Legislature(1995 - 1996)

04/01/1996 01:30 PM Senate JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
                   SENATE JUDICIARY COMMITTEE                                  
                         April 1, 1996                                         
                           1:30 p.m.                                           
                                                                               
  MEMBERS PRESENT                                                              
                                                                               
 Senator Robin Taylor, Chairman                                                
 Senator Lyda Green, Vice-Chairman                                             
 Senator Mike Miller                                                           
 Senator Al Adams                                                              
 Senator Johnny Ellis                                                          
                                                                               
  MEMBERS ABSENT                                                               
                                                                               
 None                                                                          
                                                                               
  COMMITTEE CALENDAR                                                           
                                                                               
 SENATE JOINT RESOLUTION NO. 40                                                
 Relating to extension of the United States Forest Service timber              
 sale contract with the Ketchikan Pulp Company.                                
                                                                               
  PREVIOUS SENATE COMMITTEE ACTION                                             
                                                                               
 SJR 40 - No previous Senate committee action.                                 
                                                                               
  WITNESS REGISTER                                                             
                                                                               
 Ralph Lewis, President                                                        
 Ketchikan Pulp Company                                                        
 P.O. Box 6600                                                                 
 Ketchikan, AK  99901                                                          
  POSITION STATEMENT:  Supports SJR 40                                         
                                                                               
 Diane Mayer                                                                   
 Division of Governmental Coordination                                         
 Office of the Governor                                                        
 P.O. Box 110030                                                               
 Juneau, AK  99811-0030                                                        
  POSITION STATEMENT:                                                          
                                                                               
 John Sandor                                                                   
 3311 Foster Ave.                                                              
 Juneau, Alaska  99801                                                         
  POSITION STATEMENT:  Commented on SJR 40                                     
                                                                               
 Bill Moran, Jr.                                                               
 First National Bank                                                           
 646 W 4th Ave.                                                                
 Anchorage, AK                                                                 
  POSITION STATEMENT: Supports SJR 40                                          
                                                                               
 Jack Phelps                                                                   
 Alaska Forest Association                                                     
 111 Stedman, Suite 200                                                        
 Ketchikan, AK  99901                                                          
  POSITION STATEMENT: Supports SJR 40                                          
                                                                               
 Bill Brock                                                                    
 McDowell Group                                                                
 416 Harris St.                                                                
 Juneau, AK  99801                                                             
  POSITION STATEMENT: Discussed the results of a research study he             
   conducted on the forest products industry.                                  
                                                                               
 John Antonin                                                                  
 Southeast Regional Resource Center                                            
 210 Ferry Way, Suite 200                                                      
 Juneau, AK  99801                                                             
  POSITION STATEMENT:  Discussed the results of a survey of timber             
   impacted schools and communities in Southeast Alaska.                       
                                                                               
 Mayor Doug Roberts                                                            
 City of Wrangell                                                              
 205 Brueger St.                                                               
 Wrangell, Alaska                                                              
  POSITION STATEMENT:  Supports SJR 40                                         
                                                                               
 Sol Atkinson                                                                  
 Metlakatla Indian Community                                                   
 Metlakatla, AK                                                                
  POSITION STATEMENT:  Supports SJR 40                                         
                                                                               
 Mayor Carlton                                                                 
 Ketchikan Gateway Borough                                                     
 344 Front Street                                                              
 Ketchikan, Alaska  99901                                                      
  POSITION STATEMENT: Supports SJR 40                                          
                                                                               
 Wayne Weihing, President                                                      
 Tongass Conservation Society                                                  
 P.O. Box 3377                                                                 
 Ketchikan, AK  99901                                                          
  POSITION STATEMENT:  Opposed to SJR 40                                       
                                                                               
 Steve Kallick                                                                 
 Alaska Rainforest Campaign                                                    
 1016 W. 6th Ave., Suite 200                                                   
 Anchorage, AK  99501                                                          
  POSITION STATEMENT:  Opposed to SJR 40                                       
                                                                               
 John Sisk                                                                     
 Alaska Environmental Lobby                                                    
 419 6th Street                                                                
 Juneau, Alaska  99801                                                         
  POSITION STATEMENT: Opposed to SJR 40                                        
                                                                               
 Tina Lindgren                                                                 
 Alaska Visitors Association                                                   
 3201 C Street, #403                                                           
 Anchorage, AK  99501                                                          
  POSITION STATEMENT:  No position taken on SJR 40                             
                                                                               
 Kate Tesar for Mayor Stanton                                                  
 Alaska Services Group                                                         
 P.O. Bx 22754                                                                 
 Juneau, Alaska  99802                                                         
  POSITION STATEMENT: Supports SJR 40                                          
                                                                               
  ACTION NARRATIVE                                                             
                                                                               
 TAPE 96-31, SIDE A                                                            
 Number 001                                                                    
                                                                               
  CHAIRMAN ROBIN TAYLOR  called the Judiciary Committee meeting to             
 order at 1:32 p.m.  Also present were Senators Adams, Green, and              
 Miller.  The matter before the committee was SJR 40.                          
        SJR 40 EXTENSION OF KETCHIKAN PULP CO. CONTRACT                       
                                                                              
 RALPH LEWIS, President of the Ketchikan Pulp Company (KPC),                   
 introduced Ernesta Ballard, former EPA Region X Administrator and             
 current consultant to KPC, and Kent Nicholson, timber specialist              
 for KPC.                                                                      
                                                                               
 MR. LEWIS discussed his 30 year background with KPC and KPC's                 
 history.  KPC has been in operation for 41 years, and began with              
 the 1946 Tongass legislation that enabled the U.S. Forest Service             
 to provide 50 year timber sales.  In 1948, Puget Sound Pulp and               
 Paper bid on the timber contract, which was accepted, formed a                
 partnership with American Viscose, and built KPC.  The first pulp             
 was produced in 1954.  KPC was then purchased by Georgia Pacific,             
 and is now owned by Louisiana Pacific.  When the contract volume              
 has been met, up to 1,000 people have been employed and up to 1,500           
 people had direct contact with the timber.  The people of Ketchikan           
 have supported, and still support, KPC since its inception.  KPC              
 leases the land that houses the Annette sawmill.  That lease                  
 expires in 1999 but contains three 15 year extension options.  KPC            
 provides the only year-round employment in Metlakatla.  The                   
 Ketchikan sawmill shut down in 1983 but because the harvested logs            
 were smaller, a new sawmill was constructed as the smaller logs               
 were more valuable as sawed logs than pulp.  Approximately 15                 
 percent of those logs are exported to Japan, the rest are used for            
 domestic products, primarily as building materials.  Rapid                    
 fluctuations in the domestic market and a six-week delivery                   
 schedule to the lower 48 make that market less attractive than the            
 export market which is better able to absorb their own market                 
 fluctuations.  The capacity of the pulp mill is 540 tons: KPC                 
 averages 500 tons.  The product is exported to approximately 20               
 countries each year and is used to manufacture up to 50 different             
 products.  KPC sells to a lot of small rayon mills worldwide.  In             
 41 years of operation, KPC has only experienced a total of six                
 months of market downtime.  The mill is in operation seven days per           
 week, 24 hours per day.                                                       
                                                                               
 Number 179                                                                    
                                                                               
 CHAIRMAN TAYLOR asked what percentage of the harvested forest is              
 only fit for pulp production.  MR. LEWIS replied it depends on the            
 amount of cedar, but estimated the amount to be between 33 and 50             
 percent.                                                                      
                                                                               
 CHAIRMAN TAYLOR questioned whether there is any higher value that             
 can be added to the low-grade timber.  MR. LEWIS stated KPC                   
 handles, including chips and the rest of the byproduct, the                   
 equivalent of 150 million board feet (MBF), which would otherwise             
 go to waste.  It could be exported as chips, or MDF, but MDF would            
 only employ about one-third of the 600 workers who work with the              
 byproduct.                                                                    
                                                                               
 CHAIRMAN TAYLOR asked Mr. Lewis why KPC needs the extension that is           
 the subject of SJR 40.  MR. LEWIS replied there are eight years               
 left under the existing contract, and the inclination of the Forest           
 Service and some in Washington, D.C. is to cancel the contract; in            
 1988 the U.S. House actually passed a bill to cancel the contract.            
 KPC needs the assurance that the federal government wants the                 
 industry to continue past the year 2004.  KPC needs that assurance            
 to make required investments.                                                 
                                                                               
 CHAIRMAN TAYLOR questioned what types of investments KPC is                   
 required to make over the next few years.  MR. LEWIS answered KPC             
 signed a consent decree that requires up to about $20 million in              
 expenditures of which approximately $10 million has already been              
 spent.  That amount does not include going to ECF, or its final               
 goal of TCF.  TCF has nothing to do with the consent decree and               
 includes the outfall, secondary treatment plant, and other things.            
 All of the environmental expenditures are not required as part of             
 the consent decree.                                                           
                                                                               
 CHAIRMAN TAYLOR asked what ECF is.  MR. LEWIS responded it stands             
 for Elementary Chlorine Free.  KPC is currently working with an               
 Austrian outfit named Lensing.  Lensing is producing dissolving               
 pulp in its own rayon mill in a much smaller quantity.  At present,           
 Lensing is been unable to get a steady quality.  In between going             
 to TCF, KPC is going to ECF, or oxygen reliquification, which will            
 remove about 80 percent of the chlorine from the process.                     
                                                                               
 CHAIRMAN TAYLOR asked what other expenditures KPC expects to make             
 in the next few years.   MR. LEWIS estimated KPC needs to spend a             
 total of $150 to $200 million in the next three to 7 years because            
 the mill is 41 years old and the powerhouse needs to be upgraded to           
 be able to burn different fuels.  The powerhouse upgrade will cost            
 between $40 and $50 million.                                                  
                                                                               
 CHAIRMAN TAYLOR questioned how KPC will amortize those investments            
 if the contract is not extended.  MR. LEWIS responded KPC could not           
 amortize, and would have to cut back on expenditures and do only              
 those repairs and improvements required by law.  KPC could not be             
 a leader in the industry.  Investors will not be willing to invest            
 in KPC.                                                                       
                                                                               
 In summary, MR. LEWIS said he does not want to be a part of                   
 watching something die, which is what will happen if KPC does not             
 get an extended contract.  In 1990, when the Tongass Timber Reform            
 Act (TTRA) was enacted, the industry pleaded with the government to           
 provide a long term contract.  Without such a contract, it is                 
 likely KPC would not be operating today, because it is not likely             
 it would have provided enough timber for KPC, or any other pulp               
 mill, to operate.  The Forest Service is required to meet the                 
 current contract, and although it is only meeting about two-thirds            
 to three-quarters of the requirement, it is trying.  KPC was down             
 90 days in 1993, and when APC shut down, KPC bought its wood.  If             
 APC hadn't sold its wood or would have operated another three to              
 four months, KPC would have been down 130 days.  The federal                  
 government needs to make a recommitment to the industry which will            
 allow KPC to finish its ECF project and be a leader in the                    
 industry.  The ECF project is not part of the consent decree, KPC             
 has taken it on voluntarily.  That project will cost KPC $35                  
 million, and is expected to be completed by next fall.                        
                                                                               
 CHAIRMAN TAYLOR asked why KPC cannot receive adequate timber by               
 purchasing from independent sales.  MR. LEWIS responded there is              
 not enough volume.  At present, the independent sales program is              
 broke.  MR. NICHOLSON added the independent sales for this year               
 will total 97 mbf.  The Forest Service has projected independent              
 sales of 200 mbf in 2002, 172 million in 2003, and 207 million in             
 2004.  That volume will not sustain the industry.  The Forest                 
 Service has no long term sale scheduled for the year 2002.                    
                                                                               
 MR. LEWIS explained right now, if KPC could get 192 mbf, it would             
 still need to purchase 40 to 50 mbf.  Those logs can be purchased             
 from independents or from Native Corporations.  Private land                  
 contractors can export logs.  Alaska is in a unique position                  
 because primary manufacturing must occur in Alaska.  Wood from                
 federal lands in Oregon can go to Idaho or anywhere else in the               
 United States.  The reason that primary manufacturing was required            
 in Alaska was to help create an infrastructure in the state.  Six             
 mills existed in this area at one time.                                       
                                                                               
 Number 348                                                                    
 SENATOR ELLIS referred to line 22, page 2, of SJR 40 which states             
 the KPC extension is critical to the environmental well being of              
 the Tongass National Forest timber workers.  He asked for an                  
 explanation of that statement, and to explain KPC's felony                    
 conviction for Ward Cove and its EPA ranking among other polluters.           
                                                                               
 MR. LEWIS clarified that statement means in harvesting the Tongass,           
 all fiber, including the lower quality material, will be processed.           
 If that material was used for a chipping operation, that type of              
 operation could be shut down temporarily whenever the market is               
 down.  That type of operation does not provide stable employment.             
                                                                               
 Number 373                                                                    
                                                                               
 SENATOR ELLIS noted KPC has a documented track record of                      
 environmental violation.  He asked if KPC was promising to                    
 dramatically improve its track record on environmental issues if it           
 gets a contract extension and to stop commiting violations.                   
                                                                               
 MR. LEWIS replied KPC has no excuse for those violations.  KPC did            
 not purposely set out to do anything wrong, but it got caught.                
 During the 1980s the amount of capital slowed down, the possibility           
 of employee ownership was being discussed, and other things were              
 going on.  Representative Miller from California had a bill that              
 passed the House to cancel the contract and shut KPC down.  Living            
 under that kind of terrorism was difficult.  KPC kept up with                 
 changes in the laws in the 1970s, but the changes moved faster in             
 the 1980s.  New laws were passed rapidly, therefore most companies            
 waited until regulations were set in stone, then sat down with EPA            
 to establish a consent decree to determine what environmental                 
 requirements needed to be met.  KPC is now trying to be a leader,             
 and is not waiting for a consent decree.                                      
                                                                               
 MR. LEWIS discussed the felony conviction.  Ward Cove is stressed,            
 but to what degree no on knows.  The sea life has not been                    
 affected.  In the first 20 years of operation, most of the material           
 went directly into Ward Cove.  In the last 20 years, most of that             
 material goes through secondary treatment and has very little                 
 impact on Ward Cove.  When the secondary treatment plant has to be            
 drained and cleaned, the effluent is put back through the system to           
 try to recover as much of the solid material as possible.  The                
 remainder is sent out through the outfall and is tested and                   
 measured.  According to the permit the effluent was considered a              
 collected solid, and once something is termed as "collected" it               
 cannot be discharged to the bay.  KPC misinterpreted the permit,              
 which provides no excuse.  The misdemeanor offenses pertained to an           
 upset in the mixing chamber, which was affected by high tides, and            
 overflowed.                                                                   
                                                                               
 CHAIRMAN TAYLOR asked Mr. Lewis to explain an upset.   MR. LEWIS              
 clarified a process upset can occur when there is a mechanical                
 failure during manufacturing and cannot be corrected until the                
 machinery can be turned off.  During the process upset at KPC, the            
 quantity that was discharged was not enough to do damage, but any             
 discharge is illegal.  KPC viewed the situation as non-damaging so            
 took no action.  KPC no longer addresses such situations that way,            
 because common sense doesn't rule, laws and regulations do.                   
                                                                               
 Number 445                                                                    
                                                                               
 SENATOR ELLIS inquired whether Mr. Lewis meant to imply that an               
 industry would not exist at all if the long term contract is not              
 approved.  MR. LEWIS replied any pulp mill that has a high capital            
 investment has a wood supply.  On the East Coast, many of the wood            
 supply companies have tree farms on private lands but in the West,            
 the amount of land in private hands is not enough to sustain the              
 industry.  If the Forest Service is not required to meet a certain            
 volume, it is not likely to do so.  It does not make for an                   
 attractive proposal for investors and makes competition difficult.            
                                                                               
 CHAIRMAN TAYLOR questioned why, if the free market system works so            
 well, other businesses have not sprung up when the APC contract in            
 Sitka ended three years ago.                                                  
                                                                               
 Number 479                                                                    
                                                                               
 DIANE MAYER, Director of the Division of Governmental Coordination            
 in the Office of the Governor, testified.  She read the following             
 letter stating the Administration's position on SJR 40.                       
                                                                               
 The Knowles Administration recognizes the important role the                 
 Ketchikan Pulp Company plays in the timber industry, including                
 employment in Ketchikan and Southeast Alaska.  The                            
 responsibility and statutory authority to extend the KPC                      
 contract lies with the U.S. Department of Agriculture and                     
 Congress.  Our Administration is promoting sustainable,                       
 responsible economic development of Alaska's natural resources                
 in Alaska.  We can do it right.  As KPC develops its business                 
 plan to present to the U.S. Department of Agriculture for a                   
 contract extension, Alaskans will be interested in KPC's                      
 commitment to fully address the following: long term jobs for                 
 Alaskans; the use of Alaska businesses, both in harvesting and                
 value added processing; provision of a solid tax base for                     
 Ketchikan and other Southeast communities; responsible                        
 environmental management; participation in and support of the                 
 Tongass Land Management planning process that assures                         
 sustainable uses of our forest; and consideration of other                    
 forest users, including those dependent on timber production,                 
 tourism, commercial and sport fishing, seafood processing,                    
 mining, subsistence, and personal use.  We hope the                           
 legislature will address these important matters in its                       
 deliberations.  We look forward to the Department of                          
 Agriculture providing Alaskans the opportunity to review                      
 proposals regarding the contract extension.  We stand ready to                
 work with Alaskans and KPC to achieve these goals.                            
                                                                               
 Number 479                                                                    
                                                                               
 CHAIRMAN TAYLOR asked Ms. Mayer if she supports SJR 40.  MS. MAYER            
 responded the position clearly lays out the terms for deliberation            
 that the Administration is looking for consideration of.                      
                                                                               
 SENATOR GREEN asked for clarification.  MS. MAYER noted the state             
 position lays out terms for consideration by the legislature in               
 developing and passing SJR 40.  The Administration looks forward to           
 those types of discussions to bring closure to this important                 
 question of contract extension.                                               
                                                                               
 Number 515                                                                    
                                                                               
 CHAIRMAN TAYLOR questioned whether the Governor's Office will                 
 support the resolution contingent upon the six conditions being               
 met.  MS. MAYER answered when dialogue occurs to satisfy the terms            
 addressed in the letter, and to consider the other forest users,              
 responsible environmental management, and support of the TLMP in              
 the process, the result could be support of SJR 40.                           
                                                                               
 CHAIRMAN TAYLOR stated Congress will be looking both to the                   
 Legislature and the Governor as representatives of the people of              
 the state on the very simple question of whether the state supports           
 the extension of the contract and believed an appropriate reply to            
 be yes or no.                                                                 
                                                                               
 MS. MAYER believed the distinguishing factor to be the simplicity             
 of the question versus the complexity of the question.  The                   
 conditions touch upon the complexity of the question.                         
                                                                               
 Number 530                                                                    
                                                                               
 JOHN SANDOR, former regional forester, discussed his background as            
 a Forest Service employee and Department of Environmental                     
 Conservation Commissioner.  He gave the following testimony on his            
 own behalf.  SJR 40 does more than extend KPC's contract: it                  
 focusses on the need for community stability in Southeast Alaska.             
 There are serious unemployment and dislocation problems throughout            
 Southeast Alaska.  SJR 40 requires an investment of $155 million in           
 capital to meet changing environmental quality standards and other            
 associated operating needs.  It is reasonable to extend the KPC               
 contract termination date to the extent necessary to amortize this            
 investment. He addressed the conditions that have changed since the           
 long term contracts were awarded in the 1950s.  World markets for             
 the dissolving pulp produced by the two pulp mills have                       
 dramatically changed.  Cellophane and nylon replaced rayon in many            
 manufactured products.  Environmental controls have changed to meet           
 higher water and air quality standards.  It has long been                     
 recognized that it may be desirable to modify or replace one or               
 both long term manufacturing products to produce a more competitive           
 product that could better meet higher environmental quality                   
 standards.  The possibility of developing some type of fiber                  
 product at the Sitka Pulp Mill seemed promising when that mill was            
 facing closure.  He was disappointed that opportunity was not more            
 fully explored and open for public discussion.  The pulp mills,               
 although antiquated, did achieve the objectives of their time by              
 strengthening the economies of many Southeast communities.  They              
 allowed the development of a highway infrastructure on Prince of              
 Wales Island and benefitted the hunting and fishing opportunities.            
                                                                               
 MR. SANDOR made the following recommendations to assure community             
 stability in Southeast Alaska.  It is essential that the                      
 Legislature, Administration, and communities themselves be partners           
 with the Forest Service in all decision making processes.                     
 Community based industries must be sustained by the national                  
 forest; its original purpose.  Forest planning and project planning           
 must be better coordinated to reduce appeals and lawsuits and the             
 need for perpetual planning.  The Department of Agriculture's plan            
 to centralize accountability and decision making in Washington,               
 D.C., must be watched to ensure decision making by the Forest                 
 Service is done at the field level.  The Forest Service should                
 jointly work with Alaskan communities to meet specific needs of               
 fish and wildlife, and the Forest Service must recognize that the             
 Alaska Department of Fish and Game has that authority.  The small             
 business timber sector must have a sustainable level: 100 mbf is              
 reasonable.  Incentives should be developed to encourage secondary            
 and value added manufacturing of forest products in Southeast.                
 Congress should consider establishing a task force that would                 
 develop recommendations to sustain communities in Southeast Alaska.           
                                                                               
                                                                               
 TAPE 96-31, SIDE B                                                            
 Number 050                                                                    
                                                                               
 MR. SANDOR stated in summary, the proposed extension to amortize              
 the investments is reasonable, but it is absolutely essential that            
 other steps be taken to ensure that all Southeast communities                 
 benefit from the Tongass National Forest.                                     
                                                                               
 BILL MORAN JR., First National Bank, testified from Ketchikan.                
 First National Bank is the only commercial bank headquartered in              
 Southeast Alaska, and only operates in Southeast Alaska.  It has              
 about $85 million worth of direct loans in its loan portfolio and             
 services an additional $85 million in real estate loans for                   
 secondary markets;  Alaska Housing Finance being one.  First                  
 National has been rated as one of the two top banks in the state              
 for small business lending and received an outstanding rating from            
 the FDIC.  He provided that information to demonstrate the bank's             
 knowledge of the Southeast Alaska market, and its responsible                 
 corporate citizenship.  The bank was incorporated in 1924, and is             
 knowledgeable about the impacts of closing mills in Southeast                 
 Alaska.                                                                       
                                                                               
 Number 526                                                                    
                                                                               
 CHAIRMAN TAYLOR asked if bankers find it prudent to make loans to             
 KPC if it must rely on the Forest Service's independent timber sale           
 program to supply its timber needs.  MR. MORAN responded not only             
 would banks be reluctant to lend in that situation, but businesses            
 would be reluctant to borrow if they cannot plan an investment. He            
 likened the depressing effect it has on the economy to Juneau's               
 experience with the uncertainty of the capitol move.  Private                 
 residential construction virtually stops, and a good portion of the           
 commercial activity hibernates, waiting to see what will happen.              
 If it was certain that the mill was going to close after the                  
 contract ended in 2004, the economy would be even more seriously              
 depressed.                                                                    
                                                                               
 CHAIRMAN TAYLOR referred to the closure of the Wrangell mill two              
 years ago, and questioned whether many loan requests have been made           
 to start up small operations, such as saw mills.  MR. MORAN replied           
 the bank has not had many requests, and consequently has taken a              
 pro-active step by sponsoring a variety of programs in an attempt             
 to get independent development going, but has not been successful.            
 Wrangell needs a primary employer with access to outside capital              
 and development.                                                              
                                                                               
 CHAIRMAN TAYLOR asked Mr. Moran if he supports the contract                   
 extension for KPC.  MR. MORAN said he did.  He added he believes,             
 in his personal and professional experience, that KPC has been a              
 responsible environmental citizen.                                            
                                                                               
 Number 491                                                                    
                                                                               
 JACK PHELPS, Alaska Forest Association, introduced Brian Brown,               
 Chief Logging Engineer for Silver Bay Logging, a member company,              
 and gave the following testimony.  SJR 40 deals with the type of              
 issue the Alaska Forest Association would not normally take a                 
 position on, because it does not get involved in the contract                 
 matters of member companies.  He directed his testimony to the                
 economic and technical issues as to why it is important for KPC to            
 remain a viable forest products company.  This industry, due to               
 government policies and environmental extremism, has lost 42                  
 percent of its workforce since 1990.  Two years ago Alaska had two            
 pulp mills to process the huge volume of utility logs available in            
 the Tongass National Forest; today there is only one such mill.               
 The importance of KPC to Southeast Alaska's economy, and to the               
 forest industry in this state, cannot be overemphasized.  The need            
 for a stable, year-round employment base in Southeast Alaska was              
 recognized after WWII and lead to the establishment of the long               
 term contracts in the 1950s.  KPC is Southeast Alaska's largest               
 industrial employer.  KPC's presence in the market helps support              
 the smaller mills in the region by building and maintaining                   
 infrastructure, by purchasing power and other utilities, and by               
 creating downstream employment in the wood products industry and              
 service industry.  The pulp mill provides local, value added                  
 employment, based on the use of a local, renewable, natural                   
 resource.  KPC provides 1,000 jobs which are not only important for           
 the families that depend upon them, but for the entire economy of             
 the region.  In sustaining a forest industry in any forest, it is             
 always easy to sell the high end logs: finding a market for the low           
 end timber and byproducts is another matter.  The pulp mill                   
 provides the opportunity to utilize those products here.  In                  
 summary, the Tongass National Forest is more than capable of                  
 sustaining the last remaining pulp mill in Alaska.  Furthermore,              
 the forest industry, as a whole, needs that mill to operate at                
 capacity.  In a healthy forest industry, two or more mills could be           
 sustained.                                                                    
                                                                               
 Number 441                                                                    
                                                                               
 CHAIRMAN TAYLOR asked if he and Mr. Brown supported SJR 40.  They             
 replied affirmatively.                                                        
                                                                               
 BILL BROCK, analyst for the McDowell Group, discussed the results             
 of a research study he conducted on the forest products industry              
 over the past 18 months.  The following information indicates what            
 has happened in Southeast Alaska due to declines in timber                    
 harvesting.  Between 1990 and 1994 the U.S. Forest Service data               
 indicates a 40 percent decrease in Tongass timber industry                    
 employment which equates to 1700 jobs.  To determine the impact of            
 that decrease, Southeast was divided into three separate economies:           
 Juneau; other urban, which includes Sitka, Wrangell, Ketchikan,               
 Petersburg, and Haines; and the rural economies.  Juneau's economy            
 has experienced a seven percent annual increase between 1990 and              
 1994 and has gained over 1,000 jobs over the last four years in               
 primarily the retail and service sectors.  Southeast Alaska's other           
 urban economy has experienced a four percent decline in employment            
 since 1990 for a net loss of 640 jobs.  Collectively they have                
 experienced a 10 percent decline in real payroll since 1990 which             
 equates to $40 million.  The mill's closure in Sitka cost 400 jobs            
 and $19 million in payroll.  In Sitka in 1994, employment averaged            
 about 3,875 jobs, an approximate 10 percent decline from 1993.                
 Income in the community between 1993 and 1994 fell from $115                  
 million to $100 million.  Wrangell has also been hit hard by the              
 Tongass timber harvest decline.  The closure of APC's mills cost              
 the community 225 jobs which equated to 20 percent of the entire              
 Wrangell work force.  The saw mill was the community's largest                
 employer and largest contributor to property tax revenue.                     
 Approximately 20 percent of city revenues came from the mill.                 
 Rural Southeast Alaska has possibly been the hardest hit.  There              
 has been a four percent decline in employment since 1990.  Real               
 payroll has declined by 15 percent, almost $20 million.  Personal             
 income has declined by four percent, and transfer payments have               
 increased by 16 percent between 1990 and 1993.                                
 MR. BROCK described what is at stake if Tongass timber harvesting             
 decline continues.  If timber declines were to force the closure of           
 KPC, it would cost the community of Ketchikan 700 jobs and $45                
 million in annual payroll, one-fifth of Ketchikan's economic base.            
 A total of 1,000 jobs throughout the region, including 700 in                 
 Sitka, and 700 indirect jobs, could be lost if the mill was closed.           
 Other sawmills in Klawock, Metlakatla and Ketchikan would likely be           
 adversely impacted, as well as logging companies.  In addition,               
 other long term economic impacts would occur.  Fishing and tourism            
 would become the region's primary employer: both industries are               
 seasonal.  While there has been some overall job growth in the                
 region, most are part-time and lower paying jobs in the service               
 sector industries.  Continued declines in the timber harvest will             
 likely continue the economic fallout that the region has been                 
 experiencing since 1990.                                                      
                                                                               
 JOHN ANTONIN, Executive Director of the Southeast Regional Resource           
 Center, discussed a survey conducted by SERRC of timber impacted              
 schools and communities in Southeast Alaska.  The survey was                  
 completed at the request of a number of Southeast school districts            
 and had two purposes: to determine the impact of the reduced timber           
 harvest and mill closures on children and families in Southeast               
 Alaska; and to recommend educational programs and services                    
 necessary to remediate the impacts.  The recommendations were taken           
 to Alaska's congressional delegation, but have not been acted upon            
 to date.  The Southeast REAA completely removed facilities when               
 logging camps moved out which was a direct cost to the school                 
 district.  The reduction in jobs in Wrangell and Prince of Wales              
 has had a direct effect on the number of children on the subsidized           
 lunch program, receiving Aid to Dependent Children funds, and other           
 social conditions.  When a community loses an economic base,                  
 children, communities, and schools suffer.  As the state reduces              
 school funding, school districts will have to look to local                   
 communities to pick up the costs.  Those communities need a strong            
 industry.                                                                     
                                                                               
 CHAIRMAN TAYLOR asked Mr. Antonin to give Ms. Mayer a copy of the             
 report to be delivered to the Governor, because families, children,           
 and schools were omitted from the six conditions.                             
                                                                               
 Number 320                                                                    
                                                                               
 DOUG ROBERTS, Mayor of Wrangell, testified that Wrangell's                    
 unemployment rate is about 30 percent.  Wrangell was proud to be a            
 city that manufactured goods: timber and fish products.  It no                
 longer manufactures very much timber.  He supports KPC and small              
 businesses that will provide jobs.  He could not speak to the                 
 contract extension, but stated his support of the industry.                   
 Wrangell has changed from a fishing town to a timber town to a                
 government town.  The most dramatic change is in the manufacturing            
 and government sectors of the economic base.  In 1994 manufacturing           
 jobs comprised 29 percent of the available jobs, today that number            
 is 11.4 percent.  Likewise, government jobs comprise 47.4 of the              
 economic base compared to 32 percent two years ago.  Wrangell was             
 proud to be the timber capital of Alaska; now it cannot provide               
 25,000 board feet to operate.  The state was aware Wrangell needed            
 that much timber last year.  The timber is out there, however                 
 Wrangell does not seem to get any of it and sawmills are closing.             
 Former specialized mill workers are being retrained to be computer            
 technicians, barbers, etc.   Southeast Alaska needs mining, timber,           
 and fisheries.  Wrangell has tried to attract small businesses but            
 is isolated so has been unsuccessful.                                         
                                                                               
                                                                               
 CHAIRMAN TAYLOR asked what happened to the 19 jobs at the downtown            
 restaurant in Wrangell.  MAYOR ROBERTS answered the restaurant                
 closed yesterday and 20 jobs were lost.  Those 20 restaurant                  
 workers will have to be retrained and leave Wrangell.  Many need              
 GEDs.                                                                         
                                                                               
 Number 221                                                                    
                                                                               
 SOL ATKINSON testified on behalf of the Metlakatla Indian Community           
 in support of SJR 40 as follows.  It is time the Legislature and              
 Governor's Office recognized that something must be done for the              
 timber dependent communities in Southeast Alaska that are being               
 ignored in the rush to save the environment.  Metlakatla supports             
 sound environmental policy but also supports jobs, people, and                
 families, and applauds this effort to move Congress to do something           
 to bring some stability to the economy.  Metlakatla is a federally            
 recognized Indian tribe with a population of about 2,000 people.              
 It is a timber dependent community with an unemployment rate of               
 over 50 percent.  A stable timber supply is essential to its                  
 welfare.  In the last few years, in an effort to improve its                  
 economic situation, Metlakatla successfully established a Small               
 Business Administration timber sale purchase program and started a            
 small sawmill to provide jobs and revenues.  The mill has operated            
 profitably for about three years and provides between 20 to 40                
 jobs.  Metlakatla also depends on the lease of its big mill to KPC,           
 for 100 jobs plus the lease revenues.  Metlakatla has become a                
 timber dependent community; its new economic program is now                   
 threatened by lack of timber, which is why it supports SJR 40.                
 Under ordinary circumstances, Metlakatla would not support a system           
 that singles out one business for the benefit of the public's                 
 forest.  It would rather encourage the free market system so that             
 all timber-related businesses could compete for timber and seek the           
 markets for logs and timber products that would be most                       
 economically beneficial.  It does not see any alternative but to              
 encourage the extension of the long term contract for KPC.  It has            
 made the capital investments that justify an assurance that it will           
 have a timber supply.  It provides jobs and other timber operators            
 with markets for logs.  In a perfect world, all timber operators              
 would compete for a steady and reasonable supply of timber from the           
 vast resources of the Tongass National Forest.  Natural market                
 forces would separate the good operators from the bad, and a                  
 stable, reliable, timber dependent economy would evolve.  Operators           
 could plan for appropriate capital investments or planned                     
 improvements and marketing expenses.  Reasonable environmental                
 protections would be a cost of doing business.  Under the present             
 conditions however, with environmental preservationists protesting            
 the harvest of every tree and with a Forest Service unwilling or              
 unable to overcome legal bureaucratic inertia, few alternatives are           
 left.                                                                         
                                                                               
 MR. ATKINSON continued.  A few weeks ago, the head of the Forest              
 Service said a stable timber supply from the forests of Southeast             
 Alaska is impossible.  One thing is certain, small independent                
 operators cannot count on any supply and without that fundamental             
 variable in the marketing equation, they must support extraordinary           
 measures that are essential to their survival.  The extension of              
 the long term contract for KPC is one of those measures.  The rest            
 of us who would like to be able to compete for timber, if it were             
 available, simply cannot risk losing the last strong economic force           
 in our industry.  If the long term contract for KPC is not                    
 extended, the last years of the timber industry in Southeast are in           
 sight.  Metlakatla's economic history is rooted in the seafood                
 industry, but it does not provide the revenue Metlakatla formerly             
 enjoyed.  Its cannery stopped production on pinks before last                 
 season because it is no longer economical.  The potential for                 
 tourism exists, but Metlakatla has not benefitted at this time, and           
 needs something to depend on year-round.  Metlakatla believes                 
 Southeast can sustain the timber supply without permanent harm to             
 the environment and holds the most potential for long term economic           
 stability.                                                                    
                                                                               
 Number 111                                                                    
                                                                               
 MAYOR CARLTON, Ketchikan Gateway Borough, testified in support of             
 SJR 40.  He represents 15,078 people, and asked committee members             
 to consider the proportional amount of people in opposition to SJR
 40.  On March 14 the Assembly approved a letter he sent to Governor           
 Knowles asking for: support of the amendment sponsored by Senator             
 Stevens to resolve the AWARTA lawsuit; protection of the compromise           
 timber base established by the TTRA in 1990; and, most importantly,           
 support of a 15 year plus extension of a revised KPC contract.  To            
 date, he has not received a reply.  The Assembly also passed a                
 resolution in support of Representative Young's HB 2413, turning              
 the Tongass over to the State.  On March 20 and 21, five people               
 from Ketchikan travelled to Washington, D.C. to talk with Alaska's            
 congressional delegation, John Katz, and Dave Unger, the Associate            
 Chief of the U.S. Forest Service about the concerns he addressed to           
 Governor Knowles.  A shutdown of KPC will have statewide impact.              
 Spouse abuse and alcohol consumption will increase, as it has in              
 Sitka and Wrangell, and taxes will increase.  Stumpage fees help              
 the boroughs throughout the state.  With less stumpage fees, the              
 Legislature will have to either raise taxes or dip into the                   
 Permanent Fund.  The Southeast Conference has a contract study on             
 the timber impact of all Southeast communities, which should be               
 completed soon.  Recently the Ketchikan Gateway Borough had a                 
 timber contract with Sealaska.  The contract contained a caveat of            
 the $200 per thousand feet discount if any of the timber was                  
 locally processed.  Ketchikan needs help from the Governor and                
 Legislature on this issue.  He hoped the issue does not become a              
 political one.                                                                
                                                                               
 TAPE 96-32, SIDE A                                                            
 Number 000                                                                    
                                                                               
 KATE TESAR read the following statement for Mayor Stanton of                  
 Ketchikan.                                                                    
                                                                               
 I wholeheartedly support the resolution, and as you know, Mr.                
 Chairman, my personal life has been very much determined by                   
 the establishment of this, the first year-round industry                      
 within the State of Alaska.  My husband and I moved to                        
 Ketchikan 42 years ago because of his employment as a chemical                
 engineer with the Ketchikan Pulp Company.  We raised our                      
 family in Ketchikan, supported by one stable, well paying job.                
 We brought property and built a house.  My husband was                        
 promoted and our kids graduated from Ketchikan High School,                   
 went away to college, earned their college money by working at                
 Ketchikan Pulp Company each summer.  Our family's story, and                  
 many like it, would not have been possible in Ketchikan                       
 without the long term contract between KPC and the U.S. Forest                
 Service.  The early capital investment by Puget Sound Pulp and                
 Timber Company and FMC would not have been made unless they                   
 had the security promised within the contract.  Year-round                    
 jobs and the stability, which is necessary for families and                   
 communities to survive, is as necessary today as it was when                  
 the strategy was first developed in the 1950's, and long term                 
 stability is as important now for KPC as it ever was.  If KPC                 
 is going to upgrade its facilities to ensure that it is a                     
 better neighbor and to remain competitive in a world pulp                     
 market then it needs to know that a stable timber supply will                 
 be available in the future.  The community of Ketchikan has                   
 been involved in intensive economic development studies and                   
 discussion during the last three years.  The 2004 information                 
 was developed with wide representation from the community.                    
 The statistical and consensus information is readily available                
 from the city, the borough, or the University of Alaska                       
 Southeast.  Our conclusions were, and are, that the loss of a                 
 fully operating pulp mill at Ward Cove, and its inter-related                 
 sawmills and wood operations in Southeast Alaska would cause                  
 severe economic impacts and would probably cause devastating                  
 social consequences as well.  We are already seeing evidence                  
 of these impacts within the community, due to the fact that                   
 there are fewer jobs now and there is considerably less money                 
 circulating than there was just four to five years ago.                       
 Finally Mr. Chairman, I believe we should send copies of the                  
 adopted resolution to all the members of the U.S. Congress,                   
 not just the leadership and our own delegation.  Many members                 
 of Congress and people in the other 49 states may not be aware                
 that there is little other timber available here except that                  
 in the National Forest.  I would also stress that Ketchikan                   
 Pulp is a value-added product.  KPC and its related                           
 enterprises not only utilize the whole log, but also the trash                
 and scraps that otherwise just rot or burn.  This is a very                   
 efficient use of a renewable resource.  Thank you very much                   
 for allowing me to represent the citizens of Ketchikan in                     
 voicing our support of this resolution which sets out how                     
 essential the operation of KPC is to the continuing economic                  
 and social wellbeing of our families and community.                           
                                                                               
 Number 078                                                                    
                                                                               
 WAYNE WEIHING, President of Tongass Conservation Society, a                   
 Southeast Alaska Conservation Council board member, a 28 year                 
 resident of Ketchikan, and a 21 year former employee of KPC, spoke            
 in opposition to a 15 year extension.  In 1976 and 1977 the same              
 tactic of threatening a mill shutdown was used, but to a different            
 audience.  KPC is promoting economic fear and insecurity in                   
 Ketchikan which is unfounded.  He gave the following examples of              
 KPC's earlier attempts to promote fear.  In 1973, following the               
 first attempts to implement basic environmental impact statement              
 requirements, C.L. Cloudy of the Alaska Loggers warned that                   
 requirements would cause complete 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 will close July 1, 1977.  As the paper explained the             
 next day, the announcement wasn't news, it was part of a publicity            
 stunt.  The paper then criticized the pulpmill for issuing false              
 alarms one week before EPA hearings, and shortly before employee              
 negotiations were to start.  One editorial concluded that KPC was             
 crying wolf and playing with the faith of thousands of people.  In            
 1984, the comptroller, then later president, Martin Peele claimed             
 if the Forest Service didn't reduce the price of timber in larger             
 clearcuts, they were going to pack it up and leave (Juneau Empire,            
 March 29, 1984).  In 1992, EPA proposed much tighter controls on              
 pollution for KPC's pulpmill.  KPC's president, Martin Peele,                 
 claimed the new pollution controls would seriously threaten the               
 survival of the mill, or any mill, anywhere (Ketchikan Daily News,            
 April 17, 1992).  On June 26, 1995, the Ketchikan Daily News                  
 announced that KPC would close its Ward Cove sawmill for an                   
 indefinite period, starting Friday, because it was running out of             
 timber sold by the U.S. Forest Service.  On the same day, the                 
 Ketchikan Daily News contained an ad paid for by KPC which offered            
 to sell approximately 3,000 board feet of red cedar, and 2,000                
 board feet of yellow cedar, during their third quarter of '95.  The           
 decision to close the mill was a business decision driven by pulp             
 prices that had more than doubled in 1994 and were then near the              
 highest price ever.  While pulp prices were exploding, the average            
 market for sawed timber was down about 33 percent.                            
                                                                               
 MR. WEIHING discussed worker and labor issues.  In 1984, KPC                  
 terminated the labor agreement with the pulp workers and                      
 implemented an offer that included huge wage cuts.  Today the pulp            
 workers still don't have a contract, and are working for less wages           
 than they made in 1984.  The workers have suffered a huge economic            
 hardship, while KPC made large profits.  The workers' paychecks               
 have a direct impact on the economy, as those people live and work            
 in the community, and buy groceries and houses for their families.            
 In 1984, before the huge pay cuts were taken, a journeyman was                
 earning $20.05 per hour.  After the six month shutdown, the workers           
 were offered $12 per hour.  Today, after 12 years, those workers              
 are still not earning the $20.05 they earned in 1984.  KPC has a              
 history of noncompliance with air and water standards, and                    
 continues to operate in violation of their permits.  KPC has a                
 history of corporate greed and not being responsible to the                   
 community or the workers in the community.  KPC should not be                 
 granted a 50 year timber contracted, it is a scare tactic and                 
 economic blackmail.  KPC has used this tactic in the past and is              
 doing it again today.  People are buying into a panic situation               
 that was not justified in the past, and is not justified now.                 
                                                                               
 Number 171                                                                    
                                                                               
 CHAIRMAN TAYLOR asked Mr. Weihing if he believed the mill would               
 continue to operate in the future.  MR. WEIHING replied he hopes so           
 and is very concerned about Ketchikan's economy, but believes the             
 mill needs to comply with pollution controls and provide better               
 contracts with its workers.  As the union representative, he found            
 KPC would not give the workers contracts; it would bargain, but not           
 in good faith.                                                                
                                                                               
 CHAIRMAN TAYLOR asked Mr. Weihing if he believed the mill could               
 continue to operate after there is no longer a 50 year contract.              
 MR. WEIHLING responded he believes it can.  He suggested re-logging           
 some of the second growth areas.  He expressed his concern about              
 the fear, and doom and gloom tactic being used to promote an                  
 extended contract.                                                            
                                                                               
 CHAIRMAN TAYLOR commented part of that concern is generated by the            
 fact that Sitka's mill closed over two years ago.  That mill was              
 more modern than KPC.  He questioned why no one is operating that             
 mill now if pulp prices are high.  He noted brand new pulp mills              
 are being built in other countries and are operating at a profit.             
 Without a commitment of volume, there is no guarantee that economy            
 can be sustained.  No one is concerned about a doom and gloom                 
 economy over the next five or six years if a commitment is made by            
 the Forest Service to provide timber to sustain that economy.                 
                                                                               
 Number 222                                                                    
 MR. WEIHING agreed it is necessary to look now at the long term,              
 but it is important to not be mislead by a gloom and doom scenario.           
                                                                               
 STEVE KALLICK, director of the Alaska Rainforest Campaign, a                  
 coalition of Alaska and national conservation organizations, stated           
 his organization does not oppose all logging, or clearcutting on              
 national Forest Service lands, but supports balanced multiple use             
 of public lands and is looking for locally based solutions for                
 resource management challenges.  SJR 40 is based on incorrect                 
 assumptions which lead to an incorrect conclusion.  The first                 
 assumption is that the Forest Service has failed to make adequate             
 timber available to give KPC security under the current contract,             
 therefore the extension is necessary.  If the current contract is             
 inadequate to provide a timber supply, how can the extension, which           
 takes effect in eight years, provide any more security?  If the               
 contract itself is inadequate, the extension itself would also be             
 inadequate.  To verify whether the terms of the contract are being            
 met, he called the Forest Service and was told KPC has, on hand,              
 approximately 175 mbf of timber at this time, which is nearly a one           
 year supply.  KPC may want more than that, but cannot say the                 
 contract terms are not being met.  A second assumption is that                
 economic common sense dictates that Louisiana Pacific cannot make             
 this level of investment for mill improvements without a contract             
 extension.  Essentially this extension asks the citizens to trust             
 the company and the government to work out a fair deal for us in              
 secret.  A proposal to do this with other industries would be                 
 highly criticized and rightly so.  The same standards of disclosure           
 and public scrutiny here need to be applied to this case.  We know            
 that Louisiana Pacific had over $3 billion is sales in 1994 and               
 profits of $350 million.  According to the Ketchikan Daily News,              
 Louisiana Pacific is currently building 5 new timber mills in                 
 Venezuela and without long term contracts, Louisiana Pacific has              
 converted mills in British Columbia and California to a chlorine              
 free, environmentally preferable process.  The company clearly has            
 resources to invest without a long term contract extension.  While            
 we have the value of the investments LP seeks to amortize in                  
 Ketchikan, which is $155 million, we don't know what they make on             
 the existing contract each year, nor do we know the value of the              
 contract's remaining eight years, and we also don't know the value            
 of the contract extension on the open market which could be as high           
 as several billion dollars.  It's hard to know because it is so               
 unique.  We need to know the pros and cons of this proposal before            
 the cost of the investment versus the remaining eight years of the            
 contract or the extension can be evaluated.  Before going any                 
 further with SJR 40, we should ask LP to open their books for the             
 Ketchikan mill and show us some hard numbers.  Finally, the entire            
 onslaught of the Tongass timber bill that Congress has before it is           
 embodied in the assumption that the only way to maintain timber               
 jobs in Southeast is to maintain the existing industry and to                 
 increase the timber supply.  We all know the industry and the                 
 economy are not static and you cannot succeed by trying to stop               
 progress and maintain the existing industry.  The only way to                 
 maintain jobs in any industry is to modernize and innovate, but               
 that cannot be done if all efforts go into the protection of the              
 status quo.  Value added products are a great improvement.                    
 Everyone in Southeast realizes we have to make new products and add           
 value to the timber we cut.  The key to stability will not be                 
 provided by mandating or forcing a timber supply from the Tongass             
 if it's not economically, environmentally, or politically                     
 sustainable.  The current bills in Congress that attempt to do that           
 have run into opposition, both nationally and in Alaska.  This                
 proposal will make it worse, unless it is handled right and many              
 other variables are considered.  You just can't vanquish the                  
 opposition on either side.  The Sierra Club can't dominate the                
 industry and vice versa.  Stability can only be achieved by a local           
 consensus.  Alaskans all have to work together to establish the               
 level of logging and the land use that we can all support and live            
 with.  He agreed with many of Mr. Sandor's points and believes we             
 need to take the time over the next eight years to consider all of            
 the resource needs and consider what kind of product and plants we            
 can have in Southeast Alaska, and to find solutions that work for             
 all of us so that we won't have political winds shifting and                  
 creating instability.                                                         
                                                                               
 Number 310                                                                    
                                                                               
 CHAIRMAN TAYLOR asked if the Alaska Rainforest Campaign sent out              
 fundraising letters requesting money from people and claiming the             
 organization did everything it could to cause the cancellation of             
 the APC long term contract in Sitka.  MR. KALLICK answered the                
 Alaska Rainforest Campaign did not, and believed Senator Taylor may           
 have been referring to a fundraising appeal by the Sierra Club                
 Legal Defense Fund.   He did not agree with Senator Taylor's                  
 characterization of the letter.                                               
                                                                               
 JOHN SISK discussed his background, and endorsed the positions of             
 the Southeast Alaska Conservation Council and the Alaska                      
 Environmental Lobby with regard to SJR 40.  He shared the following           
 personal concerns and recommendations with regard to the contract,            
 economy and the Tongass National Forest.  Alaska conservationists             
 care deeply about the people, communities and forests of Southeast.           
 SJR 40 is the wrong move for the Legislature to make; this is the             
 wrong time for the Legislature to make this kind of endorsement to            
 any aspect of our timber industry.  We have eight years to look at            
 the KPC situation and need more specific information before                   
 committing the Tongass to KPC or to anybody else through the year             
 2019.  KPC's parent company is in the midst of a major management             
 change.  It has had some real problems with leadership and                    
 performance during the last few years, and it is taking action to             
 address those.  It would be wise for Alaskans to follow LP's lead             
 and do our part of the job by looking down the road to determine              
 what kind of timber industry is most desirable in Ketchikan and in            
 Southeast, and then determine how to get there.  To move forward              
 and extend the contract now would be to put the cart in front of              
 the horse.  He suggested completing the revision of the Tongass               
 Land Management Plan.  In May of 1996 there will be new information           
 and a whole round of local community round tables addressing these            
 very topics, among others.  There will be a serious attempt to                
 figure out how a long term timber supply is going to balance out              
 with our other industries; other uses of the forest.  It might be             
 helpful to identify a modest but significant timber supply level              
 that most interests can either live with or can support.  That                
 might become a base timber supply that an investor could bank on.             
 Beyond that level, there may be less than consensus and increasing            
 risk, but the base level would be reliable.  Unfortunately the                
 Hickel Administration advocated the 580 mbf cut levels which                  
 polarized everyone, and tended to engender opposition to the entire           
 Tongass timber program, making almost every sale uncertain and                
 challenged, even when there might be some supply level that folks             
 could live with.  Second, we need to clarify the landless Natives             
 issue and get a ballpark idea of how much Tongass land, if any, is            
 likely to be transferred to private Native corporation ownership              
 because this could become a significant component of regional                 
 timber supply, and if it happens, will affect the sustainable cut             
 from the Tongass.  We need to take the time to look at what                   
 criteria should apply to our long term sustainable timber industry.           
 Value added will work, we can saw a much larger proportion of our             
 Tongass wood than we've ever been able to as a result of technology           
 changes, market changes, and labor cost differentials.  Over the              
 long haul, we need to determine: whether we need as big a fiber               
 plant as we have now; whether it should be dissolving pulp; how to            
 capture the value; how to saw as much wood as possible, even if it            
 has to be re-manufactured; and come up with a sound strategy of               
 what to do with the cull and residual wood. That is likely to be              
 very different in the 21st century.  We need to be market driven              
 and to look at an integrated set of sources of saw log supply.  The           
 Tongass can't provide all of this.  There will be private lands,              
 state lands, the whole Gulf coast is out there.  Unfortunately logs           
 go back and forth in Dixon Entrance between here and British                  
 Columbia; that situation needs to be ironed out.  If stumpage                 
 prices were not subsidized on national forest land, there would be            
 more incentive for private logs to go into sawmills and fiber and             
 other kinds of manufacturing.  One basic criteria that                        
 conservationists feel strongly about is that we should avoid sudden           
 changes that are going to displace workers and hurt communities.              
 That's in nobody's interest: not the environment, not the                     
 community, not the workers.  Where changes are desirable, or if it            
 turns out that some are unavoidable due to market conditions or               
 resource constraints, we need to develop sound transition plans               
 that support the communities.  There are a lot of questions about             
 what the supply level should be.  He agrees with Mr. Sandor's                 
 statement that there are obligations from the national forest that            
 have to be met: multiple use, sustained yield, protection of fish             
 and wildlife, etc.  It is too early to tell whether an extended               
 contract is going to be in the best interest of the region, or                
 whether it is going to be something KPC or LP ultimately decides it           
 wants to do.  The resolution is premature.                                    
                                                                               
 TINA LUNDGREN, Alaska Visitors Association, stated she was not                
 testifying to suggest that the specific contract for KPC should be            
 extended, but to point out that tourism and the timber industry are           
 not mutually exclusive.  The AVA has long recognized that Alaska's            
 economy is supported by a multitude of industries from petroleum to           
 mining, fishing, timber, and tourism.  AVA recognizes that Alaska             
 needs a diversified economy and healthy basic industries upon which           
 so many of the supporting jobs rely.   AVA endorses multiple use of           
 the forest.  Timber harvesting and tourism have, and can, co-exist            
 within the large and diversified rich resources of the forest.  In            
 some cases, access and visitor activities use roads, docks and                
 other facilities initially constructed for the timber industry.               
 The AVA knows timber is required for hotels and other construction,           
 but at the same time AVA requires wild spaces with no development,            
 so it is extremely aware of the need of both uses.  AVA is working            
 with the Forest Service to identify areas where potential conflicts           
 may exist.  AVA shares some common concerns with SJR 40.  Number              
 one is the need for businesses to be able to plan ahead in order to           
 justify capital investments.  Most businesses have this problem and           
 it's particularly true of businesses in the Tongass.  Access to               
 public lands is the second concern as there is tremendous pressure            
 to further restrict access to public lands for commercial tourism             
 as well as for other commercial uses of all types.  AVA realizes              
 that both tourism and the forest products industry in Alaska are              
 renewable, sustainable, regulated, and compatible with the                    
 potential of the environment, if conducted in a responsible manner.           
 AVA looks forward to working with the timber industry, Legislature            
 and congressional delegation, as well as the Forest Service, to               
 help alleviate the uncertainties that the businesses that rely on             
 the forest are facing.                                                        
                                                                               
 DICK KOOSE, Chairperson of the Ketchikan Chamber of Commerce Timber           
 Issues Committee, testified.  The Ketchikan Chamber of Commerce               
 consists of approximately 400 businesses and individual members               
 representing over 4,000 jobs.  Its members represent the three                
 primary industries in Ketchikan: timber, fishing and tourism. There           
 is no single issue of greater importance to its members than a                
 strong economy, and there is no greater threat to its economy than            
 a reduction of the timber industry in Ketchikan and Southeast                 
 Alaska.  Each year it polls members to determine where to focus its           
 efforts.  Its number one issue continues to be to maintain a strong           
 timber industry.  The Greater Ketchikan Chamber of Commerce                   
 supports a 15 year extension of the KPC timber sale contract.  KPC            
 has initiated a $200 million investment program to operate                    
 facilities to remain competitive in the world pulp market and to              
 meet new and ever-changing environmental requirements.  For any               
 business to commit to an investment of this size, it must be                  
 reasonably assured the raw material supply will be available.  The            
 long term timber sales contract provides that assurance.  KPC's               
 assessed value equals 8.6 percent of the Ketchikan Borough assessed           
 value for 1995 or $78.9 million.  KPC property taxes to the                   
 Ketchikan Borough for 1995 amounted to $675,000.  KPC's payroll,              
 with benefits, for 1995 was $53.6 million.  KPC's total employees             
 in March of 1995 was 670.  For each employee for a major industry             
 like KPC there are three additional jobs in the service and supply            
 sectors and the income for the indirect jobs is four times the                
 payroll.  If KPC ceases operations in Ketchikan, other businesses             
 will have to close; about one-third of the jobs in the community              
 will disappear.  KPC has been, and will continue to be, a                     
 responsible citizen in the community.   Harvesting enough timber              
 from the national forest lands to sustain the timber industry in              
 Southeast Alaska is not an environmental, conservation, or                    
 scientific issue; it is an issue of personal philosophy and                   
 politics.  The Ketchikan Chamber of Commerce has initiated a                  
 petition to Governor Knowles requesting his support of the KPC                
 contract extension.  Over 1600 names have been collected in three             
 and one-half days of effort in Ketchikan.  The Ketchikan Chamber of           
 Commerce supports and urges the committee's approval of SJR 40.               
                                                                               
 CHAIRMAN TAYLOR asked if there were any other witnesses signed up             
 to testify.  There were none.                                                 
                                                                               
 SENATOR MILLER moved the proposed committee substitute.  SENATOR              
 ELLIS objected and asked for an explanation of the proposed                   
 committee substitute.                                                         
                                                                               
 CHAIRMAN TAYLOR clarified the proposed committee substitute goes              
 into specific detail concerning the U.S. Forest Service and the               
 long-term commitments made under TTRA.  It actually sets a 420 mbf            
 cut requirement, approved by the Forest Service as Alternative P in           
 1992, after 12 years of TLMP hearings.                                        
                                                                               
 SENATOR ELLIS noted the proposed committee substitute looked like             
 a fax, and did not appear to be in the format used by legislative             
 drafters.                                                                     
                                                                               
 CHAIRMAN TAYLOR explained it is not in typical legislative drafting           
 format because of insufficient time.                                          
                                                                               
 SENATOR ELLIS asked where the proposed committee substitute                   
 originated.  CHAIRMAN TAYLOR answered it was not drafted by Legal             
 Services, it was drafted, in part, by staff and others who have               
 been circulating various ideas for some time on this issue.                   
                                                                               
 SENATOR ELLIS asked who it was faxed to.  CHUCK ACHBERGER,                    
 committee aide, replied it was faxed to him this morning from Jim             
 Clark, an attorney.                                                           
                                                                               
 CHAIRMAN TAYLOR asked if there was further objection to the motion            
 to adopt the proposed committee substitute for SJR 40.  There being           
 no further objection, the motion carried.                                     
                                                                               
 SENATOR ELLIS stated he understood that testimony taken today was             
 by invitation only, but the committee would provide another                   
 opportunity to take additional testimony from those not invited.              
 CHAIRMAN TAYLOR commented he started it off to get the first series           
 out of the way with invitation only testimony.  He assumed anyone             
 who wanted to testify would show up and do so.  He added the House            
 is scheduled to hold two days of hearings beginning tomorrow.                 
                                                                               
 SENATOR ELLIS pointed out he was under the impression that today              
 was an invitation only hearing, and the normal course of public               
 testimony would occur at a different time.  CHAIRMAN TAYLOR                   
 responded he had planned to take all of the testimony he could                
 today and move SJR 40 on.                                                     
                                                                               
 SENATOR ELLIS asked if today's public hearing in the Senate                   
 Judiciary Committee was advertised as invitation only testimony.              
 CHAIRMAN TAYLOR said it was.  SENATOR ELLIS felt that discouraged             
 anyone else from attending who was not on the invitation list.  MR.           
 ACHBERGER added it was explained in the invitation that public                
 testimony would be taken beginning tomorrow for two days, in the              
 House.                                                                        
                                                                               
 SENATOR ELLIS asked how people were notified, and whether it was              
 posted in the Journal.  MR. ACHBERGER answered he notified people             
 who asked to testify or called for information on the bill.  He               
 noted the House has published its hearing schedule.                           
                                                                               
 SENATOR MILLER moved SJR 40 as amended out of committee with                  
 individual recommendations.  SENATOR ELLIS objected.  The motion              
 carried with Senators Green, Taylor, and Miller voting "yea," and             
 Senator Ellis voting "nay."                                                   
 CHAIRMAN TAYLOR adjourned the meeting at 3:44 p.m.                            
                                                                               
                                                                               

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