Legislature(1997 - 1998)
02/18/1997 02:07 PM House RES
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
JOINT MEETING
HOUSE RESOURCES STANDING COMMITTEE
SENATE RESOURCES STANDING COMMITTEE
February 18, 1997
2:07 p.m.
HOUSE MEMBERS PRESENT
Representative Bill Hudson, Co-Chair
Representative Scott, Co-Chair
Representative Beverly Masek, Vice Chair
Representative Fred Dyson
Representative Reggie Joule
Representative Joe Green
Representative Bill Williams
Representative Ramona Barnes
HOUSE MEMBERS ABSENT
Representative Irene Nicholia
SENATE MEMBERS PRESENT
Senator Lyda Green, Vice Chair
Senator Loren Leman
SENATE MEMBERS ABSENT
Senator Rick Halford, Chair
Senator Bert Sharp
Senator Robin Taylor
Senator John Torgerson
Senator Georgianna Lincoln
COMMITTEE CALENDAR
TIMBER INDUSTRY BRIEFING
PREVIOUS ACTION
No previous action to record
WITNESS REGISTER
JACK PHELPS, Executive Director
Alaska Forest Association
111 Stedman, Suite 200
Ketchikan, Alaska 99901
Telephone: (907) 225-6114
POSITION STATEMENT: Presented an overview of the Alaska Forest
Association and addressed Interior issues.
KEATON GILDERSLEEVE, President
Alaska Forest Association;
President, Gildersleeve Logging
Pouch B
Ketchikan, Alaska 99901
Telephone: (907) 225-1224
POSITION STATEMENT: Discussed the timber industry in Southeast.
ERROL CHAMPION, General Manager
Aviation Division
Silver Bay Logging
Cube Cove, Number 2
Juneau, Alaska 99850
Telephone: (907) 586-4133
POSITION STATEMENT: Presented an overview of the Governor's
Southeast Regional Timber Task Force and
the independent sales program.
JOHN STURGEON, President
Koncor Forest Products;
Member, Board of Forestry; and
Member, Executive Committee of Resource
Development Council
3501 Denali, Suite 202
Anchorage, Alaska 99503
Telephone: (907) 562-3335
POSITION STATEMENT: Gave an overview of the State Forest
Practices Act.
TERRY NININGER, Vice President
Circle DE Pacific Corporation;
Member, Board of Directors,
Alaska Forest Association
6239 B Street, Suite 201
Anchorage, Alaska 99518
Telephone: (907) 235-1545
POSITION STATEMENT: Presented an overview of Circle DE Pacific
Corporation operations.
RICHARD LEARY, Controller
Ketchikan Pulp Company
Box 6600
Ketchikan, Alaska 99901
Telephone: (907) 225-2151
POSITION STATEMENT: Gave an overview of the Ketchikan Sawmill
and Annette Sawmill.
DAN BENSON, Production Manager
Ketchikan Sawmill
Box 6600
Ketchikan, Alaska 99901
Telephone: (907) 225-2151
POSITION STATEMENT: Gave an overview of the Ketchikan Sawmill
and Annette Sawmill.
ACTION NARRATIVE
TAPE 97-14, SIDE A
Number 0001
CO-CHAIR BILL HUDSON called the joint meeting between the House
Resources Standing Committee and the Senate Resources Standing
Committee to order at 2:07 p.m. Present at the call to order from
the House Resources Standing Committee were Representatives Hudson,
Ogan, Dyson, Joule, Green, and Williams. Representatives Masek and
Barnes joined the meeting at 2:08 p.m. and 2:18 p.m., respectively.
Present at the call to order from the Senate Resources Committee
were Senators Green and Leman.
CO-CHAIR HUDSON announced the first order of business was a timber
industry briefing. He expressed his appreciation to the industry
representatives for taking the time to bring committee members up
to date on what's happening in the timber industry. He asked Jack
Phelps to come forward to begin his testimony.
Number 0090
JACK PHELPS, Executive Director, Alaska Forest Association (AFA),
said the Alaska Forest Association is the statewide Alaska timber
industry trade group, representing about 300 member companies doing
business in the timber industry in Alaska. The three divisions
within the association are: Government affairs and public
relationships; Tongass Timber Trust; and Alaska Loggers Association
Retirement Trust.
MR. PHELPS said the association has identified a couple key
priorities with respect to state timber issues. First, the
association's mission statement says, "The Alaska Forest
Association works to maintain a viable forest products industry as
an important part of Alaska's economy." With respect to that,
there are two issues on the state level that are of immediate
importance to the association. The first is to maintain the
state's timber sale program. He said a number of the association's
members depend directly on the purchase of state timber from the
state forested lands. Timber harvest, particularly because of its
ability to provide money to the state for reforestation, is a key
element in addressing the beetle epidemic in Southcentral Alaska.
Number 0289
MR. PHELPS commented the association's second key priority on state
issues is to maintain the integrity of the Forest Practices Act
implementation with the Department of Natural Resources (DNR) as
the lead agency. He informed committee members of the need to keep
the Alaska Department of Fish & Game (ADF&G) in that process to
ensure their statutory and regulatory responsibilities are upheld
and to provide adequate field presence in Forest Practices Act
issues. With respect to the discussion about lack of funds, the
association believes there may be an allocation problem that should
be looked at.
Number 0354
MR. PHELPS maintains that AFA is doing its part with respect to
forest practices. The association and its member companies have
invested an average of $120,000 into scientific stream monitoring
studies over the last four to five years and anticipate an
increased level to that commitment this year. The AFA believes
that a full participation of the agencies in the fisheries/forestry
working group on cooperative forestry research is essential to make
the Forest Practices Act issues work. The industry is not afraid
of the scientific facts with respect to their timber harvest
activities and its effect on other uses of the forest. On the
other hand, the association believes that it is crucial for the
agencies to show a greater commitment of cooperation on these
issues.
Number 0440
MR. PHELPS said he would direct his next comments to the Interior
issues. Currently, there are no large manufacturers operating in
Alaska's Interior; in other words, no operations processing more
than 10 million board feet (mmbf) a year. There is, however,
capacity for growth and capacity for expanded harvest and
utilization of the timber resources in the Interior. He continued
that Northland Wood Products, the largest mill operating in the
Interior, recently joined with a major West Coast grading bureau
and is now providing structural graded lumber into the Interior
market. He discussed the harvesting of white spruce in the
Interior, and said it currently averages about 10 - 15 mmbf, of
which two-thirds is on state land and one-third on private lands,
primarily Native Corporation land.
MR. PHELPS added that with respect to the hardwood resources, the
state has an allowable cut of 60 million feet in the Interior;
however, less than 1 million is currently being harvested. The
association is actively exploring options for companies to utilize
that.
Number 0569
MR. PHELPS concluded by requesting that Megan Smith from the
National Biofuels Institute be given an opportunity to address the
committee on Thursday. The institute has what may be a very viable
proposal for Alaska.
CO-CHAIR HUDSON verified the committee would do that. It was his
understanding that the institute was looking at making fuel from
pulp.
MR. PHELPS advised the institute was working on converting wood
waste to ethanol. Alaska has an 8 1/2-cent-a-gallon tax incentive
to use ethanol as an additive to reduce air emissions, but
currently ethanol used in Alaska is produced in Ohio, trucked, and
then barged to Alaska. Therefore, it's a major advantage to
produce it in Alaska.
CO-CHAIR HUDSON thanked Mr. Phelps for his statement and asked Mr.
Keaton Gildersleeve to come forward to present his remarks.
Number 0790
KEATON GILDERSLEEVE, President, Alaska Forest Association; and
President, Gildersleeve Logging, stated his family had logged in
Alaska continuously since 1953. He and his wife purchased the
operations in 1980 and they've never had a violation of the Alaska
Forest Practices Act. The company normally logs 30 - 50 mmbf per
year, and builds the attendant 10 - 20 miles of road. Their
operation involves the complete job from the stump to the completed
raft. His wife is the owner of a tugboat and barge company that
does ship tending, log towing, as well as charter and support work
for remote sites and other loggers. In addition, their operation
includes subcontracting for specialty jobs such as helicopter
logging, and occasional drilling and blasting of a technical
nature. He noted the company generally hires approximately 125
people including subcontractors, and normally operates eight to ten
months during the year. Many of the employees are second and third
generation.
Number 1049
MR. GILDERSLEEVE described the family-oriented lifestyle of the
camps, the quality and level of the education available, and the
social activities such as salmon derbies.
Number 1098
MR. GILDERSLEEVE continued that the company has used all the
technologies from A-frame logging to balloon logging and helicopter
logging. They have operated in approximately 24 different sites,
which now have extensive merchantable, second growth timber and the
salmon streams are among the most productive on Prince of Wales
Island. From a silvacultural point of view, Mr. Gildersleeve
believes these stands are superior to the original harvest.
Number 1149
MR. GILDERSLEEVE next commented on the Alaska Timber Insurance
Exchange, a spin-off of the Alaska Forest Association, which
provides workers' compensation for qualifying members. He said the
retirement, health benefit and insurance programs will all need to
be examined for long-term viability in light of the impending loss
of up to one-third of their beneficiary. The health insurance
program is anticipated to be the first program to experience
problems because of the implications of the COBRA Act.
Number 1279
CO-CHAIR HUDSON asked if the groups that were involved in crafting
the Forest Practices Act had recently gotten together.
MR. GILDERSLEEVE responded they have not formally met.
CO-CHAIR HUDSON thought it would be a good idea to bring the groups
together to ensure that everyone concerned understood what was
currently going on.
MR. GILDERSLEEVE said the Alaska Forest Association considers the
Forest Practices Act to be a good Act, and would welcome the
opportunity inasmuch as the facts, when viewed objectively, bear
scrutiny.
Number 1361
REPRESENTATIVE BILL WILLIAMS asked how much timber Mr.
Gildersleeve's company had been cutting prior to the closure of the
Sitka pulp mill and the Wrangell mill?
MR. GILDERSLEEVE responded the highest volumes were in the
neighborhood of 55 mmbf per year from either long-term sales or
from a variety of private landowners. He projects the company will
be logging about 25 - 30 mmbf this year.
Number 1480
REPRESENTATIVE JOE GREEN reflected that was almost a 50 percent
drop and questioned if all nine camps were still working or had
some of them been cut out.
MR. GILDERSLEEVE responded, "No, we will be working at that
percentage of our capacity." The number of people will be cut from
approximately 125 last year to about 85 this year.
Number 1517
REPRESENTATIVE BEVERLY MASEK asked if the company had to go through
a permit process each time a new area was opened up to logging, or
do the permits carry over for every site?
MR. GILDERSLEEVE responded that each place has site specific
permitting, but the floating camp has generic permits that go with
it. He noted the company has one full-time person that takes care
of permits and the landowners have staff that take care of the
required notifications for the logging operations.
REPRESENTATIVE MASEK asked what kind of problems were encountered
in the permit process?
MR. GILDERSLEEVE said the biggest problem was the timing. The full
coastal management review process can take up to one year. The
permits are very onerous and cumbersome.
Number 1618
REPRESENTATIVE MASEK asked if the permit process was fairly costly
and if a company was able to break even?
MR. GILDERSLEEVE responded, "That's a dead loss." He estimates
that it cost $100,000 per year to meet their permitting
requirements.
REPRESENTATIVE MASEK asked what area Mr. Gildersleeve thought the
state should look at in terms of easing the permit requirements.
MR. GILDERSLEEVE said that was a good question. He explained that
his company deals with tidelands, so the Army Corps of Engineers is
involved, mean low tide to mean high tide is under state
jurisdiction, in addition to the restrictions for private lands.
The coastal management review process basically "puts you through
the same hoops" with each agency. In his opinion, there could be
some streamlining in that area. He explained that remote sites
have permitting requirements with fuel transfers, spill prevention
measures, et cetera, which come under Coast Guard jurisdiction.
While recognizing there isn't a lot that can be done at the federal
level, he observed there were a number of things that could be done
at the state level to make the process more workable.
CO-CHAIR HUDSON noted there would be a hearing the following
Saturday on legislation that proposed to opt out of the Coastal
Zone Management Program altogether. He welcomed input from Mr.
Gildersleeve as to what the responsibility and requirements of
working through the process, and any recommendations he had. He
thanked Mr. Gildersleeve for his remarks and asked Mr. Champion to
come forward.
Number 1849
ERROL CHAMPION, General Manager, Aviation Division, Silver Bay
Logging, stated that he had been involved in the timber industry,
mining and other natural resource type industries most of his life.
He pointed out that last fall Governor Knowles appointed 16
Alaskans to the Alaska Timber Task Force and his comments would be
directed to the activities of that task force. The mission
statement of the task force was to look at restructuring the
industry for competitiveness in the twenty-first century. He said
the industry is changing; shortly after appointing the task force,
the announcement of Ketchikan Pulp Company's closure came and no
one could anticipate the significance of the forthcoming changes.
MR. CHAMPION said the second mission statement was to develop
solutions to the timber supply problem. He noted that throughout
his presentation his would be referring to the "empty wood basket."
In other words, there simply isn't a timber supply. One of the
real challenges is that up to 50 percent of the harvest in the
Tongass National Forest is pulp wood, or what is known as utility
grade sort, and with the closure of the mill there is no place to
go with that wood. The choices are to either to leave it in the
woods or stockpile it and hope for a future opportunity.
Number 1989
MR. CHAMPION continued that the third mission statement was to
stabilize the remaining players in the industry. Twenty years ago
when he moved into Southeast Alaska, there were 45 operating
logging camps; today there are 12 and that number will decline if
the proposals being discussed in Washington, D.C. come about.
Number 2011
MR. CHAMPION further stated the fourth mission statement was to
provide assistance to individuals and businesses in the Southeast
region. That's a very admirable mission and the task force is
trying to determine what type of assistance could happen. It still
boils down to needing a timber supply. Without a fiber supply, no
one is going to invest in Southeast.
Number 2026
MR. CHAMPION said the final mission statement was to provide
counsel to the Governor regarding wood products processing
proposals. Last year there was a lot of talk about value-added,
but the fiber supply has to be taken care of first before value-
added can be addressed. The Governor asked the task force to
prepare a business plan and submit it by mid-March.
MR. CHAMPION said the task force is comprised of seven mayors, six
industry members, and two from other interest groups. The first
two areas reviewed by the task force were the current status of
timber supply from the United States Forest Service (USFS) and the
timber inventory from three state agencies. The next meeting
consisted of receiving a report from the Alaska Forest Association
on the "four visions" of the new Tongass. He said the industry
reviewed what the Tongass would really look like with four harvest
levels; a harvest level of 300 mmbf, 420 mmbf, 100 mmbf, and 200
mmbf. A consensus was reached that if the harvest level fell below
300 million annual sales quantity, the Tongass, as it is now known
and the current infrastructure, won't survive. The infrastructure
would not be there. The Southeast Alaska Conservation Council's
(SEACC) views of the Tongass were 50 mmbf, 100 mmbf and 150 mmbf.
Number 2120
MR. CHAMPION pointed out the outcome was a resolution brought forth
by some of the mayors in December in support of the Tongass Land
Management Plan (TLMP) decision, which had been postponed and
continues to be postponed, "but the resolution was on record
saying that the Tongass and the members of the Governor's task
force are in support of the 300 million."
Number 2132
MR. CHAMPION commented that the last presentation was from the
Forest Product Science Group from Wisconsin. This group is
proposing to conduct five workshops in Southeastern communities
trying to derive ideas as to alternate uses and other suggestions
that community members may have for the low-end utility grade wood.
They are also proposing to take 2,000 pieces of wood back to their
laboratory to determine other uses for this wood no longer being
consumed through the pulp mill. That science lab work will take
some time and should not be considered to be a "fix all" for what's
going to be needed in the Tongass for 1997, or even 1998. The
business plan currently being written should be completed by the
end of March.
Number 2191
MR. CHAMPION referred to four handouts which reviewed the status of
timber resources. According to the Department of Natural Resources
(DNR), between the years 1996 and 2000, there will be a harvest of
34.6 mmbf out of the Haines State Forest, 8.2 mmbf out of the
Ketchikan area, and 17.3 mmbf out of the Juneau area, for a total
of 60 mmbf over the 5-year period. The next major landholder in
the state is the University of Alaska, who according to their
presentation before the task force are anticipating sales in
Southeast of 18.2 mmbf, 50 mmbf in the Gulf Coast (Yakataga), 4
mmbf off the Kenai Peninsula and 0 mmbf out of the Fairbanks/Delta,
for a total of 72.2 mmbf for that same 5-year period.
Number 2239
MR. CHAMPION remarked that the last major landholder in the state
with timber resources is the mental health lands, with
approximately 130,000 acres of commercial forest land. Based on
their presentation in December, they have no plans to go forward
with timber harvesting. He noted that with both university and
mental health lands, there is no requirement for in-state
manufacturing, so both these landholders simply advertise to the
highest bid. In fact, currently the university has a sale going on
in Cape Yakataga with an operator from the Lower Columbia River
area. Logs are leaving the state with little, if any, handling by
Alaskans. The last handout, the "U.S. Forest Service Independent
Timber Sales" is the U.S. Forest Service's independent sales
program which was presented to the task force. There are three
areas in which they will be selling: The Stikine area, where some
of the sales are held up in court, so 18.6 mmbf will be offered in
1997 instead of 55.6 mmbf; the Chatham area will have 21.4 mmbf
instead of 51.4 mmbf because of litigation; and in the Ketchikan
area, 56.3 mmbf will be offered. Instead of 163.3 mmbf being
offered, there will be 96.3 mmbf offered for the independent
program.
MR. CHAMPION concluded that the issue for the timber industry and
for all operators is the "wood basket is empty."
Number 2364
REPRESENTATIVE WILLIAMS asked if those numbers were for FY 97?
MR. CHAMPION responded affirmatively. He noted this is the fourth
consecutive year where the commitment in October was for a much
higher number and for a variety reasons, it is reduced and reduced.
He added that the federal administration's unfavorable attitude
toward logging is evidenced by the continual delays in the release
of the TLMP. He believes the recommendation of 297 mmbf will be
reduced to about 200 mmbf when it is released. The Tongass Land
Management Plan will not bode well for the timber industry in
Southeast.
REPRESENTATIVE GREEN said for the last few years there have been
comments about the declining fish prices, reductions in the chip
and round log markets, and until last year, declining oil prices.
He wondered if with all the bouncing around, there may become a
stigma attached to Alaska that could discourage individuals from
going into the logging industry. He inquired if the federal
government were to allow more harvesting at some time in the
future, would the work force be available and would prices
worldwide ever allow Alaska to get back into a competitive mode?
TAPE 97-14, SIDE B
Number 0001
MR. CHAMPION: .... "attitude and (indisc.) environment where the
investor community could come forward and you had this wood supply
where you weren't -- you could go forward -- that I think the
marketing would take of itself. We will have some up years and
some down years and we're prepared to deal with that issue. But
when you simply don't know whether you've got enough wood to
operate the balance of the season, so what is left is simply a
fractured, fragmented effort here that causes the infrastructure to
gradually erode away and that's what's happening. You give us a
wood supply and the infrastructure will take care of itself.
There's no doubt that the quality of the wood out of the Tongass
would make a viable product."
Number 0039
SENATOR LYDA GREEN asked Mr. Champion to translate million board
feet into numbers of trees or acres.
MR. CHAMPION responded that the average harvest is about 35,000
board feet per acre. However, there are areas where the harvest
and yield is much higher. He was hesitant to translate it into
trees, inasmuch as it depends on the size and grade of the tree.
SENATOR GREEN questioned if Mr. Champion had calculated the
available harvest on private and Native lands.
MR. CHAMPION said he did not have that data with him, but he
recalled that the harvest from private lands had been averaging in
the vicinity of 150 mmbf to 200 mmbf in the Gulf of Alaska Prince
William Sound, and throughout Southeast Alaska areas on private
lands.
Number 0129
REPRESENTATIVE WILLIAMS asked Mr. Champion to comment on the views
of the task force concerning the amount of pulp wood that will be
left in the woods with the closure of the pulp mill.
MR. CHAMPION said it is of significant concern because of the cost
of harvesting the wood and secondly, for every million board feet,
there's going to be about 350,000 board feet of utility grade,
utility sort that will need to be stacked or decked. The bottom
line is, it will lay in the woods or decked, and we'll hope that an
operation will come in that can comply with the federal laws and
get around the primary manufacturing requirement.
CO-CHAIR HUDSON thanked Mr. Champion for his comments and asked
John Sturgeon to come forward to present his statement.
Number 0263
JOHN STURGEON, President, Koncor Forest Products; Member, Board of
Forestry; and Member, Executive Committee of Resource Development
Council, stated that Koncor Forest Products is owned by four small
Native Corporations; one in Southeast Alaska, one in Prince William
Sound, and two in the Kodiak area. Koncor generates about $75
million per year in revenue and has about 2,000 shareholders. The
money generated by Koncor Forest Products over the last 20 years
has helped the economy of those villages. One is the major owner
of a new bank in Anchorage, two have built fish processing plants
in their villages, there's scholarship programs, senior programs,
et cetera. The timber industry, at least on private land, goes far
beyond just the impact of 500 - 600 people in their company - it
goes to the shareholders who use the money and it all stays in
Alaska.
Number 0331
MR. STURGEON said the Alaska Forest Practices Act originated in
1989, passed in 1990, and applies to private land, state land,
borough land, mental health lands, and university lands. It
doesn't affect state lands at all. As for private landowners, that
is the major law insofar as harvesting trees. The forest practices
committee, set up in 1989, consisted of fishermen,
environmentalists, loggers, saw millers, private landowners and
others. The group came up with the original Forest Practices Act
which was based on four main principles: 1) that it be fair to all
parties involved; 2) there be no big hit for any one entity i.e.,
the various resources would share the risk; 3) that it was
enforceable; and 4) it would have professional management. The
originators of this Act set up a Board of Forestry which was
supposed to be a continuation of the group. The Board of Forestry
works on a consensus in that it must be unanimous, minus one, in
order to approve anything. Any changes to the Forest Practices Act
must be brought before the Board of Forestry.
MR. STURGEON reminded committee members that the Forest Practices
Act was supposed to focus on three things: 1) to protect fish
habitat from any harm from timber harvesting; 2) to protect water
quality; and 3) to ensure reforestation.
Number 0487
MR. STURGEON said the question is, "How well is the Act working?"
To quote the Board of Forestry, "The Act is working generally very
well in protecting fish habitat and water quality." Most people
working with the Act would agree with that statement. He remarked
that the industry has done a good job of funding monitoring
programs. They have paid private scientists to set up studies that
monitor water quality and the effects on fish habitat which has
been done with the cooperation of the Departments of Natural
Resources and Environmental Conservation. He considers this to be
important because it is an indicator of whether the Forest
Practices Act is doing what it is supposed to do; i.e., protecting
water quality and fish habitat. After four years of study, they
have found no detectable impacts from timber harvesting. He
remarked the Alaska Department of Fish & Game has not participated
in the monitoring studies, as the board would like.
Number 0574
MR. STURGEON referenced a study completed by the National Oceanic
and Atmospheric Administration (NOAA) Coastal Ocean Program, which
looks at the various Forest Practices Acts in the western United
States. He believes that fish biologists, without question, agree
that one of the most important factors in protecting fish habitat
is the contribution of large, woody debris. In other words, they
want logs to go into the streams and stay there. Page 97 of the
study indicates that Alaska does very well in terms of large, woody
debris contributions. The study also speaks highly of Alaska's
Forest Practices Act.
Number 0664
MR. STURGEON concluded that from a private industry standpoint,
Alaska has a model Act. In terms of what the government and
legislature can do to help the timber industry, one thing would be
the assurance that enforcement or administration of the Forest
Practices Act remains consistent. Secondly, ensuring that current
statutes and regulations are consistently enforced is important, as
well as streamlining and encouraging agencies to work together.
Third, to ensure that all agencies, especially the Department of
Fish & Game, participate in monitoring studies and participate in
the effects of timber harvesting on resources in order to bring
credibility to the costly studies conducted by the timber industry.
He noted the Division of Forestry and the Department of
Environmental Conservation (DEC) have been very helpful in this
area. Lastly, to have some type of cost-benefit analysis for
regulations, statutes or policies made by government.
MR. STURGEON thanked committee members for their time and
attention. He reiterated the timber industry in Alaska is at a
very critical time and if things remain status quo, there will be
no industry.
Number 0855
CO-CHAIR SCOTT OGAN referred to previous testimony about having to
stockpile fiber because there's timber that is not saw grade timber
in the sales and asked how long logs will last when stockpiled and
would they last longer if they were chipped.
MR. STURGEON responded that logs can last up to three or four years
without getting too much sap rot. There are several problems with
chipping such as the high cost of getting equipment in, there is a
waste problem on private land, and transporting the chips to a ship
is very expensive. It has been his experience that it is better to
leave it in log form until the market improves.
Number 0959
CO-CHAIR OGAN asked if there was any way to determine if a log was
going to be pulp or saw grade in advance of cutting down a tree.
MR. STURGEON said that people who cruise timber can get within 10 -
15 percent. To leave it stand is, in many cases, not very
practical in Alaska because of the high lead systems used. He
noted they have not figured out a way to be able to leave those
trees standing and still operate.
CO-CHAIR HUDSON thanked Mr. Sturgeon for his presentation and asked
Terry Nininger to come forward.
Number 1024
TERRY NININGER, Vice President, Circle DE Pacific Corporation; and
Member, Board of Directors, Alaska Forest Association, said the
Circle DE Pacific, which started operations in 1992, is involved in
the harvest of beetle infested timber and beetle dead timber. That
product is manufactured primarily into wood chips for export to
Japan. Circle DE Pacific runs about 65 percent pulp and 35 percent
exportable logs; frequently 100 percent pulp. The company operates
on the Kenai Peninsula, harvesting on lands from Clam Gulch to
Homer. They built a chip storage and reload facility in Homer that
was funded by a $4 million loan from the Alaska Industrial
Development and Export Authority (AIDEA). The facility includes a
4-acre tract, a chip loading system with a 1700-foot conveyor
system and other modifications to the existing deep water dock in
Homer. This is a state-of-the-art facility with the ability to
load a full chip vessel - 14,000 to 15,000 bone dry units - in
about three and one-half days. The company employs approximately
65 full-time employees and another 65 employees employed by
subcontractors. Their product is harvested with feller-bunchers
and then skidded with rubber-tired skidders. The product is then
either chipped in the woods with the chips being hauled to the pad
in Homer or the logs are hauled to one of three concentration
yards, where the product is ultimately chipped or segregated out
for export.
Number 1148
MR. NININGER stated in 1996, the company produced about 135,000
bone dry units which translates into 325,000 tons of logs or about
11,500 log truckloads. He remarked that represents about 8,500
acres of logging and added their timber lands on the Kenai
Peninsula average between 5,000 and 7,000 feet per acre as opposed
to the 35,000 to 40,000 per acre in Southeast. Their timber
resources come primarily from regional and village corporations.
They have a contract with Cook Inlet Region, Incorporated for about
17,000 acres; with Ninilchik Native Association for about 10,000
acres; and a 50 million foot contract - about 10,000 acres - with
the Crescent River Timber Venture, which is a joint venture between
the Ninilchik and Seldovia Native Corporations. They have a number
of smaller, state sales which total about 7,000 acres, as well as
a substantial sale of about 2,800 acres with the University of
Alaska.
Number 1211
MR. NININGER said the company is actively involved in reforestation
on state and university lands; replanting about 480,000 seedlings
last year. Their product is used for both high-grade bond
letterhead and newsprint. It's very light in color, taking a
nominal amount of bleaching in the pulp process which makes it
environmentally friendly.
Number 1251
MR. NININGER commented the company is excited about their operation
on the Kenai Peninsula. They generate revenues to timberland
owners that have a product that's rapidly decreasing in value,
they've reduced the fire threat, created local jobs and generate
about $250,000 per year for the city of Homer for their deep water
dock.
Number 1274
MR. NININGER noted that Circle DE Pacific encourages the state to
continue its timber sale program on beetle infested and beetle dead
timber. There is a 5-year program in place for the Kenai Peninsula
and Circle DE Pacific would like to see some of that timber
consolidated into one single large sale of about 80 million feet or
16,000 acres. It is their contention that by consolidating into
one large sale what has already been laid out in the Forest
Practices Act sales, it would enable some of the larger players in
the Kenai area to develop a long-term market and possibly increase
their production. The facility at Homer does 135,000 to 140,000
bone dry units a year, but there's no reason that couldn't be
increased to 300,000 bone dry units. He explained that Circle DE
Pacific's plan would not interfere with the small timber owner sale
program.
Number 1347
MR. NININGER said the second issue he'd like to address is on
behalf of R-Key(ph) Resource Base, which is Cook Inlet Region, Inc.
and Ninilchik Native Corporations. The Native corporations are
having trouble continuing to provide timber because of the
requirements of the Forest Practices Act regeneration stipulations.
The issue will be addressed with the Board of Forestry, as well as
a number of resource people in the Administration and the
legislature. The problems are with the restocking requirements,
which are about 450 spruce seedlings per acre, and the 7-year
window allowed for the restocking requirements. Cook Inlet Region,
Inc. and Ninilchik are actively involved in coming up with a
program of land utilization that best suits the needs of their
shareholders. Specifically, they're looking at a combination of
regeneration with other land uses, they are escrowing funds for
regeneration, et cetera. However, at this time they are in a
difficult situation in terms of meeting the regeneration
requirements and still generate any kind of profit from their
timber holdings. He noted this ties in directly with Mr.
Sturgeon's previously remarks about the "no big hit" theory; this
is a big hit. If Cook Inlet Region, Inc. and Ninilchik decide not
to provide any more timber because of the statutes and mandates, it
will create a problem downstream for everyone in the timber
industry.
Number 1445
MR. NININGER, as a principal of Circle DE Pacific and a member of
the board of directors for the Alaska Forest Association, spoke in
support of the Forest Practices Act regulation enforcement
provisions. He echoed Mr. Sturgeon's remarks concerning the need
for field presence of the DEC, ADF&G, and AFA staff to see what's
going on, validate what the industry is doing, as well as ensure
that operators are operating within the regulations.
CO-CHAIR HUDSON thanked Mr. Nininger for his very informative
testimony.
Number 1545
RICHARD LEARY, Controller, Ketchikan Pulp Company, said "In brief
summary, Ketchikan Pulp Company sell our quality logs which
constitute about 55 percent of our forest down there -- spruce and
hemlock type -- are converted to either one of our two sawmills.
The large saw logs, 16 inches and up approximately, is converted to
our hemlock mill. The small saw logs which range down to 5 inches
up to 15 inches, are converted at our Ketchikan Sawmill located
adjacent to the Ketchikan Pulp Company." Mr. Leary gave a brief
history of the construction of the Ketchikan Sawmill facility which
began in 1988. The total cost of the mill was approximately $15
million and was constructed on 11.2 acres of land owned by
Ketchikan Pulp Company. With sufficient raw material, the mill can
operate on a two-shift basis year-round, employing 89 people at
direct sawmill jobs. He pointed out that does not include the
logging jobs, tow boat operators, the stevedores, or the
administrative or managerial staff. The Ketchikan Sawmill
processes small diameter saw logs and the plain, green lumber
products.
Number 1648
MR. LEARY stated the Annette Sawmill, which is owned by the
Metlakatla Indian community, was built in 1968 and has been leased
by the Ketchikan Pulp Company since 1971. With sufficient raw
material, this facility also can operate on a two-shift operation
year-round, employing approximately 100 people with the same
description of jobs. The mill is a cornerstone of the Metlakatla
economy.
Number 1686
DAN BENSON, Production Manager, Ketchikan Sawmill, directed
committee members' attention to a handout, and narrated a picture
tour of both sawmills. He explained that log rafts arrive in Ward
Cove and the Ketchikan Sawmill lifts the individual bundles of logs
to a breakdown deck. The bundles are broken apart and each log is
sent through the debarker. At this point, two things transpire.
First, the flow of material diverges as the bark is collected in
trucks and taken to the power boilers, with the log continuing down
the line for further processing. The bark reduces the need for
diesel and power generation. Second, from the point that the log
hits the debarker, every processing center in the complex becomes
computer assisted. Programmable logic controllers are used to
handle machine sequencing, timing, and conditions monitoring tasks,
which allows each employee to focus more on the subjective decision
making portion of the lumber production. The debarked logs are
trimmed according to the defect contents, such as knots and rot,
into primarily 10- and 13-foot segments. These are accumulated in
the yard for processing in the sawmills. He noted these lengths
work well for both the domestic and export markets. The log
merchandising line allows Ketchikan Sawmill to run a broad spectrum
of logs; from pulp utility logs to the high grade, while still
realizing the highest possible fiber recovery. When fed to the
sawmill, each segment is swung through a two-axis infrared scanning
system and is measured for length, shape and diameter. A real time
solution generator uses this data to position the segment for
maximum yield. A solution generator combines the product line with
machine capability and makes up the sawing pattern. The segment
passes through a high strained quad band saw, where the boards and
cants continue to one of two edgers. The three breakdown centers
utilize state-of-the-art technologies to produce the least possible
waste. They use linear positioning set works, which are accurate
to one-thousandths of an inch, thin curved saws and cobalt alloy
tipping on the saws to assure a product that is of consistently
high quality. He explained the edger saws actually float on a
bubble of air between the saw plate and guide surface to reduce
heat build up. Mill run lumber is stacked, after being sorted,
precision end trimmed, and packaged to be run in the planer
department. These packages are broken down and fed through a high-
speed planer that maintains product sized tolerances to within two-thousandths
to defect content, such as knots or decay, and then packaged,
tallied and stored for shipment.
Number 1898
MR. BENSON explained that a close relationship is maintained with
their customers. For example, as a result of the relationship with
one of their customers, a mini-packaged product was created that
allows the Japanese carpenter to take the product from the
distribution yard to the job site and go to work with it with a
minimum amount of handling. He explained further improvements that
are being explored at the Ketchikan Sawmill, such as variable-pitched band saw
MR. BENSON noted the product flow at the Annette Hemlock Sawmill
is similar; however, it processes the larger log from the forest.
Both of the mills aggressively seek improvements in the processes
to ensure the highest possible fiber recovery from each log.
Operations are continuously reviewed to add the highest value to
every log that is run. They have an international reputation of
quality as well as the people, technology and facilities, to thrive
in both the domestic and export markets. The question is, "Do we
have the resource supply necessary to continue our operations?"
Number 2075
MR. LEARY discussed the product lines of the company and further
commented that both sawmills target their primary production toward
the traditional housing market in Japan. Ketchikan Sawmill
delivers finished products that are used for structural components
in the housing market. HM products are remanufactured into
specialty doors and window frames. The high grade spruce is used
in precision musical instruments, the lower grade saw logs are
merchandised and the higher segments are turned into export quality
lumber. The lower grade cants and cut stock grade from each mill
enter the domestic market in the Pacific Northwest.
MR. LEARY discussed the options available for the future. The
infrastructure currently at the Ward Cove site can be used for many
further value-added production, as well as other industrial
opportunities. A real estate development expert has been hired to
assist in the area of conversion. He directed committee members'
attention to a handout which depicted their vision of how the
facilities will look after cleanup. With the impending closure of
the pulp mill, Ketchikan Pulp Company is entering a new phase with
many new challenges.
Number 2292
CO-CHAIR HUDSON thanked Mr. Leary and Mr. Benson for their
informative remarks. Based on the information presented, he
concluded that supply appears to be one of the major issues.
Number 2337
CO-CHAIR OGAN asked if finger joined materials were made at either
one of the sawmills.
MR. BENSON advised that the raw material was made at the facility,
but the finger joining was not done at either one of the locations.
Number 2383
REPRESENTATIVE WILLIAMS observed there were two shifts running at
the sawmill, but he questioned how much wood it could take for the
two shifts. Also, he wondered what would happen to the pulp when
the mill closed down.
MR. LEARY said it takes roughly 100 mbf for a single shift, which
translates into 400 mbf for two shifts at each mill. The company
would like to operate 50 weeks per year which provides continuous
employment and they can make and deliver a product that is wanted.
TAPE 97-15, SIDE A
Number 0001
MR. LEARY said the pulp would be a challenge. One of the
alternatives is to export the logs, if that's allowed. He noted
the facilities have the capability to chip it, with the nearest
users being in Canada and the Pacific Northwest. If enough volume
could be created, perhaps the export market in Japan would be an
option. It would, however, take more infrastructure for the large
ocean-going ships to come into port.
CO-CHAIR HUDSON asked about the possibility of cutting prefab, for
example, to Japanese specifications.
MR. LEARY said that could be done because of the flexibility in the
products they market.
Number 0130
CO-CHAIR OGAN asked if there were any reasons why the company
wouldn't consider getting into a more higher value-added market.
He commented that a few of the logs in the yard at the mill could
provide literally years of work for him by creating a more finished
product. He reflected that Alaska may be missing the boat
somewhere.
MR. LEARY noted that kind of finished process requires the kiln
drying. They do not have kiln drying at either one of their
operations because they have focused on recovering the maximum
amount of fiber from the resource. In order to look at kiln drying
or other value-added, they would need a resource to justify the
capital investment.
CO-CHAIR HUDSON thanked everyone for their participation and
informative presentations.
ADJOURNMENT
Number 0462
CO-CHAIR HUDSON adjourned the joint meeting of the House/Senate
Resources Committees at 3:46 p.m.
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