occur in January 1997
Log Transfer Facilities
Ketchikan Pulp Company operates an extensive logging operation. Logs are transferred
fi-om sort yards and collection points at log transfer facilities which are regulated by the
US Environmental Protection Agency (EPA) pursuant to the Clean Water Act. The
agency issues permits to log transfer facilities as part of the National Pollutant Discharge
Elimination System (NPDES) program. KPC holds several such permits for its log
transfer facilities. These permits generally place restrictions on how logs may be loaded,
unloaded, and stored. Some permits also require monitoring to ensure that the deposition
of bark does not cause environmental degradation. Monitoring of the waters for oil
sheens at all KPC operated log transfer facilities is performed and logged on a daily basis
This is an NPDES permit stipulation. The United States Coast Guard and the Alaska
23
142
Department of Environmental Conservation are notified immediately by phone with a
written follow-up report when KPC is responsible for a spill of any size to the water.
Debris is not allowed to accumulate on, or beneath log transfer structures Thome Bay
and the Annette Hemlock Mill both have permitted annual dredge activities Thome Bay's
dredging is strictly monitored as required by State, Section 401 certification stipulations
General Stormwater permits (NPDES) are held by either KPC or the United States Forest
Service for each Log Transfer Facility These stormwater permits have requirements for
monitoring which are implemented in a pollution prevention plan specifically for each Log
Transfer Facility
Pollution Prevention
Pollution prevention activities have been unofficially underway for many years at KPC. In
the past, these activities have been carried out informally due to the absence of a
requirement for specific pollution prevention activities in the State of Alaska These
activities include, but are not limited to, the use of non-toxic antifreeze, vegetable based
hydraulic oils, recycle of lead batteries, buming waste oils and substitution of non-
hazardous materials for hazardous materials Recently however, KPC has been required
to conduct a pollution prevention study by Consent Decree No A92-587-CV
KPC is in the process of conducting this study at the present time The due date for
completion is March 27, 1997, at which time EPA Region 10 will make determinations for
implementation of any recommendations which appear in the final report Currently, KPC
has completed about 50% of this study, and has just completed the preliminary evaluation
of alternatives as specified in the following draft workplan
The goal of pollution prevention is to identify manufacturing and management process
changes that will prevent the formation of pollutants, thus eliminating the need to remove
them through various treatment processes Pollution prevention focuses on all media,
therefore, the transfer of a pollutant from one medium (eg, water) to another (e g , air or
land) is not a preventive measure and is not considered an acceptable alternative for
purposes of this study The pollution prevention study is focused on KPC'^ key
production processes, such as pulping and bleaching, and other on-site areas that may be
responsible for the production and possible release of hazardous compounds (particularly
chlorinated organics) to the environment
KPC's commitment to pollution prevention dates back to the mill's initial construction.
At that time, in the eariy 1950's the company decided to install a system for complete
recovery of pulping chemicals. This decision was made at a time when other similar mills
were achieving much less. Other accomplishments since the mill's startup include
installation of a log bundle crane to reduce debris loss in Ward Cove, conversion from
hydraulic to mechanical debarking to reduce water consumption, and expansion of
evaporation capacity, washing improvements, and boiler modifications to fijrther improve
spent sulfite liquor (SSL) recovery.
24
143
This commitment to pollution prevention continues today KPC is in the final design stage
of a major bleach plant modification that will allow elemental chlorine free (ECF)
bleaching and will result in a significant reduction in the formation of chlorinated organic
compounds. Other studies and designs are currently in progress to implement spill
containment and close up the screen room, both of which should aid in reducing the
toxicity of the mill's wastewater The pollution prevention study is another step in KPC's
ongoing process of minimizing the amount of waste generated by its manufacturing
operation.
KPC's Pollution Prevention Study will be patterned after EPA guidance documents
provided by Region 10 ,Handbook on Pollution Prevention Opportunities for Bleached
Kraft Pulp and Paper Mills, EPA 600/R-93/098, June 1993 znd Model Pollution
Prevention Plan for the Kraft Segment of the Pulp and Paper Industry, EPA 9 1 0/9-92-
030, September 1992. In addition, KPC's study will incorporate an approach similar to
those used by the states of Washington (WAC 173-307) and Texas (TAC 335 Subchapter
Q)
KPC routinely collects a significant amount of analytical data to document chemical
purchases and releases to the environment (air, water, solid waste,) This existmg
information will form the database for the pollution prevention study
Chronic Toxicity
Chronic toxicity is defined by the particular bioassay tests performed on an effluent The
rationale behind toxicity testing is to measure the combined effects of all individual
components of an effluent in terms of biological toxicity to a selected aquatic life form or
life stage. KPC is committed to reducing final effluent chronic toxicity
In previous attempts to identify specific sources of chronic toxicity at KPC, researchers
were able to narrow the contributors of the greatest chronic toxicity to a small number of
sources and to identify broad classes of chemical constituents that may account for the
measured toxicity Based on this internal research, a number of preliminary conclusions
have been reached:
• Different compounds may account for toxicity to different marine test
organisms, i e., what is chronically toxic to sea urchins may not be toxic to
oysters or mussels (and vice versa)
• Chronic toxicity in the mill internal effluent streams cannot be added and
subtracted, as is the case with more conventional contaminants such as
BOD and TSS The synergistic or antagonistic effects of multiple
compounds when mixed together may resu't in increases or decreases in
the combined toxicity This makes the study of individual contributing
sources very difficult, and the results of internal effluent stream studies are
25
144
inconclusive without verification using some type of simulated pilot plant
testing
• Compounds or classes of compounds that may be responsible for the mill's
chronic toxicity include residual chlorine, chlorinated organic compounds,
color or lignin fragmentation products, aldehydes, resinous compounds,
and sulfur compounds Residual peroxide from the future ECF bleaching
sequence may also contribute to toxicity Results indicate that KPC's
chronic toxicity is not related to a single compound
• Major sources of chronic toxicity are thought to be the chlorine stage
filtrate, screen room effluent, hot caustic stage filtrate, evaporator
condensate, and in the future, the peroxide stage filtrate
• Attempting to identify' the specific compound(s) responsible for toxicity has
proven to be a very inefficient process for reducing the mill's chronic
toxicity KPC will continue to seek a better understanding of the causes of
toxicity and will follow developments in this field Until cause-and-efFect
relationships are better documented, KPC will measure the chronic toxicity
levels for different combinations of process changes and wastewater
treatment steps in search of the best result that can be achieved, regardless
of a precise understanding of the chemistry involved Effect on final
eflHuent toxicity will be considered when selecting pollution prevention
alternatives.
KPC is committed to reducing final effluent toxicity as defined by the test procedures
specified in KPC's NPDES permit and State water quality regulations Over the past two
years, KPC has performed a series of studies to identify efTluent streams and classes of
compounds which appear to impact chronic toxicity The pollution prevention study will
build on that work by exploring pollution prevention opportunities for those classes of
compounds identified in the earlier studies
Spill Prevention and Containment
Spill prevention measures have been developed and are aimed at addressing the following
materials:
• pulping chemicals including cooking liquor, spent cooking liquor, and
magnesium oxide;
• mineral acids;
• caustic (sodium hydroxide),
• polymers;
• chemicals delivered and unloaded from rail cars,
26
145
• chemicals used in the bleach plant such as chlorine, sodium hypochlorite,
surfactants, and defoamer;
• materials used and stored in the maintenance shops and "stores" areas, such as
oils, fuels, solvents, defoamers, and polymers,
• wastewater, foam, and defoamer spilled outside of the wastewater treatment
system;
• oil, diesel fuel, fliel oil, boiler feed chemicals, caustic and sulfijric acid in the
boiler building and turbine building
The measures developed to address potential spills were divided into two categories;
prevention and containment. The spill prevention measures include over 60 specific
measures which can be categorized as:
• a program of installing instrumentation and control improvements, such as
tank level sensors and alarms, pipeline pressure sensors and alarms,
chlorine detectors, and non-discharging liquor density monitors,
modification of operating procedures and methods,
improved labeling program for piping and equipment;
installation of a standby power system to operate critical loads during
power outages,
installation of additional equipment, such as instrument air compressors,
pumps, and a vent line separator,
rerouting piping, particularly overflows, to more appropriate locations,
installation of paving and curbing as appropriate to prevent migration of
spilled material out of the immediate area of a pci ;ntial spill,
installation of drip pans to collect oil and fiiei from pipes and hoses in the
wood room, the boiler house, and in the machine room,
root cause analysis of process upsets and spills to
The spill containment measures were consolidated into 20 projects briefly described as
follows:
Project 1 - Liquor tank containment
Project 2 - Digester/accumulator area pump station
27
146
Project 3 - Heavy red liquor pump station
Project 4 - High liquor content diversions to spill tanks
Project 5 - Magnesium oxide unloading area containment
Project 6 - Magnesium oxide slaking tank and day tank containment
Project 7 - Screw press polymer tank containment
Project 8 - Filter plant polymer tank containment
Project 9 - Containment for rail car unloading and tanks south of the bleach plant
Project 10 - Auto shop furnace oil double wall tank
Project 1 1 - Containment for small tanks inside the bleach plant
Project 12 - Double containment piping for sulfuric acid and caustic
Project 13 - Central storage area for totes and barrels
Project 14 - Small containment systems throughout the mill for barrels and totes in use
Project 15 - Containment for the secondary treatment defoamer tank
Project 16 - Containment for the phosphoric acid tank
Project 17 - Containment for the sulfuric acid tank
Project 18 - Containment for the sulfuric acid and caustic day tanks in the turbine building
Project 19 - Oil containment on the first floor of the turbine building
Project 20 - Improved containment for fuel oil and diesel on the first floor of the boiler
building
Components of the spill prevention and containment program are included in both the plea
agreement and the Civil Consent Decree as well as KPC's Best Management Practices
(BMP) Plan. The study and preliminary designs were completed and submitted to EPA in
January, 1996. Many of the projects have been started and many are already complete
Final designs for the spill containment projects, along with an implementation schedule,
will be submitted to EPA in September, 1996 The final implementation of the spill
prevention and containment measures is expected to be complete in September, 1997
Ketchikan Pulp Company also maintains Operations Manuals for Marine Transfer
Facilities and Facility Response Plans for each camp. Spill Prevention Control and
28
147
Countermeasure Plans are maintained for each of the camps, the Thorne Bay Son Yard
and the Annette Hemlock Mill
Resource Conservation and Recovery Act
The Resource Conservation and Recovery Act (1970) mandates that hazardous waste will
be treated, stored, and disposed of so as to minimize the present and future threat to
human health and the environment RCR.A is a regulatory statute designed to provide
"cradle to grave" management of hazardous waste by imposing requirements on
generators and transporters of hazardous waste The Hazardous and Solid Waste
Amendments of 1984 (HSWA) mandated waste minimization and a national land disposal
ban program Congress has declared that the generation of hazardous waste is to be
reduced or eliminated as expeditiously as possible, and land disposal should be the least
favored method for managing hazardous waste For facilities operating in the State of
Alaska, this program is regulated by the Environmental Protection Agency There have
been no regulatory actions filed regarding hazardous waste management at KPC
Ketchikan Pulp Company operates several facilities that have the potential for hazardous
waste generation at different generation rates and volumes The pulp mill complex
currently operates under a Large Quantity Generator (LQG) status, although actual waste
generation levels would often qualify it for Small Quantity Generator (SQG) status A
large quantity generator is one which generates over 1000 kilograms of waste in any
calendar month, or exceeds a storage volume of hazardous waste of 6000 kilograms at
any time KPC's camps, sawmills, and helicopter hanger currently operate under a
Conditionally Exempt Small Quantity Generator (CESQG) status This level of generation
specifies generation of up to but less than 100 kilograms of hazardous waste in a calendar
month
As a large quantity generator of hazardous waste, KPC's pulp mill complex is actively
involved in waste minimization and source reduction programs Ail waste streams are
reviewed for source reduction and recycle possibilities Ketchikan Pulp Company currently
recycles a large number of waste streams, including but not limited to, antifreeze, crushed
oil filters, batteries, light ballasts, and paint solvents KPC has eliminated several waste
streams through the substitution of less toxic or non-toxic material
Ketchikan Pulp Company Company's pulp mill complex generates a variety of
wastes that represent the following waste codes
DOOl Unlisted Hazardous Wastes Characteristic of Ignitability
D002 Unlisted Hazardous Wastes Characteristic of Corrosivity
D003 Unlisted Hazardous Wastes Characteristic of Reactivity
D004 Unlisted Hazardous Wastes Characteristic of Toxicity - Arsenic
D005 Unlisted Hazardous Wastes Characteristic of Toxicity - Barium
D006 Unlisted Hazardous Wastes Characteristic of Toxicity - Cadmium
D007 Unlisted Hazardous Wastes Characteristic of Toxicity - Chromium
D008 Unlisted Hazardous Wastes Characteristic of Toxicity - Lead
29
148
D009 Unlisted Hazardous Wastes Characteristic of Toxicity - Mercury
DOl 1 UrJisted Hazardous Wastes Characteristic of Toxicity - Silver
D019 Unlisted Hazardous Wastes Characteristic of Toxicity - Carbon
Tetrachloride
D026 Unlisted Hazardous Wastes Characteristic of Toxicity - Cresol
D028 Unlisted Hazardous Wastes Characteristic of Toxicity - 1,2
Dichloroeththane
D035 Unlisted Hazardous Wastes Characteristic of Toxicity - Methyl Ethyl
Ketone
D039 Unlisted Hazardous Wastes Characteristic of Toxicity -
Tetrachloroethylene
D040 Unlisted Hazardous Wastes Characteristic of Toxicity - Trichlorethylene
F002 The following spent halogenated solvents, all spent solvent mixtures/blends
containing, before use, a total often percent or more (by volume of one or
more of the below listed halogenated solvents or those listed in FOOl,
F004, F005, and still bottoms from the recovery of these spent solvents and
spent solvent mixtures).
a) Tetrachlorethylene
b) Methylene Chloride ,
c) Trichloroethylene
d) l,l,l,Trichloroethane
e) Chlorobenzene
0 l,l,2-Trichloro-l,2,2-trifluroethane
g) 0-Dichlorobenzene
h) Trichlorochloromethane
i) 1,1,2 Trichloroethane
F003 The following spent non-halogenated solvents and solvents:
a) xylene
b) acetone
c) ethyl acetate
d) ethylbenzene
e) ethyl ether
f) methyl isobutyl ketone
g) n-butyl alcohol
h) cyclohexanone
i) methanol
F005 The following spent non-halogenated solvents and the still bottoms from
the recovery of these solvents
a) toluene
b) methyl ethyl ketone
30
149
c) carbon disulfide
d) isubutanol
e) pyridine
U019 Benzene
U210 Tetrachloroethene
U226 1,1,1-trichloroethane
In 1994 and 1995 these materials accounted for over 25 tons of hazardous waste legally
transported to an off-site treatment storage and disposal facility where most were burned
for energy recovery, solidified, or extracted
KPC expects the current rate of reporting generation of hazardous waste to remain
constant or increase to some degree during 1996 and 1997 This is due primarily to
obsolete and outdated materials being sent ofF-site for disposal However, beyond 1997,
the company expects the generation of hazardous waste to decrease substantially
Hazardous waste at Ketchikan Pulp Company Company's camps, sawmills, and the
helicopter hanger continues to be reduced, recycled and burned on-site for energy
recovery. Used oil is also burned on-site in the power boilers for energy recovery These
facilities are also currently reducing supplies of obsolete inventories and may experience a
brief increase in waste generation activities for 1996 Waste codes traditionally found at
these facilities include DOOl, D002, and D008 as a result of on-going mobile-equipment
maintenance activities
KPC reports all waste generation activities in the Biennial Hazardous Waste Report as
required by sections 3002, 3004, and 3007 of the Resource Conservation and Recovery
Act and Alaska Statutes 46 03 302 and 46.03 305 Completion of this report fulfills both
the State of Alaska Hazardous Waste Report and the Federal Biennial Report for each odd
calendar year. In addition, KPC submits a waste minimization questionnaire as a
supplement to the State of Alaska's Annual Hazardous Waste Report. In 1995, Alaska
reduced it's Annual Hazardous Waste Report's annual submittal requirements to biennial
submittal to correspond with the Federal reporting requirements
KPC has also been aggressive in reducing its non-hazardous waste A Recycle Process
Improvement Team ("Recycle PIT") has been charged with increasing recycle rates and
decreasing wastes for off-site disposal Ketchikan Pulp Company became a Charter
Member of EPA's Voluntary WaSteWiSe program in 1994 This program fosters
industry's innovative efforts to pledge and meet goals for reduction and recycle of non-
hazardous wastes.
Oil
The oil spill resulting from the Exxon Valdez in Prince William Sound, Alaska in March
1989 catalyzed the enactment of oil spill prevention and discharge programs by several
regulatory bodies
31
150
Ketchikan Pulp Company Company's transportation and storage of petroleum products at
its pulp mill complex, camps, sawmills, and helicopter hanger have resulted in several
plans to address these recent regulations
Applicable regulations include:
• ISAAC 75
• 40CFR110
• 40CFR112
• 40CFR114
• 33CFR153
• 33CFR154
• 33CFR156
These regulations establish guidelines for procedures, methods and equipment, and other
requirements necessary to prevent the discharge of oil from transportation and non-
transportation-related on-shore and offshore facilities into or upon the navigable waters of
the United States or adjoining shorelines
Programs developed to meet the regulations include Operation Procedures, Product
Transfer Procedures, Storage and Containment Programs, Notification Procedures,
Equipment Lists and Inspections, Line Testing, Health and Safety Response Training,
Identification of Environmentally Sensitive .\reas, and Emergency Wildlife Management
Procedures.
KPC is required to develop several spill scenarios for its operations and to regularly
conduct response drills for those scenarios in order to be ready if a spill actually occurs A
quarterly notification exercise must be conducted by all EPA and USCG regulated
facilities as well as aboard manned vessels and unmanned barges The quarterly biannual
Emergency Procedures Exercise must be conducted by manned vessels and unmanned
barges. The Equipment Deployment Exercise must be conducted by all EPA and USCG
regulated facilities and vessels. The annual Tabietop exercise must be conducted by all
EPA and USCG regulated facilities and all vessels One Tabietop exercise over the
triennial cycle must evaluate the worst case discharge scenario .^n annual Unannounced
Exercise requirement must also be met
KPC utilizes the following plans to fulfill planning requirements
• EPA Facility Response Plan
• KPC Oil Discharge Prevention and Contingency Plan
• USCG Facility Response Plan
• KPC Facility Operations Manual
• KPC Spill Prevention Control and Countermeasure Plan
• KPC Emergency Response Plan
32
151
• Oil Discharge Prevention and Contingency Plan tor KPC's oil and supply delivery
barge.
• USCG Response Plan for the barge.
TSCA
The Toxic Substances Control Act (TSCA) enacted in 1976 provides EPA with the
authority to require testing of chemical substances entering the environment and to
regulate them where necessary Programs under TSCA gather mformation about the
toxicity of chemicals and the extent to which people and the environment are exposed to
them Polychlorinated Biphenyls (PCBs) are regulated under TSCA The EPA regulations
that accompany the law set specific standards regarding PCB manufactunng and use.
Ketchikan Pulp Company does not manufacture PCBs, but is considered a generator of
PCB waste Prior to the mid seventies, PCBs were commonly used in transformers and
capacitors because of their excellent heat transfer characteristics PCBs were also
commonly found in some petroleum products
Processing, distribution and the use of PCBs are prohibited except in a totally enclosed
manner A transformer or capacitor is an example of an allowed totally enclosed system.
Over the course of several years, Ketchikan Pulp Company has replaced PCB containing
transformers and capacitors with more updated systems The PCB fluid inside the units as
well as the "carcass" of the units are disposed of in permitted disposal facilities. Ketchikan
Pulp Company ships them off-site accompanied by a manifest similar to the manifest used
for hazardous wastes in the RCRA program
Several shipments of PCB contaminated material have been made off-site in recent years
As of Spring of 1996, all PCB enhanced transformers and capacitors have been
successftjlly removed from operations and from locations at Ketchikan Pulp Company An
annual report to EPA early in 1997 will successfijlly close this program for KPC.
CERCLA
Section 302 of the Emergency Planning and Community Right-to-Know Act (EPCRA, or
Title III of the Superfund Amendments and Reauthorization Act (SARA) of 1986), Public
Law 99-499 requires reporting of a release of a regulated substance above the Federally
mandated 24 hour Reportable Quantity (RQ) that is not "federally permitted" or
"continuous in nature" This reporting requirement is for releases expected to travel
beyond the plant boundaries.
In the 1986 legislation. Congress specified an initial one pound RQ for all SARA
"Extremely Hazardous Substances (EHS)"except for those substances which were already
CERCLA hazardous substances with established RQs In May, 1996 an EPA final rule
was published which increased the reportable quantities for over 200 substances
33
152
Ketchikan Pulp Company voluntarily chose to repon the releases due to the potential
exposure to persons off-site. Since January 1, 1996 Ketchikan Pulp Company has
reported under Section 302 of EPCRA over sixty releases to the National Response
Center for sulfur dioxide and chlorine gas. None of the sulfur dioxide gas releases
approached the 500 pound RQ, and none of the chlorine gas releases approached the 10
pound RQ In conjunction with the State air permit which is to be issued soon, KPC has
agreed to report sulfiar dioxide releases which exceed 25 pounds in a twenty hour period
Submission of the Tier One, Emergency and Hazardous Material Inventory Form, is
required by Section 312 of the Emergency Planning and Community Right-to-Know Act
(EPCRA, or Title III of the Superfijnd Amendments and Reauthorization Act of 1986),
Public Law 99-499 The purpose of the form is to provide State and local officials and the
public with information on the general types and locations of hazardous chemicals present
at a facility during the past year
A Tier Two form may be substituted for a Tier One form The Tier Two form provides
detailed information and must be submitted in response to a specific request from State or
local officials.
In 1996, Ketchikan Pulp Company filed Tier Two Reports for
Ketchikan Pulp Company Mill at Ward Cove
Flight Department
Ketchikan Sawmill
Shelter Cove Camp
Marguerite Bay Log Transfer Facility
Annette Hemlock Sawmill
Tuxekan Logging Camp at Labouchere Bay
El Capitan Logging Camp at Coffman Cove
Naukati Logging Camp
Polk Inlet logging Camp
Thome Bay Logging
These reports were provided to local fire officials, the Local Emergency Planning
Committee, and the Alaska Department of Environmental Conservation.
34
153
Submission of Form R, the Toxic Chemical Release Inventory (TRl) Reporting Form, is
required by Section 313 of the Emergency Planning and Community Right-to-Know Act
(EPCRA, or Title III of the Superfijnd .Axnendments and Reauthorization Act of 1986),
Public Law 99-499. Reporting is required to provide the public with information on the
releases of listed toxic chemicals in their communities and to provide EPA with release
information to assist the Agency in determining the need for future regulations Facilities
must report the quantities of both routine and accidental releases of listed toxic chemicals,
as well as the maximum amount of the listed toxic chemical on-site during the calendar
year and the amount contained in wastes transferred otTsite
Chemicals reported on Form R include hazardous chemicals used and hazardous chemicals
generated in the manufacturing process (as defined by 40 CFR 372 65) in excess of the
threshold planning quantities listed in 40 CFR 370 20. Form R also includes any
information on hazardous substances above the threshold planning quantity in storm water
and in wastes that are sent off-site for disposal
A completed Form R must be submitted for each toxic chemical manufactured, processed,
or otherwise used at each covered facility as described in the reporting rule in 40 CFR Part
372 (originally published February 16, 1988, in the Federal Register)
Section 313 of EPCRA requires that reports be filed by owners and operators of facilities
that meet all of the following criteria Ketchikan Pulp Company Company's Pulp Mill
Complex meets the submission requirements presented below:
• The facility has 10 or more flill-time employees, and
• The facility is included in Standard Industrial Classification (SIC) Code 261 1
and
• The facility manufactures (defined to include importing), processes, or
otherwise uses listed toxic chemicals in quantities greater than the established
threshold in the course of a calendar year
Facilities that must report under section 313 of EPCRA are required to develop reasonable
estimates of the amounts of listed chemicals released from the facility Additional
monitoring is not required by section 313, however facilities are required to consider all
available data, including that developed under other environmental regulations. Facilities
are required to document data developed and to maintain records for three years from the
date that the report is submitted
Until 1995, TRI reporting was required for 368 chemicals and chemical categories. On
November 30, 1994, EPA promulgated final rules that added 286 chemicals and chemical
categories to the list of toxic chemicals for which reporting is required, and provided an
alternate threshold for some reporting The addition of these chemicals and chemical
categories almost doubled the number of toxic chemicals subject to TRI reporting.
35
154
Section 3 13's purpose is to malce information available on the amount of specific toxic
chemicals released to the environment from manufacturing facilities EPA is required to
make this information accessible on a computerized database The Toxic Release
Inventory (TRI) database became available in June 1989 through the National Library of
Medicine's TOXNET system. EPA also is providing information on microfiche, computer
tape, CD-ROM and diskette for analysis by interested organizations and individuals
Annual reports have been prepared by EPA to summarize release data by industry, region
and chemical.
Ketchikan Pulp Company is required to develop reasonable estimates of amounts of
chemicals released. KPC has historically relied on pulp mill specific data If it has not
been available, Ketchikan Pulp Company has referred to industry data, specifically the
National Council For Air and Stream Improvement for the Pulp and Paper Industry's
(NCASI) SARA Release Reporting documents The report allows for estimates based on
monitoring data or measurements, estimates based on mass balance calculations, estimates
based on published emission factors, or estimates based on engineering calculations or best
engineering judgment.
Separate section 313 reporting thresholds apply to manufacturing, processing and
"otherwise using" section 313 chemicals Manufacturing and processing thresholds are set
at 25,000 pounds per year The "otherwise use" threshold is 10,000 pounds per year
Any chemical that meets any of the three reporting thresholds must be reported for all
activities at the facility Of the 600 reportable chemicals, KPC only manufactures,
processes or "otherwise uses" 9 chemicals in volumes that require reporting under
Section 313
Ketchikan Pulp Company currently provides reports for the following nine chemicals:
Nitric Acid
Phosphoric Acid
Chlorine
Chloroform
Hydrochloric Acid
SuliliricAcid
Ammonia
Methanol
Formic Acid
36
155
Of those nine chemicals, two CNitric Acid and Phosphoric Acid) are not discharged to the
environment unless an unanticipated spill or release occurs Nitric Acid has been
successfully eliminated from pulp mill operations since 1989 Phosphoric acid, a
feedstock for the secondary aerobic treatment system, was released to the environment in
one reporting year over the last six years due to an unanticipated spill or release
Chlorine is released to the environment in air emissions This chemical's release ordinarily
results from production activity in the Bleach Plant of the Pulp Mill facility unless an
unanticipated spill or release provides alternative avenues to the environment
Chloroform release amounts continue to decrease This reduction in reported chloroform
levels is based on recently available emission measurements taken at the mill Originally,
KPC used estimated values presented in the NCASI publications which include Kraft pulp
mills as well as sulfite pulp mills Ketchikan Pulp Company Company's sulfite pulp mill
produces significantly less chloroform than a Kraft mill With actual measured data
available, Ketchikan Pulp Company has reported significant reductions in releases of this
material. This material is expected to continue its decreasing trend with conversion to the
Elemental Chlorine Free bleaching process in 1997
Ketchikan Pulp Company has accomplished a dramatic reduction of hydrochloric acid
releases. An average two million pounds of hydrochloric acid was calculated as released
in the wastewater effluent each year from 1989 to 1992 In late 1993, with the addition of
an Effluent Neutralization System (ENS), KPC successfijily reduced hydrochloric acid
discharges to less than 1,000 pounds a year. Technical documents suggest hydrochloric
acid may be released in the effluent as a fijnction of pH (Hydrochloric acid concentration
is inversely proportional to the pH of the effluent )
Release of sulfuric acid to the environment is another by-product emission from the
powerhouse and is directly related to the sulfijr content of the fuel burned Technical
documents suggest sulfijric acid aerosol is inadvertently produced as an impurity in oil
combustion in boilers The reported release values for sulfuric acid continue to decrease
from the eariy 1990's to present through the use of low sulfijr fuels
Releases of ammonia to the environment show a significant decrease over the last few
years. This reduction in ammonia emissions is based on recently available emission
measurement data. Originally, KPC used the values presented in the NCASI publications
which allow for the reporting of either un-ionized or total ammonia In prior years total
ammonia has been reported. For 1994, Ketchikan Pulp Company reported un-ionized
ammonia. The combined outfalls and better effluent pH control with the Effluent
Neutralization System have provided assurances of consistent and acceptable pH ranges
over the course of the year. The pH of the effluent directly impacts ammonia release
Reported methanol releases over past years show a slight increase in fijgitive releases and
a slight decrease in air releases. This is a result of improved mill-specific data. Water
releases show a significant decrease in methanol This is a result of better pH control of
the combined outfalls by way of the Effluent Neutralization System
37
26-689 - 96 - 6
156
For the first time, KPC reported the manufacture of formic acid as a by-product of the
pulping process under the Form R for the 1994 reporting year Once this material is
manufactured, it tends to adhere to the pulp fibers It remains with the product and human
exposure to the substance does not occur under normal conditions of use
Ketchikan Pulp Company is a charter member and continuing participant in EPA's
voluntary 33/50 program which fosters industry's innovative efforts to pledge and meet
goals for reduction of TRJ chemical releases Ketchikan Pulp Company continues to
regularly review guidance documents and mill specific data in order to anticipate future
reporting responsibilities
Alaska Hazard Ranking Model
The Alaska Hazard Ranking Model was developed as a tool to allow ADEC to prioritize
contaminated sites for cleanup actions under Alaska's Oil and Hazardous Substances
Pollution Control Regulation. 18 AAC 75, and the state's Underground Storage Tank
Cleanup Regulation, 18 AAC 78. The model is designed to be used in the evaluation of
sites where contamination has occurred, and contaminating activity has ceased
The Hazard Ranking Model has several limitations that are important to understand First,
the Ranking Score derived by the model does not consider the actual human health impact
of a site, only the potential for impact, therefore, a high score does not mean that human
health impacts such as cancer and chronic health conditions have been observed that can
be attributed to the site. Second, although the model does identify site specific conditions
such as the relative toxicity and volume of the contaminants present, and the proximity to
potentially affected plant, animal and human populations, the model is not a risk
assessment. A relatively high Ranking Score based on agency file data alone does not
demonstrate that a site poses any threat to human health or the environment, or that
immediate action is warranted. Third, the model has no way to incorporate the actual or
potential benefits of management practices or remediation programs which may have been
implemented to address potential exposure pathways
The Ranking Score compiled by ADEC incorrectly combines contaminants, contaminated
media, and exposure and release pathways to develop a "composite" ranking score The
instructions which are part of the Model instruct the user not to score a site in this manner
in several different places. Multiple contaminants and multiple source sites are accounted
for using the Multiple Sources or Contaminants Value in the model The method used by
ADEC seriously overstates the resulting score.
38
157
Worker Safety
Ketchikan Pulp Company follows regulations established by the Federal Department of
Labor, Occupational Safety and Health Division The State of Alaska has adopted the
Federal Regulations listed in 29 CFR From January 1, 1993 through June 28, 1996 five
inspections of the Ward cove pulp mill facilities were conducted by State OSHA These
were both in response to complaints filed by employees and unannounced inspections
These five inspections resulted in eleven citations and Ketchikan Pulp Company paid a
total of $15,000 in fines. These inspections are further detailed below
Three inspections occurred under the Process Safety Management Standard established in
Federal law This standard sets regulations for every process phase of highly hazardous
chemicals. Such chemicals are in daily use in the pulping process which operates
continuously, twenty four hours per day, seven days per week. These inspections were
the result of chemical releases that either could have or did result in employee exposure to
chemicals. These investigations resulted in a settlement with OSHA in which Ketchikan
Pulp Company agreed to abatement procedures, and the potential fine was reduced by
60%.
One inspection resulted fi'om an employee complaint regarding the Permit Required
Confined Space Entry standard As host employer on a work site, KPC also has
responsibility for independent contractors working on the site The complaint came from
a contractor employee. The citation that resulted from the inspection was a "paperwork
citation" that was classed, "Other than Serious" and carried no monetary penalty
In 1993 an incident involving the improper removal of asbestos by a contractor resulted in
a State OSHA inspection. This incident resulted in a $7,000 fine
Prior to 1993, there were numerous asbestos inspections at KPC as a result of employee
complaints In 1988, a settlement agreement was reached with the Department of Labor
that established a new asbestos abatement management program at the Ward Cove facility
In 1992 OSHA inspected the facility and determined that all of the required procedures
had been implemented
In the period from January 1993 through June, 1996 there was one Federal OSHA visit at
the mill Federal OSHA has jurisdiction over waterfront facilities along with the US Coast
Guard. Five citations were issued The basis for the citations was employee failure to
wear Personal Protective Equipment when working on the barge, and management failure
to enforce the nile requiring that the equipment be worn The fine was $4,000.
KPC cooperates voluntarily with the Training and Consultation Section of the Department
of Labor Between 1991 and 1996 there have been five voluntary compliance inspections
at Ward Cove. During a voluntary compliance inspection, representatives from OSHA
and KPC inspect the facility for deficiencies and items that could lead to a citation if not
corrected.
39
158
There have been ten OSHA inspections of other Ketchikan Pulp Company facilities
including the Annette Hemlock Mill, Ketchikan Saw Mill, Shelter Cove logging camp,
Thome Bay Sort Yard and Shop and the Ward Cove wood room Five were voluntary,
one resuhed from an injury, and three resulted from or complaints The injury related
inspection resulted in a fine of $16,000. A total of $4,000 was paid in fines as a result of
all other inspections.
Ketchikan Pulp Company has a proactive safety management program which includes cash
safety awards to employees. Over $1 million has been spent on proactive programs since
1991.
Employee Training and Development
Ketchikan Pulp Company involves employees throughout all divisions in discovering and
fixing the root causes of compliance problems, and seeking solutions which are designed
to prevent the recurrence. Planning for environmental compliance is now integrated with
planning for product development, process changes, and power plant operations to be sure
that production is achieved without compromise to environmental results
Ketchikan Pulp Company has had success in involving employees in several company wide
efforts to improve performance. The Total Quality Commitment program trains each
employee in how to contribute to product quality The STOP program trains each
employee in how to recognize and stop unsafe acts in the workplace The Company
believes that knowledge of environmental requirements accompanied by the daily exercise
of individual good judgment on the part of all employees will achieve the commitment and
momentum necessary to achieve good results.
Ketchikan Pulp Company has introduced an Environmental Compliance program that
includes engineering, construction, process changes, material substitutions and employee
training Employee training is a key element of the program A comprehensive training
program for KPC was developed in December, 1995 The program includes job-specific
training for KPC's production personnel and general environmental sensitivity/awareness
training for all management, administrative and operations personnel The training
program was developed in two stages:
1 . Corporate Responsibility/Business Ethics/Environmental Overview Training.
2. Mill Operations Training for Environmental Compliance
The first stage represents training requirements that apply equally to all KPC personnel
with emphasis on Corporate Responsibility. This training was completed for all company
employees in June, 1996. The second stage involves training requirements that apply to
all mill operations personnel. This stage is currently underway.
40
159
An employee handbook was developed and distributed to all employees The handbook
embodies KPC's Corporate Environmental Policy Statement, defmes KPC management
responsibilities as well as environmental responsibilities expected from all employees
Ketchikan Pulp Company encourages its employees to voice concerns about suspected
environmental problems or operating conditions that may adversely affect compliance
Employees are urged to report any concerns and are guaranteed protection from
retribution for expressing concern about a problem Efforts by co-employees or
supervisors to retaliate against employees for reponing suspected problems will not be
tolerated and will result in discipline. The company will not tolerate efforts to discover the
identity of employees who choose to report anonymously
Ketchikan Pulp Company has an open door policy in regard to reporting environmental
concerns. Employees are encouraged to express concerns to their supervisors, Operations
Manager, Industrial Relations Manager or the Environmental Manager If employees are
not satisfied with the reporting at these levels, they are welcome to meet with the General
Manager
If any employee is uncomfortable reporting environmental concerns to a supervisor or
manager, KPC has retained an outside service to take confidential reports about suspected
environmental problems This service was selected to ensure that reports are strictly
confidential. This "800" number service has been instructed to relay concerns to
management for follow up but not to reveal the identity of the caller
41
160
Ketchikan Pulp Company
Permits and Reporting Procedures
1996
ATTACHMENT C
Location
Type
Draft Air Quality Operating
Permit #951 3-AA003
Pulp Mill Complex
Air
Consent Decree with the
State of Alaska
Pulp Mill
Air
Federal New Source
Performance Standards
Pulp Mill Package Boiler
Air
Federal New Source
Performance Standards
Annette Hemlock Mill
Air
ACOE Dredging Permit R-
730053
Ward Cove
Dredging
ACOE Dredging Thorne Bay
14
Thorne Bay
Dredging
Maintenance and Operating
Manual
Naukati Log
Drinking Water
Biennial Hazardous Waste
Report
Pulp Mill
Hazardous Waste
Waste Minimization
Pollution Prevention
Supplement:
Annette Hemlock Sawmill
Hazardous Waste
Coffman Cove
Hazardous Waste
Flight Department
Hazardous Waste
Ketchikan Sawmill
Hazardous Waste
Labouchere Bay
Hazardous Waste
Naukati Log
Hazardous Waste
Thorne Bay
Hazardous Waste
316 Health Permit
Coffman Cove
Health
Naukati Log
Health
Shelter Cove
Health
Thorne Bay
Health
ACOE Log Storage Permit
Clarence Strait 21
Thorne Bay
Log Storage
ACOE Log Storage Permit
Clarence Strait 53
Thorne Bay
Log Storage
ACOE Log Transfer Facility
Permit
Coffman Cove
Log Transfer
ACOE Permit NPAC)-OP
Naukati Log
Moorage
161
Tuxecan Passage 6
ACOE Float Camp Moorage
N-890511
Marguerite bay 1
Moorage
ACOE Permit NPACO-OP-P
Tuxecan Passage 3
Naukati Log
Moorage
Facility Operations Manual
Marguerite Bay
Oil and Chemicals
Facility Operations Manual
Shelter Cove
Oil and Chemicals
Facility Response Plan
Coffman Cove
Oil and Chemicals
Labouchere Bay
Oil and Chemicals
Marguerite Bay
Oil and Chemicals
Naukati Log
Oil and Chemicals
Shelter Cove
Oil and Chemicals
Thome Bay
Oil and Chemicals
Fuel Transfer Operations
Manual
Naukati Log
Oil and Chemicals
KPC Emvergency Response
Plan
Pulp Mill
Oil and Chemicals
KPC EPA Facility Response
Plan
Pulp Mill
Oil and Chemicals
KPC Facility Operations
Pulp Mill
Oil and Chemicals
KPC Oil Discharge
Prevention and Contingency
Plan
Pulp Mill
Oil and Chemicals
KPC USCG Facility
Operations Manual
Pulp Mill
Oil and Chemicals
Naukati Logging
Naukati Log
Oil and Chemicals
Spill Prevention Control and
Countermeasure Plan
Marguerite Bay
Oil and Chemicals
Naukati Log
Oil and Chemicals
Polk Inlet
Oil and Chemicals
Pulp Mill
Oil and Chemicals
Thome Bay
Oil and Chemicals
Tier II EPCRA Report
Annette Hemlock Sawmill
Oil and Chemicals
Coffman Cove
Oil and Chemicals
Flight Department
Oil and Chemicals
Ketchikan Sawmill
Oil and Chemicals
Labouchere Bay
Oil and Chemicals
Marguerite Bay
Oil and Chemicals
Naukati Log
Oil and Chemicals
162
Pulp Mill
Oil and Chemicals
Shelter Cove
Oil and Chemicals
Thorne Bay
Oil and Chemicals
Solid Waste Disposal Permit
#9213-BA001 Pulp Mill
Solid Waste
#9313-BA001 Thorne Bay
Solid Waste
#91 13-BA005 Pulp Mill
Solid Waste
NPDES Stormwater
Thorne Bay Sort Yard
Stormwater
NPDES Stormwater
Thorne Bay Waste Yard
Stormwater
NPDES Stormwater Pollution
Control Plan
Thorne Bay
Stormwater
NPDES Stormwater Pollution
Control Plan
Naukati Log
Stormwater
Wastewater Disposal Permit
#941 3-DB007 Shelter
Cove
Wastewater
#AK-000092-2 Pulp Mill
Wastewater
#AK005252-3 Draft Pulp
Mill
Wastewater
#9510-DB004SM Floating
Camp
Wastewater
#9510-DB010SM3
Floating Camp
Wastewater
#9610-DB001 SM3
Floating Camp
Wastewater
#9213-DB020Coffman
Cove
Wastewater
#9313-DB021 Naukati Log
Wastewater
#941 3-DB007 Shelter
Cove
Wastewater
Consent Decree with United
States Government
Pulp Mill
All media,
Environmental
Audit
Compliance Agreement with
EPA
Entire Company
Corporate
Responsibility,
Environmental
Awareness
Best Management Practices
Plan
Pulp Mill
Operating
Procedures
316 HealthPermit
Coffman Cove
Health
Naukati Log
Health
Thorne Bay
Health
163
Marguerite Bay Water Use
Permit
Construction Operation
Certificate
Operation Maintenance
Manual
Water Treatment
Construction
Marguerite Bay
SM 3 FloatingCamp
SM 3 Floating Camp
Shelter Cove
Water
Water Treatment
Water Treatment
Water Treatment
164
Testimony of Emesta Ballard
Senate Energy Committee
July 10, 1996
My name is Emesta Ballard I am an environmental consultant, and was formerly
Regional Administrator of the Environmental Protection Agency In my testimony I am
going to focus on the serious allegations that have been made about KPC's environmental
compliance. In my view, the time has come to set the record straight
Ketchikan Pulp Company operates only with the specific permission of both State and
Federal environmental agencies KPC operations are regulated by at least 75 different
permits and plans which cover everything from logging camp stormwater to hazardous
waste disposal
The allegations of KPC's opponents attack their performance, vilify their people, and
diston their record They present data out of the context in which they were originally
reported and without regard for the strict scientific methods which are mandated by
regulation They reach conclusions which are based on subjective values instead of the
objective measures established by law In these presentations information has been
manipulated and distorted in order to support theories which are intentionally designed to
raise public alarm
The Felony and Misdemeanor Violations of the Clean Water Act
Wastewater management at Ketchikan Pulp was the subject of a lengthy investigation by
the I'nited States Environmental Protection Agency which began in 1991 In 1995 KPC
paid a fme of $4,250,000, and agreed to complete capital projects in lieu of an additional
fine of $1,750,000 Available for Committee review are twelve studies and workplans
describing additional projects required by the settlement
KPC has paid a heavy price for the mistakes of the past Money and management time
have been heavily invested in achieving change The enforcement action achieved the
intended result of dramatically increasing corporate awareness of environmental
responsibility.
Ward Cove Fish Kills
It has been alleged that KPC effluent kills fish in Ward Cove There have been no
reported fish kills resulting from KPC's effluent The only fish kill for which KPC was
responsible resulted over fifteen years ago from an accidental release of a cleaning
chemical downstream of the water reservoir at Connell Lake
Toxic Release Inventory
A regulatory report which is filed annually by KPC has been used by opponents to support
a theory that the pulp mill is among the so-called "worst" polluters in the Pacific
165
Northwest. Submission of Form R, the Toxic Chemical Release Inventory is required by
the Emergency Planning and Community Right-to-Know Act
The reporting of hydrochloric acid on Form R is one of the best examples of data which
must be properly interpreted to be understood From 1989 to 1992 following Form R
instructions, KPC reported that they discharged 2 million pounds of hydrochloric acid
even though it is not used anywhere in the pulp process This figure was an anomaly of the
reporting process In late 1993 KPC installed an effluent neutralization system which
reduced the reported discharge of chloride ion as hydrochloric acid which is now more
properly reported at less than 1,000 pounds per year
To my knowledge, EPA does not use Form R in the way it is abused by KPC's opponents.
The Form collects information for future use and is not a compliance measurement tool
Nonetheless, KPC's opponents continue to cite the old Form R data in a manner which
completely distorts the truth
Health Effects of Air Pollutants
Some have asserted that Ketchikan Pulp has not complied with Alaska laws protecting the
enjoyment of life and property
In April 1995, KPC completed exactly such a study for the State of AJaska The purpose of the
study was to determine the risk that air pollutants might pose to human health and the
environment.
The study looked at the impact of dozens of chemicals including dioxin and showed that only
chloroform merited further analysis KPC completed a health risk assessment of chloroform
which showed that the human health risk was within the State's regulatory risk level.
Resource Conservation and Recovery Act
Testimony has suggested that KPC is not properly regulated by the Resource Conservation and
Recovery Act (RCRA) because the State of Alaska lacks adequate funding to enforce the law
Alaska does not enforce this very important environmental law EPA does KPC reports all
hazardous waste generation activities to EPA in the Biennial Hazardous Waste Report as
required by the Resource Conservation and Recovery Act In addition, KPC submits a
waste minimization questionnaire as a supplement to the State of Alaska's Annual
Hazardous Waste Report
Ward Cove Sediments and Bioaccumulation of Toxics
Testimony has been given citing KPC's evaluation of water and sediment quality in Ward
Cove KPC monitors for dioxin as well as metals, mfethyl mercury, toxicity and many organic
chemicals Some have been detected at some Ward Cove sampling stations, but at levels lower
than the action thresholds established in sediment standards Concentrations of dioxin are 20
166
times lower than the standards and well below the threshold considered low risk for fish Some
compounds have been detected at levels which will be addressed in the Ward Cove remediation
plan
Alaska Hazard Ranking Model
KPC's score on the Alaska Hazard Ranking Model has been cited as evidence of threats to
public health from the mill The Hazard Ranking Model was developed as a tool to allow
the State to rank sites where contamination has occurred and contaminating activity has
ceased. It is inappropriate to apply to an ongoing operation.
The model has no way to incorporate the benefits of management practices or remediation
programs which have been implemented by the site owner The State has acknowledged
that permits and review programs already in place properly manage the contaminants of
concern and are rescoring the facility accordingly.
Conclusion
KPC's environmental record contains evidence of serious problems which include the
enforcement action which I have already described. They have already been punished, and
have already paid a heavy price They deserve the same opportunity as other industrial
enterprise to accept responsibility for their mistakes and to move on with their future
I have only been able to cover a few of the fabrications of KPC opponents The alarm
they have raised is unsupported and unwarranted State and Federal regulators charged
with enforcing environmental regulation and protecting public health are knowledgeable of
the most minute details of KPC operation They have available a fijll array of compliance
and enforcement measures
KPC's compliance and enforcement history is already a matter of public record They
accept responsibility for their shortcomings and mistakes They have nothing to hide from
the regulators, this Committee, or their community Thank you for the opportunity to
testifV today
167
WRITTEN TESTIMONY OF J. SCOTT ESTEY: H.R. 3059
INTRODUCTION
Ketchikan Pulp Company (hereinafter "Ketchikan" or "the Company") has
retained Jaakko Poyry Consulting North America (hereinafter "Jaakko
Poyry") to provide testimony regarding typical financial return and project
life requirements for capital expenditure within the pulp and paper
industry. The request for testimony was made in light of the Company's
request for an extension of its timber supply contract with the USPS in
order to ensure that fiber supply is available for a sufficient period of time
to allow the Company to earn an adequate return on capital expenditures
at the Company's pulp mill in Ketchikan.
PULP AND PAPER INDUSTRY INVESTMENTS
Pulp and paper is a capital intensive industry which requires not only large
initial investments, but also significant on-going investments for the
purposes of maintenance, environmental compliance, and facility
improvements. Additionally, the pulp and paper industry is commodity
oriented, highly cyclical, and typically realizes relatively low margins.
Expected rate of return, and the life of an investment project that is
required in order for a company to earn that return, can vary significantly
within the pulp and paper industry. In Jaakko Poyry's experience, it is not
uncommon to observe project returns ranging from negative to 30+%, and
project life requirements ranging from 5 to 25 years.
Of the many factors that can potentially influence these measures, those
items having the most significant impact include; the timing of the
expenditure relative to the industry cycle, the magnitude of the
expenditure, and the purpose of the expenditure, which, within the pulp
and paper industry, can be roughly categorized as follows:
• New Mill or New Production Line
• Major Rebuild
• Productivity and/or Margin Enhancements
• Replacement/Maintenance
• Environmental
New Mill or New Production Line
The capital intensive nature of the pulp and paper industry is most evident
when reviewing the investment requirements of a new mill or production
line. As a reference point, a greenfield, or new, market pulp facility with a
production capacity of 500,000 metric tons per year of bleached softwood
168
kraft pulp (BSKP) would require a capital investment of approximately US
$900 million, or $1,800/annual ton. The historical trend selling price for
BSKP is approximately US $680/ton.
Experience within the industry indicates that companies investing in new
mills or production lines can typically expect to achieve a real, after tax,
internal rate of return between 10% and 15%, and will require a project life
of between 20 to 30 years in order to realize that return.
Major Rebuild
Major rebuilds of pulp and paper assets are typically designed to result in
a significant increase in the productive potential of a mill, or to facilitate
the conversion of an asset to the production of a higher valued grade. A
major rebuild typically can require an investment on the order of 20% to
50% of the investment requirement to build new capacity.
While a major rebuild will often result in a significant increase in the
remaining life of a facility, in most cases the project life will be somewhat
less than would be expected with new capacity. As a result, experience
indicates that companies will typically require a more significant rate of
return, perhaps 15% to 20%, in order to compensate for the added
uncertainty around project life. With this type of major rebuild investment,
a company will usually require a project life of 10 to 20 years to realize
return expectations.
Productivity and/or Margin Enhancements
Expenditures falling within this classification are minor capital projects
relative to new investment and major rebuilds, and are typically
undertaken in order to realize the full productive potential of a facility,
resulting in incremental sales volume and/or improved profit margins.
This type of expenditure can be further segmented to include productivity
enhancement, cost reduction, and quality enhancement expenditures.
Productivity enhancements result in incremental capacity and an
improved revenue stream. Often, productivity enhancements are
accomplished without increasing the annual fixed costs of the facility, and
therefore have the added benefit of reducing the operating cost per unit of
production.
Cost reduction expenditures result in improved profit margins while having
little or no impact on the capacity of a facility. An example of this type of
expenditure would be an increase in the level of automation at a facility
which results in a permanent reduction in the level of required personnel.
169
Expenditures for quality enhancement may result in improved profit
margins through an increase in the realizable selling price, or may simply
allow a facility to maintain its competitiveness in a market which is
experiencing increased quality demands from its customers.
In general terms, the relatively low capital requirement for this type of
expenditure, in combination with a relatively minor impact on the life
expectancy of a facility, result in rate of return expectations of
approximately 20% to 30%, and a required project life of 5 to 15 years.
Replacement/Maintenance
This type of capital expenditure includes the replacement of components
or equipment as required to maintain productivity, cost structure, or
product quality. By definition, these expenditures do not enhance the
sales volume or margin potential of a facility and therefore are difficult for
companies to justify based on rate of return expectations.
Large investments which result in the total replacement of a major section
of a production line can be referred to as a major replacement. Since this
type of replacement will often result in a significant increase in life
expectancy of a facility, similar to a major rebuild investment as described
above, but is not typically made for the purpose of significant improvement
in revenues or margins, companies will typically require a project life of 15
to 20 years to realize an adequate return on the investment.
Environmental
Capital expenditure for environmental purposes within the pulp and paper
industry is often required in order to maintain compliance with
environmental regulations. In this regard, environmental expenditures are
similar to maintenance expenditures in that they have no direct impact on.
the sales volume or margin potential of a facility and therefore are also
difficult for companies to justify based on rate of return expectations. To
the degree that environmental expenditures are required in order for a
facility to operate and realize the full potential of prior investments, the
expected rate of return will be lower, and the required project life to realize
that return will be longer than expectations for new construction or a major
rebuild.
KETCHIKAN PULP COMPANY'S REQUEST FOR EXTENSION
Jaakko Poyry's knowledge of the capital program being considered by
Ketchikan is limited to the aggregate value of the expenditure, US $200
million, the estimated completion of the expenditure, 5 to 8 years hence,
and a general description as provided by Ketchikan, which described the
170
expenditure as including bleach plant modifications, environmental
equipment and facilities modifications, an upgrade of power generation
facilities, and a modernization of the chemical recovery systems.
Given the general description and magnitude of the investment project, it
appears that the majority of the investment could be classified best as a
major replacement and environmental expenditure. Based on the above
review/ of rate of return and project life requirements, it is within the range
of expectations to require 15 to 25 years to allow for an adequate return
on an investment program of this nature and magnitude.
171
Southeast Alaska Conservation Council
SEACC 419 6th Street, Suite 328, Juneau, AK 99801
(907) 586-6942 phone (907) 463-3312 fax
email: seacc@alaska.net
"^^N^K-.>
S lATEMENT OF ROBERT LINDEKUGEL, CONSERVATION DIRECTOR accompanied
by DAVID KATZ, FOREST PLAN COORDINATOR
REGARDING H.R. 3659 THE ENVIRONMENTAL IMPROVEMENT TIMBER
CONTRACT EXTENSION ACT
JOINT HEARING BEFORE THE HOUSE COMMITTEE ON RESOURCES AND
SUBCOMMITTEE OF THE COMMITTEE ON AGRICULTURE
JULY 11, 1996
Mr Chairman, and members of this Committee:
My name is Robert LindekugeL and I am the Conservation Director for the Southeast Alaska
Conservation Council (SEACC). With me today is David Katz, our Forest Plan Coordinator,
who can help answer any detailed questions you may have. Thank you for the opportunity to
participate on one of the panels testifying before you today. I respectfully request that my
written statement and accompanying materials be entered into the official record of this
Committee hearing.
Founded in 1970, SEACC is a coalition of 15 local citizen, volunteer conservation groups in
12 Southeast Alaska communities, from Ketchikan to Yakutat. SEACC's individual members
include commercial fishermen, Alaskan Natives, small timber operators and value-added wood
manufacturers, tourism and recreation business owners, hunters and guides, and Alaskans from
all walks of life SEACC is dedicated to preserving the integrity of Southeast Alaska's
unsurpassed natural environment while providing for balanced, sustainable use of our region's
resources.
This is the first hearing conducted by this Committee on H.R. 3659, the "Environmental
Improvement Timber Contract Extension Act." Senator Murkowski did conduct Energy and
Namral Resources Committee field hearings in Ketchikan and Juneau, Alaska, on May 28 and
May 29, 1996, on the subjects of the Tongass Land Management Plan and a "possible
extension" of the Ketchikan Pulp Company (KPC) 50-year contract more generally.
However, we need to point out that those testifying at the May 28 and May 29 field hearings
were not testifying to the provisions of this bill, because the bill had not vet been introduced.
We suspect that if these Committees held hearings in Alaska on the specific provisions of this
bill, a great many Alaskans would vehemently oppose this bill.
LYNN CANAL CONSERVATION. Haines • FRIENDS OF GLACIER BAY. Guslavus • FRIENDS OF BERNERS BAY. Juneau
WRANGELL RESOURCE COUNCIL • ALASKA SOCIETY OF AMERICAN FOREST DWELLERS. Polnl Baker • PEUCAN FORFiSTRY COUNCIL
ALASKANS FOR KJNEAU • NARROWS CONSERVATION COAUTlON, Pelersbutg • TONGASS CONSERVATION SOCIETY, Kelchikan
CmcHAGOF CONSERVATION COUNCIL TcMkee • JUNEAU GROUP SIERRA CLUB -SITKA CONSERVATION SOCIETY
TAKU CONSERVATION SOCIETY. Juneau • PRINCE OF WALES CONSERVATION LEAGUE, Craig • YAKUTAT RESOURCE CONSERVATION COUNCIL
printed on recyciea paper ^^
172
Simply put, this bill is one of the most outrageous pieces of special interest, corporate
welfare legislation we have ever seen and one of the most damaging pieces of legislation
ever proposed for Southeast Alaska and the Tongass National Forest. SEACC strongly
opposes this bill.
Even the name of this bill is an insult and double-speak at its worst. The Delegation's
and L-P's proposal will damage the environment and threaten the Tongass. a national
and international treasure.
We are sure we will hear time and time again today that the recent Supreme Court decision in
United States v. Winstar Corp. et al. , No 95-865, (July 1 . 1996) is relevant to the unilateral
modifications made by Congress to the two Tongass 50-year pulp contracts in the 1990
Tongass Timber Reform Act. Some may take the view that this decision limits the ability of
the Congress or the Administration to modify or terminate a contract. Because KPC and
Alaska Pulp Company have both filed lawsuits alleging that the Tongass Timber Reform Act
breached the contracts or was a "taking" of contract interests, this is not the time or place for a
debate on the relevance of this recent decision on past Congressional actions.
It is SEACC 's position that the relevancy of the Winstar Corp. decision is the wrong question
to focus on here. Instead, Congress should carefully consider whether it is good public policy
for Congress to take any action today that may tie its hands in the future. The proposed bill
will adversely affect the public interest by constraining the Forest Service's discretion to
manage and protect public resources on this nation's largest national forest, the Tongass
National Forest. We believe Congress should avoid even taking the risk of giving KPC an
argument that might constrain a future Congress from taking an action it finds necessary to
protect the public's interest in forest resources.
Our bottom line is that KPC does not need a new long-term contract to obtain timber. KPC is
pushing for this bill because it does not want to pay fair market value, like other Tongass
timber operators, for Tongass timber. It wants Congress to shield it from the inherent risks
that come from competing in the free market. We find it hard to believe that Americans
would support such an action by this Congress.
The Alaska Delegation's frontal assault on the Tongass National Forest.
This is the latest attack in an unprecedented assault that began in the fall of 1994. Counting
this hearing and the Senate hearing scheduled for July 17, 1996, the Delegation has held 14
hearings on 11 pieces of legislation. All of these actions have been aimed at rolling back
the Tongass Timber Reform Act, increasing clearcutting, and giving over the Tongass, a
national and international treasure, for exploitation by private commercial concerns.
Chairman Young, your footprints are all over the bill to giveaway the Tongass, dismantle
our national forest system, and the effort to hand over 200,000 acres of the Tongass to
five (5) new Native for-profit corporations as an amendment to the Presidio Bill.
173
Background
Louisiana-Pacific Corporation (L-P) is holding the workers at its Ketchikan Pulp Company (KPC)
subsidiary and the people of Ketchikan hostage KPC still has eight years of timber remaining on
its 50-year monopoly Tongass timber contract, which expires in 2004 But L-P is demanding an
immediate re-write of that contract, with unheard-of new governmental concessions and taxpayer
subsidies, ostensibly to help the company obtain financing for a court-ordered environmental
cleanup and other "improvements" at the aging and polluted KPC pulp mill. Otherwise the
company threatens to shut the pulp mill down
KPC has used this scare tactic many times before. (See Attachment 1 ) KPC has threatened
closure at least seven times since 1973, most often to prevent the imposition of pollution controls.
The threat to close KPC is ceneratcd entirely from L-P
Developments at L-P. In the wake of scandal, major class-action and shareholder lawsuits, and
market problems related to its oriented strand board siding, as well as major environmental
problems resulting in civil and criminal penalties at several facilities including KPC, L-P has been
replacing its top corporate management and re-focusing the company. At its last annual meeting,
the company reportedly described its new strategy as focusing on its core business, doubling the
size of the company by the year 2000 and reassessing the competitiveness of its mills.'
In the last four years plus one quarter, L-P lost S64 million on its pulp division, and lost $22
million on pulp in the first quarter of 1996 alone. The pulp sector lost money in 1992, 1993,
and 1994, and the first quarter of 1996 The pulp division lost over twice as much as it made.
Current weak pulp prices may be below KPC's production cost^ The KPC mill is the largest
toxic water polluter in the entire Pacific Northwest, and last year received the largest
environmental fine ever assessed against a facility in that region-over $6 million in civil and
criminal penalties, including a felony KPC faces a costly environmental cleanup And the largest
part of its workforce is without a labor agreement and has been so for 12 years.
The bottom line appears to be an extraordinary sweetheart deal to induce L-P to remain in
business in Ketchikan So the company has asked for one It is using its threat to shut down to
see what it can leverage out of the federal government and the American taxpayer.
For its part, the Alaska Delegation is doing "whatever it takes" to get the company to stay This
bill would allow the company to operate virtually whatever operation it wanted, and force the
Forest Service to sell L-P a guaranteed amount of Tongass timber, at "whatever price it takes" to
keep the company competitive with mills in Washington and Oregon.
'"Stump Talk," Pacific Rim Wood Market Report. May 1996 at 16.
^Alaska Department of Labor. Alaska Economic Trends, May 1996 at 19.
174
The Delegation is touting proposed legislation as a 15-year KPC contract "extension " But in
testimony before this Committee on May 28 and 29 in Ketchikan and Juneau, L-P CEO Mark
Suwyn made it clear that L-P would not be satisfied with its current contract terms, and required
a new contract, starting right now
The Delegation also claims that Governor Knowles supports this bill Is the Governor here
supporting this bill^ The answer is no! This is not his bill, it is your bill The Governor said he
could support a contract "extension" but only if several conditions were met Furthermore, this
bill does not embody anything close to the conditions the Governor laid down in his letter
to L-P.
SEACC strongly opposes this bill because it:
• Replaces the current KPC timber contract, set to expire in 2004, with a new, 23-year
monopoly contract starting right now and continuing through 2019, with the
intention to continue in perpetuity.
• States Congress" intent to keep KPC in business, at a profit, permanently.
• Mandates increased clearcutting, regardless of impacts to any other Tongass
resource. The bills force the Forest Service to provide an average of 192 5 million board
feet (mmbf) yearly to KPC, and require KPC to cut it, regardless of impacts to commercial
and sport fishing, hunting, subsistence, tourism, recreation, fish and wildlife habitat. This
is 33.5 mmbf higher than KPC's 15-year average annual cut of 159 mmbf This means a
mandate for a total of nearly 160,000 acres of clearcuts— 130,000 football fields of
clearcuts, or 5,650 football fields of clearcuts a year— in the heart of the world's most
intact remaining temperate rainforest This totals a line of football-field-sized clearcuts
from Ketchikan to Washington, DC —and back This would severely damage key fish and
wildlife areas important to Ketchikan residents and other Alaskans— Cleveland Peninsula,
Honker Divide, East Kuiu, Port Houghton, Poison Cove, and other areas.
• Allows L-P to shut the pulp mill down, and replace it with a difTerent facility (if the
facility uses pulp logs for any part of its process), even if the new facility provides
fewer jobs. This would undermine the federal government's basic interest in the 50-year
contract, which is the provision of local jobs A basic premise for this bill is L-P's
claim that it must have time to amortize the costs of adding pollution upgrades and
improvements to the pulp mill. But in fact, the bill would allow L-P to shut the pulp
mill down.
• Guarantee that no matter what kind of mill KPC decides to run, the Forest Service
must provide KPC timber at a rate that does not place the company at a
"competitive disadvantage" to a similar mill in the Pacific Northwest.
175
This extraordinary concession could force the Forest Service to sell Tongass old-
growth trees for the price of PNW raw materials such as recycled newspapers or
sawmill waste—or even give refunds to keep KPC competitive. This open-ended
government subsidy could cost American taxpayers billions of dollars.
• Extend the current contract term by 1 5 years and make the new contract effective 45 days
after passage of the bill
• Requires the contract to include a 23 -year schedule of KPC timber sales through 2019.
The Forest Service must prepare this binding 23-vear schedule within 45 days, without
opportunity for public involvement; and once in place, the Forest Service cannot change
this plan unless L-P agrees
• Requires the Tongass Land Management Plan (TLMP) Revision to conform with the KPC
plan. The current TLMP Revision draft does not contemplate any such schedule or
requirement for KPC timber sales This provision would delay the new Tongass plan, and
require vet another draft of the plan This means the KPC contract and logRJne schedule
will control all future Forest Service Tongass planning.
• Eliminates the Forest Service's right to terminate the contract for serious
environmental damage, or because it is significantly inconsistent with the Tongass
Land Management Plan, unless L-P agrees. This is a provision of every Forest Service
timber contract and basic to responsible management of public resources But, if the
Forest Service and L-P agree, they can change (or worsen) the contract terms without
Congressional approval
• Eliminates the TTRA requirement for KPC to pay rates comparable to those paid by
independent Tongass timber purchasers and gives KPC new timber quality and price
advantages over independent timber purchasers
This bill, and a new KPC contract, would tie the hands of the Forest Service and substitute the
corporate needs of a single favored company for the principles of balanced multiple use
management of public lands embodied in the Tongass Timber Reform Act, the National Forest
Management Act, and the Multiple-use Sustained Yield Act The bills are the most extreme
example of corporate welfare of which we are aware This is public policy at its worst.
The bill rolls back the Tongass Timber Reform Act.
Section 101. Section 101 of the Tongass Timber Reform Act ("Tongass Reform Law" or
"TTRA") replaced Section 705(a) of the Alaska National Interest Lands Conservation Act
(ANILCA), which the Forest Service interpreted as requiring the agency to offer 450 million
board feet (mmbO of timber a year, regardless market conditions or cost to the taxpayer
Throughout the 1980s, acting under this mandate the Forest Service put up millions of board feet
of timber which did not sell because of weak international pulp markets, but preparation and
176
administration of these and other sales cost the US Treasury over $50 million a year. At the same
time, the timber program threatened many Tongass special fish, wildlife and recreation areas
The Tongass Reform Law replaced this unwise and costly mandate with a flexible instruction
authorizing the Forest Service to sell timber in response to market demand, but only to the extent
consistent with the National Forest Management Act and all other applicable forest management
laws, and only "to the extent consistent with providing for the multiple use and sustained yield of
all renewable forest resources "5— including fish and wildlife and the commercial, sport, and
subsistence uses thereof
Your bill would turn back the clock, and reinstate inflexible, unnecessary and costly logging
mandates It would also institutionalize this mandate as part of the Tongass Land Management
Plan This contractual logging requirement will require the Forest Service to emphasize satisfying
KPC's long-term contract over other multiple uses of the Tongass and over the sustainable
management offish and wildlife, hunting, sport and commercial fishing, and subsistence.
Section 301. Section 301 of the Tongass Reform Law modified the KPC long-term contract
Congress unambiguously expressed its intent behind imposing these unilateral modifications to the
contracts in Sec 301(b)(1):
[I]t is in the national interest to modify the [long-term contracts] in order to assure that
valuable public resources in the Tongass National Forest are protected and wisely
managed Modification of the long-term timber sale contracts will enhance the balanced
use of resources on the forest and promote fair competition within the southeast Alaska
timber industry
These unilateral modifications, which your bill seeks to roll back, were based upon
recommendations from the Forest Service's own internal review team following their investigation
into the 1981 antitrust scandal— in which KPC was convicted of utilizing its contractual
advantages to monopolize the Tongass timber industry Thus, your bill rewards a monopoly
for monopolizing the industry and illegally driving others out of business.
Your bill effectively repeals (among other TTRA subsections):
TTRA Sec 301(c)(1), in which Congress sought to modify the long-term contracts "to resemble,
to the greatest possible degree, short-term, independent sales " (TTRA Conference Report at
18 ) By reinstating 5-year plans and other special considerations for KPC, S 1877 again makes
two classes of citizen in the Tongass timber industry and harms the interests of independent
timber operators
TTRA Sec. 301(c)(3). in which Congress sought to end the "back-log" and "pick-and-choose"
abuses under the 50-year contracts As noted in the Conference Report (at 18), this provision
'Tongass Timt)er Reform Act Sec 101.
■•Tongass Timber Reform Act Conference Report.
177
was intended to "prevent the long-term contract holders from harvesting only the better quality
timber while continuing to accrue large backlogs of uncut, lower quality stands."
TTRA Sec 301(c)(8). in which Congress instituted an adjustment intended to assure that the
long-term contract holders would pay stumpage prices comparable to those paid by independent
purchasers, and assuring similar profitability criteria The bill repeals this comparison and replaces
it with a different "comparability" clause keeping KPC competitive with mills in the Pacific
Northwest The bill also provides for a "mid-market" test of profitability which was never in the
KPC contract, and which independent operators do not enjoy
L-P wants its timber prices lowered despite the fact that in 1995 it paid less than half what
independent purchasers paid for Tongass timber.^ From 1991-94, independent operators
on the Ketchikan area paid in cash $97 per thousand board feet of Tongass timber, while
KPC paid Just $7 in cash.''
The bill jeopardizes Tongass fish and wildlife, and their commercial, sport
and subsistence uses.
The bill would (a) set a KPC logging mandate over 33 mmbf per year higher than KPC's 1 5-year
average annual cut, resulting in a huge cumulative amount of logging— 4.4 billion board feet, (b)
set a 23-year timber sale schedule that could not be changed without KPC approval, and (c)
prevent the Forest Service from ending the contract for environmental damage or inconsistency
with the Tongass Land Management Plan Taken together, or separately, these measures
seriously threaten fish and wildlife populations on the Tongass
Every credible study of Tongass fish and wildlife over the last several years indicates that
more habitat must be protected, not less. These studies include
• A Proposed Strategy for Maintaining Well-Distributed. Viable Populations of Wildlife
Associated with Old-growth Forests in Southeast Alaska-Report of an Interagency
Committee, May, 1993 The so-called "Viapops Report," commissioned for use in the TLMP
Revision and carried out by wildlife scientists from the Forest Service, the Alaska Department
of Fish and Game, and the US Fish and Wildlife Service, identified the need for a network of
no-logging wildlife setasides, called Habitat Conservation Areas or HCAs, distributed across
the forest, in order to provide for viable, well-distributed wildlife populations as required by
the National Forest Management Act of 1976
• Review of Wildlife Management and Conservation Biology on the Tongass National Forest: A
Synthesis with Recommendations. March, 1994 US Forest Service Pacific Northwest
Research Station, Corvallis, OR This "blue-ribbon" Peer Review of the Viapops Report as
'us Forest Service. 1995 Tongass Timber Supply and Demand Repon at iv Counting cash payments and
roadbuilding. KPC paid $121 per thousand board feet, independents forest-wide paid $279
^SEACC calculation from Forest Service Alaska Region timber shop data. Counting total payments, including
roadbuilding. KPC paid less than half the independent stumpage charge ($84 per thousand board feet vs. $166 for
independents)
178
well as existing Forest Service wildlife conservation approaches was mandated by Congress in
mid- 1993 This review by nationally known experts endorsed the HCA approach but said it
needed to go farther, including protecting more land from logging, to adequately provide for
viable wildlife populations
• Viapops Committee "Reconciliation Memo." May 1994 This response by the interagency
biologist committee to the Peer Review of its work accepted many of the Peer Review's
findings and embodied them in a further series of recommendations to protect additional lands
from logging pending adoption of a comprehensive wildlife conservation strategy in the
TLMP revision and completion of necessary scientific studies
. Anadromous Fish Habitat Assessment-Report to Congress. January 1995, US Forest Service
Pacific Northwest Research Station (AFHA Report) This extensive review of salmon and
steelhead habitat condition and management practices on the Tongass concluded (with
emphasis added):
"Current direction for anadromous fish habitat protection on the Tongass National Forest
is less than fully effective, and additional protection is needed to make timber harvest more
compatible with maintaining high-quality fish habitat and long-term conservation of
anadromous fish stocks " AFHA Synthesis Report at 1 1
"Current procedures for fish habitat protection are now applied primarily on a project-area
basis, consequently, the much more important cumulative effects of timber harvest on fish
habitat in a watershed are not fully assessed" AFHA Synthesis Report at 8.
"[For the Tongass watersheds in which logging is allowed], 72% of these watersheds
were classified as healthy, and 28% had conditions with reduced condition " An
Evaluation of the Effectiveness of Current Procedures for Protecting Anadromous Fish
Habitat on the Tongass National Forest. September 1994, US Forest Service Fish Habitat
Analysis Team at 15 (included in the AFHA Report)
"The long-term conservation of a harvestable surplus of salmon and steelhead across the
Tongass is essential to the economic future of Southeast Alaska " AFHA Synthesis
Report at 1.
Despite this evidence that less logging, not more, is needed to protect fish and wildlife, your bill
would prevent the Forest Service from curtailing KPC logging even if it were shown to be
necessary to protect these vital forest resources, which provide the basis for commercial fishing
and tourism, the two largest private employers in the region
The Forest Service presently cannot protect subsistence in the face of any timber sale,
often because of obligations to provide timber under the KPC long-term contract.
Subsistence is protected under Title VIII of ANILCA. A new contract with a mandated
179
logging level would tie the Forest Service's hands and cause the loss of traditional
subsistence areas. Over 80% of mral Southeast Alaskans engage in subsistence hunting, fishing,
or gathering ' Under ANILCA, federal actions are to have the least adverse impact possible on
subsistence But the Forest Service has gone so far as to develop a boilerplate disclaimer
describing the fact that subsistence resources may be impacted, but that the agency has no choice
but to do so because of its timber commitments Extending the contract and mandating a higher
KPC cut, as the bills do, will harm subsistence uses
The bill will prevent the development of a modern, high-value-added, secondary-processing
timber industry based on the free market by keeping log prices artificially low and
hindering independent operators from getting a timber supply.
The new contract will prevent competition for logs and give L-P enormous price breaks, keeping
the price of logs artificially low This both cheats American taxpayers out of a fair return on their
resources and diminishes any incentive to add value through additional manufacturing
Between 1992 and 1995, the Forest Service emptied the independent sale pipeline to give
independent sales to KPC under its contract The Forest Service transferred six sales comprising
190 mmbf of independent sales to KPC With a new KPC contract, independent operators
will continue to be second-class citizens.
Case in Point: the Control Lake/Honker Divide timber sale. The Control Lake/Honker
Divide timber sale on Prince of Wales Island is not within KPC's "primary sale area," and as such
is available for independent operators It includes the region known as Honker Divide, one of the
most important wildlife habitat watersheds in the Tongass, with critical habitat for wolves, four
species of Pacific Salmon, an internationally known run of steeihead trout, and an outstanding
wilderness canoe route Conservationists, independent timber operators, Alaska Natives,
biologists, and other area residents collaborated to propose a 40 mmbf timber sale that would
have constituted the largest independent timber sale on the Ketchikan Administrative Area, and
would also have stayed out of Honker Divide But driven by demands of the KPC contract, the
Forest Service has made clear that it will very likely give this sale to KPC, and cut a much higher
amount of timber (the agency's draft preferred alternative contained 182 mmbf) from the area
This will take timber away from independents and harm Honker Divide at the same time. With its
higher mandated cutting level, a new KPC contract raises the likelihood of ftirther cutting in this
sensitive area
While this bill goes way beyond a contract "extension," a 15-vear KPC contract extension
by itself would be devastating for the Tongass. The leverage provided by a long-term
contract makes it extremely difTicult to gain fair consideration for other resources that
would be harmed by logging —even when that logging would violate the law.
'William Alves, Residents and Resources: Findings of the Alaska Public Survey on the Importance of Natural
Resources to the Quality of Life of Southeast Alaska Anchorage, AK: Institute of Social and Economic Research,
University of Alaska, 1979alV-4
180
At Its average cutting rates under KPC's current contract, extended 1 5 years beyond 2004 to the
year 2019, the 23 years of timber that would be cut would equal 3.7 billion board feet. Honker
Divide, Cleveland Peninsula, Port Houghton, East Kuiu, Poison Cove, and other
magnificent Tongass wildlands are all scheduled for cutting by KPC. The Forest Service will
continue to be unable to protect subsistence areas, threatening the way of life of Alaska Natives
and other rural residents The agency will be unlikely to implement critical watershed analysis and
conservation measures recommended by the AFHA Report The agency is unlikely to take
additional steps to conserve huntable populations (not just "viable" ones) of Tongass wildlife
recommended by the Interagency Biologist Committee or the Peer Review of their Habitat
Conservation Area plan
An extended KPC contract by itself will harm other Tongass dependent industries such as
commercial and sport fishing and tourism, by clearcutting and removing the resources they rely on
for their health-namely the forest As stated in the AFHA report:
"Should freshwater habitats be degraded for long periods, salmon and steelhead stocks
will eventually be confi-onted simultaneously with low marine productivity and degraded
freshwater habitat The likely result of such double jeopardy could be high, long-term risk
of extinction The overall risk to Southeast Alaska fisheries and the people who depend
on them is determined in part by the total number of watersheds degraded "*
A contract "extension" would make such a result far more likely by placing contract requirements
before watershed protection
Rewardine a corporate polluter for violating the law.
One reason KPC has a high pollution cleanup bill is because it has violated, avoided and
*" evaded environmental laws for so long. After failing ever to fully comply with the Clean
Water and Clean Air Acts, after over 445 violations of pollution laws, and after pocketing
the profits that came from its illegal acts, KPC is trying to force the American public to pay
for its cleanup. KPC is a chronic pollution law violator In addition to their criminal and civil
pleas last year, they have been sued for another 200 violations of the Clean Water and Clean Air
Acts, and have just reported exceeding pollution limits under their consent decree. (Please see
our May 28, 1996 written testimony at page 8, submitted to this Committee, as well as testimony
submitted by the Alaska Clean Water Alliance )
LrP Still is not coming clean with the public. (Please see our first Supplementary Statement to
the official record of the May 28 ad 29, 1996 hearings.) L-P's CEO, Mark Suwyn, and its
pollution consultant made what can only be characterized as inaccurate and misleading statements
about KPC pollution that indicate they are still trying to cover up or hide fi'om the public the
seventy of KPC's pollution problems This is unfortunate, because public health, public resources
, and the fijture of the Tongass are at stake This behavior should not be rewarded
*.^FHA Report. Synthesis Report al 4
10
181
L-P has other serious civil and criminal pollution violations as well. As revealed in L-P's
most recent Securities and Exchange Commission quarterly filing (form 1 0-Q, period ending
March 31, l<)96)(hereinat1er "March 1996 L-P 10-Q"):
• The United States Department of Justice has stated its intention to seek civil penalties
from KPC for Clean Air Act violations at the Anette Island hemlock mill.
• In March 1996. an "information" was fried in the US District Court for the Eastern District of
Washington charging l,-P with two misdemeanor counts related to alleged record-keeping
violations in connection with the disposal by an independent contractor of transformers from a
mill owned by L-P in 1991
• In June 1995, a grand jury returned an indictment in the US District Court in Denver, CO L-
P has been charged with 23 felony counts related to environmental matters at its Montrose,
CO oriented strand board mill, including alleged conspiracy tampering with opacity
monitoring equipment, and making false statement under the Clean Air Act. The indictment
also charges L-P with 25 felony counts of fi"aud relating to improper use of a trademark as a
result of L-P's alleged tampering with the procedure for the independent certification of its
OSB product performance
• L-P has been named a defendant in at least 12 purported class actions filed in various
jurisdictions, as well as numerous non-class action proceedings because of alleged unfair
business practices, breach of warranty, misrepresentation, conspiracy to deft'aud, and other
theories related to alleged defects, deterioration or failure of OSB siding products In
addition, four other OSB-related actions have been brought between July 1995 and February
1996
• L-P has also been sued by its stockholders for failure to disclose or improper disclosure
related to the above matters
• International Paper (IP), former employer of L-P CEO Suwyn, sued L-P in January 1996
claiming that Suwyn's employment with L-P violated a previous employment agreement he
had with IP
The Delegation's, and L-P's arguments will not fly.
The Delegation and L-P have advanced several arguments in support of these bills:
1. Delegation/L-P Claim: L-P must have a new contract because the Forest Service hasn't
given them enough timber According to CEO Suwyn, the shortfall in timber over the last two
years was 120 mmbf ' The Forest Service's shortfalls are what has caused KPC to lose money
'Oral testimony before this Commillee. June 29, 1996, Juneau. AK
11
182
every day of 1996'" KPC personnel commonly blame "timber shortages" for periodic mill
shutdowns
The Facts: This is not what L-P is telling its shareholders. In its most recent SEC
quarterly report, the company states:
Pulp sales dropped 47 percent in the first quarter of 1996 over first quarter 1995.
Prices decreased an average of approximately 11 percent while volume decreased
approximately 41 percent. World-wide pulp inventories were high at the beginning
of 1996 and remained high through the first quarter, creating very weak pulp
markets. Production volume was 60 percent of capacity in the first quarter of 1996
compared to 90 percent in the first quarter of 1995. The decreased volume resulted
from the lack of demand and from unscheduled maintenance shut-downs."
(Emphasis added )
L-P does not cite timber shortages in this report, and given the description of weak market
conditions it is dishonest and misleading for L-P to claim timber shortages as the reason for either
mill shutdowns or financial losses L-P's problem is not its present long-term contract, timber
shortages, or contract changes under the Tongass Timber Reform Act.
L-P's real problem is very weak international pulp markets.
There is no shortage of logs for L-P. and there hasn't been one. (Please see SEACC's Second
Supplementary Statement to the June 28-29, 1996 hearings at page 2 ) From 1989-94, KPC
logged 96% of their maximum allowable amount under the contract, and actually came within
35 6 mmbf of having to stop logging KPC began FY 95 with over a year's supply of timber— 164
mmbf— released for timber operations, and at the beginning of FY 96 that cushion had grown to
180 mmbf As of April 1, 1996, KPC had access to 209 mmbf— including 87 mmbf that required
no, or minimal, new reading (KPC's 15-year annual average cut is 159 mmbf)
While complaining of timber shortages, from 1993-95 KPC exported from Alaska an average
of 26 mmbf per year of cedar logs in the round. KPC could have sawed these logs in its
sawmill
KPC complained of worse shorta2es prior to the Tongass Timber Reform Act. Please see
Attachment 2, a letter from KPC timber manager Owen Graham to the Forest Service prior to
passage of the Tongass Timber Reform Act In it, Graham complains about a shortage of timber-
-before the Tongass Reform Law He claims that KPC's pipeline of released timber had shrunk to
only 54 mmbf If that was true, then KPC's timber pipeline improved after the Reform Act.
L-P has plenty of timber remaining in its existing contract. L-P has eight years of timber
remaining on its current contract Subsequently. L-P can buy timber from the Forest Service on
'"Id
"L-P Quarterly Report Under Section 13 or IS(d) of the Securities Exchanse Aclof 1934. for Quarterly Penod
Ended March 31. 1996
183
the open market—iust like every other timber purchaser in the country They can also purchase
logs from private owners
The Delegation is spreading the myth that the Tongass is the only source of logs in
Southeast Alaska. But from 1985-1995, private Alaska Native Corporations ciearcut and
exported 4 2 billion board feet of timber— more than half of all the timber cut in Southeast Alaska.
Over that time, the Tongass timber program cut a yearly average of 339 mmbf Native
Corporations cut and exported in the round an annual average of 383 mmbf including 72 mmbf of
pulp logs a year In 1994, Sealaska Native Corporation sold pulp logs to pulp mills in British
Columbia KPC was unwilling to bid for these logs, preferring to wait for cheap, taxpayer
subsidized timber under their long-term contract
L-P has plenty of timber available. What L-P wants is cheap, taxpayer-subsidized timber,
without competition in the bidding process.
2. Delegation/L-P Claim: L-P claims it needs this new deal in order to obtain financing to clean
up the pulp mill
The Facts: In 1994, L-P was the 24th-largest forest products company in the world '^
That year, L-P had the highest return on investment of any forest products company in the
world '^ L-P has eight years of timber remaining on its current contract. That is far more
than many forest products companies have Clearly, L-P has access to credit According to the
March 1996 L-P 10-Q:
Significant capital has also been expended for environmental projects (such as
pollution control equipment) and upgrades of existing production facilities. L-P is
budgeting capital expenditures, including timber and logging road additions, for all
of 1996 orS27S million to S325 million. "■
L-P has invested in facility upgrades and environmental controls elsewhere. L-P's one-year
capital expenditure is up to S325 million, yet the company is unwilling to undertake a five-
year'^ program to improve KPC, whose purported total expense is S200 million. The
problem is not L-P's credit-worthiness, but the reluctance of its Board and management to
commit capital to the KPC pulp mill. L-P and the Alaska Delegation want US citizens to
commit the capital L-P is unwilling to commit.
L-P told its shareholders that its required environmental upgrades would cost no more
than $20 million~not $200 million. In the March 1996 10-Q, L-P states, with respect to the
settlement of the recent civil lawsuit against KPC:
'^Pricc Waterhouse; ForestProducts Survey 1994-North America at 37. Measured by sales value.
I'ld al 36
'"L-P March 1996 10-Qal7
"According to CEO Suwyn, June 29, 1996 oral lestimony before this Committee.
184
KPC also agreed to undertake further expenditures which are primarily capital in nature,
including certain remedial and pollution control related measures, with an estimated cost
of up to approximately S20 million.'^
In testimony before this Committee. L-P said it must spend up to 10 times that amount to
"improve" the KPC pulp mill. '^ But clearly they'll invest the capital only if the American
taxpayer repays that investment.
As the price of staying in Ketchikan, L-P wants the American taxpayer to buy the company
a mill. In 1995, KPC paid $121 per thousand board feet (mbf) of timber (including "payments" in
the form of logging roads built) Independent timber purchasers paid over twice as much-$279
per mbf (These rates include the TTRA "comparability" adjustment supposedly making KPC
timber charges equal to rates paid by independent purchasers )
This new contract, and this bill, would provide KPC timber is worth at least $1.23 billion at
prevailing market rates. Over time and with free-market competition, market rates and
the total value could be expected to go up.
At the current average stumpage price KPC paid in 1995 under its current contract, KPC would
pay just $532 million— a difference of S695 million below current market value, pocketed by
the company. And under the new contract's outrageous pricing scheme, KPC's timber
payments could go down, dramatically increasing the value of this gift from the American
taxpayer to KPC. This taxpayer gift' to KPC greatly exceeds L-P's purported $200 million
expense to upgrade the mill. And as discussed below, after getting the new contract L-P is
not required to spend a dime on these purported improvements.
3 Delegation/L-P Claim: L-P must have a new contract in order to assure that it has enough
timber to amortize the investment in cleanup and improvements at the pulp mill There is no
timber other than the timber L-P can access under its contract
The Facts: The Delegation's bill would in fact allow L-P to shut the pulp mill down.
The day after this bill becomes effective, l^P could close the pulp mill, not perform the
improvements to the pulp mill that are the rationale for this bill, and instead completely
revamp its Ketchikan operation, investing whatever it pleased. Its only obligation would
appear to be cutting 192 mmbf per year and processing pulp logs in some way— including chipping
them and exporting chips The new L-P mill would not have to maintain its current complement
of jobs, and CEO Suwyn has talked of "increasing productivity"-a code word for fewer
employees
This scenario is not far-fetched L-P's purported "improvements" are experimental Initial testing
shows that the new "elemental chlorine free" process would increase effluent toxicity in some
respects While not using "elemental" chlorine, the process would instead use chlorine dioxide or
"March 1996 L-P 10-Qat9
'^L-P CEO Mark Suwyn oral lestimony. May 29. 1996, Juneau
185
other chlorine compounds, and would still produce toxic, persistent organochlorine pollutants
such as dioxins and furans And there is no guarantee that the pulp produced would sell, or at
what price
Thus this bill would allow L-P to obtain a 23-ycar guaranteed supply of public timber,
along with a governmental guarantee to price that timber at a rate that kept L-P
competitive with the Pacific Northwest no matter what l^P decided to do with the timber,
and an expression or Congressional intent to supply adequate timber for permanent
operation of KPC's facilities on a "permanently economical" basis—again, no matter what
KPC decided to do with the timber. This timber would come to L-P regardless of the cost
or impact of providing it on the taxpayer or any other Tongass resource or resource user.
It would come regardless of environmental laws protecting other resources, and the deal
could never be altered unless KPC agreed. All based on the rationale of improvements and
investments that KPC is not required to make, and might choose not to make. Mr.
Chairman, that's a hell of a deal.
4 Delegation/L-P Claim: Southeast Alaska's economy is dependent on KPC. Without KPC,
there will be an economic disaster— 4,000 jobs are at stake— there is no other major timber
operator Senator Murkowski has said, "I can't stand back and watch Ketchikan die"
The Facts: Every job is important. But giving in to corporate blackmail is not the
way to safeguard Southeast Alaska's economy. It is especially troubling for the Delegation to
be making this argument given KPC's history of using its contract to monopolize the Southeast
Alaska timber industry, illegally driving competitors and industry participants out of business.'*
The new, 23-vear. taxpayer-subsidized contract L-P wants is a clear example oFa huge
government program stifling free enterprise
Southeast Alaska's largest private employers and its growth industries depend on a healthy
environment. Government is the largest employer in Southeast Alaska, with 12,350 jobs In the
private sector, activities associated with salmon produce the most natural resource jobs annually
in Southeast Alaska
Commercial salmon fishing and fish processing is the largest private employer, providing over
5,000 direct jobs. Commercial salmon fisheries yield 160 million pounds (average annual
production from the Tongass) worth about $250 million annually "
Sport fishing provides another 1,200 direct jobs with over $28 million in earnings and
250.000 angler-days, and is growing ai an average of 10% per year '^'^ The Ketchikan charter-
boat fleet doubled in size from 1987-92, to 157 boats. ^'
'^Reid Bros-Loeeing v Ketchikan Pulp Co . 464 U.S 916 (1981)
"United Stales Forest Service, Pacific Northwest Research Station and Alaska Region, Anadromous Fish Habitat
Assessment. Report to Congress. January 1995 at 1
^"id Note there may be some overlap between sport fishing jobs and tourism jobs
186
Tourism provides approximately 2.500 direct iobs7^ From 1990-94, tourism exploded, with
visitor spending more than doubling to $160 million," and total regional tourism jobs expanding
by nearly 40%, to 3,674 jobs 24 Over the same period, annual visitors to Ketchikan rose by 55%,
annual hotel gross sales rose 33%,25 and visitor spending increased by 88% to $32 million.
These industries depend on a healthy Tongass old-growth forest— fishing for healthy
watersheds and tourism for wild lands, unspoiled landscapes, and fish and wildlife.
Large-scale clearcutting under the KPC contract threatens jobs in these industries, as
well as the subsistence economy, community use areas, and the healthy fish and
wildlife habitat that is basic to Alaska 's quality of life. It also threatens long-term
timber jobs and precludes the development of a sustainable timber industry based on
the free market
Timber is the fourth-largest industry. In 1995, the timber industry (including private, Native
Corporation logging) provided 2,002 direct jobs, and Tongass timber accounted for 1,216 direct
jobs Region-wide, KPC provides around 1,000 jobs (counting loggers and another sawmill it
leases in Metlakatla) KPC directly provides just 3% of the region 'sjobs and 5% of all direct,
indirect and induced employment
Recent Alaska Delegation claims of massive job losses have little to do with reality. The
Delegation claims 4,000 jobs will be lost if KPC closes ^6 But in 1995, the entire Southeast
Alaska timber industry, including all direct, indirect, and induced employment on Tongass
National Forest, State, and private Native Corporation lands produced 3,463 jobs— how could
4,000 be lost'' Independent timber sales and Native Corporation logging will continue Using
standard Forest Service multipliers, the 600 jobs at KPC's Ketchikan mills would support an
additional 438 indirect and induced jobs for a total of 1,038 jobs or 13% of Ketchikan's jobs
Please see Attachment 3, The Potential Economic Consequences of a Reduction in Timber
Supply from the Tongass National Forest— 1996 Revised Report, prepared by ECONorthwest,
Eugene, OR This report demonstrates that a reduced timber supply would have a minor impact
on the regional economy, that timber was not the driving force behind the economy, and that "the
growth industries are tourism, Fishing, and trade, all of which may benefit from reduced
logging.""
^'Economic Development Center, University of Alaska Southeast Ketchikan Campus, Ketchikan Gateway Borough
Economic Indicators. June 1995
^^US Forest Service, Alaska Regional Economist. Southeast Alaska Economy, February 1995 (number listed is
2.330. presumable referring lo 1994).
^'Planned testimony of Alaska Commisioner of Commerce Willie Hensley before Senate Energy Commitee, S
1054, August 9, 1995 at 4 Heanng was downgraded lo a workshop due to opposition to the bill
"Id
^Ketchikan Gateway Borough Economic Indicators. 1994 al v
^'Letter to the Editor of the New York Times, June 25, 1996
"The Polenlial Economic Consequences of a Reduction in TimberSuppIv from the Tongass National Forest-1996
Revised Report. Eugene. OR: ECONorthwest at i. Summary of report attached.
16
187
Ketchikan's economy, and the regional ecoiiomv. are robust and diverse, and are not
driven by timber. Contrary to misleading KPC advertisements. KPC's mills are directly
responsible for only 7.5% of Ketchikan's jobs. In 1995, Ketchikan, a town of 15,000, had
7,981 jobs producing $255 million in wages and salanes 28 There are 515 jobs at KPC's pulp mill
and around 85 at an adjunct sawmill Together, these directly account for less than 7 5% of
Ketchikan's jobs and less than 10% of its total wages Despite steep declines in timber jobs,
Southeast Alaska's economy has grown every year for the past eight years, and in 1995 the
region's jobs base grew more than any other area of the state ^9 The region is now one of the
world's premier cruise ship markets.
From 1991-95. as Ketchikan's total timber jobs declined by 12%. virtually every other part
of the Ketchikan's economy grew, indicating that timber does not drive the economy.
Construction grew by 24%, transportation, communication and utilities also increased by 24%;
retail trade grew by 23%, services grew 18% ^0 Tourist spending nearly doubled ^ • From 1988-
94, gross business sales increased by 52%, to $458 million,32 driven largely by tourism.
Construction is strong, with conversion of the old Ketchikan Spruce Mill dock into a major new
residential and commercial development, also linked to tourism.
There are other steady, year-round employers in Ketchikan. KPC's Ketchikan mills have
600 employees and a payroll of around $25 million. But government is the largest employer in
Ketchikan, with 1,783 jobs and a payroll of S68 million. Trade employs 1,625 with a payroll of
$36 million. Services employs 1,445 and pays $34 million, Transportation, communication and
utilities 770 with $25 million. Construction employs 432 with a payroll of $22 million, and
Finance, insurance and real estate employs 3 19 at $8 million"
These are all year-round employers including many familv-wape jobs.-^'' In 1 993 there were also
322 commercial fish penmit holders, holding 543 permits for many different fisheries, earning 18 7
million ''
Ketchikan will go through a transition, just as Sitka did. When the Japanese conglomerate
that owned the Sitka pulp mill closed it for business reasons in October 1993, the mill directly
accounted for 10% of that city's jobs and around 16% of Sitka's total wages. Ketchikan is
considerably less dependent on KPC than Sitka was on its pulp mill when that mill closed. Just
two and a half years later, Sitka's economy is healthy. Despite the loss of mill jobs, Sitka's
housing starts, single-family housing prices, and gross business sales were all up through 1994,^^
^"Alaska Dcpanmcnl of Labor. Emplymcni and Earnings Summary Reports. Ketchikan Gateway Borough. 1995
^'Alaska Department of 1-abor. Alaska Economic Trends. May 1996.
^"Alaska Department of Labor. Employment and Earnings Summary Reports.
^'Hensley testimony, supra
^^Ketchikan Gateway Borough Economic Indicators. University of Alaska Ketchikan Campus, 1"94
''Alaska Depi of Labor. Ketchikan Gateway Borough Employment and Earnings Summary Reports
'■* Alaska Dept of Labor. Ketchikan Gateway Borough Employment and Earmngs Summary Reports
'^Ketchikan Gateway Borougii Economic Indicators. University of Alaska Ketchikan Campus. 1995. Fishing
income includes crew salaries, but number of crew members is unknown.
'^Presentation to Moody's Investor Service by Sitka city officials, March 6, 19'>4.
26-689 - 96 - 7
188
and 1995 single-family housing starts increased by 17% over 1994 " Sitka's unemployment rate
is the second-lowest in the region, below the state averaged' Sales taxes remain strong, and
Sitka's Finance Director recently acknowledged that predictions of disaster did not materialize.-'^
While KPC's Ketchikan mills provide around one-third more jobs than the Sitka pulp mill,
Ketchikan's total economy is around twice the size of Sitka's with its pulp mill ''°
5 Delegation/L-P Claim: No other timber industry is possible, because 30% of the trees are
"dead or dying," and suitable only for pulp Therefore a pulp mill is absolutely necessary
Moreover, transportation costs will make it impossible for a secondary-manufacturing industry to
develop in Southeast Alaska
The Facts: The logical conclusion of this argument is that if KPC closes, no one will
ever cut another Tongass tree on a commercial basis. This conclusion is not believable, and
is belied by recent developments. Transition to a high value added, secondary
manufacturing timer industry based on the free market is both possible and desirable.
(Please see SEACC's original written comments. May 28 and 29, 1996 at 10-12, and our
Supplementary Testimony at 7, where we discuss a value-added timber industry for Southeast
Alaska )
Please see Attachment 4. Far from being impossible, an established Southeast Alaska sawmill
owner and operator has just proposed a new remanufacturing plant and wood drying operation
for Prince of Wales Island. This kind of an operation is an important facet of a secondary-
manufacturing industry This is the kind of operation we'd like to see in our region's future.
The Alaska Legislature passed, and Governor Knowles just signed, a bill to promote high value-
added manufacturing in Alaska The provisions of this bill were weakened by the legislature,
leaving the Department of Natural Resources with increased responsibility to recognize regional
differences in Alaska's forests and make sure that the bill accomplishes its stated purposes while
conserving important Alaskan resources Nonetheless, the Governor and the legislature have
embraced the importance of secondary manufacturing in the future Alaska timber industry
Studies have shown that components of a secondary manufacturing industry can work
from Southeast Alaska.
• Feasibility Analysis of Alternative Wood-Based Industries for the City and Borough of Sitka.
Alaska, prepared by International Resources Unlimited, Inc for the Forest Service and the
City and Borough of Sitka (draft 12-13-95) showed that a sawmill, a dry-kiln operation, and a
planer mill could be built from scratch and operated profitably in Southeast Alaska, both
separately and as an integrated operation Such a mill, while not necessarily producing
secondary products in and of itself, produces the raw material-kiln-dried, surfaced lumber—
'^Alaska Department of Labor. Alaska Economic Trends. May 1996
■•'Alaska Department of Labor statistics
^'May 10, 1996 radio news stor>. KCAW. Sitka {transcript available)
■""Measured bv gross business sales (other measures reveal a similar relationship).
18
189
for secondary production Custom kiln-drying of other companies' wood is also an important
service provided by such a facility to the secondary sector
• Southeast Alaska Value-added Timber Manufacturinp Study, prepared for the Southeast
Conference by C L Cheshire, Jon Galea, and Dubai, Beck and Associates (June 1991),
examined opportunities in low-grade and small-diameter logs and determined that finger-
jointed moulding and edge-glued boards— both value-added products— could be produced
profitably in Southeast
The Forest Service has recognized the potential for a secondary manufacturing industry in
Southeast Alaska.
In Charting a Course for Sustainable Development in Southeast Alaska.'" the authors stated, after
visiting Southeast Alaska wood manufacturers:
Past efforts to develop the timber-using industry and the timber-based economy have
partially relied on strategies that encouraged a few, large firms The current situation
offers an opportunity for some transition to a large number of smaller firms Markets
appear to be more economically accessible to these firms than in the past (Page 13.)
Thirty-five of the 42 manufacturing facilities in SE Alaska are on Prince of Wales Island.
There is considerable interest in new markets Another opportunity is installing a regional
dry kiln and concentration yard on Prince of Wales Island " (Page 16 )
In Economics of the Southeast Alaska Timber Industry.''^ Forest Service Alaska Regional
Economist Kathleen Morse said
Old growth timber still commands a premium price because it is becoming increasingly
scarce in wood products markets A key to the successfijl fijture of the wood products
industry in Alaska lies in recognition of this fact and developing the ability to use this
wood to its maximum advantage in local manufacture. (Page 4.)
Value-added wood products could be a key element of the Southeast Alaska timber
industry in the fijture. . This would mean a reorientation fi'om the production-oriented
manufacture of industrial commodities to more market-oriented production of specific
products (Page 6 )
When you've got a high-cost producing region, like we've got here; you've [sic] simply
must target higher value end-use products Fortunately, we have a good supply of very
valuable trees, that when logged, should have every penny squeezed out of them To do
otherwise, would be a true waste of resources (Page 6 )
^'Madison, WI Forest Products Lab. Pacific Northwest Research Station and Forest Service Region 10, undated
(approximately January/February 1996)
*^ A mid- 1994 presentation to the "Ketchikan 2004" conference held at the University of Alaska Southeast-
Kclchikan
190
The high value-added sector is the dynamically growing segment of the Pacific Northwest
timber industry. According to the Center for International Trade in Forest Products at the
University of Washington, exports of secondary products through the Columbia-Snake river
Customs Districts, which includes all of Washington and Oregon, increased 181% between 1989
and 1993 "^
According to the Evergreen Partnership, a Tacoma-based private non-profit membership
corporation aiding the value-added sector, there are an estimated 1 ,400 secondary wood products
producers in the states of Washington and Oregon, employing 33,000 people. Exports increased
nearly 200% from 1989 through 1995, reaching $300 million.'''' While banks are reluctant to loan
money to the primary sector, the Evergreen Partnership and secondary businesses have had
success with banks by showing them that they are a separate, growing, profitable building
products industry. ■'5
Sealaska Regional Native Corporation has shown interest in a new timber industry. At a
March 20-21, 1996 Wrangell conference on secondary wood product manufacture, Sealaska CEO
Leo Barlow said that a timber industry based on pulp and cants is a thing of the past Sealaska
has been considering buying the old APC Wrangell sawmill and running it as a different kind of
operation, based on markets rather than commodity production.
Transportation costs are not a bar to secondary manufacturing in Southeast Alaska.
Barging containerized cargo by water is far less expensive per mile than hauling containerized
cargo by truck, enabling Southeast Alaska manufacturers to compete with manufacturers closer to
major transportation hubs
One manufacturer of knockdown cedar firmiture on Vancouver Island"" ships a 40-foot container
of finished product to Vancouver, B C for trans-shipment to their customers in Europe. The
cost of trucking the container from the plant in Port Albemi to Vancouver is approximately
$700CN or $51 lUS Trans-shipment to European ports such as Antwerp, Belgium or
Bremerhaven costs around $2,500US Shipping costs are paid by the customer, and clearly the
transportation costs from the Vancouver hub to the final destination dwarf shipping costs to the
hub
Barging this amount of knockdown furniture from Ketchikan to the hub of Seattle would cost
approximately $95 1 ,''■' for approximately 450 pieces Significantly, this quote for shipping does
not lake into consideration better deals that might be worked out with shippers This difference
in shipping cost to the hub would thus result in adding .98 to the cost of each piece of
furniture. Clearly this is not significant—and shipping costs from Seattle to some
"^Center for International Trade in forest Products (CINTRAFOR). August 1994. Fact Sheet #13
''''The Evergreen Partneship, Prospectus at 1
'"Greg Schellberg, Evergreen Partnership Executive Director, workshops sponsored by SEACC in Ketchikan and
Wrangell, February, 1996
■"Sarita Furniture. Port Alberni
""Quoted pnce of $5.37/1001bs, prorated including prorated pickup and delivery of container This amount does
not consider more favorable deals that might be worked out with shippers and as such is overly costly.
20
191
destinations might be lower than costs from Vancouver, thus recapturing initial shipping
cost difTerences.
A similar situation would hold true for many other Southeast Alaskan products.
A high value-added, secondary manuTacturing industry is market driven— based on quality
and marketiiie to a far greater extent than is a commodity, production based industry, like
pulp. Therefore, differences in shipping costs are far less significant. The quality of the
individual product and the needs of the customer are paramount.
Southeast Alaska received SI 10 million from Congress last year to help with problems in
the timber industry'. Now is the time to use that funding to effect a transition in the timber
industry
Your bill deprives us of one of our greatest strengths—the genius of the free-enterprise
system. By decreeing who will get timber, and mandating price controls that have nothing to do
with fair economic competition, your bill prevents free-market entrepreneurs in timber or other
industries from establishing the most valuable and efficient use of Tongass resources, and at the
same time cost .American taxpayers a massive subsidy This is a clear example of environment and
development being compatible until distorted by a misguided and heavy-handed government
subsidized program
Conclusion.
By placing the needs of KPC above those of all other forest users, your bill threatens all other
forest users, and the environment Although billed as a contract "extension," the new, 23-year,
taxpayer-subsidized contract L-P wants (and the bill provides) would be devastating for the
Tongass National Forest It would start right now and go at least until the year 2019 It would
place L-P's corporate needs ab' ve the needs of any other forest user; give L-P rights over the
Tongass it has never had before, threaten jobs in other Tongass-dependent industries, and make a
mockery of balanced multiple use
Your bill would roll back vital balanced-management reforms of the 1990 Tongass Timber
Reform Act, undermine the National Forest Management Act as it applies to the Tongass, and
make conservation offish and wildlife habitat and protection of the world's largest remaining
temperate rainforest secondary to the commercial exploitation of that forest The bill rewards a
major corporate polluter for violating pollution laws. Because it officially establishes one
company as the major commercial user of the forest, and commits the government to keeping that
company profitable, the bill squelches free enterprise and will likely halt the development of a new
timber industry based on the free market awd secondary manufacturing of wood products within
192
the region The new timber industry would cut less and employ more Alaskans, while allowing
for conservation of vital forest resources that complement rather than threaten other Tongass-
dependent businesses
By contractually enshrining L-P as the dominant user of the Tongass, this bill returns
Southeast Alaska to the days of the timber barons. It is destructive to the environment and
future generations. It should be rejected.
22
193
SOUTHEAST ALASKA CONSERVATION COUNCIL
TESTIMONY BEFORE THE U.S. SENATE
ENERGY AND NATURAL liESOURCES COMMITTEE
JULY 10, 1996
LIST OF ATTACHMENTS
ATTACHMENT
KPC's Threats to Close Its Mill, 1973-Present
ATTACHMENT 2 September 2 1 , 1 990 Letter from Owen Graham, KPC
Timber Manager, Complaining of Timber Shortages Prior
to the Tongass Timber Reform Act
ATTACHMENT 3 The Potential Economic Consequences of a Reduction in
Timber Supply from the Tongass National Forest
1996 Revised Report-Executive Summary
ATTACHMENT
"Seley Looks to Re-Open Mill in Thome Bay," article in
Ketchikan Daily News, June 8-9, 1996
194
CORPORATE OUTLAW SEEKS
NEW SWEETHEART DEAL
Since 1954, Ketchik'an Pulp Company (KPQ, a wholly-owned subsidiary of Louisiana Pacific
Corporation, has owned exclusive rights to log timber on a substantial portion of the southern
Tongass National Forest. In exchange for a guaranteed 50-year pulp timber supply at
noncompetitive rates, KPC agreed to build and operate a pulp mill in Ketchikan until the
contract expired by its terms in 2004.
Currently, KPC is seeking Congressional support for what it calls a 15-year "extension" of its
monopolistic pulp contract. KPCs proposal, however, is not for an "extension" of its existing
contract but a request for Congressional approval of a new, monopoly contract. The standard
provision in Forest Service timber sale contracts permits an "extension" of that contract only if
"purchaser's operations to date have been in reasonable compliance with contract terras." KPCs
repeated violations of its pulp mill's air and water pollution discharge permits, which endanger
the health and safety of Ketchikan residents, disqualify it from obtaining a contract "extension."
KPC claims it needs an "extension" so it can afford to spend the $150 million needed to install
pollution-prevention upgrades at its antiquated pulp mill. These upgrades are required under a
1995 criminal plea agreement between EPA and KPC, in which KPC pled guilty to violating its
water quality permit by intentionally dumping toxic sludge into marine waters adjacent to its
pulp mill. This criminal plea agreement is the most notorious example of KPCs chronic failure
to live up to its contractual promise to "conduct its operations under this contract and other
related business aaivities in compliance with Federal, State, and local statutes, standards, orders,
permits, or other regulations."
Below are several examples of KPC holding local communities hostage by threatening mill
closures over the last 23 years.
• In 1973, following the first attempts to implement basic environmental impact statement
requirements, C. L Cloudy of the Alaska Loggers Association warned that the requirements
would cause "complete [pulp] mill shutdowns" and "shutdowns of the remaining sawmills in
Southeast Alaska." (Ketchikan Daily News, April 19, 1973).
• On May 4, 1976, the Ketchikan Daily News headline screamed "KPC says it will close July
1, 1977." But as the paper explained the next day, the announcement "wasn't news. It was
part of a publicity stunt." The paper criticized the pulp mill for issuing false alarms one
week before EPA pollution hearings and shortly before employee negotiations were due to
start. One editorial concluded "Ketchikan Pulp Co. is crying wolf and playing with the faith
of thousands of people. God help it." (Ketchikan Daily News, May 5, 1976.
• During 1983 EPA hearings, officials from KPC said the cost of installing water pollution
control equipment would force them to shut down. KPC said it would "consider both legal
recourse and mill closure if the variance requests" were denied (Southeastern Log, December
1983).
Southeast Alaska Conservation Counci
Senate Bill 1877
July 10, 1996
AHarhmcnt 1
195
• In 1984, KPC's comptroller (later president) Martin Pihl claimed that if the Forest Service
didn't reduce the price of timber and allow larger clcarcuts, "we're all going to pacic up and
leave." (Juneau Empire, March 29, 1984).
• In 1992, EPA proposed much tighter pollution controls for KPCs pulp mill. KPC's
President, Martin Pihl, claimed that the new pollution controls "would seriously threaten the
survival of the mill, or any pulp mill anywhere." (Ketchikan Daily News, April 17, 1992).
• In early summer of 1993, KFC announced that it would shut down its pulp mill "in August
for three months because it was running out of wood for pulp." (Ketchikan Daily News,
August 6, 1993). However, KPC "delayed the temporary shutdown of its pulp mill until the
week of Sept. 15 and says it will last just 30 days ... [because of the mill's] aggressive
logging plan, along with purchases of pulp logs and chips throughout Southeast Alaska and
Canada." (Sitka Sentinel, August 5, 1993).
• On June 26, 1995, the Ketchikan Daily News announced that KPC "says it will close its
Ward Cove sawmill for an indefinite period starting Friday because it is running out of
timber sold by the U.S. Forest Service." The same day it announced the closure of the
sawmill, the Ketchikan Daily News contained a paid add by KPC, which offered to sell
"approximately 3,000 board feet of red cedar and 2,000 board feet of Alaska yellow cedar
during the third quarter of 1995." In fact, the decision to close the sawmill was a business
decision driven by pulp prices that had more than doubled since 1994. and were then at or
near their highest price ever. While pulp prices were exploding, the average market price for
sawn timber dropped by 33 percent.
• On March 12, 1996, iheKetchikan Daily News reported that KPC would close its sawmills in
Ketchikan and Metlakatia from late March until after Memorial Day because of "a shortage
of timber." KPC's problem is not timber supply, but the cyclical, and recently volatile,
nature of the international pulp market. In the same article, the Ketchikan Area Forest
Supervisor expressed his personal opinion "that the current shutdown has more to do with
market conditions than supply of logs ...." These shutdowns occurred despite KPC having
access to 209 million board feet of Tongass timber as of March 24, 1996 — well over a year's
supply " including roughly 87 million board feet that required no new roading. KPCs
problem is that its monopoly contract has shielded it from competition for so long that now it
has trouble competing with modem, lower-cost competitors on the international pulp market.
KPC has a long history of "crying wolf with closure threats every time their logging operations
are questioned. KPC has further threatened to pack up and leave unless EPA waived pulp mill
pollution requirements or relaxed enforcement of water quality regulations.
KPC does not deserve any special treatment from Congress because it has repeatedly failed
to act as a responsible corporate citizen. Any "extension" of KPC's monopoly would
continue the environmental and economic problems caused by this exclusive, 50-year
contract, and become one of the biggest heists of public resources since the days of the
railroad robber barons.
SEACC 05/27/96
196
Ketchikan Pulp Company
Pcsl Odice Bo« 6300
Kelcnixan Alaska 99901 USA
Teleolone 907-225-2i5l
Telefax 907.225-8260
September 21, 19S0
Mr. J. Michael Lunn
Forest Supervisor
U. S. Forest Service
Ketchikan Area
Federal Building
Ketchikan, Alaska 99901
Dear Mike:
I
The five-year allotment of timber the Forest Service identi-
fied in the 89-94 EIS for our LTS appears to require about 360
miles of new construction to access the 960 mmbf.
Obviously, the roads must be built early enough in the five-
year period to allow time for harvest. As you know, normally
we consider six months of road constructed ahead of the
logging the minimum, although two or more years ahead in some
cases was necessary to keep construction costs (e.g. mobiliza-
tion) to a reasonable amount. Indian Point is an example of
an area where we had to build road two to three years ahead of
the logging in order to avoid unreasonably costly remobili-
zation. With relatively few opportunities for alternate means,
of mitigation to allow crossing fish streams outside the
three-month fish timing "window", we now realistically need to
maintain a winimum of 12 months of timber released ahead for
road construction and six months of timber roaded ahead for
logging.^ In any case, in order for you to offer the contractu-
ally required volume during the five year period the Forest
Service must release all of the timber (960 mmbf) for con-
struction and logging in not less than the first four years of
the five year period and those releases must be distributed
over those four years in a manner that will allow for the
orderly construction of the roads required and also allow for
a reasonably efficient logging operation (e.g., summer logging
at high elevation, winter logging at low elevation) .
In the period from October 1, 1989 through September 17, 1990
the Forest Service released only 139 mmbf for harvest. Our
pipeline of timber released ahead has fallen from 79 mmbf on
Southeast Alaska Conservation Council
Senate Bill 1877
July 10, 1996
4^^c ktt\f.J-:i-
L
197
Mr. J. Michael Lunn
September 21, 1990
Page 2
October 1, 1989 to only 54 mmbf on September 17, 1990.
Likewise, the volume prepared but not yet released has fallen
from 73.1 mmbf on October 1, 1989 to 26.7 mmbf on September
17, 1990 (see Attachment "A") .
The amount of timber available for us to harvest has become
intolerably small. We have only a couple of months of timber
roaded ahead and only a month of road released ahead of our
construction crews. Through no fault of KPC, we have been
forced to cut back our logging operations at Naukati,
Labouchere, Coffman Cove and Thorne Bay. Many workers have
been laid-off, and many of our construction crews have been
able to work only intermittently all year. Our harvest costs
have become unreasonably high this year because of the inter-
mittent shutdowns caused by Forest Service failure to provide
necessary timber volumes in a timely fashion, the reduced
level of operations and the lack of planning opportunities
available to us.
All of these operational problems are a result of not having
sufficient timber prepared ahead to permit proper planning and
management of our business. We had planned to harvest about
205 mmbf this year, but it is obvious now that we will not
come close to that level. It appears more likely that we will
be able to harvest about 175 miobf. We have made an effort to
replace this fiber loss with outside purchases. We have- paid
a premium for the additional fiber and we are still critically
short. One or both of our sawmills will likely suffer consid-
erable down time which could occur by late 1990 or early 1991.
Furthermore, if the Forest Service does not get caught up with
their sale preparation work immediately there is serious risk
that our pulp mill will be without fiber in the fairly near
future.
The Forest Service assured us at our May 10, 1990 meeting they
would be back on schedule with our Annual Operating Plan by
September. . Instead, as of September 1990, the volume released
was 238 mmbf behind what was approved in the Annual Operating
Plans for 1989 and 1990 (see Attachment "B"). We request that
you immediately investigate whatever possible Forest Service
activities there may be that are contributing to this con-
tinuing problem of delayed releases. We request again that
you take the steps necessary to get back on schedule immedi-
ately so that our company will not suffer further damages.
Another related problem is the fall-down in acreage and volume
and economics from what was approved in the Record of Deci-
sion. Through September 1, 1990, the new units that have been
198
Mr. J. Michael Lunn
September 21, 1990
Page 3
released to us (not including residual timber) have averaged
21.1% less acreage than the ROD (see Attachment "C") . This
has exacerbated our problem with volume released ahead to
operate on and it has an extreme impact on our costs (e.g.,
road construction cost per mbf, mobilization cost per mbf,
etc.). Further, if this trend is not reversed you may be
forced to prepare a supplemental EIS to replace the lost
volume.
Finally, I still have not been able to locate the source of a
report to Mike Barton that indicated we are harvesting timber
that averages better than 40 mbf per acre. The truth is that
from March 1, 1989 through June 30, 1990, our harvest averaged
31.3 mbf per acre net + net utility or 28.2 net
(Attachment "D"). If you or anyone else in the Forest Service
disputes this calculation I would like to hear about it now!
We are being given a deaf ear in the Juneau office. Perhaps
updating them with the correct information would help
alleviate this situation. *
Sincerely,
0. tf. Graham
Timber Division Manager
:ts
cc: M. R. Pihl
199
The Potential Economic
Consequences of a Reduction
in Timber Supply from the
Tongass National Forest
1996 Revised Report
Prepared for:
The Alaska Rainforest Campaign
Prepared by:
ECONorthwest
99 W. Tenth. Suite 400
Eugene, OR 97401
(541) 687-0051
December 1994
Revised June 1996
Southeast Alaska Conservation Council
Senate Bill 1877 a ,,
July 10, 1996 A-mcl^Kyf^^
200
Executive Summary of
1996 Revised Report
In December 1994, ECONorthwest studied the economy of Southeast
Alaska and concluded that a reduced timber supply from the Tongass
National Forest would have a minor impact on the region's economy, and
this impact would be confined largely to the timber industry. Our report
documented that the timber industry represents a relatively small fraction of
the region's total economy and that, since 1990, Southeast Alaska's economy
had grown steadily even as the timber industry was shrinking. We found
that the growth industries in the region are tourism, fishing, and trade, all of
which may benefit from reduced logging. We discussed the unique
importance of subsistence in Southeast Alaska, an economic and cultural
activity which is directly harmed by logging. Finally, we noted that Southeast
Alaska's experience was consistent with the Pacific Northwest, which has
ezp>erienced significant growth in total employment as employment in the
timber industry declined.
One year later ECONorthwest reviewed the latest economic data frt>m
Southeast Alaska. This data strongly reinforces the findings and conclusions
described above. The region's total employment continues to climb as
employment in the timber industry continues its downward trend. Between
1988 and 1996, total employment in Southeast Alaska increased at an
average-annual rate of 2.2 percent, in refreshing contrast to the average-
annual decline of almost 7 percent for employment in the region's lumber,
wood products, and gulp industries. In 1995, those directly employed in the
timber industry accounted for less than 6 percent of the region's total
employment, and many of these workers were nonresidents.
Clearly, Southeast Alaska's economy is diverse and strong enough to
absorb reductions in timber harvest yet keep growing. In fact, since 1988,
employment and earnings have increased steadily in every sector of the
region's economy except timber — construction, transportation, trade, and
services, to name a few.
Fishing, tourism, and the quality of the natural environment contribute
to the regional economy's diversity and strength. Reductions in logging may
have a positive effect on these driving forces of economic growth. For
example, in a report to Congress in 1995, the Alaska Region of the U.S.
Forest Service concluded that existing measures of habitat protection are
inadequate and greater protection is needed to avoid declines in salmon and
steelhead runs. As another example we note that a 1995 report concluded
that while the number of boat-based tourists in Southeast Alaska is
increasing dramatically, the number of suitable anchorages has declined, in
part, due to logging.
Reduced Timber SuppJy From Tongass ECONorthwest Page i
201
This updated report, like the origuiai, does not attempt to assess the
impacts of reduced logging on every community in Southeast Alaska. The
focus of our analysis is on the regional economy of Southeast Alaska. We
note, though, that much of the concern regarding the economic
consequences of reduced logging on the Tongass National Forest focuses on
the communities that denve substantial income from logging. One cannot
fully descnbe the consequences to these communities, however, by looking
at each community, or even the entire set of communities, in isolation from
the regional economy. The economic well-being of every community adjacent
to the Tongass is tied to, and cannot be separated from, economic activity of
the regional economy.
Page ii ECONorthwest Reduced Timber Supply From Tongass
202
Ketcmmn Dally Newsi
Saturday-Sunday, June 8-9, 1996
Seley looks to reopen
mill in Thome Bay
By CATHY ST. JOHN
Daify News Staff Wriiir
Seaborne Lumber owner Steve Seley
is coniidering relocating his now shut-
down Ketchikan operations to Prince of
Wales Island as part of a new S5 million
secondary manufactvihng facility.
Seley is scheduled to present a pro-
posal, which is in the early stages, to the
Thome Bay City Council on June 20, he
said.
Seaborne Lumber's J5.1 million mill
dosed April 27 due to a declining timber
supply. Seley is especially interested in
locating to the Thome Bay area, as the
prospects of a Gravina Island industrial
site "■'" and POW growth continues, he
said.
POW has always 'extended open arms
to the (timber) industry and jobs.' he
said.
The island has more beachfront prop-
erty than Ketchikan and will probaUy
surpass Ketchikan's population in the
next 10 years, he said.
"Thome Bay is also a good commu-
nity of primary manufacturers,' hesaid.
Seley would relocate his log mer-
chandising and primary manufacturing
equipment and remanufacturing plant.
He plans to add a dry kiln and planer to
the facility. A dry kiln reduces the mois-
ture content of wood in preparation for
further manufacturing, while the planer
provides the Gnal cut before sale.
The proposal is to employ 60 work-
ers, about tour from Seley's shutdown
Ketchikan operations. The remainder
would be local hire, he said.
The plant would be designed to split
its time between Seaborne s and otner
bminess's needs. Seley is looking at a
'good, sound operation' that wUl al-
low added investment in the commu-
nity by offering additional manufac-
turing for the smaller 'mom-and-pop'
operations, he said.
Seley would like to begin construc-
tion in spring 1997, but there's a lot of
work ahead, including finding a fiber
supply, he said.
He plans on two-thirds of his timber
supply coming from U.S. Forest Ser-
vice sales. The remainder would come
from state timber sales, he said.
The facility will manufacture shop
lumber, industrial dear boards and
construction-grade products, which
have a market in other parts of the
state.
'There are a lot of users up north,'
be said.
Seley u scheduled to meet with
Gov. Tony Knowles' staff nart week
to discuss bow the project falls under
a Knowles task fonx recommenda-
tion for a regional facility with value-
added capabilities.
He is considering a site on the east
coast of POW because it is strategic to
the timber supply and because Thome
Bay has shown the most enthusiasm,
said Seley.
The City of Thome Bay had previ-
ously considered constructing a bio-
mass plant to provide power and pos-
sible dry kilning for secondary manu-
facturing.
Mayor Kay McMaster said the dty
is very exdted about the proposal.
'The dty will do whatever it can do
to accommodate (Seley) and facilitate
the project,' she said.
The dty and City Council are also the Goose Creek subdivision in case
asking the state to create two 20-acre Seley is interested in those lands, said
parcel for bid in its next sale of lots at McMaster.
Southeast Alaska Conservation Council
Senate Bill 1877 A-JL,,/,, , J-rL
July 10, 1996 /^'^^^'•c/f
203
'^.'/■''".A ^^^
ot
<pdi
can
PELICAN. ALASKA »9S32
PHONE 73S-2202
FAX 735-22Sa
- CITY OF PELICAN, ALASKA
RESOLUTION 1996-31
A RESOLUTION FOR THE CITY OF PELICAN, ALASKA,
OPPOSING EXTENSION OF THE LOUISIANA PACIFIC'S
KETCHIKAN PULP COMPANY 50 YEAR CONTRACT WITH
THE FEDERAL GOVERNMENT
WHEREAS; the 50 year contract currently enjoyed by Louisiana
Pacific's Ketchikan Pulp Company (KPC) gives that company
an unfair advantage over competitors and exclusive rights
to timber resources, and,
WHEREAS; the terms of that contract were negotiated in the 1950 's
and are wholly inappropriate today, and,
WHEREAS; the City of Pelican is opposed to federal subsidy of the
timber industry in the Tongass National Forest, (Resolution
1995-22), and,
WHEREAS; genuine multiple use of the Tongass National Forest that
provides for subsistence, tourism, independent timber
operators, and adequate fish and wildlife habitat protection
is incompatible with allowing KPC timber operations a con-
tinued priority, and,
WHEREAS; areas of Norther>JChichagof , including the Eight Fathom
Timber Sales, which were not in KPC's original contract
area, have already been identified to supply KPC under the
original contract, and,
WHEREAS; extension of the KPC contract would vastly increase pressure.
for immediate large-scale clearcutting on Chichagof Island,
and,
WHEREAS; in 1995 KPC was convicted of a felony and 13 other charges
related to violations of clean air and water laws, and,
WHEREAS; the possibility of long term economic diversity and stability
for our community and the region would be harmed by extension
of KPC's contract;
NOW THEREFORE BE IT RESOLVED that the City Council of Pelican, Alaska
hereby opposes extension of Louisiana Pacific's Ketchikan
.", Pulp Company's 50 Year Contract with the USDJV Forest Service.
PASSED, APPROVED AND ADOPTED THIS 17TH
MZ
u
JMck.
Signed:
Glen WT Woods
Mayor Pro-Tempore
Sherd Paddock, City Clerk/Treasurer
i.^'^iS'BB^'F'Bb'L'dW^BSs^DfpA'RTM'ENT "pELl'cAN HEALTH CLINIC PELICAN VOL'JNTEEr! ,
204
aty ofTenakM Springi
RESOLUTION 96^7
hlheCouncd fntro(hic«d by fiM
April 25. 1 996 Council Presxlait
A RESOLUTION FOR THE Crry OF TENAKEE SPRINGS, ALASKA,
OPPOSING EXTENSION OF THE LOUISIANA PACDIC'S KETCHIKAN PULP COMPANY
SO YEAR CONTRACT WITH THE FEDERAL GOVERNMENT
WHEREAS, the SO yev oontnct oonntly enjoyed hy LouisuM PKific% Ketchikan Pulp C<mp«^ (LPIQ
give* thtt oompaoy m unlUr minrtagfs ovtr oocnpctiton aad aehahe tif^ to timbflr
nsoutow, tnd
WHEREAS, the Unna of that cortrict were negotiated in the \9iCft tnd m wholly iMppiupriite today, mi
WHEREAS, genuine multiple use of the Tongus National Fofeat that provide* for subsistence, tourism,
inklcpcnJcnt limber operalon, and adequate fith and wildlife habitat protection u incompatible
with allowuig LPK tunber operations a continued pnority, wJ
WHEREAS, areas of Temkae Inlet, whiob wore not in LPICi original oontnct ««•, hive already been
identified to s^iply LPK under the original contiKr. and
WHEREAS, extension of the LPK oontnct would vastly Increase pressuc tar fanmedtate laigft-scale
clearcutting in Tenakee Inlet, and
WHEREAS, in 1995 LPK was ooovicted of a feto(\y and 13 other charges related to violationt of clean air
and water laws, aid
WHEREAS, the possibility of lor^ torn eoortomic diversity and stability for our oonmnunity and the region
would be hamed by extension of LPICs contnct;
THEREFORE BE IT RESOLVED that the Common Council of tfte City of Tenakee Springs, Alaska hereby
oppoKi extension of Louisiana Pacific's Ketchikan Pulp Conpan/s 50 Year Contract with the
USDA Forest Service.
BB FT FURTHER RESOLVED to direct the city cleric to forwnd a copy of this resolution to the Honorable
Tony Knowles, Oovcnxir of the State of Alaska.
ADOPTED Cf\/eS,s 1 VaXA^S^iirmS ^^"^^ DAY OF APRIL 1996
Louis S.Heint
City Council Preakknt
ex o£Bck> MAYOR
^^P^-
205
GustavxLS
Community
Aesociation
-^ ^
\r
, Post Otiice Box 62
jj Gu5tavus, Al&flka 90836
June 13, 1996
GonoraL Meeting '
Introduced by
Janes Kaclcovjak
K tuEsaunioii fob the gost&vds (xmvssvn AssociAiia>
OPPOSniG KXTEIISIQH OF THE LOUISIANA PArmC*8 MBUillMI PULP
COKVkKt SO-TEAB OQHTSACT WITH THE nCERU. OOVEBMOR
WHEREAS, tho SO-yo&r contract currantly enjoy«^ by tha Lonlalana
Pacific's Ketchikan Pulp Ccnfiany (IJ>K) gives that coqpany .
an unfair actvantAg« over coopctitors and exolueivs rights to
timber resources, and
HHEaEAS, the terns of the contract were ncgnt^ ifltM in thn 19S0's and
are wholly inap{>roprlate today, and
WHKKJCAS, CAnulna luLtipIa uea of th« Tocvjass (ipMnn Vcvtp^ thnt
provides for subsistence, tour in, indepeodeat tuabor
operators, and adequate fish and vlldllfs habitat protection
ia inoost>atlble with allowioq LPK tiabec oporatioos and
extended priority, and
WHEREAS, areas near Gastavus, which ytara not in IfK's original contract
area, have already been identif jad to sux>ply LPK under the
original, contract, and
WHEREAS, axtansion of the LPK contract would vastly increase pressure
for JEinediate large-scale clearcutting in areas nsar Gustavus,
and
MHF.RFAS, the possibility of long-tent economic diversity and stability
for oar cooDunlty and the region would be hamed by the
extension of LFK's contract;
THEREFORE BB IT RESOLVED that the GuBtavus Conminity Association hereby
opposes the extension of Louisiana Pacific's Ketchikan Pulp
Coatiany's BO-Tear Contract with the USDA Forest Service.
•FKlo ncoolution Adopted Unaninously tbH nth Hfly
199«
206
Comimmlty of CHki C«v« N«n-Prof(t Corporation
potT orrc* tern on(
nm COM. MAIM Mas
Testimony of Comiminity of Elfin Cove June 7,1996
For TLMP Revision
The Community if Elfin Cove Is opposed to:
Clearcut logging sale levels as pHDposed by tbe preferred alternative.
Elfln Cove advocates for a reduced harvesq therefore consequent
reduced impact on deer and fish habitat
The Community of EMin Cove is opposed to timber sales at Eight-
Fathom Bight and Tenakee Inlet. There needs to be further study
done on the adverse effects of logging on Tenakee Springs' economy
and the impact of additional dearcuts at Chicken Creek on the
tourism cqperators of Hfin Cove, Gustavus and Hoonah,
The Comnnmlty of Elfin Cove is opposed to:
Renewal or extension of Ketchikan Pulp Company's long-term
contract.
The Community of Elfin Cove believes that the Tongass left unlogged
will provide the highest possible benefit for the social and economic
structure of the comnmnity, now and in the future. Maintaining the
LUD n designation for the surrotmding area is of utmost importance
to the community.
Adopted by unanimotis vote at a regular meeting of the Commxmity
of Elfin Cove on June 7,1996.
signed i>y,\^ vU/W
Jim Wild, secretary for the Community of Elfin Cove
207
m hmu
TXiNY KMOmJS, GOVBtNOR
PORT ALEXANDER FISH AND GAME
ADVISORY COMMTTTKE
RESOUm««-l
/
A REsaimo m» THT PORT mnMosK nsH wc ok nmscry ocmnTEE opposnc m toposed is-yem
OONTI^CT EXTBCIOM Rft LOUISUW PKIHC'S lOKKM RLP CGNWCT
ueS/IS, the SD-yea- contract arrantly uscl ly lAilsIni Pacific's Ketdilkar Pulp Cd^parv (UV)
gtws inc an unfair aalget aA«antage over ottar tMor luirassK and apcluslw H^ to tidtar
rasouxBs; and
IKREIG. tfe tens of ttat oontract tort nagotlatad 1n 1954 and are enHraly Inapfroprlata fa-
today's Mrtiet and latiral raaoroa conditiara In Southnst Alaska; and
weSAS, raking LFK tirtw operations the prkrHy for the laiaiiaBit of the Tcngsss (btlanal Forest
danages other niltiple use resorces loportant for SoiAheast Alaslca's econcny Including sit>s1stence,
touism, recreation, fish and wildlife habHjt; and
MQCAS, KSt of the tWw to sin>1y li^'s ramlnlng contract will be logged In the northart)
Tongass, an wm not In the corrtract for Its tlnter sinily. Indicating that logging in the ^ndflcd
VC contmrt area 1s not sustainable; and
yuCV&t the eoonoric base in the northern Tongass, Wrtch Includes oaaexial and sport fishing,
recreation, tau*l9M, and svtslstanoe hunting and fisMug, irlll be dangad tf iiBUEtalrable logging to
■■t LPK's contract oontinues; and
WBSf&, Lnc «as oorwlcted of a felony and 13 other charges due to violations of clean Mrtar and
clean air la« in iaS6; and
l«0EAS. the lonH'n economic diversity nl stability of northern Southeast Alaska and the vrthv
pehhendle region will be daooged by the proposed 15-yMr esctension of WC's ttitw contract.
MREFFE BE IT RESCLVED that the Port Alexv^der Fish and Geoe Advisory Canrittee opposes ary
axbcnslon of Louisiana Pacific's Ketchikan Pulp Coopaty's 50-yeer contract with the U.S. Forest
Sarvlce.
BE n FUmCR RESCLVED ttiat Louisiana Pacific's Ketchikan Pulp Cbainv's SO-year oontract with the
\iS. Forest Service should be revoked Imdiately due to breaches of 1U contract.
IE IT RFT}£R RESXVGD that a copy of this resolution shall be Blled to Toiv Knowles, GoMnwr of
tte State of Alaska and to the Tongass Land Mnagoent Planning Tnb of the USDA Forest Service.
MXnO) JliC 25, 1396.
Mia KCcmll , ChBirvan
Serving ibe Alaska Board of Fisbedes and Alaska Board of Game
208
rvHYiotowLa. aovemnoR
PORT ALEXANDER FISH AND GAME
ADVISOBT COMMTITEB
OURe 26, 1996
Honorable Bill ClUton
1600 Pennsylvinla AveriM
Washington, O.C. 20500
Dear President Cllaton:
The Port Alexander Fish and 6aiie Advisory Coanlttee would like to thank
yo« for your efforts 1n blocking the passage of harmful legislation last
fall and winter concerning the Tongass National Forest In Alaska.
Unfortunately, Sen. MurkowskI has onca agiln Introduced legislation that
Mould cause ham to the Forest.
The Port Alexander Fish and Gane Advisory Coailttee Is part of Alaska's
Dept. of Fish and San Boards systec. We are all '<'.ig-t1ae residents of
Port Alexander, a reaote coiaMrclal fishing vll^^e In Southeast Alaska.
Ue arc surrounded by the Tongass National Forest. We tre tired of how
the Forest is being Mnaged. We have enclosed a copy of a resolution Me
adopted expressing opposition to Louisiana Pacific's Ketchikaa Pulp
Coaipany's contract to log the Tongass National Forest.
We are asking you to oppose any bill that proaotes an extension of the
existing contract with Louisiana Pacific's Ketchikan Pulp Coapany or
that increases cutting to above current levels (approx. 150 Mbf/year).
Furthermore, «e believe the daaagc being done to the Tongass National
Forest through current Mnagaaent practices should be stopped, even if
It means breaking the 50-year contract with Ketchikan Pulp Coaipany.
When considering the cost of breaking this contract please be aware of
the fact that the subsidies to Louisiana Pacific are already costing
taxpayers hundreds of all lions of dollars.
We invite you to com to Southeast Alaska to see for yourself the
terrible raping of the Tongass National Forest that has occurred in
these past 42 years. Paying Louisiana Pacific's Ketchikan Pulp Company
to ravage our National Forest Is wrong and must stop.
Sincerely,
Mia NcConnell, Chairman
Enclosure
Serving the Alaska Board of Fisheries and Alaska Board of Game
BoOTk S«fv<>rt S««o<i. PC. Box U526. lusea^ Alub 99t02-SS26
209
TONGASS HUNTING AND FISHING
COALITION
PO Box 20637
Juneau, AK 99802
Reaolutlon 96-625
A RESOLDTION FROM Tonqaae Hunting and PlsMnq Coalition
OPPOSING THE ENVIROWMENTAL IMPROVEMENT TIMBER CONTRACT
EXTENSION ACT, BILLS S. 1877 & H.R. 3659, OR, THE 15-YEAR
CONTRACT EXTENSION FOR LOUISIANA PACIFIC'S KETCHIKAN POLP
COMPANY
WHEREAS, the 50-year contract currently enjoyed by Louisiana
Pacific's Ketchikan Pulp Conpany (LPK) gives LPK an
unfair market advantage over other tlnber businesses
and exclusive rights to tlnber resources; and
WHEREAS, the terns of the current contract vere negotiated In
1954 and are entirely Inappropriate In today's
natural resource and narket conditions In Southeast
Alaska; and
WHEREAS, allowing LPK tlnber operations a priority on the
Tongass National Forest Is Inconsistent vlth nultlple
use principles that provide for subsistence, tonrlsn,
Independent tlnber operators, and adequate fish and
vlldllfe habitat; and
WHEREAS, the obligatory supply of tlnber to fulfill LPK's
renalnlng contract vlll be taken fron the northern
Tongass, an area not In the original contract area.
Indicates unsustainable logging practices In the
specified contract area; and
WHEREAS, the econonlc base of the northern Tongass Includes
commercial and sport fishing, recreation, tourlsn,
and subsistence hunting and fishing vlll be damaged
If the level of logging allowed under the contract
spreads to the northern Tongass; and
WHEREAS, LPK was convicted In 1995 of a felony and 13
misdemeanors for violating the Clean Water Act; and
WHEREAS, LPK was convicted In 1983 of violating civil
arjtl-trust, driving 102 small Independent timber
operators out of business In Southeast Alaska; and
WHEREAS, the long-term econonlc diversity and stability of
Southeast Alaska will be damaged by the proposed
15-year extension of LPK's timber contract.
210
THEREFORE BE IT RESOLVED that the membership of the Tongaee
Hunting and Fishing Coalition, a graaeroots organjgatlon vlth
widespread membership throughout Southeast AlasKa of hunters,
fishers, tourism operators and Forest subsistence resource
gatherers, who feel their interests are not being recognized
adeguately by the Alaalca Congressional Delegation opposes
any extension of Louisiana Pacific's Ketchikan Pulp Company's
50-year contract with the D.S. Forest Service.
Be it further resolved that a copy of this resolution shall
be sent to Tony Knowles, Governor of the state of Alaska, the
Alaska Congressional Delegation, and other members of
Congress.
ADOPTED
o^-Ji>^^ 7/V^^
'i^Av-. ,5ZZA^>7-v..ioj2_^ _ (J^ _ ,Q^^^f.JJidnj
211
A RESOLUTION FROM FRIENDS OF SOUTMEASFS FUTURE
OPPOSING THE ENVIRONMENTAL IMPROVEMENT TIMBER CONTRACT
EXTENSION ACT
BILLS S.1877 & H.R. 36«9. OR , THE 16-YEAR CONTTMCT EXTENSION
FOR LOUISIANA PAaRC'S KETCHIKAN PULP COMPANY
VWHEREAS, the 50-ye«r contract currently enjoyod by Louisiana Paafic's
KetchJkan Pulp Company (LPK) gives LPKan unfair mari<et
advantage over other timt)er Ixieinesses and exdusive rights to
trnber resources: and
WHEREAS, the terms of tt>e current contract were rtegotiated in 1954 and are
entirely inappropriate in today's natural resource and market
conditions in Southeast Alaska and
WHEREAS, aBowng LPK timber operations a priority on the Tongass National
Forest is inconsistent with multiple use princptes ttiat provide for
subsistence, tourism, irxlependent timtjer operators, and adequate
fish and wildrife habitat and
WHEREAS, the obligatory supply of timber to fulfUl LPK's remaining contract will
be taken from the northern Tongass, an area not in tfw original
contract area arvl is indicative of unsustainable logging practices;
and
WHEREAS, the ecorK>mic base of the northern Tongass includes oommerctal
and sport fishing, recreation, tourism, and subsistence hunting and
fishing vvhich wil be damaged if the level of logging allowed under
the current contract spreads to the rxirihem Tongass; and
WHEREAS, LPK was corrvicted in 1995 of a felony and 13 misdemeanors for
violating the Clean Water Act; and
WHEREAS, LPK was convKted in 1 963 of violating dvil anti-trust laws ar>d
driving 102 smaH independent timt>er operators out of business in
Southeast Alaska; and
WHEREAS, the long-term ecorK>mic diversity arxJ stability of Southeast Alaska
will be damaged by the proposed 1 5-year extension of LPtCs
timt>er contract, and
WHEREAS, 1 .698 Sitkans. out of 3.400 voters, voted in October, 1995, to end
clearcutting in the Sitka Local Use Area: and
26-689 - 96 - 8
212
WHEREAS, SrtkA is the largest subsistence community in Alaska, and the
harvest and sharing of subsistence foods and matahal« are vial to
the culture, economy, and wefl-beinQ of our community; and
WHEREAS, it is widely believed the imminent logging wil cause negative
impacts to subsistence and other forest uses thsit are rreversble
within the span of marty human generatiorK; and
WHEREAS, ail the streamt and astuwtes In Soutt^east Alaska rBpresant the
richest hablat for an ou* fisheries, they deeerve al the protection
we can provMe; and
WHEREAS, about 88 peroerrt of the originaihigh-voiunie timber per acre forest
(wtiich fbrmerty was habitat of highest importance for mnntainins
silMistence hunting arvj flshlng and other forest uses) has already
been removed by logging fixxn the Sitka Local Use Area; and
WHEREAS, Friends of Southeast's Future is opposed to dear-cut log^ng in the
Sitka Local Use Area, we are opposing the Poison Cove and
Nortfiwest Baranof Timber Sales; and
WHEREAS, we believe selling ansa trees to LPK to be detrimental to Sitka's
economy, that rather the harvesting of eecond-growth, with value-
added productton performed by Sitkans is prefemad; and
WHEREAS, old growth must be left for habitat, siAnlstenoe, tourism, recreatkn,
ftshenes and cunural needs; and
WHEREAS, the 'SXka Local Use ArBa* is the area from Broad Creek and Ushk
Bay southward down the west skle of Baranof Islarxl, inclucfing
adjacent isteinds, to Wixiy Passage (speciic^. Forest Service
Vakj^ Comparison Units 24e, 279-281. 287-290, 299-313. 318-
325. and 349-351,
THEREFORE BE IT RESOLVED that Friends of Southeast's Future opposes
any extenskm of Louisiarvi Pacific's Ketchlcan Pulp Compan/s SO-year contract
with the U.S. Forest Service
I:AL'U.
213
Point Adolphus Seafoods
P.O. B«x63
Gustavus, Alaska 99826
(907) 697-2246
April J. 1996
To: Governor Tony Knowles
From: James R. Markovjak
Re: KPC k>ng-tenn contract extension
l)oflr (Jovcmor Knowlcs,
As a long-time rcsklcnt or southeast Alastui, I have seen firsthand the damage
caused by extensive clearcut logging. Near our commmiity, the dcarcutting done on
the Tongas waa done to meet tlie Forest Service's obligation tinder the terms or the
Alaska Pulp Company's long-term contract
Although they may have been considered a good idea half a century ago, the
long-term timber contracts on the Tongass have been no less than a blight upon the
forest. Though we may be connected to the Internet, southeast Alaska is, as regards
timber, a bona fide member of the "Third World''.
1 understand that much of Alaska's legislatiur, an institutionalized
embarrassment, is pressing a resolution to support a fifteen year extension to KPCs
long-term contract. This is the ultimate in stupidity, and wiO guarantee that the
Loubiana Pacific Corporation prospers at the expense of southeast Alaska's future.
Take a flight some day soon and see what b left of the forest on N.E. Chichagof
Island-its only 20 minutes by air from Jonean.
Ctven your common sense and concern for the ftiturc of our children, 1
expect that you will not support an extension to KPCs hmg-term contract. Your
ofBcc should take a leadership position toward Insuring the sustainahility of our
ftitnre.
Thank you,
James R. Mackovjak
214
^
ALASKA DISCOVERY
Senator Frank Muikowski
Committee on Eneigy and Natiual Resources
via fax to: 202-228-0S39 ^tention MaHc Rey
May 23, 1996
TONGASS FIELD HEARING, JUNEAU ALASKA. MAY 29, 1996
Testimony of Ken Leghorn, PicskleDt and co-owner, on behalf of the Boaid of Direclots of Alaska
Discovery, Inc.
WE OPPOSE THE KPC CONTRACT EXIIENSION
In the 1950s when Tongass timber policy was enacted, there was virtually do tourism industry of^eratlng
on the Tongass, and only e few small tour ships plied the Inside Passage. In 1972, Alaska Discovery
was the fiat tourism company to receive a permit to operate commercial torn using federal land on (be
Tongass National Forest. Today there are atsJS^ businesses under pemik on the Tongass. Our
company's major concern with Tongass management is (hat (he Tongass is quickly becoming crowded
with a wide variety of osQS, not all of which are mutually ocanpatibie, and yet too moch pnme kod for
tourism development is being committed to the timbet industry.
Although we support (he tiniber industry in general and believe there is enough land base on (he Tongass
to maintain a long term timber industry, we are opposed to the extension of the KPC contract
Tourism artd timber arc only compatible to the extent that tlicy utilize mutually exchisive areas.
Virtually no tourism can take place in an area utvdergoing major cieetcutling. and most Alaska tourism
opportunities arc very limited in places after clear-cutting has taken place. This is largely due to
impacts on scenery and the desires of visitors to come to Alaska to experience pristine nature combined
with a degree of quiet and tranquillity they are no longer able to experience in National Parks or
National Forests elsewhere.
Unfortunately, clearcutting ja:ac(ices needed to support the KPC pulp contract force the Forest Service to
continually develop timber sales in new, previously untouched areas.
We have also seen timber sales increased in size and scope to meet (he needs of the KPC contract,
including areas of prime toonsm potential such as Honker Divide on Prince of Wales Island and Port
Houghton. • For example, whereas a 65 million board feet timber sale was originally planned for Port
Houghton , the current Port Houghton project recommends a sale volume of 123 million board feet, with
a range of alternatives studied that only varies between 100-125 million board feet This thiee-fold
increase in sale volume is based entirely on the need to satisfy the pulp mill contract, and suddenly puts
this timber sale into major conflict with tourism and recreation uses of that area.
iU0k .*^'^ -t<^- -^
215
Wilderness areas on the Tong&ss arc not adequate to meet the needs of the expanding nature-based
tourism industry, and these areas aie totally ofT-limits for any tour operations (hat require even simple
facilities, such as cabins, shelterj, or even out houses or new trails. Wilderness is also limited to groups
smaller than 12 people, including guides. And although Wilderness desigoaljon is a great marketing tool
in attracting vlsiiofs to an area, the Forest Service has determined that the carrying capacity (or those
tour groups that use Wilderness is quite limited. Furthermore, approximately 70% of Tongass
Wildeniess consists of high nxMinuins, ice and snow fields, poody-<k2iaai cnuskegs, and low-volume
forests supporting tow wildlife numbers. Much of the coastal Wijdemess has rocky or steep diotelines
or contains no safe aocfaoragcs. lliereibfe, much of WUderoess is of limited utility to a m^ority of the
tour industry, and to those companies like Alaska Discovery wtab heavily market trips to the more
sccessibtc and piotcUeJ coest Wikleniess areas, these areas are designed and managed for low levds of
commercial use. Thus, we and other companies look to areas outside of Wilderness, such as many of
those in the KPC sale area, for future tourism opportunities.
The Forest Service estimates in the current draft Tongass Plan that the demand for scnu-primitive
motorized recreation will exceed the supply wjthin a few areas. This means that those areas of coastal
southeast Alaska most accessible by visitors will no longer meet their desired goal of less than 10 group
encounters per day and camping or aochoriog at night without being in si^ht or sound of other cajipers
or boats. The KPC contract extension would greatly exacerbate this shortage of recreation and tourism
places. If this happetn, coastal southeast Ala^ will no k>ngcr provide adequate opportunities for
visitors and residents alike to have the experiences for which they travel to the Tongass.
Rather than extend the contract, and thus the high level of conflict, we prefer to see Metal aod stale
officials use the remaining 8 years of the current ooniiact to plaa for a transition to a lower timber
vohjnae for the Tongass. Rather than coooling timber volunoe, we urge ofiictals to help die industry
provide the same number of timber jobs using a lower timber volume via an emphasis on high value-
added secondary woods fxoducts manaufacturing.. Without the pulp mill contract, this should be
possible, thus representmg a win-win situation for everyone in the Tongass.
TLMP UNDERESTIMATES TOURISM SECTOR AND DOES NOT ADEQUATELY PLAN FOR
FUTURE TOURISM DEVELOPMENT •
We continue to be disappointed in the tourism analysis and planning contained in the latest version of
the Tongass Land Management Plan. However, wc do not wish to see the Plan delayed any longer, and
WC urge the Forest ftervice to stay on it.'i currgnt timeline to cnmpleie the Plan.
TLMP is clearly a timber plan only, and it does an iitadequate job of plaivniog for tourism development
over the next ten years. For example, there is no alternative that emphasizes tourism development and
exaiTunes the employment that could be generated if tourism development were a goal in the Plan.
Instead, tourism is assumed to remain virtually the same in all alternatives. Also, tt)e methodology
used to detemiine present net value of recreation/tourism on page 3-323 is highly questionable,
considering no good date exists to estimate total recreation visitor days on the Tongass, and the daily
value of an average recreation visit on the Tongass of S25.73 is unsupported by any study other than an
216
inadequate 1988 study. (Indeed, Fish and Game eaJcuJations show values for spmtfuhJng, which is one
of the most cocmnon activities on the Tongass, of approximately $200/dAy. Alaska Discovery guests
spend an average of $250 per person p6r day on the Tongass, and many companies charge higher rates
than we do.) The prime importance of tourism and recreation doHars to the region as a whole is
underscored by the figures shown on page 3-295, which demonstiate that the regional economy is
expected to grown above 1994 levels no matter which timber harvest alternative is chosoi.
Rather than delay TLMP any further, we recommend the agency be funded to do the first economic
survey to ever determine the total contributioQ of the tourism and recreation industries to the Toogass
region. We also recommend that the above shortcomings in the socioeconomic study of TLMP be
addressed between iww and issuance of (he fmai HA, and that a record of decision that tninitniaes
conflicts between coastal tourism needs and the timber industry be reached without further delay.
Thank you.
217
Alaska p.o,Box22«27
-:^-> J.A^ Wilderness June«o,AK 99802
; ^^Li 1^ Recreation & *»»«»• (WD4«^3<«8
Association Ejfflai.wrU(g«l««WnH
Honorable Tooy Koowlet April 16, 1996
Dear Oov«ntor Knowlea,
The Alaska Wildemess Reaeatkm and Touram Associatioii ( AWRTA) stroogty opposet
Miy >Tt>ncw«i r,e tdtrhOmn Piilp Crjrprwitinn'K (KPT) rimhw cnntfart nntil h^OT! fliwi in
Tongass Forest timber manageiDcnt are addressed. BxtB»fiiix Qk contact before iheae
issues are resolved would oot be ID tbe best intorests of either &e toudsm indasiTy or the
cofmmmities of Southeast Alaska.
Tbe recent history of ToQ^ass Foreat nuoiageaieat ttodcT the mODOpoly oootracts provides
abaodantieasoa to reject exteoaioo of the KPCoootract Tbne ooolracti hM« forced the
I^>re3t Service to Igiiore ngiaficaM famacts to toiirisiii, recieatioiial hoitiiig and fiah^
Eubaistence. imd indepcsodeot logger; that are cle«]y identified in tbeDnplaiis and
enviiomi^ntal tmp*ct statements. As you know, tUs has forced AWRTA and other users
of the Toogass into court to get the Forest Service to cootider our inletests.
Tourism is tiw ftatMi eowiBg iadDitiy in Southeast Alnfat & divertlfiea the eoooomiea of
rawiiiruMiitiBs in tibe lepoa, and hat tbe potential for qgwHw-M* growth Al Alaska tourism
is essenti ally natute based, rkpendine 00 sMoic beaaty, djimdant wildlife, and wQd places
to satisfy our visitcn. Howeva.wiuout a long-term plan for tominn in the Toogass. our
members have no asuiraoces that the areas diey use tor their bosincssos wiO not be logged
and their busfaicsspUm ditsnqKed.
The Tcogass Laiid Maitageiiieiit Flan leviaiOD is the obvious piaoe to addttaa the iiee<b of
our industry and other osersoftiieTongassrdatrve to the needs of the timber indMiy.
We bdlievethitk should be completed, gcviog the public and bar bosiiietaea a chatkoe to '
^ec what the Potest Service says aboix iixpacis of alternatiYes, befcve an exiatHion of the
KPC contract is considered. ItsbooldinciDderBliabfedatatiboatanEabcectotsoftfie
tourism fautaistty and their treads in the Toogass, analyze the fanpacia of loggmg on tite*
whh nature tourism potential, and analyze the comparative beotfits and costs of logging
veiTus protecting aie^ for tourism.
Until these questions are resolved extension of the 183*C coatran would only continue, and
exacerbate, unwise and unsustainable land management policies. ' Please oppose extension
<^ the contract.
Sincerely.
Steven Behnke
Executive [&ector
218
,11 R.
rangeii ixesource Council
P.O. B« 1727 Vft^fW, AL-k* 99929
Plu». (907) 874.3MH F«.(907)S74^31
A PESOLUTION FROM WRANGEU RESOUHCE COUNCIL OPPOSING THE BJVRONMENTAL
lMPROVEMENTTIM!U«f:ONTRACTeXTa<5IONACT, BILLS S.ia77tH.R. 3869, OR, THE 15-YEAR
CONTRACT EXTPr r-N FOR LOUISIANA PACIFIC'S KfTChlKAN PUUP COMPANY
WHEREAS. th« SO v«* contract cun*niiv us«d by Louisivw Paeme't lUtchikan
Puio :omp*»v (LPKI Bivw LPK tn unfaif nurkM advantag* ow otf>af
tim->ti tMwnasMi and txtiutim rigtiu U> tvntMr rsMurcas; and
WHEREAS. ttw Mim» ot that contract war« neootiatad in 1954 and ira amirelv
tmw r.uanm lor today'i marVet and natural re«ourc« conditions in
Soi.1 '■ ast Alaska: and
WHEREAS. matii .» lPK timber operations tha priority for tha manaBamefit of the
Tongiii Nalierul Fwast da(nao«* ottiar multipla usa raieurcas
Mnpofum tor Southaati Alaska's aconomy indudbtg aubsistanc*.
tou-i ' ' facraation, fish and wildlife habiut: and
WHEREAS, tho«>ch not In tha LPK contract araa. most of tha timbor talai in tha
\NtAt jiia araa hava gona to LPK insisad oi banif itino V>m local WrangeB
acccifTDv; and
WHEREAS. mt.'ii ut tha timbar to supply LPK's ramaining contract wil ba logotd
in thi' northom Tonoass, an araa not in tha contract for Itt timbar
supD / indicadng that logging in tha specined LPK eonuact araa is not
su.,u> 'isoie, and
WHEREAS, the economic basa In tha northarn To»>gasa, ¥»hieh Inehidas commardal
ana li^t filing, racraation, tourtsm, and aubsistanca hunting and
fi»ftir>). wD ba damaoad if uniuiiainable logoirtg to maat LPK'a
cc^ti I.- coniirHtat; and
WHEREAS. LPf w°t convictad of a falony and 13 other charge* dua lo violations
o> :wi' watar and daan air laws in 1986; and
WHEREAS, LP» •^■n convictad in 1 983 of violating civi anti-trust law, driving 1 02
s(r..'i < MepcTKient operators out of business in Southeast Alaska: and
WHEREAS, ttw ifxctarm aco^^omic divefsity aryj stability of SouthMtt Alaska will
be Oritagad by the proposed 16 yaar extension of LPK's timber
comrj'.i
THEREFORE BE IT P':'SOLVED that Wrangetl Resource Council oppoaas any extension of Louisiana
Pacilic'a Kotchikao ' >-. Compwiy't 60 year contract yith the U.S. Forest Service.
ADOPTED JUNf 2 -96
Preaident^AC-ri'*tr ^
219
Hoonah Indian Assodafion
Phone (907) 945-3545 F»x (907) 945-3703
June 4. 1996
Testimony for the ioogau Land Manigement Plan:
HOONAH INDIAN ASSOCIATION OPINION
Tbe Hoonah iDchan Assocution o the federally recognized tzibe of the Huna Thngit. My
name is Johanna Dybdahl and I am die Tribal Admiaistntor. 1 have been instnicted by the
Hoooah Infian Assocttibon Bo«d (rf^Dnctore to ofe this tesdnnay 00 bdialf <tf ^
tribal mcBvon.
In die revised Tongass Land Managoneat Plan (TLMPX the Forest Service will make
decisoiD that will guide tbe managememoftheTongass for the next 10 to 15 yean.
Since tbe impacts of logging can persist for 100 years after an area has been logged we
loust consider ^aheniatives very carcfoUy. For tbe past nine mooths the Hoonah Indian
Assodatioa has taken the potitioa of No Harvest, No Action and we must remain
steadfiut that Aitemativc 1 would be our "preferred ahermtive". The cumulative effiects
of the for profit corporations and Forest Service logging scheduled n the Huna traditional
and customary usage areas will no doubt climiiiate the tiaditioml and customary
harvesdi^ of the land, thus forever ahering tbe status of a bunting and fish gathering
people
220
~^ '^f^ The Hoonah Indian Assodadon believes that the Ketchikan Putp Co oontiact must be
canoded. The Ketcfaikan Pulp Co is a coavict«d felon (or inteotiooaUy dumping toxic
thidge into Ward Cove. The Timber Land Management documetf oonfinns that Toogist
timber has been harvested at an unsustainable rate. 'The harvest schedule, fi>r all
alternativea. indicates that there is a deficit of timber in cxistiBg stands. The KPC CoDttaa
^ Area in souhern Southeast has only about half CDO^tindber for the coatnot Therest
wiD oome from central and northern Sotdfaeast. Under standards incorporated in
Aheinative 3, KPC's Contract Area can odiy supply 96 mndf of the 192 mmbf contract
volume. The remaining 1 06 mmbf must come from the StiJdaeBid Chatham areas. These
areas under Ahemativt 3. have 145 mmbfa year available, so the majority of that would
gotoKPC. Itee is not eooi^ timber under most ahenotives to flB the needs of both
the KPC coBDact and the new oomuntuwut to Small Bumeas Admimstratiott saka. The
Trefened Alternative^ is aa ahsred veraian of Abemativ« 3 which was proihjoed by
re^dt^ protectioos for streams, beach fringes and wildHfie habitat. We believe the
proposed ABowable Sale Quantity of 337 mmbf a year win phoe in^Mvtais fiiUng and
hunting areas at risk and key arvas will be logged to meet this target We fed the timber
industry must center mcve around high vshie-added small business secoadaiy wood
processing, wfaidi would create more jobs while cutting less timber. KPC must not be
rewarded for blatant misuse of the Tongass National Forest. If KPC wishes to ronain
viable they must convert to a hitter value-added, oon-polhitfaog fadSty dot provides more
jobs with kss timber. Al the present operation, KPC costs the American taiqwycr
faandreds of millions of dollars in subsides to clear-cut the Tongass old-growth trees.
221
Under the Preferred Ahermttive the protection of streams has been severely reduced. The
Forest Service released m AnadroaxMS Fish Habitat Asaeasment in 1995. It foioid that
cuneot measures 'Yor anadromous fish habitat protecdoa oo the Toogass National Forest
are lew dian fully effective, and additional protectiOD it needed to make timber harvest
moir oompadble with maiiMaiianB faigb-quality fiali habitat and long tena oonaenvtioD of
fiahstockx" Fuhery eiq>erts who reviewed the various optioss coosidoed for protecting
fish habitat strongly neconnnrndtd ''OptioD 1 (notection for the highest vahie watersheds
and oothii^ less than Option 2 protection acroas the rematoder of the watenfaoda. We aak
that the Forest Service adopt the highest level of protection for fish habitat The Preferred
Ahenative fills to fcUow the advise of the Report to Coogresa and the best scieBtific
ialbimatioo avaSaUe on the Toqgast. No asseasmert haa been done for the Preferred
Ahemtive One of the ftrongest recommendations of the Report to Congress was to
begin implementing waterdied anatyas. Walenhed inalyvs would provide timber sale
planning teams with valuable site-specific information about highly productive fisheries,
potential road locations, unso^le and steep slopes, and other important watershed vshiet.
This needs to be aooonqilisfaed to provide more accurate infomotioa and protective
measures fiv streams and fish oo the Tongass. We ask that the Forest Service also esttend
the propoeed no-cut buffiar along the coastline fixxn 500 &et to 1,000 feet, with an
■t^acent 500-foot selection cutting zoiK to protect ^lainst Uowdown of this beach fiinge
buner.
Deer habitat will be substantially reduced under the Preferred Alternative. The enlarged
beach fiinge buffer, important for deer winter range has been abandoned. After several
decades of research biologists agree that current high levels (rf' logging and expansive road
222
building pncacea wiD likely came severe reductions in deer populatioas over tbe long
tenn. Abbough the Foreet Service has taken a step in the r^ directiaa n cresting
connecting habitat reserves tbe baSer strips along the coastiioe aie too small to profvide
adequate connecting coiridorB between reservet. These buficn naut not be reduced to
provide more wood to tbe timber industry. Tbe PrefenedAbemttiveabo drops the deer
habitat standard of Ahernattve 3, whicb was specifically desigDed to address concerns of
subsisteace and sport fauoiers of deer. Tbe Forest Service is required by law to provide
for all uaen of the forest. We must consider the other uaes nch aa bndng, fisfatog. biking
and other recreaticmal uses. We need to consider the dilcnnna that dearcutting and
expofliag has created. Tbe Forest Service needs to be tnnovttive and toag-range goal
orientated as we approach the 21 St Ceotuiy The key must be manageaMitt of dw forest
for aB users.
The Prcfisred Aberaative does not take in to consideiitioo the e£bcti that finther ktgging
wiB have on the tourian industry. As the Hoonab faidian AsKxaaticn bcgai to (fiversfy
their ecoDomic base we are &oed with tbe proq)ect of beoocniog a player in the tourism
industry. Where wfll the vast untamed tantd and its wikSift be projected- With oontiiBied
road bualdiog, cutting of the beach fringe and dearcutting practices we are kfi with voy
Kttlc to oflfer tbe visitors.
In oondusion tbe Hoonah Indian Association would like to go on record as objecting to
die release of die RfiotHdofDedaion regarding the Eight FadiomTiiriKT Sale. Wefedit
is somewhat premature c(Hisidering the Toogaas Land Management Ploi is still out for
review. We arc talking about a substittial portion of the Tongass and it ihoukl li^itfiilly
223
be inchidaJ in the miMgoncnt plan of the forest WilJ the Eight Fahom Timber Sale not
receive the same comideration u others
On behalf on the Hooiuh Indian AssocJador, 1 would like to thank you for the
oppoftuaity to ejcpress our vie ws and let uj aD consider ourselves mnagen of the Form
Raapect&Oy,
'^^^'^^^fi^'''y^^*^T^jL^^X<^^^^^
Johanna iL Dybdahl
Tribal AdministrBtor
224
Taku Conservation Society
1700 Branta Road
Juneau. Alaska 99801
This resolution opposes the Environmental Improvement Timber Contract Extension
Act, Bills S. 1877 and H.R. 3659, commonly known as the 15-year contract extension
for Louisiana Pacific's Ketchikan Pulp Company.
RESOLUTION
Whereas, the 50-year contract currently held by Louisiana Pacific's Ketchikan Pulp
Company (LPKPC) was negotiated in 1954; and
Whereas, systemic changes require different management practices today; and
Whereas, the obligatory supply of timber to fulfill LPKPC 's remaining contract will be
taken fi'om the northern Tongass, an area not in the original contract area and
an area near Juneau; and
Whereas, allowing LPKPC operations a priority on the Tongass National Forest is
inconsistent with current multiple use principles that provide for subsistence,
tourism, adequate fish and wildlife habitat, and timber operators; and
Whereas, the long-term economic diversity and stabihty of Southeast Alaska will be
enhanced by sustainable management of the Tongass National Forest for
multiple use by the U.S. Forest Service, not the U. S. Congress.
THEREFORE BE IT RESOLVED that Taku Conservation Society opposes any extension
of Lousisiana Pacific's Ketchikan Pulp Company's 50-year contract with the U. S. Forest
Service by the U. S. Congress.
Signed
Date
Uz^f ?^
225
/h^'^>
Y'
ACWA
ALASKA CLEAN WATER ALLIANCE
CooKfvauon Fuhir| Sutktiiienct ToorUm PuMk Healiii
B0< 1441. Hiioej AK 99827 Phone: (907) 766-2»6 Pm: -»90 B-«u)I •cwa«i|C.«pci>rt
5/24/96
Senator Frank Murkowski Chairmftn
U.S. Senate Committee on Energy aod Natural Resources
Fax- 202-228-0339
Re: Testimony of Gershon Cohen, Executive Director of ACWA, on the Extension of
the Ketchikan Pulp Company Long Term Timber Contract
Mr Chairman, and Members of the U.S. Senate Comminee on Energy and Natural
Resources,
The Clean Water Act has slowly begun to reverse the dangerous decline in the
health of our nation's wateit. Yet according to the National Water Quality
Inventory, half of our nation's rivers, lakes, and estuaries are still not safe for
drinking, or harvesting ftsb ai>d shellfish. Although polluted waters and
sediments often begin by contaminating the smallest aquatic organisms: the
greatest concentration of poisons are eventually found at the top of the food
chain. In Alaska the animals at highest risk are whales, bears, eagles, and
people.
Ward Cove, the site of the Ketchikan Pulp Company mill, has become one of the
most polluted water bodies in our nation. It is listed as an "impaired water
body", and ranks second out of over 2000 contaminated sites statewide. KPC's
facility consistently tops the EPA's Toxic Release Inventory list, meets the
federal criteria for Superfund, and last September was assessed the largest
penalty for water quality violations in the history of the Clean Water AcL
Ward Cove historically supported a healthy and diverse aquatic community —
but fish kills were being recorded as early as 1957. only four years after the
opening of the pulp mill. Subsequent water quality studies testify to the Cove's
rapid and continuous decline. The waters and sediments in Ward Cove arc now
heavily contaminated after forty years of discharging -34 million gallons of
polluted wastewater every day.
In 1994 EPA finally issued a standard industry permit for the mill, to replace
the mill's administratively extended permit, now twelve years old. This new
Ward Cove permit would have required the mill to comply with the minimal
226
mquirfments of State and Federal law. But the company knew that the mill's
discharge would not comply with even the most minimal of standards.
Therefore KPC immediately challenged, and comlnnes to challenge the '94 Ward
Cove permit; blocking its adoption for ihe past 21 months while it continues lo
discharge toxic waste. In an attempt to preempt the Ward Cove permit, KPC has
applied for a new discharge permit to begin the pollution of the adjacent water
body of Tongass Narrows.
On May 16th, several citizen's groups including ACWA, filed a lawsuit against
KPC for 283 violations of Suie and Federal pollution laws. More than a hundred
of these violations, totaling over a million gallons of illegal discbarges, have
occurred since the consent decree settlement last Fall. The mUl's consistent state
of non-compliance as evidenced in our stiit underscores the immediate need to
contain and cleanup the toxic waste in and about Ward Cove. To ignore the
connection between toxic pollution and cancer, reproductive disorders, and
immune dysfunction, shirks our responsibility to the residents of Ketchikan,
both present and future generations.
Why does the mill continue to have such widespread pollution problems?
Because KPC's antiquated facility is a dinosaur of the pulp industry. There is no
guarantee that even a major rebuilding of the mill would allow the operation to
meet State and Federal water quality standards.
KPC officials have stated their intention to eliminate the use of elemental
chlorine. Wc support this goal. But while eliminating the creation of highly toxic
organochlorines is a positive step towards the protection of public health, these
same process changes are expected to increase the concentration of other wastes
in the mill's effluent that rob oxygen from the water, further increasing the
toxicity of the mill's discharge to aquatic life.
Every time the government has demanded the mill clean up its operation, KPC
has used the people of Ketchikan and their economic survival as a shield, spitting
out reruns of the "jobs vs. environment" myth. The truth is a noh-pulp. valur-
added timber industry would cut fewer trees and provide far more job .security
fpr the neonle of Ketchikan than KPCs current operation.
The $110 million "Economic Disaster Fund", perhaps more aptly named the
"Economic Opportunity Fund', should be dedicated to the construction of a sute
of the art. value-added manufacturing plant that can yield a return on our
timber many times greater than the value of pulp, without producing the toxic
waste. Instead of discussing a fifteen year extension of a contract that locks us
into the past, we should be designing and constructing a new, more efficient
umber based industry for Southeast Alaska, while establishing a safety net to
protect the mill workers and their families until the new industry is operational.
227
For the past two years, as a member of the Natural Resources Task Force of the
Presidents Council on Sustainable Development, 1 have met with community
leaders from all over the Western United States, where people arc facing the
same issues we are addressing here in Ketchikan. I can report to you that more
and more communities are realizing that sustaining a high quality of life
depends equally upon economic stability, environmental proicclion, and social
justice. This contract, written over four decades ago. fsils this test of
sustainabiUty by every measure; it assumes that our forests can be clfrar-cut
forever, it forces us to manage wildlife without consideration of habitat, it
eliminates competition within the industry and eliminates the use of th«
resource by more sustainable industries, and it ignores both the physical and
financial impacts that highly toxic wastes have on all living things.
Mr. Chairman, we are blessed to have the natural resources, the financial capital,
and the skilled labor force needed to fulfill the fundamental needs of everyone
here today. This community is now at a crossroads — one path leads to a
cooperative future, the other a return to the political polarization of the past.
We Sincerely hope you will assist us in moving forward together.
Thank you for the opportunity to address your Committee on this most
important issue.
Sincerely,
(br5«^v-5/Lr Cc=.^-^-^
Gershon Cohen
Executive Director
228
Lynn Canal Conservation, Inc.
Post Office Box 964
HiiiKS, Alukfl 99827
RESOLUTION 96-617
A RESOLUTION FROM LYNN CANAL CONSERVATION, INC.
OPPOSING THE PROPOSED IS- YEAR CONTRACT EXTENSION FOR
LOUISUNA PACIFIC'S KETCHIKAN PULP COMPANY
WHEREAS, the SC^ycar contract currently nsed b; LouiaBrta Pacific's Ketchikan
Palp Company (LPK) gives LPK an unfair markrt advantage over
Olber timber businesses and exclusive rights to timber resources; and
WHEREAS, tfae terras of that contract were negotiated In J954 and are entirely
inappropriate for today's market and natural resource conditions in
Sootheast Alaska; and
WHEREAS, making LPK drober operations tbe priority for the management of
tfae Tongass National Forest damages other multiple use resources
important for Sontfaeast Alaska's economy including subsistence,
toorism, recreation, fish and wUdUfe habitat; and
WHEREAS, most of tfae timber to supply LPK's remaining contract will be logged
in the northern Tongass, an area not in the contract for its timber
supply, indicating that logging in tfae specified KPC contract area is
not sostainable; and
WFIEREAS, the economic base in flie northern Tongass, which includes
comnerciai and sport fishing, recreation, tourism, and subsistence
hunting and fishing, win be dantagcd if unsustainable logging to meet
LPK's contract continues; and
WHEREAS, LPK was convicted of a felony and 13 other charges due to violatioos
of dean water and dean air laws in 1995; and
WHEREAS, the long-term economic diversity and stabiUty of northern Southeast
Alaslia and the entire Panhandle region w3l be damaged by the
proposed IS-year extension of LPK's timber contracL
THEREFORE BE IT RESOLVED that Lynn Canal Conservation, Inc., representing more
than 100 members in northern Southeast Alaska, opposes any extensioo of Louisiana
Pacific's Kelclnkan Pulp Company's 50-year contract with the VS. Forest Service.
BE IT FURTHER RESOLVED (hat Louisiana Pacific's Ketchikan Pulp Company's 50-
year contract with tfae U.S. Forest Service should be revoked immediateiy due to breaches
of its contract
BE IT FURTHER RESOLVED that a copy of this resolution shall be mailed to Tony
Knowles, Governor of tfae State of Alaska.
ADOPTED J UNE 17, 1996. <-H^^-
EricUoHe
President
®
229
ALASKANS FOR JUNEAU
RESOLUnON
WHEREAS the Ketchikan Palp Co;pQratioa has requested the United States
CoQgiTOS to extend Its fiAy year bog-tnin federal timber sale contract for harvest
of timber on federal lank within tibe Toagm National Forest, and
WHEREAS KPC's aperaticm vakx die enstine lon^-tenn contract has resulted in
laise scale clearcuttiag of the Toofass's forests, to an extent incompatible with
other beneficial uses of the forest, inchiding recreatioo, fish and ^ame habitat,
tourism, and ticabct harvest by small vahie-added forest products companies; and
WHEREAS KPC has repeatedly violated federal and state water and air quality
regulations, cootinues to do so. and has little Kkelihood of an early compliance
with such laws; and
WHEREAS a cootinuatioo of KPC'a timber harvest levels and its poDutim levels
will become even more of a threat lo the legion's environmental and economic
health as the forest resoorces diminish in the comias ceatory; and
WHEREAS a vita] and stable econooay for Sootbeast Abska depeads on a variety
of uses of the Toofiass National Forest, including small scale value-added forest
product manu^icturing, which are no( conq>atible with extension of KPC's long-
term contract,
rr IS HEREBY RESOLVED by the Board of Directors of Alaskans for Juneau
that Alaskans for Jutieau opposes exteosioo of the long-term federal timber sale
contract of Ketchikan Pulp Corporation.
Dated:^^<«n/,3.^//ff^
attest:^^t«^,tJ^/), U k'tfS Ji^xim^
230
Governor Tony Knowles
PO Box 110001
Juneau, Alaska 08811
Dear Governor Knowles, April 4, 1 996
Below please find a copy of my testimony regarding HJR. 64, the proposal to extend Ketchikan Pulp
Company's long term timber contract for an additional 15 years. As as fishery biologist and as a
lepresentative of the Juneau Chapter of the National Audubon Society I am opposed to this resolution
and respectfully encourage you to oppose tt.
Good anemoon, and thank you for Oils oppoftun8y to speak. My nam^ i* Kalhy CogtOi and I am hef9
today on t>ehalf of ttte Juneau Ctiapter of the National Audution Society to present our posikMi on ttte
proposal to extend KetctOian PiMp Company's tong term contract for antjiher ISyears. AMhough we
support the presence of a timber Indusby In southeast Aiaska, we an opposed to this proposal (HJR 64)
for ttte foBowing reasons:
1. We are no tongerlMrtguTKler the sarne conditions wtM\ lead to ^gntng the orlgfnalcontraci In 1954.
Our economy here Is healthy and growing as we head into ttw 21st century.
Z Extending the conbvct Is not a good way to create or preserve Jobs, If more Jobs are desired, the
entasis shoukJ focus on creatkyg a better environmert for smaU timt)er contractors, and fostering valua-
added operations. ExtenOng special favors to KPC \m§ only hinder any posttve movement In ttiis
dtBcOon.
3. The Tongass Nation^ Forest wU release its latest revishn of the Tongess t-and Management Plan
wittiin the next month. As a part oftNs process, a panel of fishery experts were asked to evaluate ttte
impacts of ttte alternative plans, on the heath and productivity of salmon. Tttet consistent response was
ttiat roads are a serious cause of damage to fish ttattHat, and 0)at as more mies of road are constructed,
the danger to lish Increases. We <Odnt know tNs 40 years ago. We do know t now. How can we
continue to operate as If roads are inherently good artd award KPC awSts for creating tttem? Overtha
lest 40 years we have learned tttat togging roads are ntore of a burden titan an asset. If anyttiing, KPC
sttodd t>e paying a penalty for buikUng roads that damage ffshemten's IveBhoods and cost ttte Forest
Senrice miOtons of dollars to maintain.
4. The timt)er Industry Is heavily subsidized in southeast Alaska, and the Federal government can no
tortger afford this expense, particularly when you consider that we pay three times for this subskfy. First
we pay with road credits, virtually giving away the trees in exchange for new roads. Then we pay in tost
opportunity for tourism, fishing, subsistence, and recreation. Finally we pay for restoratton when ttte
togging roads get oto and begin to faH.
5. KPC has not been a good corporate nei^bor. In 1995 KPC pled guilty to 14 criminal violations tor
kttenttonally polluting the waters of southeast Alaska.
In ctosing, I want to re-emphasize that times have changed since 1954, and the sweetheart deal that KPC
has fceen eryoying since then is no tortger appropriate. In addition, KPC has repeatedly proven Itself
irresponsible, negligent, and parttoulariy unworthy of special favors. Extending the 50 year timber
contract with KPC is not in the best interest of Alaskans, and in fact i would do them a great disservtoe.
Thank you, Govemor Knowles, for your careful consideration of this resolution.
Sincerely,
KathyC^hill (j
231
Good afternoon, and thank you for this opportunity to speak. My name is Kathy Coghill
and I am here today on behalf of the Juneau Chapter of the National Audubon Society
to present our position on the proposal to extend Ketchikan Pulp Company's long term
contract for another 15 years. Although we support the presence of a timber industry in
southeast Alaska, we are opposed to this proposal (HJR 64) for the following reasons:
1 . We are no longer living under the same conditions which lead to signing the original
contract in 1954. Our economy here is healthy and growing as we hsad into the 21st
century.
2. Extending the contract is not a good way to aeate or preserve jobs. If more jobs are
desired, the emphasis should focus on creating a better environment for smsii timber
contractors, and fostering value-added operations. Extending special favors to KPC
will only hinder any positive movement in this direction.
3. The Tongass National Forest will release its latest revision of the Tongass Land
Management Plan within the next month. As a part of this process, a panel of fishery
experts were asked to evaluate the impacts of the alternative plans, on the health and
productivity of salmon. Their consistent response was that roads are a serious cause
of damage to fish habitat, and that as more miles of road are constructed, the danger to
fish increases. We didn't know this 40 years ago. We do know it now. How can we
continue to operate as if roads are inherently good and award KPC credits for aeating
them? Over the last 40 years we have learned that logging roads are more of a burden
than an asset. If anything, KPC should be paying a penalty for building roads that
damage fishermen's livelihoods and cost the Forest Service millions of dollars to
maintain.
4. The timber industry is heavily subsidized in southeast Alaska, and the Federal
government can no longer afford this expense, particularly when you consider that we
pay three times for this subsidy. First we pay with road credits, virtually giving away the
trees in exchange for new roads. Then we pay in lost opportunity for tourism, fishing,
subsistence, and recreation. Finally we pay for restoration when the logging road-; get
old and begin to fail.
5 KPC has not been a good corporate neighbor, in 1995 KPC pled guilty to 14
criminal violations for intentionally polluting the waters of southeast Alaska.
In closing, i want lo re-emphasize that times have changed since 1954, and the
sweetheart deal that KPC has been enjoying since then is no longer appropriate. In
addition, KPC has lepeatedly proven itself 'responsible, negligent, and particularly
unworthy of special fsv'ors. Extending the SO year timber contract with KPC is not in
the best interest of Alaskans, and in fact it would do them a great disservice.
Thank you for the opportunity to comment.
232
TENAKEE HISTORICAL COLLECTION
Post Office Box 633
Tenakee Springs, Alaska 99841
(907-736-2243)
Juno 18, 1996
Governor Tony Knowles
PC Box 110001
Juneau. AK 99811
Dear Governor Krwwies,
As local historians we find ourselves more and more concenwd about the
future of our area. Senators Murkowski's and Representative Young's efforts to
extend KPC's contract to the year 2019 will have a tremerKlous effect on Tenakee
Inlef s resources. Our major means of survival here (sutisistence. commercial
fishing and tourism) are seriousl>' threatened by this move to supply the timber
industry.
The drainages that supply Tenakee InM have suffered from the impact of
logging In the pest and present The impact of the future (23 mora years if this
legislation passes) timber harvesting will devastate the remaining delicate balance
of flora and fauna of this area.
Tenakee Inlet is home and retreat for many indivkiuals who are strong of
heart and perseverance. As a community we have coped in the past with natural
disasters of fire and storm matter-of-facUy and with determination. We are faced
now with a disastrous situation imposed by legislation.
An extension of 15 years to KPC can not allow us to proceed as carefully
and cautiously as needed to prevent ireparable damage to one o< the few last
great places on earth. Please help preserve what is left of this rich and still viable
Tenakee Inlet. We cant change history, but we can change the future. This is our
opportunity to use and protect resources responsibly and with conscience.
We beseech you to consider carefully the implications of extenskHi of this
k>ng term contract and not alkw it to happen.
Sincerely,, ^
Vicki Wisenbaugh, Coordinator^
Tenakee Historical Collectten
233
A RESOLUTION
OPPOSING THE
ENVIRONMENT IMPROVEMENT TIMBER CONTRACT EXTENSION ACT
S. 1877 AND H.R. 3659
WHEREAS: The fifty-year timber contract between the U.S.
Government and Louisiana Pacific Ketchikan Pulp mill awards
unfair market advantages to the consignee.
WHEREAS: The terms of the contract negotiated in 1954 are forty
years past the date and times in which subsistence, tourism,
recreation, fisheries and hunting have assumed new and increasing
social and economic implications and importance relative to
timber cutting.
WHEREAS: The contract is inconsistent with multiple-use of the
forest .
WHEREAS: The economics of commerical fisheries, sport fisheries,
recreation, tourist, hunting and subsistence will be irreparably
damaged .
WHEREAS: LPK in 1995 was convicted of one felony and 13
misdemeanors .
WHEREAS: LPK was convicted in 1983 of conspiring to drive out of
business 102 small independent timber operators.
WHEREAS: Movement of forest cutting practices outside of the
southern working circle into northern southeast Alaska will
irreparably damage forest resources, including, fisheries, game,
subsistence, recreation and tourist.
WHEREAS; In the sense of the members of the United States Senate
and the U. S. House of Representatives bound under oath to
support and to up hold the laws of the United States the awarding
of a contract extension to LPK is inconsistent with the intent of
those laws.
LET IT BE RESOLVED that the JUNEAU GROUP OF THE SIERRA CLUB
opposes any form 15 year contract extension to LPK embodied in S.
18J7 and H.R. 3659.
tich^d^T. Mw^en
Chair, Juneari Group of the Sierra Club
Representing 153 members in Juneau, Alaska.
June 20, 1996
File Sierra70
234
Sitka Conservation Society
P.O Box 316
SiHca,Alaska 99835
V- -. / /4/-/5t>9 Fhone
(907) 747-6105 Fax
Tbe Sitka l.:on9ervatiaii Society, a membeniup oiganiiafion in Sidci, discussed aid passed die
fbllowing RnolBtiail it a EegvUr Board mcetias on June 23id, 1996:
WHEREAS, SCS has a tweaty-sffvenyMrhittofy of cootervadoo advocacy aod,
WHEREAS, SCS has an otaUithcd icoord of momtoriDg Alaska Pulp Corpofattoa air iad
water quality violations duting this time period and has bitnigbc violations to die attentioo of
State and Federal authorities and has given formal and infoimal testimony ai public mcetagi aod
bearings, and t&nj has esta/blobcd its credibility as a dtiaen group and as ao otgaoiatioo
knowledgeable aboul air and waier quality reguiatioda aad,
WHEREAS, SCSbasaicpresaitativeontJiepitaeotCitiaea Advifloty Conunitteewhickis
involved with DEC, EPA APC aod its cootncton b the deamip of toxic waste malenals
determiacd to be picaeu oa Silver Bay aod the adjaootf mil] she, aad tlui has demonstrated its
coatiniuiig and cantnt participation and awareoess of the toxic vnat by-products torn the APC
mill she and,
WHEREAS, SCS is fiuniliarwitit and involved widi timber supply issues, Toog^ssNztiooa]
Forest land use ptanniog, and Timber Sale practices and thus has ddooostTited its cootinmi^ and
caneot panictt>atioa in leviewing and coimneating en such issues and,
THEREFORE, SCS Board of Directon does besby appose any exteasioa of the ftdttid ttober
supply contract ibr Ketchikan Pulp Oxporatioo - as indostry witii a history parallel to that of
Alaska Pulp Coiporatioa: repeated air aad water qoahty violatioaa, higb-giading clear-cut
logs^ practioiiS, a joim cocvictioa with APC for anti-truft violadons, and a convictiaa in 1995
for water poOiitioD vioiatioos.
SCS Board (lutbcr wppoits the terminatiaD of the KPC cootract as betog in tbe best interests of
tbe health of Ketcfatkaa lesidcnla, &e best interests of d>e tourism iadostry and other small scale
users of the Tongass forest ecos>'Steni, the best interestt of wildlife dependent on the old growdi
ecosj-stem, and in the best inteiests of tbe American people who through taxes are subsidizii^
die oper^<Mt of this polluting, technologicaUy outdated pulp mill.
Instead, SCS st^iports a transitioa of tbe Krtchikan Pulp ficihty into a iKxipoiluting value-added
industry that uses fewer tre«8 wfaSe etoployii^ more people. We si^ipoit fundihg for the
transitioa of this fiidlJty aiid the retnining of empioyeei. if necessao^.
Votes: Yes -12 No-0 Passed 23 Juoe, 1996
MargaraLCalvin, Reoordtog Secretary
Workinj; to conserve th€ natnral environment of the Tongass Forest and to protect Sitka's qualin o£ Kfe.
235
P'U Cofi
TENAKEE HOT SPRINGS LODGE 907-736-2400 vokiafax
POBox3
Te»akee Springs. AK 9984 1
Apri] 24. 1996
Qooemor Tony Knowies
POBox IIOOOI
Juneau, AK 998 11
De« OonenHjr Knowies,
1 implore you. do not support the extension of KetchiVan Pulp's lorg term coniract! f '
It is becoming more evident all the time that the SO year contracts where a bad idea They
locked in a management scheme for the Tongass that is simply not sustainable. Virtually
every sdentific study that has been done on the Tongass wiD support the position that the
logging practioes of the past cannot be sustained in the future. It is time we step back and
reassess the level of logging the forest can support - not just loclc in a bad policy for
another 1 5 years.
Tho Alaska Dept ofFish and Oame and the Forest Service scientists agree that the fish
and wildlife of the Toi^ass need more protection - not less - if they are to maintain healthy
populations.
For those of us in the other mductries who depend upon the Tongass for our Hvelihoods,
(fishing and tourism in my case) it is absohiteiy essential that the forest be managed for
multiple use.
Once agam, please, do not support KPC's contract extension! I
Sincerdy.
^^g^^T^^/^^
Samuel E. McBeen
236
Priace af IVales Caatarvatlaa Laagua
ResalMtiaa 9i-l5
KPC Loa§ Tern Caatract leneuial
Wh«r9as. H appears that the US Faest S«rvic« has offered enough trrber to fufii the
50 year corrtract wrth KPC;
Whereas, a new contract wil be de^merrtaf to the econotnic cfvrsifictation o( the
Whereas, we beieve a sudairtabie timber jndusty must be defirted as a vakie added
rtduary based on a lower ASQ lofkffng more people vMe outting fewer reec;
Whereas, ntice of Wales Island has al'eedy been heaviy logged artd the bulk of the
contract obigstton has come from Rince of Wales Island:
Whereas. KPCe long term contract has wasted milions of taxpayers' dolcrs,
Whereas, KPC has'been convicted In antHrust suite, crushing con^jetiion;
Whereas, KPC has ntvsr been in compliance v^ state vkI fedarai air and water
qualty laws:
Whereas, the ptrent corrtpany IP posted a profit ri excess of 370 miion doHtrs
(1994). It is unccnedonabte twt taxpayers aubektze tier environmemal compfiance
costs;
Whereas. Senator Steven's '110 iyliHion Oolar Economic Development Fuid' could
provide some of the money need»d to be^ the transition to a value added timber
induety and away Irom induskial scale logs^;
Whereas, Honker Divida is the last remamirtg hi^ volume old growth stwtd on Prince
of Wales Island, and wS be threatened by tNs contiict;
Whereas, eubdstence represents a tra<ttional way of Ife for Wnce of Wales
residents, this contract wW {eopardze a federally manadated ffestyle.
Whereas, the Faest Service continues to ignore the cumulative effects of loggng on
private and pub6c lands wt«ch have heaviy impeded fish arvj witf 1e habitat.
Whereas, indjsbial scale dearcut kxjghg represents a sin^ uae ol the forest which
does not comply with the congressionafly manadated intent of muttipie use of federal
land.
Now therefore be it resolved, the Prince of Wales Conservation League cafe for the
terrranation of the long term KPC conTact
237
THOMS PLACE HO^'kIvvnerS ASSOCIATION
P.O. Box 2073
Wranoell. Ak 999 '^
A RESOLUTION TQM THOMS PLACE HOMEOWNERS ASSOCIATION OPPOSING THE
ENVtRONMErfTAi l» 1-^0V6MENTT1MBER COf^TRACT EXTENSION ACT, BMXSS.1877 * H.R. 3«53.
OR. THE 15-YEAR : • TFIACT EXTENSION R3fl LOUISIANA PAORC'S ICETCHIKAN PULP COMPANY
WHEREAS.
WHEREAS,
ChF -{/ yMr oomnct cumntly UMd bv.Louiai»na Padfie't KitcMksn
Pup r>mpany (LPK) Qivas LPK an unfair martcat advantag* ovsf otfiar
tii> b>: 'tusinttMs and axclutlv* rights to timbar resources: and
t^'. : 'ns of that contract ware nagotiatad In 1954 and are entirely
in4C'"'priate for today's market and natural resource conditions in
Sr.i' ^••^st Alaska; and
WHEREAS. m< k <: LPK timber opcfstoni the priority for tfw management of the
Tov.'ss Nstional Forest damages other multiple use rasouroas
irro'-rtont for Sautf>east Alaska's economy including aubsistarKC,
ici' ■,■< recraation, fhh and wHdHfa habitat; and
WHEREAS, though not hi tfM LPK contract araa. most of the timber sales in ttia
W';>r/<;ll area have gone to LPK Instsad of ber^HMng the local >^angaR
ec.v -fny; and
WHEREAS, rpos : ^f the timber to supply LPK's remaining contract wil be logged
ir ;- < northern Tor>gass, an area not in the contract for hs timbar
su;; ' ■ indicating that logging in ttte specified LPK contract area is not
«•.<:■ H'^able; and
WHEREAS. th
WHEREAS,
•y-nomic base in the northern Tor^jau. wtWcfi includas commercial
> wort fishing, recreation, tourism, and aubsistance ftuntirtg and
-■0 will be damaged H unsustainable k>gging to meet LPK's
i;<-t continuea; srHJ
LTK -. IS convicted of a felony and 13 other charges due to violations
o' ' > -n water and dean air laws in 1995; and
WHEREAS,
WHEREAS,
if-e
b'
/"ts convicted in 1983 of violating civil anti-trust law. driving 102
-tdependent operators out of business k\ Southeast Alaska; artd
ng term economic diverstty and stability of Southeast Alaska wni
<">aged by the proposed 15 year extension of LPK's timber
TMEREFORE BE
Louisiana Pacific
ADOPTED JUNf-
SOLVED that Thorns Place Homeowners Association opposes any extension of
•.:hikan Pulp Company's SO year contract wht^the U.S-^rest Servkie.
996.
President
238
FRIENDS OF GLACIER BAY
P.O. Box 135
Gustavus, Alaska 99826
June 20, 1996
Senator Frank Murkowski
Chairman, Resources Committee
U. S. Senate
Washington, D.C 20510
Dear Seantor Murkowski:
Friends of Glacier Bay strongly oppose extension of the Ketchikan Pulp
Company's monopoly contract.
We wait for the day when it becomes possible to constitute a sustainable
forest inckistry on the Toogass, one that uses less timber to prockice more
jobs, and provides better protection for the other uses of the forest.
KPC could certainly decide to become part of this new way of doing
business, but they have no incentive so long as their sweeheart deal
continues at the expense of the taxpayer and the environment.
Sincerely,
Cifegory^ Streveler
Board Member
239
cc:Mail for: Representative Caren Robinson
Subject: KPC extension
From: aksKit1©alaska net (Alaska Skitt Charters) at CC2MHS1 04/03/96 7 19 PM
To: Representative Caren Robinson at JNU_CAPITOL
Caren,
You have our full support in preventing the extension of Ketchikan Pulp
Cottpany's 50 year contract. We believe KPC should not be allowed to do
business today if it cannot meet current %rater and air quality staindards and
the goveminent should not subsidize it any longer at the expense of other
Tongass users.
They state they need the extension in order to amortize facility upgrading
to tneet water and air quality standards. This is a joke. ! Their parent
conpany, Louisiana Pacific had the laurgest return on its assets in the
timber industry in the world in 1993 and 1994. KPC is a convicted felon and
should not be rewarded.
The contract must end so the Tongass can be managed on a true multiple use
basis. If KPC wants to continue doing business, then they should conduct
business within the confines of the marketplace and coirpete alongside
independent loggers of the Tongass.
We feel am extension will be harmful to our business in the sense of
additional logging effects on salmon streams throughout Southeast. Although
KPC is not logging watersheds euround our fishing area, the inpact they have
■ the Southeast stocks has a very direct effect. That being loss of
-■abitat leading to less healthy runs and possible shifting of the fishing
fleet to our fishing grounds.
Please vote NO on the resolution extending KPC's timber contract.
Xbaak you
^acheIS• aM llark Kaelte
Alaska Skiff Charters
3718 El Camino
Juneau, AK 99801
MK
240
, ttLVEft KJNfl UAfUNE
•"' - JUlktBiUmn
SW. BOX 21000S
(907) 7890 res
Jl-^s^fr« tArrM7 - i>i.£j^^gffZ!g-lLJU .itaoS& n^^l.T,^ .^««"*i-€^^3liit:_ _
/<A*;V»Wrt yt/ft^/UV^) fc-<Jg^O/vf. nttrk.Pc c,^yfejha[^;BS^t^^i #*1^P. _
■wwmi-ea aiii rti -uii- (TiTnrniifr i ji JPU im mif mr^--' -nn mj
241
<Sw»muT-TOM ) «o TVrg' ^o>>:^>- U .'='>.- -twvyrs ca<^^M th^:m CtVdg TO
•Tta-e-rs 5rT^A/^i'OC
?7Ai^a/<:€-t> XAaui^nXx-g ftjtrsoua-cg >/i^t. App^*<-h -to -n-*tr ouftt-cc.
jn±«fi/tM^fltd
._. .JImJ^z-S^c^ __
SILVER KINQ MARINE
J'^i'^eBethsiX
^ pro BOX 210003 ~
AUKE BAY. ALASKA 09821
(907) 7890165
I tUlU BO T I I'H ' iiini.in- , - -i m i i
242
F/^. T><sr^^T-,CO . _ _.. ^""""Ml&S.??^..
SILVER KING MARINB
Ulk* Bethtn
P.O. BOX 210003
Ta*/v> vstoi^Lc i ^ HbT- ^yt-^
vTw^ &Oi/c»o tf<.r- 'riHV'
f2o& itj vMaujO. *ffey> »c>-x.x
'SX>ScT?»i Can-trfcO tffey- M»iiU
^Mit f^/A/^*:x>srfc»^ .!f!i£-:. .?.2:^.VL
jtTTn^i^ /VcUutT . .ii.Tl.'^Q
CJi-axK; Ot/ity.tjic *J l«.r- b-K?o
A^J^»-> ^U5r\tTUyVMO ^^- ^^JC»
fc^Aoio MnUfc-g. _!1<>^:*T^A
lc.[>»i fcCro^J ili£-^'f?*^
^ rwrrnsaTfiSi itt iir*^!" ~" • jtrnrnnT' ■ •?■ t"'i' r_"i '"
243
^JMAWS^^M.
AT GLACIER RAY
DAVII>4JoANN ItSM. INNKEEPFRS
PwwidrBf BID Cfiatoa
1600 FtaiMylnMk Av«b»
WaAiBiloB. DC 20000
DearPrnidBat CUnloB.
I am wiitins to Oik yoQ Qol to aoppon the cattMHno of Mb KokNku Pd^
Oooimy'f Hionopoly oooiact oa (he trees of the Tongue thikni Hmct.
The Qortavia loo u a mmD ftodly tovist bushieas located OB the aocdi
d«eoricy$tadt.oevthemQadiQrGlBcierEfa9. Webirebeeaia
badaen lor 3 1 yeain. oot that mudi leas tfaao Keiddkaa Pulp CompMiy.
nPC tMSi (hey need the oactMMioa to pay for ail Ae oew ngdatioae tfMt
Aey am't oonptTiag with BOW. We tohavehadtoooopiy wUmaiy war
rmalrtnai. aame ai KPC However, onlikB die miil, we mnmr artiii «•
be gMffMlBad a cartaha prirriagi eff the toarMa fee ert«r ta fiv
tar tiw dta^iM. It if oar bettef diet the new fBgBblkNH we to fMBct te
heeHh aad wcUho of the pgbHe and coviraooirat aad ihaold hn nimplM
with. Tbeae new rales foned m to apfOKte on Mpdc aod water tytttm,
temodel to meet new fife and fifb/Hifoty codes nd faasdioBpped
■lynnwewh^toasaswBilesHianirekowconMiKaddldlciiBa. AOwam
flapecstya ead time cowwaiam
I ooDld wnto pages OB other vaUd fBaaoas oot to support dto coiiaKt bit I
willetoiteidotfaat lust feasaober. KPC is not the only om Aat has ted
to ooBipiy with tiew legahlinm
David Lssh
lAmd Jo AiaaajN^
MAY • $£PT. • CUSTAVtiS INN • P O. »OX *0 • CUSTAVJS. AI ASKA W»2* • 907/*»7 1254 • fAX 90J/i91-llSS
3Cr. APXIL • eUSTAVUS INM . 7910 OtTlLOOK • fKAIRIt VIUAGl. KANSAS *«20» • »n/M»-S230 PAX d PHONE
26-689 - 96 - 9
244
lid Ink
H
i-j-w
OMK Csvwaftr
sllca^ir M« 'm^ Muxlilt'' tteK e«a» ^mtm ce aM rnxXf f«v««t* of auMUag vlri
taM>iU< lu« if tto iMfllUli— fH]# OoKpontiM is pwslttod «• ■wfftl.ii a. MMfOty
ttae MUada dMtr ovaMct — offcar IS yuKp»» Umb «•» tMaa stU W c«« aad tbia
•nstMacMBtfy «1U b« aiMd ca tft* aacMi* that visitor* aaicUg t» Ma « lawifM
AlMte aU4«gnH|«i alU aa« Wtlwf t* cdM.
^tl«aM «M yottl^ l^flaawca ca elrusl UMfcnciat ta tba T>m— » Xha prtaetyl— af
aatlyl*-«a« tasMt ba <ha>l— ancai vltk ifea ayatidLam a< BC 1b «fc> toafiaa >.T.
Qaee thia ana |U I«w«« It has ««I7 UUl* valaa lafc te ti «m cte MR IM yaaxa
«uU Am ttasf fsvw .tack. r««MkU« ct» «aarl«a «•« f iafctas «• >»» i«g« gnat
Jao|wi4y» ^'■Mp^ 7*" '*■* 7*^ *lP* *^ iKnatii. Iqiatog vwOd <a WtuqC fac FaltMB
Okll Ob CixblB
245
ACWA
ALASKA CLEAN WATER ALLIANCE
Conservation Fishing Subsistence Tourism Public Health
Box 1441. Haines AK 99827 Phone. (907) 766-2296 Fax -2290 E-mail acwa@igc ape org
7/3/96
Representative Don Young Chairman
US. House Committee on Natural Resources
U.S. Capitol
Washington D.C. 20510
Re; Testimony of Gershon Cohen, Executive Director of ACWA, on the Extension of
the Ketchikan Pulp Company Long Term Timber Contract
Mr Chairman, and Members of the U.S. House Committee on Natural Resources.
According to the National Water Quality Inventory, half of our nation's rivers,
lakes, and estuaries are still not safe for drinking, or harvesting fish and
shellfish Polluted waters and sediments often begin by contaminating the
smallest aquatic organisms; but the greatest concentration of poisons eventually
reachs the top of the food chain — in Alaska the animals at highest risk are
whales, bears, eagles, and people.
Ward Cove, the site of the Ketchikan Pulp Company mill, is one of the most
polluted water bodies in our nation. KPC consistently tops the National Toxic
Release Inventory List. KPC easily exceeds the criteria to be classified as a
Superfund pollution site. KPC was recently ranked as the second most polluted
site in Alaska out of over two thousand evaluated sites, with a score nearly ten
times the level necessary to be placed in the highest priority category. Last fall
KPC received the largest Clean Water Act fine ever imposed; plea bargaining
down to one felony and thirteen misdemeanor convictions.
Ward Cove historically supported a healthy and diverse aquatic community —
but fish kills were being recorded as early as 1957, only four years after the
opening of the pulp mill. The waters and sediments in Ward Cove are now
heavily contaminated after forty years of discharging -34 million gallons of
polluted wastewater every day.
On May 16th, several citizen's groups including ACWA, filed a lawsuit against
KPC for 283 violations of State and Federal pollution laws. More than a hundred
of these violations, totaling over a million gallons of illegal discharges, have
occurred since the consent decree settlement of KPC's felony conviction. The
246
mills consistent state of non-compliance as evidenced in our suit underscores
the immediate need to contain and cleanup the toxic waste in and about Ward
Cove To ignore the connection between toxic pollution and cancer, reproductive
disorders, and immune dysfunction, shirks our responsibility to both the present
and future generations of the residents of Ketchikan.
KPC has routinely used the people of Ketchikan and their economic survival as a
shield from compliance with environmental laws. KPC consistently operates in a
manner that violates the Toxic Substances Control Act, the Resource Conservation
and Recovery Act, the Rivers and Harbors Act, the Clean Water Act, the Clean Air
Act, the Comprehensive Environmental Response/Compensation and Liability
Act, the Alaska Solid Waste Regulations, the Alaska General Safety Codes, and
the Alaska Water Quality Standards.
As you know these laws were passed to protect public health, maintain healthy
fish populations, and allow diverse economic and recreational use of PUBLIC
waters. If you or I conducted our daily business as KPC has and does, we'd
probably be in a federal prison.
In 1994 EPA finally issued a standard industry permit for the mill, to replace
the mill's administratively extended permit, now twelve years old. This new
Ward Cove permit would have required compliance with the minimal
requirements of State and Federal law. But KPC knew that they could not
comply with even the most minimal of standards. KPC has blocked the adoption
of the '94 permit for nearly two years; while it continues to discharge toxic
waste. In an attempt to preempt the Ward Cove permit, KPC has applied for a
new discharge permit to begin the pollution of the adjacent water body of
Tongass Narrows.
KPC officials have stated their intention to eliminate the use of elemental
chlorine. We support this goal. But while eliminating the creation of highly toxic
organochlorines is a positive step towards the protection of public health, these
same process changes are expected to increase the concentration of other wastes
in the mill's effluent that rob oxygen from the water, further increasing the
toxicity of the mill!s discharge to aquatic life.
Everyone agrees that KPC's antiquated facility is a dinosaur of the pulp industry.
But there is no agreement that even a major rebuilding of the mill would allow
the operation to meet State and Federal water quality standards.
Instead of discussing a fifteen year extension of a contract that locks us into the
past, we should be designing and constructing a new, more efficient timber
based industry for Southeast Alaska, while using the $110 million Economic
Disaster Fund to establish a safety net to protect the mill workers and their
families until the new industry is operational.
247
For the past two years, as a member ot the Natural Resources Task Force of the
Presidents Council on Sustainable Development. 1 have had the opportunity to
speak with many people in the western United States on the sustainable
development of natural resources. There is a growing understanding world-
wide that maintaining a high quality of life depends equally upon economic
stability, environmental protection, and social justice. This long term timber
contract, written over four decades ago, fails the test of sustainability by every
measure. It assumes that our forests can be clear-cut forever, it forces us to
manage wildlife without consideration of habitat, it eliminates competition
within the industry and eliminates the use of the resource by more sustainable
industries, and it ignores both the physical and financial impacts that highly
toxic wastes have on all living things.
Mr. Chairman, ACWA does not work on timber allocation issues and defers to
other individuals and organizations on such matters; however, we could not
begin to consider supporting extensions to the KPC timber contract unless four
conditions were met: (1) suspension of KPC's opposition to the 1994 EPA permit;
(2) a complete cessation of KPC's discharge of toxic materials to the waters of S.E.
Alaska; (3) the timely completion and implementation of a site remediation plan
for Ward Cove, and (4) an immediate initiation of the refitting of the facility to
allow the company to operate in compliance with all State and Federal pollution
laws.
Thank you Mr. Chairman for this opportunity to address your Committee on this
most important issue.
Sincerely,
Gershon Cohen
Executive Director
248
STATEMENT OF MARY A. MUNSON
PUBLIC LANDS ASSOCL\TE
DEFENDERS OF WILDLIFE
ON
H.R. 3659--THE ENVIRONMENTAL IMPROVEMENT
TIMBER CONTRACT EXTENSION ACT OF 1996
FOR
THE HOUSE RESOURCES COMMITTEE
THE U.S. HOUSE OF REPRESENTATIVES
JULY 11, 1996
ON BEHALF OF
DEFENDERS OF WILDLIFE
Mr. Chairman and Members of the Committee:
My name is Mary Munson, Pubhc Lands Associate for Defenders of Wildlife. On behalf
of Defenders, a national conservation organization with over 150,000 members
nationwide, I thank you for the invitation to provide testimony on H.R.3659, the
Environmental Improvement Timber Contract Extension Act. Defenders has been a
leading proponent of the protection of wildlife and wildlife habitat in the Tongass
National Forest, and is a member of the steering committee of the Alaska Rainforest
Campaign.
H.R. 3659 would modify the Ketchikan Pulp Company's 50-year logging contract in
Tongass National Forest by extending it an additional 15 years. It would also establish
minimum annual volumes of timber for the company, and guarantee that rates paid
reflect those assessed in forests of the Pacific Northwest. We strongly oppose H.R. 3659
because of the damaging impacts the existing Ketchikan Pulp Company (KPC) contract
is already having on wildlife, and the fact that KPC has a long record of violating federal
environmental laws. We also believe that H.R. 3659 would undermine an essential
forest plan revision process now taking place on the Tongass.
The Tongass National Forest is owned not only by Alaskans, but by all Americans, and
the issues involved with the Ketchikan Pulp Company's performance are of national
significance, and are not simply parochial economic or jobs issues. The Tongass is the
world's largest intact temperate rainforest, home to over 300 wildlife species, many of
which depend on old-growth forest habitats. Sustainable management of this beautiful
and unique resource is properly a matter of national concern. All Americans have an
interest in making sure Tongass wildlife thrives, so that current and future generations
will benefit from the recreation, beauty, and resources of this jewel in the National
Forest System's crown. As protector of this national interest. Congress has a duty to
oversee its management by allowing only sustainable and responsible logging at a level
consistent with habitat protection. Extending the KPC contract would be a violation of
this duty.
249
H.R. 3659 would essentially hand an additional 15 years of dominance over one of our
country's premier wildlife habitats to KPC. The area yielding the bulk of the timber
already promised to KPC is on Prince of Wales Island, which sustains the river otter,
Prince of Wales flying squirrel, Vancouver Canada goose, and two species of special
concern: the marbled murrelet and Queen Charlotte goshawk. Prince of Wales also has
a distinct population of Franklin's spruce grouse. More common residents include the
Sitka black-tailed deer and some of the largest black bears in the nation. H.R. 3659
does not provide for maintaining the viability of these populations, and will undermine
efforts to do so.
The timber wolf is also at risk. Prince of Wales Island contains a stronghold of the
Alexander Archipelago wolf. Although hunting and trapping occurs in the Tongass,
logging and roadbuilding remain the major threats to these animals. The wolf survives
largely on predation of deer. Deer depend on the diverse plant community fostered by
the multi-layer canopy of the old-growth rainforest. Stands with large trees are critical
for deer in hard winters because the crowns intercept the snow, making travel and
feeding easier. Post-logging clearcuts not only hinder deer movement in snow, but also
cause forage to become less nutritious. For a short while after clearcuts, forage is
healthy because seedling regeneration is good in logged Sitka spruce and western
hemlock forests. But some 25-30 years after clearcutting, the overlapping branches of
the new trees completely shade the forest floor, and although the deer can use the
stands for cover against snow, there is little or no forage. It takes 200 to 250 years for
clearcuts to resemble old-growth conditions conducive to these deer.
If H.R. 3659 becomes law, KPC will be allowed to continue clearcutting at increased
rates. This will have grave impacts on the wildlife already mentioned, particularly in the
region of the roadless areas of Honker Divide and nearby Elevenmile. Named for the
resonant call of migrating Canada geese following this natural flyway up the center of
Prince of Wales, Honker Divide is a misty reach of moss-covered forest studded by a
chain of lakes that stretches from the mouth of the Thorne River at Thorne Bay over
the low divide to Hatchery Creek and again to the sea. It boasts a 30-mile canoe trail
and is the source of the Thome River, known for its steelhead trout runs. The trees in
this area are generally smaller, with the biggest trees being found on hilltops separated
by sparsely timbered muskeg. If the area were open to logging, many miles of roads
would be necessary to reach the denser stands. Honker Divide and Elevenmile are
simply the best of what's left of unprotected wildlife habitat on Prince of Wales Island.
Pressure to fulfill the high-volume requirements of the extended contract would surely
put those areas in jeopardy. Logging could cause significant reduction of deer and
wolves in the area. Increased logging would not only harm the forage, it would also
provide better access for hunters. Due to this potential logging, the Thorne was named
by American Rivers as one of the nation's ten most endangered rivers.
250
The National Forest Management Act (NFMA) requires that the Forest Service provide
for the diversity of plant and animal communities. Maintenance of "viable populations
of native vertebrate species" is required in implementing regulations. The Tongass Land
Management Plan (TLMP), which is now undergoing revision, is the blueprint for
ensuring that logging activities in the Tongass are consistent with those legal
requirements as well as other legitimate purposes of the National Forest.
Activities taking place under the existing KPC contract, including the guaranteed supply
of 192.5 million board feet per year, are certainly those which must be governed by the
forest plan blueprint. So why isn't this proposed contract renewal taking place within
the context of the TLMP revision process? We believe that if the effects of the KPC
contract are legitimately assessed through the revision process, it will be found to harm
the Forest Service's ability to maintain viable populations of native species. In fact, we
are convinced that the TLMP revision team should not just reject the KPC contract
extension, but should cancel the existing contract immediately, based on KPC's black
track record and the effects of mandated logging on the wildlife habitat. This bill would
ride roughshod over the TLMP process, and force the Forest Service to provide a high
volume of trees regardless of the environmental, economic, recreational, social, and
ecological costs.
For over 40 years, KPC, owned by Louisiana-Pacific, has been operating under a
contract unique to the national forest system. Based on its record, there is no
justification for contract renewal, let alone the sweetheart deal that H.R. 3659 entails.
As representatives from local Alaskan groups have pointed out, the Environmental
Protection Agency's most recent reports show that KPC is one of the biggest toxic water
polluters in the Pacific Northwest, and has failed to comply with a host of federal clean
air and water laws. The record of KPC over the past 20 years includes a felony and
thirteen misdemeanor pollution convictions, millions of dollars in criminal and civil
penalty fines, hundreds of other pollution violations and citations, and numerous
breaches of its contract. Most importantly, the existing KPC contract guarantees a
timber volume of 192.5 million board feet per year. Based on our analysis, we believe
the Forest Service simply cannot guarantee KPC this volume, provide timber for
independent operators, and still meet the requirements of NFMA to maintain well-
distributed, viable populations of wildlife on the Tongass. And significantly, viable
population levels only meet the criteria that there are enough individuals for the
populations to continue to exist. There is no assurance that enough individuals will be
left for subsistence, hunting, viewing, or other uses of wildlife upon which Alaskans and
other Americans depend. As long as the KPC contract is in existence, timber will be
first priority, and wildlife, along with all other forest resources, will take a back seat.
Defenders of Wildlife has sympathy for anyone whose livelihood would be affected by
the non-extension of the KPC contract. But there are thousands of employers
throughout the country which also depend on timber supplies, but are not given this
unprecedented control over a national forest, nor the subsidies which amount to millions
251
of dollars. And many of these employers are dependent upon resources that do not
have fraction of the ecological importance and national significance that the Tongass
has. As discussed by other panelists at today's hearing, there are plenty of alternatives
for providing jobs which would be much less resource-intensive, and run by companies
without abysmal records of pollution and contract violations. The argument that the
company needs this contract in order to make necessary improvements to comply with
environmental laws is outrageous. KPC has had years to make the necessary changes,
but declined to do so in favor of increased profits. For this, they should not be
rewarded by a bail-out, as represented by H.R. 3659.
Logging in one of the American people's most valuable and productive forests is a
privilege, and it is important that it be done through the accepted forest planning and
management process. Comments on the proposed Tongass Land Management Plan are
due in August, and this is the appropriate forum for discussions about increased logging
and guaranteed timber supplies. The KPC contract must be considered as part of the
TLMP, not as a separate initiative which ignores the scientific analysis, ecological effects
and years of public input. For that reason, as well as the incalculable adverse effects on
wildlife and wildlife habitat in affected areas, we strongly oppose H.R. 3659.
252
AFFIDAVIT OF MARK F. HARTLEY. D.B.A.
RFFORE THE U.S. HOUSE SUBCOMMITTEE ON NATIONAL PARKS
& PUBLIC LANDS
JULY 18. 1996
PERSONALLY appeared before me, MARK F. HARTLEY, D.B.A., who being duly
sworn makes the following statement under oath:
Mr. Chairman and members of this honorable committee, I was bom on November
30, 1956, in West Palm Beach, Florida. I am presently an Associate Professor of Business
Administration at the College of Charleston in Charleston, SC, where I have been a member
of the teaching faculty for the past eleven (11) years. I currently hold the National
Association of Purchasing Management Chair in the School of Business and Economics at
the College. I hold a Doctor of Business Administration degree from Louisiana Tech
University, with a major in quantitative analysis and a minor in economics, and have taught
business statistics for over fifteen ( 1 5) years. Attached to this Statement is my curriculum
vita, academic credentials, employment history, and membership in professional and
academic organizations, as well as a list of 34 recent quantitative research studies I have
coordinated or performed, and a list of 63 academic publications I have authored or co-
authored.
I have been requested to state my professional opinion as to whether the methodology
required by a National Park Service fNPS) written guideline, known as NPS-48, is consistent
with generally accepted statistical, accounting and business practices and consequently
appropriate for calculating franchise fees payable by Concessioners, or that such
methodology is defective, invalid and unreliable for such a purpose.
253
In order to develop an adequate basis for my opinion. I thoroughly reviewed and
became famiUar with the written franchise fee determination process set forth in the NPS-48
guidehne. BeHcving it would be helpful to learn precisely how the NPS actually implements
this guideline. I used the NPS calculation for Fort Sumter Tours, Inc.. (FST) as a case study,
assuming that the same methodology would be used for all concessioners nationwide under
similar circumstances. As a part of the case study. I became familiar with a franchise tee
analysis prepared by the NPS for FST dated February 27. 1992. as well as the facts and
issues involved in Federal Case Number 94-1570. Fort Sumter Tours. Inc. vs. Bruce Babbitt,
etc. Also, because of my educational background and previous experience. I am thoroughly
familiar w ith. but have again reviewed, the annual Dun and Bradstreet Publication. Industry
Norms ("D&B Industry Norms") for "Standard Industrial Classitlcation"" (SIC) codes
generally, and particularly code number 4489. Water Transportation. Not Elsewhere
Classified, for the years 1 988- 1 989. I also ha\e re\ iewed the D&B Industry Norms data for
each SIC code, which includes any water transportation services for the years 1985-1987.
I am also familiar with and have reviewed the Robert Morris and Associates publication.
/ 990 Annual Statement Studies f "RMA Statement Studies "l. Also because of m>' experience.
I am thoroughly familiar with the content, sampling procedures and methodology employed
in producing these two publications. I am aware of the professional use and limitations of
the data contained therein. I am also thoroughly familiar with the SIC code s\stem. along
with its usefulness and limitations. As a brief explanation, the Office of Management &
Budget (0MB) has developed and publishes an SIC code manual, which contains an SIC
code classification number for c\ ery known l\ pe of business operation nationwide, such as
hotels, barber shops, restaurants, autii manufacturers, drug stores, water transportation
.services, etc. For purposes of franchise fee calculations, pursuant to its guideline, the NPS.
in its discretion, assigns each concession operation a SIC code number, thus placing the
concession operation within a SIC code classilicalion of all other related businesses. I'he
NPS then concludes or assumes that a particular concessioner is comparable to all other
254
business with the same SIC code classification, in every respect, including the relationship
between gross income, operating expenses and net profit.
A thorough understanding and review of the above clearly demonstrates that the NFS,
in accordance with its predetermined objective, attempted to set FST's franchise fee at a level
that would cause its profitability, if any, to fall at or near the average profitability for all of
the other unknown businesses classified under the same SIC code. The NFS assigned FST
to SIC code #4489 for the years 1988-1990. For the years 1985-1987, there was no SIC code
4489; therefore, deponent reviewed any and all other SIC codes involving any type of water
transportation service for the years 1985-1989. In the FFA, the NFS stated that it applied
SIC code 4489 to FST for the years 1985-1989. However, this is a clearly obvious and
undebatable error because the 4489 code did not exist until 1988. Therefore, by using this
methodology, the entire franchise fee determination process for FST was predicated upon a
completely invalid assumption. That is, that the net profitability levels reported in the D&B
Industry Norms for SIC code 4489 is a proper yardstick to measure the net income
profitability level of FST, simply because the NFS has assigned FST the SIC code number
4489. In my professional and academic opinion, the NFS's most basic assumption, described
above, is fatally flawed and therefore fee calculations based thereon are also flawed. This
renders the NFS calculations concerning FST statistically invalid, as it would any other
concessioner when this process is similarly applied. Absolutely, no statistically valid
inferences regarding any particular one or all other businesses classified under SIC 4489, can
be drawn from the data reported in the D&B Industry Norms or the RMA statement studies.
Specifically, it is totally invalid for the NFS to infer that any data contained in the D&B
Industry Norms or the RMA Statement Studies properly reflects the financial statement
information, including profitability, for all other businesses, or any particular business
classified under the same SIC code number. Drawing any such inferences from this
published data clearly violates fundamental principles of statistics, and constitutes a flagrant
3
255
misuse of the data for the NPS's purpose. All knowledgeable statisticians, after even a
cursory analysis of this particular process, would agree with this conclusion.
Because, as indicated above, the fundamental inference upon which the NPS based
its FFA is statistically invalid, the conclusion based thereon, that a twelve (12%) percent
franchise fee will cause FST's profitability to equal or approach the average profitability of
all other businesses nationwide classified under the same SIC code classification, is also
statistically invalid and completely inaccurate and unacceptable procedurally. In fact, no
valid inferences regarding the general population of businesses, or any particular business,
including any concession operation classified according to any SIC code, may be drawn
from the D&B Industry Norms or the RMA Statement Studies discussed above.
Additionalh'. the D&B Industry Norms data simply has well known deficiencies
which are both irrefutable and insurmountable statistically, including the following:
a. The samples of businesses from which the D&B infonnation is drawn are not
random samples. According to the most basic statistical principles, if one is
to draw any inference about a national population of businesses classified
under the same SIC code, based upon samples recei\ed only from a relativelx
small number of businesses who \oluntarily submit their financial data, any
such inference is basicaih fiawed because the sample businesses are not
randomly selected. The voluntary convenience samples so used are
tlindamentally not considered representative of all other businesses classified
under the same SIC code number, and information gathered in this manner is
therefore considered invalid and unreliable for such purposes as those used by
NPS. This well known D&B' Industrv Norms data deficiencv is either
256
overlooked or disregarded by NPS, but this data deficiency is clearly based
upon well known and basic principles in the field of statistics.
b. Additionally, I call into question the method of data collection employed by
the compilers of D&B Industry Norms. According to reliable sources inside
D&B, much of the data is collected through telephone interviews by
transcribers, rather than through more standard acceptable procedures such as
thorough financial statement analysis, detailed corporate personal
interviewing, and/or rigorous data collection through financial audit. I
therefore question the reliability of the D&B Industry Norms data because it
is improperly collected and potentially inaccurate on its face for this purpose,
or any purpose in which a rigorous statistical methodology is employed and
the D&B Industry Norms data is utilized as the underlying foundation for the
analysis.
c. Moreover, based upon information I consider reliable, the entire population of
businesses which could be properly classified under SIC number 4489, is
approximately 3.000 nationwide. The sample sizes reported by D&B Industry'
Norms under SIC 4489. for FST, were 16 in 1988 and 56 in 1989. and the
sample size employed in the RMA Statement Studies used by the NPS was 10.
Clearly, even if these samples had been randomly and properly selected as
required, they are too small to draw any valid inference about the larger
population of other businesses under the same SIC code, because the sample
sizes are too small relative to the vast number of other businesses classified
under the same SIC code.
257
Based upon the above, clearly the NPS's methodology is statistically unreliable, due
to the nonrandom nature of the samples reported, the small sample numbers, and the
complete absence of other data essential to properly test the statistically validity of the D&B
Industry Norms and the RMA Statement Studies. Because of this unreliability, the validit\
of an\ inferences drawn form the D&B Industry Norms and the RMA Statement Studies
cannot successfiilly withstand normal statistical validity testing. It is thus fatally flawed for
the purposes employed by the NPS.
There is a standard and fundamental procedure in the field of quantitative statistical
analysis known for measuring the degree of confidence one may place in inferences about
an entire population, when those inferences are based upon such information contained in
D&B Industry Norms. The D&B Industry Norms and the RMA Statement Studies data is
clearh and simply be\ond the reach of such flindamental statistical evaluation because of its
incomplete nature and because of the unreliable statistical techniques employed. And D&B
itself acknowledges as much in disclaimers it publishes along with its information. The onh
possible conclusion is that the data has absolutely no validity for the purposes employed b>
the NPS.
In my professional opinion, even if the D&B Industry Norms and RMA Statement
Studies were based upon data properK collected in accordance with established statistical
standards, the NPS clearly and fundamentally misuses such data in its NPS-48 process. It
is fundamentally inappropriate to use any data classified by SIC codes for the purpose of
setting a predetermined anticipated profitability le\el of any particular business based upon
SIC code classifications. Generally, four digit SIC codes, such as those employed in the
D&B Industry Norms and RMA Statement Studies, include too many varied businesses to be
properh utilized for tiiis singular purpose. In other words, rarely does a particular business
sufficientiv ""nt"" into anv four disit SIC code to enable anvone. includina the NPS. to
258
accurately utilize such profitability data as an accurate indicator of a desirable level of
profitability for any other particular business. In my professional opinion, this is clearly the
case with regards to FST and the NPS's attempt to determine what FST's level of
profitability "should be". The NPS compared FST's audited financial statements, after
adjusting same to fictitiously increased net income levels, to net profit information classified
by SIC code in the D&B Industry Norms and RMA Statement Studies, which is neither
audited nor adjusted by D&B or NPS. This procedure is akin to comparing apples to
oranges and is clearly a flagrantly flawed process. Without question this NPS-48 process,
of necessity, would, with complete certainty, produce invalid fi-anchise fee calculations for
every concessioner, based upon such a fundamentally flawed process.
Based upon the above observations alone, it is clear that the NPS-48 process should
be discontinued because it is inherently flawed, unreliable and completely inconsistent with
generally accepted statistical, accounting and business practices. There are compelling
reasons why this NPS-48 guideline, as it pertains to fi-anchise fee calculations, should be set
aside forthwith, along with any and all franchise fee increases based thereon. Upon basic
equitable principles, those in authority within our government, should immediately require
this most appropriate and proper action.
^M^9^
Mark F. Hartley, D.B.A.
SWORN TO BEFORE ME THIS
/t? day of J Illy, 1996.
y.^.-^^-'^^^^^^-
Not^ Public for the State of South Carolina
My romm.ssion Expires: motarv pg^OR^-s^^^ABOnN^
259
CURRICULUM VITA
MARK F. HARTLEY
School of Business and Economics PO Box 1 822
College of Charleston Mt. Pleasant. SC 29465
Charleston. SC 29424 (803)971-9425
(803) 953-5955. (803) 953-1797 fax hartleym@cofc.edu email
Education:
Doctor of Business Administration (D.B.A.). 1986
Louisiana Tech University-, Ruston. LA
Major field of study: Quantitative Analysis Minor fields of study; Marketing, Economics
Dissertation Title; Income Concentration in the United States; Measurement. Trends, and Stability of
Correlates. 1950-1980.
Master of Business Administration (M.B.A.). 1979
Columbus College, Columbus, GA
Major field of study; Administration
Bachelor of Business Administration (B.B.A.). 1978
Columbus College. Columbus. GA
Major field of study; Marketing
Employment:
Associate Professor. 1994 - present. Assistant Professor. 1985 - 1994.
Department of Management and Marketing, School of Business and Economics
College of Charleston. Charleston. SC.
Tenured August. 1988.
Holder, National Association of Purchasing Management - CarolinasA^irginia Chair. 1993 to present.
Courses taught at the College of Charleston;
Production and Operations Management. Purchasing and Materials Management. Business Statistics II.
Marketing Research. Quantitative Methods and Decision Making, Intermodal Infonnation S\ stems
Assistant Professor. 1982 - 1985.
School of Business Administration
Columbus College. Columbus. GA.
Teaching Assistant. 1980- 1982.
College of Administration and Business
Louisiana Tech University. Ruston. LA.
Honor Societies and Recognitions:
Beta Gamma Sigma (Business Honorary Organization)
Omicron Delta Epsilon (Economics Honorarv' Organization)
School of Business and Economics Dean's Special Scnice Award
260
Publications in Academic Peer Refereed Journals:
"The Adoption of Document Imaging Processing Systems in the Small Business Community." Accepted
for publication in Coastal Business Review ( 1 996"). (with Gregory B. Turner).
"Purchasing's Role in Corporate Strategic Planning." International Journal of Physical Distribution and
Logistics Management. XXVI (4). (1996) 51-62. (with Wade Ferguson, Gregory B. Turner, and
Edward M. Pierce).
"Ethics, Gratuities, and Professionalization of the Purchasing Function." Journal of Business Ethics,
XIV, (1995) 751-760. (with Gregory B. Turner and Stephen Taylor).
"Developing Ethical Policy Statements in Purchasing Departments." T.S.U. Business and Economic
Review. XIX (2), (1995) 2-6. (with Gregory B. Turner and Charlie Cook).
"Ethics Policies and Gratuity Acceptance by Purchasing Agents." International Journal of Purchasing and
Materials Management, XXX (3), (1995) 42-47. (with Gregory B. Turner and Stephen Taylor).
"Are You Taking Advantage of the Productivity Incentives in the Tax Reform Act of 1986?." Industrial
Management. XXXV (2), 22-24. (with J. Michael Alford and B. Perry Woodside).
"Income Concentration in South Carolina; How Much and Why." Lander College Business Review. II
(2), 5-9. (with Tom S. Sale and John D. Jackson).
Other Publications and Academic Professional Program Presentations:
"Ethical Issues in Global Purchasing: A Buyer's Guide to Gifts and Bribes Worldwide." Under Review,
National Association of Purchasing Management, for Presentation and Proceedings of the 1997
Annual Conference, (with Gregory B. Turner and Wade C. Ferguson).
"Public Sector Attitudes Toward Gratuities and Gift Acceptance." Proceedings of the 81st Annual
National Association of Purchasing Management International Purchasing Conference, 390-395.
Presented in Chicago, IL at the Annual Conference, April, 1996. (with Gregory B. Turner and
Wade C. Ferguson).
"Regional Variations in Ethical Standards and Conduct Among Purchasing Managers." Proceedings of
the 81st Annual National Association of Purchasing Management International Purchasing
Conference, 362-366. Presented in Chicago, IL at the Annual Conference, April, 1996. (with
Gregory B. Turner and Wade C. Ferguson).
"Designing for the Japanese Market." Proceedings of the 1996 Southeast Decision Sciences Institute.
231-234. Presented at Charleston. SC at the Annual Meeting, February. 1996. (with J. Michael
Alford and Gregory B. Turner).
"Purchasing's Role in the Development of Corporate Ethics Statements." Ethics Policy Statements for
Purchasing. Supply, and Materials Management. 137-141. Tempe. AZ: National Association of
Purchasing Management. 1995. Also in Proceedings of the 80th Annual National Association of
Purchasing Management International Purchasing Conference. 266-271. Presented at Anaheim,
CA at the Annual Conference. May. 1995 (with Gregory B. Turner and Wade C. Ferguson).
"Uncertainty, Effort and Risk Aversion in Sales Force Compensation: What Does Agency Theory
Offer?" Proceedings of the 1994 Southeast Institute of Management Science. 319-321. Presented
in Myrtle Beach. SC at the Annual Meeting. November. 1994. (with Gregory B. Turner and
Wade C. Ferguson).
"Group Decision Support Systems: An Application in the Participative Budgeting Process." Proceedings
of the 1994 Southeast Institute of Management Science. 222-224. Presented in Myrtle Beach, SC
at the Annual Meeting. November. 1994. Winner, Best Paper Award, (with Gregory B. Turner,
Mark Mitchell, and Ron Berry).
261
"Purchasing's Involvement in Corporate Strategic Planning." Proceedings of the 1 994 Atlantic Marketing
Association. 187-192. Presented in Atlantic City, NJ at the Annual Meeting, October, 1994. (with
Gregory- B. Turner, Wade C. Ferguson, and Ed Pierce).
"Purchasing Planning for Disaster - Are You Prepared?" Proceedings of the 79th Annual National
Association of Purchasing Management International Purchasing Conference, 259-263. Presented
in Atlanta. GA at the Annual Conference. May, 1994. (with Wade C. Ferguson).
"A Content Analysis of Ethical Policy Statements in Purchasing Departments." Proceedings of the 1 993
Southern Marketing Association, 171-173. Presented in Atlanta, GA at the Annual Meeting,
November, 1993. (with Gregory B. Turner).
"The Impact of Inbound Shipment Tracing Systems on the Expediting Function." Proceedings of the
1993 .Atlantic Marketing Association, 435-437. Presented in Orlando, FL at the Annual Meeting.
October, 1993. (with Stephen LeMay, Paul T. Nelson, and Gregory B. Turner).
"The Acceptance of Gratuities by Purchasing Agents: Toward the Development of Effective Control
Methods." Proceedings of the 1993 Association of Marketing Theors' and Practice, 522-525.
Presented in Hilton Head, SC at the Annual Meeting, March, 1993. (with Gregor>' B. Turner and
Steve Taylor).
"Teaching Styles and Methodologies: Pitfalls and Suggestions." Symposium for the Graduate Student
Workshop of the Southeast Decision Sciences Institute. Presented in Chattanooga, TN at the
Annual Meeting, February, 1993. (with Ronald M. Zigli and Robert L. Andrews).
"An Empirical Examination of the Diffusion of Document Imaging Processing Systems." Proceedings of
the 1993 Southeast Decision Sciences Institute. 179-181. Presented in Chattanooga, TN at the
Annual Meeting, February, 1993. (with Gregory B. Turner).
"Symbiosis: A Theoretical Foundation for the Development of Strategic Procurement Alliances."
Proceedings of the 1993 Southeast Decision Sciences Institute. 204-206. Presented in
Chattanooga. TN at the -Annual Meeting, February. 1993. (with Gregor>' B. Turner and Mark A.
Mitchell).
"An Examination of Political Campaign Pricing Decisions: A Multi-Stage Approach." Proceedings of
the 1 992 .Atlantic Marketing Association. 419-423. Presented in Greensboro, NC at the .Annual
Meetmg, October, 1992. (with Gregory B. Turner).
"Take It Or Leave It? The Ethics of Gift Acceptance by Industrial Purchasing Agents." Proceedings of
the 1992 Atlantic Marketing Association, 233-237. Presented in Greensboro, NC at the Annual
Meeting, October, 1992. (with Gregory B. Turner and Mark A. Mitchell).
"Studying Ethics Within the Purchasing Function: Let's Start by Building Some Theoretical
Foundations." Proceedings of the 1992 Southeast Institute of Management Science, 360-364.
Presented in Myrtle Beach. SC at the Annual Meeting, September, 1992. (with Gregor>' B.
Turner).
"Inbound Shipment Tracing Systems; A Perspective From the Purchasing Department." Proceedings of
the 1991 Southeast Institute of Management Science, 255-256. Presented in Myrtle Beach. SC at
the Annual Meeting, October, 1991. (with Paul T. Nelson).
"Discrimination Awards." Symposium on Forensic Evaluations for the 1991 Southeast Institute of
Management Science. Presented in Myrtle Beach. SC at the Annual Meeting. October, 1991.
(with B. Perr>' Woodside and Bill Hardy).
"An Update of Statistical Applications in Age Discrimination Cases." Symposium on Forensic
Evaluations for the 1989 Southeast Decision Sciences Institute. Presented in Charleston, SC at
the Annual Meeting, February, 1989. (with B. Perry Woodside).
"A Review and Applications of Statistical Methodologies .Appropriate for Evidence in Age
Discrimination Litigation." Symposium on Forensic Evaluations for the 1988 Decision Sciences
Institute. Presented in Las Vegas, NV at the Annual Meeting, November. 1988. (with B. Pern.'
Woodside).
262
"Testing for Model Specification Errors in Income Distribution Research." Proceedings of the 1988
Southeast Decision Science Institute. 99-101. Presented in Winston-Salem, NC at the Annual
Meeting. February, 1988. (with John D. Jackson and Tom S. Sale).
"The On-Line Case: A 'Bottom Line' Approach to Statistical Pedagogy." Proceedings of the 1988
Southeast Decision Science Institute, 105-107. Presented in Winston-Salem, NC at the Annual
Meeting, February, 1988. (with James Hawkes).
"Age Discrimination: Statistical Evidence and Measurement of Damages." Proceedings of the 1987
Southeast Institute of Management Science, 34-36. Presented in Myrtle Beach, SC at the Annual
Meeting. October, 1987. (with B. Perr>' Woodside).
"An Empirical Investigation of Income Concentration in the South: 1950-1980." Proceedings of the 1987
Southern Regional Sciences Institute. 25-29. Presented in Atlanta, GA at the Annual Meeting.
March, 1987. (with John D. Jackson and Tom S. Sale).
"The Direct Mail Simulation Game: Teaching Marketing Research for 'Bottom Line' Results."
Proceedings of the 1987 Southwest Institute of Decision Science. 233-235. Presented in Houston,
TX at the Annual Meeting, March, 1987. (with James Hawkes and Robert N. Carter).
"Experiment Shows Entrepreneurs Can Benefit from Maturity Training." Proceedings of the 1987
Southwest Small Business Institute, 65-68. Presented in Houston, TX at the Annual Meeting,
March, 1987. (with Robert N. Carter).
"Training Retail Computer Sales Personnel." Proceedings of the 1987 Southwest Small Business
Institute. 82-84. Presented in Houston, TX at the Annual Meeting, March, 1987. (with Robert N.
Carter).
"Level of Personal Maturity Seen as Fuel for Entrepreneurial Spirit." Abstract reprinted in The Journal of
Private Enterprise. 2(1), 56. Presented in San Antonio, TX at the Association of Private
Enterprise Education Meeting, April, 1986. (with Robert N. Carter).
"The Possible Effects of Firm Size on Case Writing: A Preliminary Investigation." Proceedings of the
1986 Mid- Western Case Writers Association, 53-59. Presented in Chicago, IL at the Annual
Meeting. March. 1986. (with Robert N. Carter).
"The Family Medical Center: Marketing Research and Strategic Planning." Proceedings of the 1985
National Decision Sciences Institute. Case Supplement, 39-45. Presented in Las Vegas, NV at the
Annual Meeting, November, 1985. (with Robert N. Carter).
"State of Individual Maturity Advanced as Key Determinant of Successfiil Retail Sales Training."
Proceedings of the 1985 Academy of Marketing Science Association, 195-197. Presented in
Charleston, SC at the Annual Meeting, October, 1985. (with Robert N. Carter).
"Gap Exists in Manufacturing-Sponsored Training for Retail Computer Sales Personnel: Combined
Training in Fundamental Techniques and Skills and Beyond Motivation Concepts Holds
Remedy." Proceedings of the 1 984 Academy of Marketing Science, 473. Presented in Niagara
Falls. NY at the Annual Conference. May 1984. (with Robert N. Carter).
"Advancing the Small Business Computer Marketing Channel Through Training the Retail Salesperson."
Proceedings of the 1984 Southwest Small Business Institute. 54-66. Presented in Houston. TX at
the Annual Meeting, March, 1984. (with Robert N. Carter).
"Respondent Samples in Marketing Reseeirch: A Comparison Study." Proceedings of the 1 984 Southeast
Decision Sciences Institute. 177-179. Presented in Savannah, GA at the Annual Meeting,
February, 1984. (with Albert J. Taylor).
"Salesmanship and Motivation Training: A New Direction." Proceedings of the 1983 Mid-Atlantic
Marketing Association, 1-14. Presented in Valdosta, GA at the Annual Meeting, October, 1983.
(with Robert N. Carter).
"Predicting Sales Performance: A Literature Review." Proceedings of the 1983 Southwest Decision
Sciences Institute. 107-109. Presented in Houston. TX at the Annual Meeting, March, 1983.
(with C. Richard Huston and Albert J. Taylor).
263
Other Research Published in Professional Trade Journals:
"Customer Satisfaction Surveys." Golf Business. II (4), 22-25. (June 1996). (with Gregory B. Turner and
Jack Kendree).
"Ethical Behavior is No Gimme." Golf Business. II (2), 56-58. (March 1996). (with Gregory B. Turner
and Wade C. Ferguson).
"A Comparison of Ethical Standards and Conduct: Purchasing Professionals of PMA-Philadelphia Versus
Those of Other Regions." P.M. News. 96-3. 3-4. (March 1996). (with Gregory B. Turner and
Wade C. Ferguson).
"Gift and Gratuity .'\cceptance: Ethical Standards and Conduct Among PMA-Philadelphia's Purchasing
Managers." P.M. News. 96-2. 4-6. (February 1996). (with Gregory B. Turner and Wade C.
Ferguson).
"Ethical Standards and Conduct Among PMA-Philadelphia's Purchasing Managers." P.M. News. 96-1.
5-6. (January 1996). (with Gregor)' B. Turner and Wade C. Ferguson).
"Salary Gender Gap Continues to Narrow Among Carolinas-Virginia Purchasing Professionals: Results
of the Third Annual NAPM-CV Salary Survey." Southern Purchasor. XXVI. (1), 9-1 1. (January-
February 1996). (with Wade C. Ferguson and Gregory B. Turner).
"Purchasing Planning for Disaster - Are You Prepared?" NAPM Insights. V (11). 42-44. (November
1994). (with Wade C. Ferguson and Gregory B. Turner).
"Carolinas-Virginia Purchasing Salaries Continue to Outpace National Averages: Results of the Second
Annual NAPM-CV Salary Survey." Southern Purchasor. XXIV. (6), 22-24, (November-
December 1994). (with Wade C. Ferguson).
"Keep Purchasing Functioning in Disaster's Wake." Supplier Selection & Management Report. 94-9. 10-
1 1, (August 1994). (with Wade C. Ferguson).
"How Do Carolinas-Virginia Purchasing Professionals Measure Up in Today's Economy: Results of the
First Annual NAPM-CV Salary Survey." Southern Purchasor. XXIII (4). 20-24. 31, (July- August
1993). (with Wade C. Ferguson).
"Gratuity Acceptance: Views of Future Purchasing Agents." Southern Purchasor. XXIII (4). 26-31.
(July-August 1993). (with Gregory B. Turner).
"Careful There Partner.. .They May Be A Gunnin' For You." Southern Purchasor. XXII (5). 20-24.
(September-October 1992). (with Gregory B. Turner).
"Let's Compare Ethics Policy Statements: .A Study of Purchasing Practices in the PMAC-V Region."
Southern Purchasor. XXII (4). 18-21. (July- August 1 992). (with Gregory B. Turner).
"Gifts and Favors From Suppliers: A Study of Purchasing Practices in the PMAC-V Region." Southern
Purchasor. XXII (3), 18-22, (May-June 1992). (with Gregory B. Turner).
"What's Happening on the Home Front: A Study of Purchasing Ethical Practices in the PMAC-V
Region." Southern Purchasor. XXll (2). 38-40. (March-April 1992). (with Gregory B. Turner).
"An Agricultural Product to Bank On: Trees." The Louisiana Banker. XLIX (10), 3-8. (with Lyndon E.
Dawson).
"From Pulpwood to Paper: The Channel of Distribution for Louisiana-Produced Paper." The Louisiana
Economy. XV (1). 6-8. (with Lyndon E. Dawson).
"The Louisiana Timber Industr)-; Marketing Channels and Pricing Practices." The Louisiana Economv.
XIV (4). 5-8. (with Lyndon E. Dawson).
264
Memberships, Offices Held, and Activities in Professional Organizations:
Coordinator and Publisher, The NAPM-CV Purchasing Manager's Report, published monthly since
March 1993 and extensively disseminated throughout the print and electronic media nationally
and in the Carolinas-Virginia region. Funded through a yearly grant from NAPM-CV.
Member, Past Professional Development Chairman, Past Board Member, Purchasing Scholarship
Coordinator, National Association of Purchasing Management - CarolinasA^irginia (NAPM-CV)
Coordinator, The College of Charleston Purchasing Professional Development Seminar Series
Monthly Meeting Speaker, numerous Local Chapters of the NAPM-CV
Speaker and Participant, The NAPM Annual International Purchasing Conference
Speaker and Participant, The NAPM-CV Annual Purchasing Educators Conference
Annual Convention Speaker. The South Carolina Association of Government Purchasing Officials
Member, Past Vice President for Planning & Development (1992-1993), Past Convention Host and Local
Arrangements Coordinator (1989 and 1996), Track Chair, Session Chair. Manuscript Reviewer,
Paper Discussant, The Southeast Decision Sciences Institute
Track Chair. Session Chair, Manuscript Reviewer, Paper Discussant, The Southeast Institute of
Management Science
Session Chair, Manuscript Reviewer, Paper Discussant, The Southwest Decision Sciences Institute
Session Chair. Manuscript Reviewer, Paper Discussant, The Southern Marketing Association
Session Chair, Manuscript Reviewer, Paper Discussant, The Atlantic Marketing Association
Personal Employment, Consulting:
Consultant. 1995, Kiawah Property Owners Group. Kiawah Island, SC
Consultant, 1994, Trident's B.E.S.T. Committee, Charleston, SC
Consultant. 1993-present, Fort Sumter Tours, Charleston, SC
Consultant, 1 992-present, The Patriot's Point Development Authority. Mt. Pleasant, SC
Consultant. 1991-1992, Advertising Services Agency, Charleston, SC
Consultant, 1989, Gamble, Givens, and Moody CPA Firm, N. Charleston, SC
Co-Owner, 1 992-present, Power Alley Sports Cards, Inc., Mt. Pleasant, SC
Involvement in Extension and Public Service Activities:
Vice Chairman of Commissioners, The Charleston County Housing and Redevelopment Authority
Member, The Public Housing Authority Director's Association
Member, Carolinas Council of Housing, Redevelopment, and Codes Officials
Chairman, The Charleston County Republican Party
Sponsor and Volunteer, TTie Juvenile Diabetes Foundation Walkathon
Volunteer, Tlie American Red Cross Trident Chapter
Volunteer, The Charleston Interfaith Crisis Ministry
Site Coordinator, The South Carolina .^dopt-A-Highway Program
Member, Ducks Unlimited, East Cooper Chapter
Speaker, The East Cooper Public Schools After School Adventure Program
Doctoral Dissertation Committee Assignments:
Committee Member, An Evaluation of Participation by the Purchasing Function in the Corporate
Strategic Planning Process, a dissertation by Wade C. Ferguson, Purchasing Manager, Santee
Cooper, Moncks Comer, SC, for Nova University, 1993.
265
Major College and Department Committee Assignments Held:
Member, BA/ECON Faculty, Student, & Alumni Issues Committee
Member, BA/ECON Computer Utilization Committee
Past Member, College of Charleston Judicial Board
Past Coordinator. TTie CoUeue of Charleston Career Festival
Administrator, The NAPM-CV Purchasing Scholarship Program
Administrator, The National Collegiate Business Merit Award Program
Assistant to the Dean. .^VACSB Accreditation and Reaccreditation Studies
Faculty Advisor, The College of Charleston Varsity Baseball Team
Faculty Advisor. The College Republicans
Recent External Research Activities Coordinated:
"A Customer Profile and Opportunity Assessment for the Sports Rock Cafe," performed for the
management of the North Charleston based operation, 1995.
"An Awareness Assessment of the Charleston Area Arts Council." performed for the Director of the local
agency, 1995.
"A Feasibility Study of Opening an All-Natural Products Store in Americus. GA," performed for a client
interested in entering this industry. 1995.
"A Feasibility Study of the Piggly Wiggly Carolina Company's Centralized Bakery." performed for the
Vice President of the corporation. 1994.
"An Assessment of the Charleston Trident Business Education Partnership Program." performed for the
Trident Chamber of Commerce. 1993.
"A Study of the Ethnic Greeting Card Industry," performed for a client interested in entering the industry,
1993.
"Summary of Light Manufacturing\Distribution Operations in South Carolina." performed for a local
business brokerage company. 1992.
"South American Import\Export Study." performed for a local group of future importers. 1992.
"A New Product Development and Current Product Line Expansion Study." performed for a local book
retailer. 1991.
"A Temporary Employment Services Attirudinal Sur\'ey." performed for a regional temporary
employment services company. 1991.
"Medical University of South Carolina Purchasing Department Assessment," performed for the Director
of Procurement at the Medical University of South Carolina, 1990.
"A Needs Assessment for the Charleston World Trade Center." performed for the Trident Chamber of
Commerce and the Council of Trade. 1990.
"A Peninsular Charleston Fitness Facility Feasibility Study," performed for clients interested in
developing such a facility. 1990.
"A Study of the Need for Mortgage Information Services in the Trident Market." performed for clients
interested in the start-up of such a business. 1990.
"A Dealership Satisfaction Survey." performed for a local power boat manufacturing company. 1 989.
"A Feasibility and Location Study for U-Bake-It Pizza," performed for clients interested in bnngmg this
concept to the Charleston market, 1989.
"A Home Furnishings Consumer Preference Study," performed for a national home furnishings concern,
1989. ' ^
266
Recent Institutional Research Activities Coordinated:
"A Program Assessment of the College of Charleston's Center for Entrepreneurship," performed for the
Dean of the School of Business and the College's Entrepreneur in Residence, 1995.
"An Assessment of the College of Charleston's Department of Public Safety," performed for the Director
of the Department, 1995.
"An Analysis of Student Interest in the Field of Arts Management and Administration", performed for the
Dean of the School of the Arts and the Senior Vice President at the College, 1994.
"An Assessment of the College of Charleston's Maymester and Summer Sessions Program," performed
for the Director of the Program, 1994.
"The 1 994 Student Budget Survey," performed for the Office of Financial Aid and Scholarships at the
College, 1994.
"Assessment of Attendance at Men's Basketball Games at The College of Charleston," performed for the
Athletic Department at the College, 1994.
"A Risk Management & Insurance Curriculum Program Feasibility Study," performed for the Dean of the
School of Business and Economics at the College, 1993.
"An Assessment of the Office of Financial Assistance and Scholarships," performed for the Director of
the Office of Financial Aid and Scholarships at the College, 1993.
"An Assessment of the Office of Career Development," performed for the Interim Director Office of
Career Development and Placement at the College, 1992.
"The 1 992 Student Budget Survey," performed for the Office of Financial Aid and Scholarships at the
College, 1992.
"The TQM Initiative: A Study to Determine the Integration of TQM into the Business and Economics
Curricula," performed for the School of Business and Economics, 1992.
"The 1991 Student Expenses Study," performed for the Office of Financial Aid and Scholarships at the
College, 1991.
"The Feasibility of a Major in Communications at The College," performed for the Office of the Vice
President for Academic Affairs and the English Department Faculty, 1991.
"The Masters of Accountancy Program Feasibility Study," performed for the Accounting Faculty in the
School of Business and Economics, 1989.
"The 1 989 Student Budget Study," performed for the Office of Financial Aid and Scholarships at the
College, 1989.
"A Feasibility Study of Off-Campus and Weekend Programs at the College of Charleston," performed for
the Office of the Vice President for Academic Affairs, 1989.
"An Internal Audit of the College Campus Shop," performed for the College Bookstore, 1988.
267
References:
Howard F. Rudd, Jr., Ph.D.
Dean, School of Business and Economics
College of Charleston
Charleston, SC 29424
(803)953-8110
Rhonda Mack, Ph.D.
Chairman, Department of Management & Marketing
School of Business and Economics
College of Charleston
Charleston, SC 29424
(803) 953-6566
Gregory B. Turner, D.B.A.
Assistant Professor of Marketing
Wall School of Business Administration
Coastal Carolina University
Conway, SC 29528
(803) 349-2688
Wade C. Ferguson, D.B.A.. C.P.M.
Past President of NAPM - Carolinas/Virginia
Santee Cooper
PO Box 2946101
Moncks Comer, SC 29461
(803) 761-8000, ext. 5498
V. Gilbert Snyder, Jr., C.P.M.
Executive Vice President
NAPM - CarolinasA'irginia
560! Roanne Way, Suite 312
Greensboro, NC 27409
(910)292-9228
Henry D. McMaster, Esq.
Chairman. South Carolina Republican Party
c/o Tompkins and McMaster Law Firm
PO Box 7337
Columbia, SC 29202
(803) 799-4499
Montez Martin
Executive Director
Charleston County Housing and Redevelopment Authority
2106 Mt. Pleasant Street
Charleston. SC 29403
(803)722-1942
268
Southeast Alaska Conservation Council
SEACC 419 6th Street, Suite 328, Juneau, AK 99801
(907) 586-6942 phone (907) 463-3312 fax
email: seacc@alaska net
Katie McGinty
Chajr, Council on Environmental Quality
360 Old Executive Office Building
17th Street and Pennsylvania Avenue, NW
Washington, DC 20500
July 15, 1996
Dear Katie,
As you know, the topic of granting an extension to Ketchikan Pulp Company has heen a
hot one in July SEACC strongly opposes this legislation
At the July 1 1th heating on H R 3659 Congressman Don Young challenged SEACC's
statement that the Governor of Alaska does not suppon H R 3659 and that the bill
doesn't even come close to including the specific niinimiiin conditions set forth by the
Governor in his letter to Mark Suwyn, CEO of Louisiana Pacific Corpoiation
Although Governor Knowles has expressed his support for an extension, it is absolutely
clear that there has not been a single written word from Governor Knowles, stating that he
supports the proposed HR 3659 extension or the Senate Companion bill
Please see the attached Anchorage Daily News anicle which confirms our \ leivs We are
requesting that Congressman Young make this anicle pan of the hcanng recoid
Jan Koehler
Executive Director
SEACC
Buck I.indekugcl
Conservation Directt
SEACC
LYNN CANAL CONSERVATION. Haines* FRIENDS OF GlACAf.K BAY. Gusiavu, . FRUNDS OF liERNERS U^Y Jiii.,^u
WRANGCLL RESOURCE COUNCIL • ALASK.\ SOCIETY OF AMERICAN F0RE5T IJWEI.IXRS. I'oiDi bAcf • PEI KAN 1 1 ikl -S I RY rilllNfll
ALASKANS FOR JUNEAU • NARROWS CONSERVATION COALJTION. Pcitraburg • TONGASS CONSEKVaTIuN SOCIL I ^ . KcKh.Un
CHICIIAGOF CONSERVATION COUNCII.Tti,.ktc» JUNEAU GROUP SitKRA (Mm 'SFrKACONSIKVAlK IN S(l( II n
269
•^ rt SoiiJ^ ob.9 5«S*ti-S8^
i^ a U 0} /a
270
GEORGE M. LEONARD
July 25, 1996
Honorable Don Young
Chairman
Committee on Resources
United States House of Representatives
Washington. DC 20515
Dear Mr. Chairman:
This letter responds to your request at the hearing last week that I submit my suggestions
for changes in the Environmental Improvement Timber Contract Extension Act of 1996. My
suggestions follow:
Section 2 (a) (1) is not technically correct in that it applies the Scribner Log Rule to
utility log volumes. The Scribner Rule is a log rule which measures the portion of a log which is
suited for the manufacture of lumber. By accepted definition, utility logs are those not suitable
for lumber production. Further, as written the provision would effective preclude a reasonable
charge for utility logs. A better approach would be to specify the volume requirements of
sections 2 (c) (3) and 2 (e) as 192,500,000 board feet net scribner long-log scale for all logs per
year. This would make it clear that the Forest service can charge for utility logs on an
appropriate scale.
Section 2 (a) (4) confuses the concept of appraising timber with the concept of offering
timber which meets mid-market criteria. The timber offered to KPC under the contract should
meet mid-market criteria. However, the appraisal of all timber offered under the contract should
be done using normal Forest Service appraisal methods in use on the Tongass. I recommend
that section 2 (a) (4) be rewritten to separate and clarify these concepts.
Section 2 (c) (4) should be revised to make it clear that the Forest Service can collect
Knutson-Vandenburg (K-V) funds or other agreed deposits. In addition, 1 would recommend
striking the word independent from the appraisal requirement. As noted above, the timber in the
long-term contract should be appraised using normal Forest Service appraisal methods in use on
the Tongass National Forest.
Section 2 (c) (5) needs to be revised to make it clear that all contiguous management
areas are being grouped to measure proportionality. Subsections (B) and (C) should reference
the maps and rotation periods used in the current Tongass Land Management Plan.
10909 Paynes Church Dr., Fairfax, VA 22032-2920
271
Section 2 (c) (6) needs to set a reasonable time period for conversion or replacement of
the pulp mill if the company elects to do so. It should also specify what activities under the
contract are permitted during the conversion or replacement period.
Finally, KPC has a number of outstanding and potential claims against the Government
arising from past contract operations and the Tongass Timber Reform Act. I believe it is
appropriate to condition the contract extension on the waiver of these claims, at least as they may
accrue from future contract operations.
Continued operation of a pulp mill or other facility to permit economic utilization of
utility logs and low quality sawlogs is essential if the timber resource on the Tongass is to
continue to contribute to employment and the economic well-being of the communities in
southeast Alaska. Please let me know if I can be of further assistance.
Sincerely,
Geori
BOSTON PUBLIC LIBRARY
272
3 9999 05984 185 6
Southeast Alaska Conservation Council
SEACC 419 6lh Sireel, Suile 328, Juneau, AK 99H01
(907) 586-6942 phone (907) 463-3312 fax
email: seacc@alaska.nel
^'^y^'}~i*'^---\r
July 23, 1996
The Honorable Don Young
Chairman of Committee on Resources
U.S. House of Representatives
1324 Longworth House Office BIdg.
Washington, DC 20515
Dear Chairman Young:
This letter follows up on your July 1 1, 1996 hearing in Washington D C regarding H R
3659, the so-called "Environmental Improvement Timber Contract Extension Aci "
Instead ofimproving the environment, this bill only serves to improve the bollom line for
Louisiana Pacific Corporation, the Ketchikan Pulp Company's parent corporation, at the
expense of the other Tongass-dependent industries, forest resources, and the American
taxpayer. After pocketing years of profit from repeated violations of stale and federal
envirorunental laws, the Ketchikan Pulp Company now wants the Amencan taxpayer to
pay it to cleanup its act The Ketchikan Pulp Company was also found guilty in 1983 of
anti-trust violations including price fixing, collusive bidding, and conspiring to monopolize
the Tongass logging industry by driving independent timber operators out of business
During my oral statement at the July 1 0, 1 996 hearing, I submitted for the record a
number of resolutions and letters from Southeast Alaska communities, businesses and
organizations opposing your bill Since the hearing, we have continued lo receive
resolutions and letters opposing your bill We request that you ioclude the enclosed
package of 1 17 resolutions and letters into the ofTicial, written hearing record for
H.R. 3659.
We again ask you to stop this outrageous piece of special interest, corporale welfare
legislation right now
Best Regards,
■^uck Lindekugel /
Conservation Director
LYNN CANAL CONSERVATION. lUmcs • FRIENDS OF Glj^ClER UAY.Gu^uvus • FKIENDSOIDEKNliKS DAV.Juulju
WRANGELL RESOURCE COUNCIL 'ALASKA SOCIETY OF AMERICAN FOREST DWLlJ-LKS.l'oimliakit* I'LUCAN IDUli I KV COUNCIL
ALASKANS FOR JUNEAU • NARROWS CONSERVATION COAIJ HON. Ptitrsburg • lONOASS CONSIiUVA HON SOCILI V. Ktuhik^ii
CHICHAOOFCONSERVATION COUNCIL Tciiikcc • JUNEAU GUOUI'SILRKA HUl) "SI IKA CDNSLKVA HON MX ILIY
TAKU CONSERVAllON SOCIETY. Juneau • PRJNCE OF WALES CONSERVATION l-EAGUE, Ctaig • YAKUTAT RESOURCE CONSLKVA nON COUNCIL
/.«(i(i;i/i
i yi Iwtfuiln
o
273
Resolutions and Statements From Alaskan Communities, Civic
Groups, Businesses and Associations Opposed to Extending
Louisiana Pacific's KPC Long Term Contract
Partial List - Current
7/30/96
City of Psllcni
CItyof Angoon
City of Tenakaa Spring*
Outtavus Community
Afiociatlon
Community of Elfin Cova
Port Protactloii Community
Association, Inc
Pod Alaxandar Flah S Same
Advisory CommHtM
Tongas* Hunting ft Fishing
Coalition
SItfca Frtand* of SoutheasTs
Futura
Point Adolphus Saafoodi
Alaska Discovery, Inc.
Alaska WlldcriMsa
R«:r«atlon & Tourism
Association
Wrangall ftesourca Council
Hoonah Indian Association
Alaska CIsan Water Alliance
Alaska Center For The
Environment
Alaskans For Juneau
Tenakee Historical Society
Sitka Conservation Society
Tenakee Hot Springs Lodge
Juneau Chapter Slarra Club
Toms Place Homeowners
Assodstlon
Parker / Boyce Hunting Guide
Service. Inc
Friends of Qladsr Bay
Friends of Bemer's Bay
Alaska Skiff Charters
Sihrer King Marine
UsIanskI Lodge
Oustavus Inn
Oustavus Marine Charter
Good RIvcf Bed & Breakfast
aiscicr Bsy Sea Kayaks
Crondahl Bed & Breakfast
Alaska Up Close
Peyton Fisheries Business
Consulting, Marketing &
Development
Alaska Cruises
Laura Lucas Design
Sockeye Cycle
Dr. Margaret Davidson
Admiralty Islsnd Sightseeing
Northwest Art
OM Hartxir Books
Searing Up
Peterson F.I.S.H.E.S.
Prince of Wales Conservation
League
S8°22' North Sailing Charters
Olacler Qukles, Inc - Aisska
Master Hunting Oukles,
Jimmie C, & Mary Ann
Rosen bruch
Alaska Applied Sciences, Inc
Ravens Fire, Inc
Mark Kelley Photography
Inner Hariaor Lodge
RIe Munoz, Ltd.
Alaska's Leading Edventures
Norttiem Kets, Inc
F/V Hanss
Bluejacket Passages
Laughing Raven LoOga
A Sign of Design
Southeast Exposure
The Bakery
The Rainforest Retreat
Icy Strait Adventures
Shearwater Lodge A Charters
Douglas Island Veterinary
Service
Juneau Chspter Audubon
Society
Boardwalk Bight
Mother Truckers Kayak &
Bike RenUI
Mountain Oears
Walton Radar MarhM
Wild's Ala*kan Seafarm
Cougar f>roductlon*
Evthtone Hueklos
Tenakee Resourtw Recovery
Junesu Outdoor Center
Qusto Tours & Charter*
Olacler Bay Photography
Cross Sound Lodge
Caribou Trails Photography
Starship Rsheries
StartHick Charters
Annie May Lodge
Water Ouzel Outings
Taku Conservation Society
Johnson Enterprises
Baldarka BoaU
Tongass Conservation
Society
Lynn Canal Conservation,
Inc.
Tims Line Cruises, Inc
Manchee & McLean
Computer Consultants
Tenakee Towing
Whaler* Cove Lodge
icy Straits Environmental
Services
Association of Forest Servk:e
Empioyaee for Environmental
Ethics
Alaaka Council of Trout
Unlimited
Einn Cove Hah t Game
Advisory Commlttae
Tenskee Springs Fish &
Gams Advisory Commlttae
The FIddlehead Restaurant &
Battery
MacOunnah's Lid.
Southeast Alaska Land Trust
Alaska Bed ft Breakfast
Aa»oclatton
Salmon lUvar Smokatmuee
Alaaka Outdoor Consultanta
Pelican Charter*
Alaeks iUlnforest Tour*
Mount Juneau Inn
Alaaka Houae Inn
Splrtt Walker ExpedlUon*
PufTIn Travel, Inc
Angoon Trading Company,
Inc
Wales Waterworks
Sea Otter Sound Sestooda,
Inc
InterOeeIgn / Mac De*lgn
Southeest Alaaka Veterinary
Clink:, inc
Alaaka Pa**agas Tour*
Sea Flak Consulting «
Management
v .:iaon Engineering, Ino
Consulting Engineers ft
Project Manager*
Bear Track Msrcanllle
DennI* Ha/* Elfln Cove
Resort
More
274
Resolutions and Statements Opposed to Extending
Louisiana Pacific's KPC Long Terra Contract
Page 2
Tongass Cmn Projact I
Prefect of Uw National
Sp»l*olcD!cal Society
FtdnuMthar Adventures
The ObMTvalofy, ABAA
&««■• Neat Cabins / Oltts
/Cafe
Chlchagot ConMrvatlon
Council
Marine Adventure Sailing
Tours
OM Harbor Press
AlasU Fly W Fish Ctisrtacs
Sticks S Stonss
Due to the high cost of printing,
copies of all 117 resolutions are
included in the official Committee
files.
o
26-689 - 96 (280)
ISBN 0-16-053778-9
9 780160"537783
90000
Live Music Archive
Librivox Free Audio
Metropolitan Museum
Cleveland Museum of Art
Internet Arcade
Console Living Room
Books to Borrow
Open Library
TV News
Understanding 9/11