Legislature(1995 - 1996)

04/02/1996 04:35 PM RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
               HOUSE RESOURCES STANDING COMMITTEE                              
                         April 2, 1996                                         
                           4:35 p.m.                                           
 MEMBERS PRESENT                                                               
 Representative William K. "Bill" Williams, Co-Chairman                        
 Representative Joe Green, Co-Chairman                                         
 Representative Scott Ogan, Vice Chairman                                      
 Representative John Davies                                                    
 Representative Pete Kott                                                      
 Representative Don Long                                                       
 Representative Irene Nicholia                                                 
 MEMBERS ABSENT                                                                
 Representative Alan Austerman                                                 
 Representative Ramona Barnes                                                  
 COMMITTEE CALENDAR                                                            
 *HOUSE JOINT RESOLUTION 64                                                    
 Relating to extension of the United States Forest Service timber              
 sale contract with the Ketchikan Pulp Company.                                
      - HEARD AND HELD                                                         
 (* First public hearing)                                                      
 PREVIOUS ACTION                                                               
 BILL:  HJR 64                                                               
 SPONSOR(S): RESOURCES                                                         
 JRN-DATE    JRN-PG    ACTION                                                  
 03/25/96      3310    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 03/25/96      3310    (H)   RESOURCES                                         
 04/02/96              (H)   RES AT  4:00 PM CAPITOL 124                       
 WITNESS REGISTER                                                              
 CHERYL SUTTON, Legislative Assistant                                          
   to Representative Bill Williams                                             
 House of Representatives                                                      
 Alaska State Legislature                                                      
 Capitol, Room 128                                                             
 Juneau, AK  99801                                                             
 Telephone:  (907)  465-3715                                                   
 POSITION STATEMENT:  Explained changes in the CS for HJR 64.                  
 RALPH LEWIS, President                                                        
 Ketchikan Pulp Company                                                        
 P. O. Box 6600                                                                
 Ketchikan, AK  99901                                                          
 Telephone:  (907) 225-2151                                                    
 POSITION STATEMENT:  Explained Ketchikan Pulp Company position on             
                      HJR 64.                                                  
 DICK COOSE, Chairperson                                                       
 Timber Issues Committee                                                       
 Greater Ketchikan Chamber of Commerce                                         
 P. O. Box 5957                                                                
 Ketchikan, AK  99901                                                          
 Telephone:  225-3184                                                          
 POSITION STATEMENT:  Presented comments on behalf of Ketchikan                
                      Borough Mayor, Jim Carlton; and testified in             
                      support of CS HJR 64.                                    
 STEVE KALLICK                                                                 
 Alaska Rainforest Campaign                                                    
 1016 West 6th Avenue                                                          
 Anchorage, AK  99501                                                          
 Telephone:  (907) 274-7246                                                    
 POSITION STATEMENT:  Testified that HJR 64 is not in the best                 
                      interest of the state.                                   
 DIANE MAYER, Director                                                         
 Office of Governmental Coordination                                           
 Office of Management & Budget                                                 
 P. O. Box 110030                                                              
 Juneau, AK  99811-0030                                                        
 Telephone:  (907) 465-3562                                                    
 POSITION STATEMENT:  Presented Governor's statement on HJR 64.                
 WILLIAM MORAN, President                                                      
 First Bank                                                                    
 P. O. Box 7920                                                                
 Ketchikan, AK  99901                                                          
 Telephone:  (907) 228-4202                                                    
 POSITION STATEMENT:  Testified in support of HJR 64.                          
 JOHN ANTONEN, Executive Director                                              
 Southeast Regional Resource Center                                            
 210 Ferry Way, Suite 200                                                      
 Juneau, Alaska  99801                                                         
 Telephone:  (907) 586-6806                                                    
 POSITION STATEMENT:  Testified in support of HJR 64.                          
 WILLIAM BROCK, Analyst and Project Manager                                    
 McDowell Group                                                                
 416 Harris Street                                                             
 Juneau, Alaska  99801                                                         
 Telephone:  (907) 586-6126                                                    
 POSITION STATEMENT:  Testified in support of HJR 64.                          
 JOHN SISK, Former Director                                                    
 Southeast Alaska Conservation Council                                         
 Address Unknown                                                               
 Telephone:  Unknown                                                           
 POSITION STATEMENT:  Testified in opposition to CS HJR 64.                    
 WAYNE WEIHING, President                                                      
 Tongass Conservation Society and Board Member                                 
    Southeast Alaska Conservation Council                                      
 P.O. Box 3377                                                                 
 Ketchikan, Alaska  99901                                                      
 Telephone:  (907) 2255827                                                     
 POSITION STATEMENT:  Testified in opposition to CS HJR 64.                    
 KELLY NOLLEN, Attorney                                                        
 Sierra Club Legal Defense Fund                                                
 325 4th Street                                                                
 Juneau, Alaska  99801                                                         
 Telephone:  (907) 586-2751                                                    
 POSITION STATEMENT:  Testified in opposition to HJR 64.                       
 KATHY LIETZ, Bookkeeper                                                       
 Black Bear Cedar Products                                                     
 Box 19112                                                                     
 Thorne Bay, Alaska  99919                                                     
 Telephone:  Not Available                                                     
 POSITION STATEMENT:  Testified in support of HJR 64.                          
 BRIAN S. BROWN, Chief Logging Engineer                                        
 Silver Bay Logging Company                                                    
 Cube Cove, Number 2                                                           
 Juneau, Alaska  99850-0360                                                    
 Telephone:  (907) 586-4133                                                    
 POSITION STATEMENT:  Submitted written testimony to be included in            
                      committee file.                                          
 JACK PHELPS, Executive Director                                               
 Alaska Forest Association, Inc.                                               
 111 Stedman, Suite 200                                                        
 Ketchikan, Alaska 99901-6599                                                  
 Telephone:  (907) 225-6114                                                    
 POSITION STATEMENT:  Testified in support of HJR 64.                          
 TINA LINDGREN, Executive Director                                             
 Alaska Visitors Association                                                   
 3201 C Street, Number 403                                                     
 Anchorage, Alaska  99503                                                      
 Telephone:  (907) 561-5733                                                    
 POSITION STATEMENT:  Testified on HJR 64.                                     
 SOL ATKINSON, Council Member                                                  
 Metlakatla Indian Community                                                   
 Metlakatla, Alaska                                                            
 Telephone:  (907) 886-1175                                                    
 POSITION STATEMENT:  Testified in support of HJR 64.                          
 GARY PAXTON, City Administrator                                               
 City & Borough of Sitka                                                       
 100 Lincoln Street                                                            
 Sitka, Alaska  99835                                                          
 Telephone:  (907) 747-3294                                                    
 POSITION STATEMENT:  Testified on HJR 64.                                     
 DOUG ROBERTS, Mayor                                                           
 City of Wrangell                                                              
 205 Brueger                                                                   
 Wrangell, Alaska  99929                                                       
 Telephone:  (907) 874-3952                                                    
 POSITION STATEMENT:  Testified in support of HJR 64.                          
 KATE TESAR, Lobbyist                                                          
 Alaska Services Group                                                         
 P.O. Box 22754                                                                
 Juneau, Alaska  99802                                                         
 Telephone:  (907) 463-5657                                                    
 POSITION STATEMENT:  Read statement on behalf of the Mayor of                 
                      Ketchikan, Alaire Stanton.                               
 ERNESTA BALLARD, Environmental Consultant                                     
 Ketchikan Pulp Company                                                        
 P.O. Box 6600                                                                 
 Ketchikan, Alaska  99901                                                      
 Telephone:  (907) 225-2151                                                    
 POSITION STATEMENT:  Testified on CS HJR 64.                                  
 ACTION NARRATIVE                                                              
 TAPE 96-46, SIDE A                                                            
 Number 001                                                                    
 CO-CHAIRMAN WILLIAM K. "BILL" WILLIAMS called the House Resources             
 Committee meeting to order at 4:35 p.m.  Members present at the               
 call to order were Representatives Green, Williams, Ogan, Davies,             
 Kott, Long and Nicholia.  Representatives Austerman and Barnes were           
 HJR 64 - EXTENSION OF KETCHIKAN PULP CO. CONTRACT                           
 CO-CHAIRMAN WILLIAMS announced that it was not his intent to move             
 the resolution out of committee today; committee members would hear           
 from invited speakers only.  Public testimony would be heard                  
 tomorrow, April 3, and following that, he would pass the bill out             
 of committee.  Co-Chairman Williams brought forth the proposed                
 committee substitute for HJR 64.                                              
 Number 118                                                                    
 CO-CHAIRMAN WILLIAMS stated he had introduced the resolution at the           
 request of community leaders in Ketchikan.  He stated, "They were             
 concerned about timber available in the pipeline to continue on in            
 Ketchikan Pulp and Southeast Alaska.  They were very concerned                
 about seeing mills like Sitka, Wrangell and Ketchikan I believe,              
 was closed last year for nine months.  Seley Mill was closed.                 
 Seaborne Mill was closed.  I think they are talking about closing             
 now.  Ketchikan Pulp is working to do the environmental concerns              
 that were brought before us.  They are concerned also about whether           
 or not we have enough timber to continue on with this, at least the           
 community members are, and I am sure that the board of directors at           
 Ketchikan Pulp Company are also concerned about whether they should           
 continue on with this project."                                               
 Number 240                                                                    
 CO-CHAIRMAN JOE GREEN moved to adopt the proposed committee                   
 substitute for HJR 64, Version 9-LS1812\C, dated 4/2/96 as the                
 working draft.  Hearing no objection, it was so ordered.                      
 CO-CHAIRMAN WILLIAMS announced the House of Representatives was               
 going back into session at 5:00 p.m.  He indicated that he would              
 like Vice Chairman Scott Ogan to remain with the committee to                 
 continue to take testimony and get everyone on record.                        
 Number 334                                                                    
 CO-CHAIRMAN WILLIAM requested the sponsor statement for HJR 64 be             
 incorporated into the record:                                                 
 "The Majorities in the Alaska Legislature have called upon the                
 Governor to work with the Legislature and the Alaska Congressional            
 Delegation to resolve Tongass issues.  Our goals very simply are,             
 at a minimum, to maintain the existing industry and to require the            
 Forest Service to provide sufficient volume to allow the industry             
 to grow back to the level contemplated in the 1990 Tongass Timber             
 Reform Act (TTRA) compromise.                                                 
 "This resolution to extend the Ketchikan Pulp Company (KPC)                   
 contract is critical to maintaining the existing industry.  In                
 order to meet various environmental and related requirements, KPC             
 will have to make major capital expenditures.  No company can                 
 justify to investors the level of capital expenditure which KPC               
 requires without showing its investors that it has access to the              
 raw materials it needs to process to pay back the investment.                 
 "In this case, investors quite reasonably need confidence that                
 there will be sufficient timber made available.  Given the Forest             
 Service's continuing failure to provide adequate volume to the                
 industry, only a contractual commitment will provide the necessary            
 investor assurance of sufficient timber.  Thus, it is clear that an           
 extension of KPC's long term contract is necessary for financing              
 "In addition, KPC's contract economics need to be restored from the           
 unfortunate unilateral changes in the TTRA.  Alaska Pulp                      
 Corporation (APC) cited these changes as a significant factor in              
 its decision to close.  The need to restore the contract economics            
 is as vital as the extension.                                                 
 "It is particularly important here to understand that the federal             
 government plays two roles.  It is the monopoly holder of the                 
 timber supply needed to maintain KPC and the timber industry in               
 Southeast.  It also sets the requirement for many of the permits              
 without which these plants, including the KPC pulp mill, cannot               
 "Because of these competing roles, the federal government has a               
 special obligation in this case to provide a sufficient guaranteed            
 timber supply to KPC by contract to justify the expenditure of                
 millions of dollars which federal legislation is requiring KPC to             
 invest to keep operating.  If there were other sources of supply,             
 maybe the situation would be different, but there are not.  When              
 the supplier also sets the regulatory standards, as the federal               
 government does here, it has a special obligation to the public to            
 coordinate its policies.  It can do that here by extending and                
 modifying the contract.                                                       
 "Louisiana Pacific has made it clear that unless a contract                   
 extension and modification process begins taking shape this year,             
 it will face extensive uncertainty inconsistent with making a                 
 significant portion of the required capital expenditures.                     
 "We, as Alaskans, really need to think about what it would mean if            
 we had no pulp mill in Southeast Alaska.  Since the 1920s, the                
 Forest Service has recognized the need for pulp mills as the                  
 cornerstone of a timber industry in Southeast Alaska.  The sawmills           
 cannot buy timber sales unless they have a means of disposing of              
 the pulp logs and the high product chips from sawmilling                      
 operations.  The pulp mill converts low value material into high              
 value material.  Indeed, it is the most significant example of                
 ongoing value added processing in the timber industry in Alaska.              
 While the sawmills could arguably chip up pulp logs and send those            
 chips along with by-product chips from their sawmill operation to             
 the Lower 48, it would be more expensive and involve more risk.               
 Higher Alaska logging costs and transportation costs would make               
 Alaskan chips more expensive and thus, less competitive in Lower 48           
 markets.  It is riskier because of the uncertainty of being able to           
 sell into the Lower 48 market.  In other words, if the last pulp              
 mills goes out of business, the sawmills will be under much greater           
 financial pressure.                                                           
 "The impact on the economy in Southeast Alaska of losing the timber           
 industry will be devastating.  On a Southeast areawide basis, we              
 will lose the stumpage receipts program which has poured millions             
 of dollars into our school and road system throughout Southeast               
 Alaska for many, many years.                                                  
 "In addition, there will be a cataclysmic impact on the City and              
 Borough of Ketchikan with the loss of its largest employer.  This             
 will affect countless others throughout the region who are                    
 suppliers and contractors to KPC.                                             
 "In addition, it must be remembered that the pulp mill is a major             
 contributor to forest health and good conservation by serving as a            
 processor of over-mature timber and chips which are a by-product of           
 sawmilling operations.                                                        
 "We have a robust, healthy National Forest which has 8.3 million              
 forested acres which will never be harvested.  Of the 1.7 million             
 acres in the timber base, only 400,000 acres have been harvested              
 since the turn of the century.  Thus, the Forest Service should               
 make 420 million board feet per year available as promised by the             
 TTRA and as proposed in the February 1993 Tongass Land Management             
 Plan (TLMP) Record of Decision (ROD).  As ex-Regional Foresters               
 Sandor and Barton testified last year at Wrangell at Senator                  
 Murkowski's hearing, this is a sustainable, allowable sale quantity           
 consistent with sound fish and wildlife protection.  Granting this            
 contract extension would not jeopardize the other users of the                
 Tongass and there would be sufficient timber for small businesses             
 and independent operators.                                                    
 "For the foregoing reasons, the legislature, the Governor and the             
 congressional delegation need to act together to get this contract            
 extended.  The purpose of House Joint Resolution 64 is to show                
 support of the Alaska Legislature for this proposition."                      
 CO-CHAIRMAN WILLIAMS asked Cheryl Sutton to come forward and                  
 explain the changes in the committee  substitute.                             
 Number 410                                                                    
 CHERYL SUTTON, Legislative Assistant to Representative Williams,              
 outlined changes in the committee substitute.  Page 1, line 16,               
 adds the language: "due, in part, to the failure of the United                
 States Forest Service to make available the approximately                     
 420,000,000 board feet per year needed to meet the jobs protection            
 promises made by those who sought passage of the TTRA,".                      
 Number 547                                                                    
 MS. SUTTON stated on page 2, line 5, Add: "WHEREAS, another of the            
 reasons for the closure of the Sitka pulp mill was the adverse                
 economic impacts of unilateral changes to its long-term contract              
 made by the TTRA, those unilateral changes also adversely impact              
 the economics of the Ketchikan Pulp Company (KPC) contract; and".             
 Page 2, line 9, add: "year-round" after the word create.                      
 Page 2, line 13, after the words pulp mill, delete: "could cause"             
 add: "could lead to".                                                         
 Page 2, line 17, add: "of the" following the word `failure'.                  
 Page 2, line 18, after the word Service, add: "to meet its volume             
 requirements under KPC's contract and the TTRA,"                              
 Page 2, line 18, delete: "policy and," add: "as a result of the               
 adverse economic impacts to its long-term contract caused by the              
 unilateral TTRA changes, and as".                                             
 Page 2, line 25, after the word expenditures, add: "without an                
 adequate supply of timber, and without modifying those portions of            
 the unilateral TTRA contract changes that have adversely impacted             
 the contracts economics;".                                                    
 Page 2, line 29, after amortization;, add: "and".                             
 Page 2, line 30, add:  "WHEREAS the legislature finds that the                
 420,000,000 board feet promised by the TTRA must be made available            
 in order to provide sufficient timber to maintain the KPC contract,           
 to provide for the contracts to small business, and to reopen the             
 Wrangell facility and a by-product facility in Sitka;".                       
 Page 3, line 5, after the words 15 years, add: "and modify those              
 portions of the contract which the TTRA unilaterally impacted,".              
 Page 3, line 6, after the word "extension," add: "and modification            
 are", delete the word "is".                                                   
 Page 3, line 11, add:  "FURTHER RESOLVED that the Alaska State                
 Legislature also respectfully urges the Alaska Congressional                  
 Delegation, the Governor, and the United State Forest Service to              
 take action this year to assure that a minimum of 420,000,000 board           
 feet per year is made available as part of any revision of the                
 Tongass Land-Use Management Plan."                                            
 Number 609                                                                    
 MS. SUTTON referred to several letters in the committee packet and            
 said that some of the folks testifying today would be reading, in             
 part, through some of these statements.                                       
 Number 690                                                                    
 RALPH LEWIS, President, Ketchikan Pulp Company, thanked Chairman              
 Williams and the committee for hearing HJR 64.  He introduced KPC             
 staff, Ernesta Ballard who is the former Region X administrator for           
 the Environmental Protection Agency (EPA) in Seattle, and was hired           
 to help KPC go forward with all items including the environmental             
 challenges ahead.  He also introduced Kent Nicholson who is KPC's             
 timber specialist.  Mr. Lewis indicated that Ms. Ballard and Mr.              
 Nicholson were available for technical questions.                             
 MR. LEWIS continued, "As you know by the letter, KPC is seeking,              
 through Congress, an extension to the contract.  We are looking,              
 certainly, for some local support.  The mayors in the towns have              
 come forward because they see that with eight years left, and where           
 KPC is with the expenditure cycle, and they are just as concerned             
 and as worried as we are."                                                    
 MR. LEWIS recollected that the first timber bill in the late 1940s,           
 established 50-year contracts which brought stability and long                
 term, year-round jobs to Southeast because everything was seasonal            
 at that time.  This stability helped to balance the economy by                
 providing hospitals and those types of facilities that year-round             
 jobs bring.                                                                   
 MR. LEWIS continued, "What came about was a 50-year sale that was             
 bid on by Puget Sound Pulp and Paper on the open bidding process,             
 who sat down with the Forest Service and negotiated a contract.               
 Both parties sat down and negotiated this 50-year contract which we           
 were operating under."                                                        
 MR. LEWIS said in the late 1970s, when ANILCA passed, a lot of                
 wilderness was set aside and lands were designated into different             
 groups.  Everybody that came to the table agreed at that time, that           
 about 450 million would be sustainable and should be met by the               
 Forest Service to sustain the industry knowing that even with that            
 some of the industry was going to fall by the wayside.  And, in               
 fact, did.  In the early 1970s, we had probably some of the highest           
 volume and then going into the 1980s, it slowed down.  There were             
 also some market depressions that knocked some of the people out.             
 Number 889                                                                    
 MR. LEWIS continued that the Tongass Timber Reform Act (TTRA) came            
 about in 1991.  Historically, through the efforts of Representative           
 Miller of California and Senator Worth, the House passed a bill to            
 cancel the contracts which put all of us at a disadvantage in                 
 trying to negotiate, trying to salvage what we had and trying to              
 make this thing work.  Out of that came the TTRA, which again, I              
 think everybody that came to that table agreed that with the TTRA,            
 the industry could continue and go on, and stay at that size.  The            
 TTRA has not worked.  All a person has to do is just look around.             
 There is no Sitka, there is no Wrangell and we are fighting for our           
 lives which shows the bill did not work.  That is one of the                  
 reasons we have to go back to Congress, there really isn't any                
 place for us to go because it was Congress who that passed the                
 TTRA.  So, we have to go back through that process to try to get a            
 fix.  Basically, what we are asking for is support from the state,            
 to be able to go back there and show that the state continues to              
 want us around and wants the business to continue and wants the               
 timber industry.                                                              
 MR. LEWIS said, "That's what it takes today - it takes that                   
 commitment, by everybody.  If you stay on the middle of the fence,            
 you basically join those that don't want the timber industry.                 
 There are a lot of them out there that say they do, but the size of           
 the industry that they want isn't going to give health care, and it           
 isn't going to give pensions, and it isn't going to give the things           
 that year-round employment and the size of the operations that we             
 have, give."                                                                  
 Number 994                                                                    
 MR. LEWIS explained that, "There have been a lot of environmental             
 issues raised, and to understand the environmental process that has           
 gone on, it started really, in the 1970s.  There's been a lot of              
 changes and modifications to the regulations.  The United States              
 has been on a very aggressive direction and a change mode.  All of            
 us that are in the middle of trying to make the changes and trying            
 to go forward, it's very difficult.  It is not that you don't try,            
 but at times it becomes difficult.  I know in the 1970s, almost all           
 the industries waited until the regulations were passed, until you            
 knew what you had to meet.  Then you would sit down with the EPA              
 and make a consent decree, sit down and figure out what you had to            
 do, they'd give you `X' amount of time and then you would go                  
 forward.  And in a lot of cases, the science was not there.  A lot            
 of the regulations and those things that you were going to meet,              
 the science really wasn't there.  You were having to generate --              
 make the science.  We used to bring in CH2M Hill, and still do, to            
 help us try to figure out what we can do to be able to meet those."           
 CO-CHAIRMAN WILLIAMS asked Mr. Lewis to describe the environmental            
 equipment being installed at the mill.                                        
 Number 1080                                                                   
 MR. LEWIS recounted, "I took over about two years ago and also,               
 came in because I am a 30-year employee.  I have seen the good                
 times and the bad times.  I thought I knew what to do and the right           
 direction, and how to go forward, and how to go forward as a leader           
 and not wait until you see the consent decrees. I talked with Harry           
 Merlo, former CEO of Louisiana Pacific, about Elementary Chlorine             
 Free (ECF), and he agreed to do that.  So, we started ahead of the            
 program, going to ECF and doing oxygen deliquidization.  We were              
 planning to be on board with that in May of this year.  Now, it               
 will be September or October, when we take our October shut down,             
 we will tie it in together.  It won't be finished by May."                    
 MR. LEWIS continued, "Also, under the consent decree, there have              
 been questions on that.  The consent decree amounted to just about            
 $20 million and most of that was containment.  In other words, all            
 of our tanks and so forth didn't have containment around them.  So,           
 we are having to go out and lift all the tanks up, put a seal of              
 concrete underneath it, and then put walls around those in case one           
 of them would split or break or there might be an earthquake or               
 something like that.  It hadn't happened before."                             
 Number 1153                                                                   
 MR. LEWIS proceeded, "One of the things that makes it difficult is            
 we are on solid rock.  We are on rock that is not (indisc.) and you           
 have to go back underneath it and put pads underneath it and go all           
 the way through it.  We don't have any draining fields."                      
 Number 1170                                                                   
 CO-CHAIRMAN WILLIAMS suggested that Mr. Lewis address some of the             
 environmental problems that are occurring, the lawsuit and whether            
 Ketchikan Pulp Company has made any changes.                                  
 Number 1187                                                                   
 MR. LEWIS responded, "What we got into trouble for was ... I guess            
 the judge said it the best, when he said, `You guys seem to have a            
 cavalier attitude' meaning that what Ketchikan Pulp Company was               
 doing was ... what we pleaded guilty to on a felony --  we have a             
 secondary treatment plant that contains our solids.  A lot of                 
 times, we pull the solids out and we burn those.  But you have to             
 clean the tank about every two years.  We took the tank down,                 
 drained it out and put it back through the system and, in doing so,           
 went back out to measure the outfall, but in the permit you are not           
 allowed to re-enter what they call any solids that have already               
 been gathered.  You can't turn around and re-enter that back to the           
 water.  We were wrong.  We did that on a shut down.  That was the             
 Number 1232                                                                   
 MR. LEWIS further stated, "The misdemeanors that we pleaded guilty            
 to -- we put in a mixing chamber in 1993 which cost about $6.5                
 million, to take the water and adjust the pH so the Ph was brought            
 up to the right value.  In doing that, with our high tides -- we              
 were already built on rock down at the tide level -- what we found            
 after we were operating was that when the high tide would come in             
 and we would also have kind of an overflow situation that couldn't            
 get through the pipes and it would come back up through, just like            
 down on your streets, which would be a sewer pipe.  It came through           
 the holes and in some of the cases, it would go down and go over              
 the side.  It was never more than what the material was that was              
 going into the water to begin with.  It was already going through             
 that.  But, you don't do that.  We should have stopped -- had a               
 different kind of attitude -- stopped and figured out how to fix              
 that, how to stop that and do that and we hadn't done that.  So, we           
 got into trouble for that.  A lot of it was in the approach of                
 doing things.  That approach has been changed, there isn't anything           
 that we don't do that if we can find out what went wrong because              
 mistakes happen.  The plant is running 24 hours a day, seven days             
 a week, it's a machine and sometimes it needs fixing."                        
 Number 1316                                                                   
 MR. LEWIS stated, "It is a process, the whole environmental side              
 and the changes to be made, is a process.  Any one firm measured at           
 any one point in time, will find itself not in good standings.                
 But, it's the process.  Are you trying to head to the right                   
 direction and to make the changes.  I certainly believe that KPC is           
 doing that.  I am giving it every effort and the people working for           
 me are.  You have to get to all the employees, you have to get down           
 to every single employee.  It doesn't just start with me; they all            
 have to come on board.  A lot of times, it isn't just the                     
 management that makes the mistake, it's all of us together in the             
 facility.  So, when you start that process, we all have to change."           
 Number 1363                                                                   
 CO-CHAIRMAN GREEN asked whether Mr. Lewis felt there was any bias             
 established because of these perceived or, in some cases, actual              
 violations, that goes from the EPA to the Forest Service.                     
 Number 1383                                                                   
 MR. LEWIS said, "Two years ago when I came on board, the first                
 thing I did was got with the EPA and everybody else, and told them            
 what my plan was and where we were going.  We have a very good                
 rapport with them now.  They understand, they know what we're doing           
 and they're supporting us.  We are doing the best that we can.  I             
 can go through and list the changes and the things that are in                
 place that were not in place two years ago.  It is substantial.  It           
 is amazing that we have been able to accomplish what we have, and             
 a part of that is Ernesta Ballard who came aboard to help get those           
 things in place."                                                             
 Number 1417                                                                   
 MR. LEWIS continued, "There is no excuse, there isn't any.   You              
 come to Ketchikan ... and for those us who like to be in Alaska and           
 like to be isolated and that is why we are there.  Sometimes, you             
 become too isolated and we became too isolated, there is no                   
 question about it."                                                           
 Number 1440                                                                   
 REPRESENTATIVE IRENE NICHOLIA wondered about Ketchikan Pulp                   
 Company's relationship with its workers and also wanted to know if            
 KPC honors its union contracts.                                               
 MR. LEWIS replied, "We have three unions at KPC: I.U.O.E, out of              
 Alaska; we have I.B.E.W., the electricians and we deal with Mr.               
 Brooks out of Anchorage.  We have contracts with both of those                
 unions.  We entered into three-year contracts with both unions.  We           
 have a third union which is A.W.P.P.W. which is represented by                
 Portland Union.  We have been unable to get a contract with the               
 third union, A.W.P.P.W. since 1984."                                          
 REPRESENTATIVE NICHOLIA asked Mr. Lewis whether KPC ever hires non-           
 union contractors.                                                            
 Number 1501                                                                   
 MR. LEWIS responded, "We hire union and non-union.  We try to hire            
 Alaskans and there are some Alaskans that are union and some that             
 aren't.  We just found it difficult to say, `I'm sorry, you're an             
 Alaskan, but you're a non-union, I can't hire you.'  So, what we've           
 done is let our contracts out, we encouraged the contractors that             
 we do -- again, the contractors that we deal with within the mill             
 are for specialized type work.  We deal with the power house, we              
 encourage them to hire Alaskans.  They hire a lot of boilermakers             
 out of Kenai, Anchorage, and areas like that, but they also hire              
 down South because of the type of work that we have and the short             
 duration they can't always get all Alaskans.  But we encourage and            
 we try to get them all to hire local first.  I can give you a list            
 of how many are local, how many are Alaskan and how many are                  
 outside.  We do that with all of our agreements."                             
 Number 1649                                                                   
 REPRESENTATIVE NICHOLIA inquired how many contractors are from the            
 Lower 48.                                                                     
 MR. LEWIS explained, "We have a group in here that is called TIC,             
 they're doing part of the Environmentally Chlorine Free project;              
 GE - they've done KPC's boiler work for years.  Off and on, if we             
 have specialized roof repair or some specialized red brick repair.            
 We usually go out for bid and usually the contractors that we deal            
 with, not all of them, are contractors that specialize in doing the           
 job, and then hire people to help them with those trades to be able           
 to do that job.  Usually it's done on the bidding and we will put             
 it out for bid.  A lot of work that is done is by local contractors           
 ... there are a couple of electricians in town that we do a lot of            
 work with.  We do a lot of work with the barge, the ship repair,              
 Ty-Matt, Inc.  We have a 115 maintenance crew at KPC that we try to           
 have do most of the work.  But being in Ketchikan, it's difficult,            
 but where you have a one month job and then out you go -- then you            
 don't again  -- we really do not have the work force to handle                
 that.  Ty-Matt, for the first time has been able to put a group               
 together of about 30-35, but they work at the shipyards, they work            
 for us; it kind of works together so when the ship comes in, they             
 can work there and sometimes we can put our work off.  We have                
 tried to work together with those guys to be able to have a steady            
 work force for what is not a year-round kind of a job."                       
 Number 1666                                                                   
 REPRESENTATIVE NICHOLIA emphasized that her questions pertained to            
 her belief in local jobs for Alaskans.                                        
 Number 1682                                                                   
 MR. LEWIS responded that, "Basically, if we can get $200 million              
 off our long term sale, there are about 1,500 people that touch the           
 log.  My guess is that 90 percent of those are in fact people that            
 live in Alaska.  Ten percent of that total workforce might work               
 here in the summer and leave in the winter.  But I would say that             
 90 percent of them are solid in the work force.  It's not like the            
 timber industry; there's only like 250 or 300 that would be in the            
 woods.  It used to be, when the wood system first started because             
 there was no infrastructure, no roads on Prince of Wales, there was           
 no Coffman Cove, no Thorne Bay, there weren't any of these towns,             
 so when it first started, no question, a lot of them came up here             
 in bunk houses, they lived in the bunk houses and they left.  Well,           
 now there are towns and cities.  Now these people live in those               
 towns and cities and the whole thing has changed.  That's part of             
 the whole structure that's taken place down there and that has                
 changed.  And part of that has been with continuous timber                    
 harvesting and a continued program.  It has changed."                         
 Number 1742                                                                   
 REPRESENTATIVE DON LONG asked what the possibility was of getting             
 an endorsement from the Environmental Protection Agency for HJR 64.           
 MR. LEWIS said, "I can ask them, I don't know if they do that.  I             
 know that when I first sat down with them and we were working with            
 the things, they said that the timber side of it is nothing that we           
 do anything about.  It's a political -- in our case it is -- it's             
 politics.  When every time you want to do something, you have to go           
 back in the halls of Congress to make the change, it's politics."             
 Number 1781                                                                   
 CO-CHAIRMAN WILLIAMS asked Mr. Lewis to explain how the Tongass               
 Timber Reform Act of 1990 affected Ketchikan Pulp Company and how             
 the Forest Service is providing KPC with timber.                              
 Number 1794                                                                   
 MR. LEWIS answered that, "Basically, the timber supply ... the                
 commitment to our contract has not been made.  Under TTRA, the                
 Forest Service changed the delivery system and the pricing system.            
 They changed a lot of things that are not working out.  It was                
 changed unilaterally, but we had a bilateral contract.  The minute            
 that was changed, we also have a suit with them.  And part of this            
 we hope is a patch back through Congress that stops the damage                
 that's occurring on that suit.  Basically, it has been the wood               
 supply and we've been down because of that.  We were down 90 days             
 for a short of wood supply.  KSM announced just now, about a six to           
 eight week shut down on its sawing operation.  Annette is going               
 down about eight weeks on its sawing operation.  I put in chippers            
 at both of those facilities last year and the first part of this              
 year -- one thing to try to be able to maintain some of the work              
 force over there.  What you have when the saw logs are gone, all of           
 a sudden the guys have no work.  If we can go ahead and chip some             
 of those logs over there, that can maintain some of the stability             
 on some of those jobs and certainly on the key people that you need           
 because a lot of those jobs are key personnel that take a long time           
 to train.  So, you've got to have some system there that you can              
 keep those people employed or you just can't start back up the next           
 day.  They have to go elsewhere to find work.  If they have to do             
 that very often, they do not count your operation as being very               
 Number 1899                                                                   
 MR. LEWIS continued, "APC, when it went down, we got about 130 days           
 from them or we would have been down another 130 days which would             
 have been 240 days of down time.  That's a lot at a pulp mill; that           
 is a lot of lost revenue.  Usually, a pulp mill will run while it             
 loses money because it loses less than it would be if it shut down.           
 That is why pulp mills were selected as the kind of a facility to             
 build infrastructure around because it runs 24 hours a day, seven             
 days a week and about 345 days a year.  Those are jobs that are               
 just continuing and go on forever and even when you are losing in             
 low markets, you are in fact still running.  So, the jobs and the             
 revenue are still going there.  Sawmills, because of the low                  
 capital that is put into there, don't cost as much.  Even to a                
 smaller operator it's a lot of money and I don't ever want to                 
 lighten that.  They can shut down at a lot less cost and a lot less           
 revenue loss.  That's why pulp mills were selected, plus to utilize           
 the 40 percent of the forest that would just lie and rot."                    
 Number 1924                                                                   
 CO-CHAIRMAN WILLIAMS related that he sees a lot of timber being               
 sold by companies like Sealaska and Klukwan and that he had read in           
 the paper where KPC is buying timber from Canada.  He asked if that           
 helped KPC?                                                                   
 Number 1938                                                                   
 MR. LEWIS answered, "The private lands, they have the right to                
 export, there's a higher value in export than there is domestic.              
 This is life, that's economic life.  That's the way it is.  They              
 will pay a lot more for saw logs than what we can process them                
 through and sell them.  The pulp logs - we should be the best in              
 the market place to be able to buy them, either APC or ourselves.             
 Over the years, between APC and ourselves, we were able to buy most           
 of the pulp logs that were generated.  Some of them did go south              
 and some of them were sold at certain times in the market place.              
 We were able to buy Concore's last year; Sealaska's we didn't.                
 Sealaska's got away from us.  But we try to negotiate with them and           
 buy it, but it's an open market and they have the ability of doing            
 both.  They try to do business with us and we try to business with            
 them.  There are times when economics might not allow us to be as             
 competitive.  They have always worked with us, they have always               
 tried to meet us.  The Canadian logs -- basically, the Skeena Mill            
 went down, we were almost out of logs, we would have probably been            
 down this spring.  The Skeena Mill went on strike.  Bang, there was           
 a surplus of logs and we were able to go over there and buy some              
 logs and keep our operations running.  Since about that same time,            
 the whole market collapsed, so now there's some logs floating                 
 Number 2007                                                                   
 CO-CHAIRMAN WILLIAMS remarked there have been comments like KPC has           
 repeatedly threatened to shut down the mill if they do not get                
 their way,; unless they get special treatment from the federal                
 government KPC will discontinue its operation; or it's a scare                
 tactic that KPC is using.  He asked Mr. Lewis if Ketchikan Pulp               
 Company will close if it doesn't get this extension.                          
 Number 2025                                                                   
 MR. LEWIS replied, "You don't want to threaten and you don't want             
 to say anything.  I guess, what has happened is ... part of what we           
 are trying to do and part of this extension is to get a                       
 recommitment that the government wants a timber industry up here              
 and the federal government is willing to supply that timber.                  
 There's been a real hesitancy on that part and I think we can all             
 see that because Seley is not running today and Klawock is                    
 struggling, the last of the mills are fighting to survive.  Most of           
 them don't have timber.  So, there isn't any real commitment.                 
 That's the real scare.  The real scare is when you're putting the             
 money forward, the resource won't be there and won't be put up for            
 sale.  Louisiana Pacific has a new CEO and he's looking at the                
 situation saying `what are you doing, that kind of money put in               
 there for the eight years won't have a pay back' and it won't."               
 Number 2073                                                                   
 MR. LEWIS related, "We went through Alaska Industrial Development             
 & Export Authority (AIDEA) trying to look at some money, and I                
 think we could have got a loan with AIDEA but only guaranteed by              
 Louisiana Pacific which would mean only the investment of it.  We             
 couldn't carry -- with an eight year contract, we could not carry             
 the payment back ourselves.  We couldn't make that payment                    
 ourselves, it would have to be extended.  I understand the threats.           
 You can't be in a small town and you can't run into trouble, and be           
 up against it.  Most people don't realize it, but one of our                  
 original parents, FMC that bought American Viscose, sold their                
 viscose business in 1975.  Eighty percent of our product went to              
 them.  They wanted out and they didn't care about taking KPC and              
 continuing it.  They were going to get out and sell, they were                
 going to sell their viscose.  The person that bought them did not             
 want the other.   KPC had a supply, so they weren't interested in             
 the supply.  Louisiana Pacific stepped forward and came forward and           
 agreed to do the environmental expenditures and basically, bought             
 FMC out - negotiated a price and became the sole owner.  A lot of             
 people go back to those days and say they were all threats and                
 everything else.  That was real, that was really going on.  It                
 wasn't made for threats, it wasn't made for anything else.                    
 Everybody was new in the environmental arena.  All of a sudden                
 there were requirements and the EPA came out and said, `You guys              
 are going to spend $60 million.'  We hired CH2M Hill and people to            
 come in and they said it would only take 28.  So, here we were at             
 a loggerhead and they were saying that you are going to spend $60             
 and you are going to have to and we said, `we don't have to, we are           
 only going to spend $28.'  And in the law is what we call a 507               
 hearing which means we can ask for economic analysis of the                   
 situation before that is done.  So, we went through that process,             
 and out of that process came an agreement with them, and after the            
 realization that you guys can go ahead with your $28 million                  
 program and it would work.  It did work and met all those                     
 requirements that were necessary.  Science was being developed at             
 that time, nobody was at fault.  It was just being developed."                
 Number 2158                                                                   
 CO-CHAIRMAN WILLIAMS announced that Mr. Lewis' time was up and that           
 he would take teleconference testimony at this time.                          
 Number 2222                                                                   
 DICK COOSE, Chairperson, Greater Ketchikan Chamber of Commerce                
 Timber Issues Committee related that he had the following comment             
 to make on behalf of Ketchikan Borough Mayor, Jim Carlton.  "The              
 Ketchikan Borough Assembly passed a resolution supporting HJR 64:             
 RESOLUTION NO. 1267                                                           
 "Section 1.  The Borough Assembly, in conjunction with the Alaska             
 State Legislature, respectfully urges the Alaska delegation in                
 Congress and Governor Knowles to take all steps necessary, this               
 year, to extend the Ketchikan Pulp Company long-term contract for             
 an additional 15 years because such an extension is critical to the           
 environmental, social and economic well-being of the Tongass                  
 National Forest timber workers, their families, and the timber                
 dependent communities in Southeast Alaska and because such an                 
 extension is in the public interest of the State of Alaska.                   
 "Section 2.  The Borough Clerk is instructed to send a copy of this           
 resolution to the Honorable Bill Clinton, President of the United             
 States; the Honorable Daniel R. Glickman, Secretary of the U.S.               
 Department of Agriculture; the Honorable Bruce Babbitt, Secretary             
 of the U.S. Department of the Interior; the Honorable Newt                    
 Gingrich, Speaker of the U.S. House of Representatives; the                   
 Honorable Strom Thurmond, President Pro Tempore of the U.S. Senate;           
 and to the Honorable Ted Stevens and the Honorable Frank Murkowski,           
 U.S. Senators, and the Honorable Don Young, U.S. Representative,              
 members of the Alaska delegation to Congress.                                 
 "Section 3.  This resolution is effective upon adoption."                     
 Number 2275                                                                   
 STEVE KALLICK, Alaska Rainforest Campaign, stated that his prepared           
 remarks were based on the previous version of HJR 64.  He said, "I            
 understand that yesterday, the resolution that was passed by the              
 Senate Judiciary Committee from what I can tell, is very similar to           
 the one that you have before you now.  I just want to say at the              
 outset, my organization is a coalition of national and Alaskan                
 conservation groups and we are concerned very much with the                   
 management of the Tongass National Forest.  But unlike an                     
 increasing number of environmental groups, we are not against all             
 logging, we are not against clear cutting, we are not opposed to              
 the harvest of old growth timber on national forest land and we are           
 supporting valid multiple use of our public land, including the               
 Tongass.  Most of all, we are really looking for locally based                
 solutions to our resource management challenges."                             
 Number 2309                                                                   
 MR. KALLICK stated he was really disappointed to see this                     
 resolution has now expanded to attack directly the Tongass Timber             
 Reform Act.  Yesterday, he felt there had been a fascinating                  
 discussion in the Senate and found himself, amazingly, in agreement           
 with former Tongass National Forest Regional Forester, John Sandor,           
 for the first time in many years.  He found many things that he               
 agreed with the borough mayor in Ketchikan on and he was depressed            
 to see that the discussion about the future of Ketchikan and the              
 future of our wood products industry and the role of government,              
 which he thought was fairly productive and which had a lot of areas           
 of agreement, has now exploded into a direct attack on the Tongass            
 Timber Reform Act.                                                            
 Number 2342                                                                   
 MR. KALLICK further stated, "If that is what the timber industry              
 wants, then the timber industry cannot complain about the                     
 instability in the region, and the instability in Tongass                     
 management because that will lead to a dramatic increase in the               
 instability of the whole situation.  I do not think that is in                
 anyone's interest and I don't think it will help us plan for a                
 future where we can have a timber industry and a tourism industry             
 and subsistence and commercial fishing and sport fishing, and all             
 of the other industries that depend on the Tongass.  I think what             
 we have got here is an attempt by one side to gain temporary                  
 advantage.  If you let that happen, you are our political leaders             
 here, you're responsible for that.  If you back one faction or the            
 other, if you continue to try to solve Tongass problems by passing            
 legislation like this resolution, then you are going to be part of            
 the problem.  This is not going to help create stability in the               
 Tongass; all it'll do is cause further fighting about the forest              
 services's management of the forest.  I just do not think that is             
 in the best interest of anyone.  I think all Alaskans need to get             
 together and all of our leadership needs to demand of us that we              
 work these things out together."                                              
 Number 2385                                                                   
 MR. KALLICK emphasized, "There are so many inaccuracies in this               
 resolution, I do not have time in five minutes to go through them             
 all.  Let me tell you that the Tongass Timber Reform Act never                
 promised that 420 million board feet would be made available.                 
 That's simply not true.  In fact, that is exactly what the problem            
 was with the laws that changed beforehand.  There was a mandated              
 timber harvest level that was not mandated (indisc.) for other                
 Number 2405                                                                   
 MR. KALLICK further stated, "Talking about changing these timber              
 contracts, Mr. Lewis has a tremendous grasp of history, but he                
 seems to have forgotten that when the House decided to cancel the             
 50-year contracts in 1989, the compromise the Senate came up with             
 was that the contracts be modified and kept.  But, the                        
 modifications were the compromise.  If you take away those critical           
 modifications, then you've completely undone that deal.  You're               
 reopening that deal.  I think it is very likely that Congress will            
 revisit the issue of whether the contracts should be cancelled.  I            
 just don't see that anybody gains from reopening the issues that              
 were agreed to ... you know, the timber industry, or I should say,            
 Louisiana Pacific because they are apparently the ones who are                
 going to be the beneficiaries of all of this...                               
 CO-CHAIRMAN WILLIAMS asked Mr. Kallick to conclude his remarks.               
 MR. KALLICK continued, "If this is what we have in store for us,              
 then I am really sorry for it because this is not going to help               
 Alaskans, this is not going to help the timber industry.  All this            
 is going to do is make this a national political football, and I              
 don't think that any of us who lives in Alaska and care about the             
 Tongass will benefit....(CHANGE TAPE)                                         
 TAPE 96-46, SIDE B                                                            
 Number 001                                                                    
 MR. KALLICK further stated ... "I believe that of all the Tongass             
 issues that need to be resolved or put on the table together that             
 that issue would belong on the table.  That's an extraordinary                
 statement.  We can't consider these things in the kind of                     
 resolution that you now have before you.  So, I think that it's               
 really unfortunate.  I am saying that we all need to talk about it            
 and reason together.  We are getting lost in what has become a                
 temporary splice for political advantage here."                               
 Number 024                                                                    
 CO-CHAIRMAN WILLIAMS asked Mr. Kallick if he had helped craft the             
 Sierra Club Legal Defense Fund fundraising letter?                            
 MR. KALLICK responded, absolutely not.                                        
 CO-CHAIRMAN WILLIAMS asked if he was aware of it or if he had seen            
 MR. KALLICK responded that he had seen the letter and was just as             
 surprised as the committee.  He had nothing to do with the crafting           
 of the letter and said he did not agree with the tone of the letter           
 and felt that the letter was not helpful in this debate.                      
 Number 060                                                                    
 CO-CHAIRMAN WILLIAMS asked if Mr. Kallick felt that letter was way            
 off base and should not have been written?                                    
 MR. KALLICK responded, "Yeah, I think that the tone of that letter            
 was way off base."                                                            
 Number 069                                                                    
 REPRESENTATIVE JOHN DAVIES inquired whether Mr. Kallick had any               
 written comments to provide to the committee.                                 
 MR. KALLICK said that he wanted to make sure that the new committee           
 substitute for HJR 64 was the same one that was written by Jim                
 Clark and handed out in the Senate the previous day.  He added that           
 he hadn't seen the House committee substitute.                                
 Number 086                                                                    
 CO-CHAIRMAN WILLIAMS remarked that Mr. Kallick was welcome to                 
 submit written testimony.                                                     
 MR. KALLICK interjected that his feeling was that no one in Alaska            
 had anything to do with the writing of the Sierra Club letter.                
 Number 115                                                                    
 DIANE MAYER, Director, Division of Governmental Coordination,                 
 Office of the Governor, read the Governor's position on HJR 64:               
 "The Knowles Administration recognizes the important role                     
 Ketchikan Pulp Company (KPC) 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: 1) long term              
 jobs for Alaskans; 2) the use of Alaska businesses, both in                   
 harvesting and value-added processing; 3) provision of a solid tax            
 base for Ketchikan and other Southeast communities; 4) responsible            
 environmental management; 5) participation in and support of the              
 Tongass Land Management Planning process that ensures sustainable             
 uses of our forest; and 6) 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 Ketchikan Pulp           
 Company to achieve these goals."                                              
 Number 224                                                                    
 CO-CHAIRMAN WILLIAMS asked Ms. Mayer if she agreed that Ketchikan             
 Pulp was doing the six issues mentioned in the position paper.                
 Number 246                                                                    
 MS. MAYER thought that KPC was working on these points.                       
 C0-CHAIRMAN WILLIAMS asked if Ms. Mayer would agreed that KPC has             
 been here for 40 years and plans to be here for another 15.  He               
 said, "KPC uses the use of Alaska businesses, harvesting and value            
 added processing, their pulp mill, they saw logs.  When I first got           
 into the timber industry, the pulp was 30 percent of the forest.              
 Now it's down to ... I am guessing, 15 or 20 percent now where we             
 are using more of the pulp type timber.  So, we are utilizing it              
 for value-added processing.  We have heard the argument was `you              
 are just using the good saw logs for pulp'.  So, we got a sawmill             
 and added more jobs in that area.  I think that was the cry we were           
 hearing from special interest groups.  I don't think that                     
 responsible environmental management -- I think we can attest to              
 that or maybe you have heard something different.  Can you expand             
 on that and why we have to question this portion of it."                      
 Number 305                                                                    
 MS. MAYER replied, "What the letter is doing is raising points for            
 deliberation that I think have been discussed somewhat in these               
 C0-CHAIRMAN WILLIAMS asked, "Does this letter say that the Governor           
 supports the resolution."                                                     
 MS. MAYER answered, "This letter lays out some terms for                      
 deliberation and focuses mostly on the call for Alaskans to be able           
 to review some specifics of contract extension and to be able to be           
 heard on the issue, and the Administration is looking forward to              
 that discussion."                                                             
 CO-CHAIRMAN WILLIAMS said, "So, you're not saying that he does                
 support it right now - yes or no?  Does he support the timber                 
 industry and does he support the extension of 15 years?"                      
 MS. MAYER stated, "These terms here, lay out the terms for                    
 deliberation and what the Administration is looking forward to is             
 the discussion of the proposal.  At that time, I think we will come           
 to the conclusions about where we go next."                                   
 Number 358                                                                    
 CO-CHAIRMAN WILLIAMS said he was confused about the statement `We             
 hope the legislature will address these important matters in its              
 deliberations.'   He remarked, "I think we heard from Ketchikan               
 Pulp Company on how they felt and what they've done in all of these           
 issues here.  I haven't heard any large outcry from the                       
 Environmental Protection Agency, I haven't heard our state forester           
 saying that they have problems with the logging practices that are            
 going on.  I think they are supposed to be watching that, aren't              
 they?  I am kind of confused by the Governor's letter saying that             
 we should be looking at it when I think, everything I've heard so             
 far, is that we are looking at it and see something --  you're not            
 saying that the Governor is supporting this very strongly.  He will           
 support it `if' and these `ifs' are already answered."                        
 Number 404                                                                    
 MS. MAYER responded that the terms of the letter talk about ...               
 "certainly, the Governor has talked about jobs for Alaska and using           
 Alaskan businesses both in harvesting and value-added processing.             
 It goes on - consideration of the land management planning process            
 and discussion among other users.  I think that we have, certainly,           
 in this and in various forms, launched some of these discussions.             
 I don't think they have come to closure yet.  The questions you are           
 asking are in regard to the resolution.  I think what the letter is           
 calling for here, is for the opportunity to actually review                   
 proposals for the extension and having Alaskans discuss those                 
 specific proposals for the extension."                                        
 Number 439                                                                    
 REPRESENTATIVE SCOTT OGAN felt the Governor's letter didn't seem to           
 be overwhelming support from the Administration for the resolution.           
 He referred to point one of the Governor's letter, "long term jobs            
 for Alaskans" and said that Ketchikan Pulp Company had produced               
 that over the years.  He asked Ms. Mayer if she disagreed.                    
 MS. MAYER emphasized the letter clearly states the Knowles                    
 Administration recognizes the important role that KPC plays in the            
 timber industry.                                                              
 Number 475                                                                    
 REPRESENTATIVE OGAN referred to point number two, the `use of                 
 businesses, both in harvesting and value-added processing' and                
 asked if there were suggestions the Administration might make that            
 KPC needs to improve on or is their track record okay.                        
 MS. MAYER said she didn't have all the details on employment, but             
 she did know that the Governor is very interested in increasing the           
 number of Alaskans in jobs.  With respect to the harvesting, as Mr.           
 Lewis discussed earlier, there is a long history of workers from              
 out of state and that has definitely shifted.  There's room for               
 discussion of these points and that's all this letter is alluding             
 to.  She didn't have all the back up here from the Department of              
 Labor to get into that.                                                       
 Number 509                                                                    
 REPRESENTATIVE OGAN felt that the Governor's letter implies that              
 these conditions aren't being met, so that's why he was asking for            
 a case-by-case basis as to what the Administration bases its                  
 assertions on and suggestions for possible areas that Ketchikan               
 Pulp needs to improve on to meet the Administration's goals.                  
 Number 540                                                                    
 MS. MAYER did not believe there were assertions about Ketchikan               
 Pulp Company directly in this.  She said, "I think it is simply               
 just putting the decision of contract extension in the broader                
 context of what's going on.  Support and participation of the land            
 management planning process is clearly something that's broader               
 than just KPC's role in that process.  I think it's just putting              
 the contract extension in the context of some of the important                
 issues that I think Alaskans want to have addressed and want to               
 then look at contract extension in the context of these terms."               
 REPRESENTATIVE OGAN reiterated that he was looking for the areas              
 that could be flushed out, if any, that the Administration has                
 problems with in supporting the resolution.  He asked Ms. Mayer to            
 articulate if there were any of those areas.                                  
 MS. MAYER responded, "The list is there.  I think the summary                 
 statement, the opportunity to review proposals -- providing                   
 Alaskans the opportunity to review proposals regarding contract               
 extension.  Put it in the context of (indisc.), put it in the                 
 context of consideration of other forest users and it names others            
 dependent on production - other industries that use the forest.               
 It's simply a statement about looking at it in the context of these           
 other issues."                                                                
 Number 607                                                                    
 CO-CHAIRMAN WILLIAMS pointed out that most of Ms. Mayer's comments            
 came out in the Environmental Impact Statement (EIS).  Presently,             
 the committee was looking for support from the Governor's Office              
 for this resolution.  He hypothesized, "Let's say for this                    
 discussion, that we don't get this resolution for whatever reason.            
 I know the Governor made some promises to Wrangell, and maybe                 
 Wrangell will be on line and Sitka also, and they can talk to the             
 promises the Governor made to them.  Let's say for this discussion            
 that we don't get the long-term extension, the 15-year extension.             
 Does the Governor have a plan for protecting the displaced workers            
 if KPC does shut down?  Does he have a plan for Ketchikan?  Is he             
 thinking out that far?"                                                       
 Number 661                                                                    
 MS. MAYER replied, "I think the focus of this letter is really to             
 focus on the dialogue needed to ensure stability in the industry              
 and I think, that is the emphasis that the Administration is taking           
 right now.  The focus of this letter is putting the debate in the             
 context that can assure the stability of the industry and that is             
 the tact that the Administration has been working on."                        
 Number 711                                                                    
 CO-CHAIRMAN WILLIAMS stressed that he would like to hear from the             
 Administration, a very strong "yes" to this resolution.  He said,             
 "We know what the timber industry is under today and the problems             
 we are having.  We have Sitka closing down, Wrangell closing down,            
 Ketchikan sawmills closing down, Annette Island sawmills partially            
 closing down, and Ketchikan Pulp Company is having a difficult time           
 with the volume of timber that's available.  Southeast Alaska is              
 going to be affected by this timber industry.  If it wasn't for the           
 timber industry in Southeast Alaska, we would be hurt and for the             
 Governor not to come out very strong in support of this timber                
 industry like he said he would when he was running for the election           
 ... getting that timber committee together run by Governor                    
 Sheffield.  I am just very concerned and I would hope that the                
 Governor comes back with a strong `yes' to us sometime in the very            
 near future."                                                                 
 Number 771                                                                    
 REPRESENTATIVE DAVIES said some of the difficulty he is having is             
 that he would like to be able to say, "Yes, I support a 15-year               
 extension."  He certainly thinks it is important that we come to              
 some agreement on how to provide for that continued timber supply             
 for Ketchikan Pulp Company.  Also, he thinks that most people would           
 agree that we would like to keep a strong presence of the timber              
 industry in Ketchikan.  But he thought the issue is, "when you are            
 asking for specific endorsement of this particular resolution; in             
 other words, the talk given by a member of your caucus recently,              
 called `the devil is in the details' and the problem is when you're           
 talking about a 15-year extension, we do not know what the details            
 of that are."  Also, he was somewhat concerned by the change in               
 tone between the original resolution and the committee substitute             
 and he really hadn't had a chance to fully digest those yet, but he           
 was struck with the same thing.  He had complimented some people              
 earlier on the restraint in the original House version and hoped              
 they could get back to that and keep the tone even in this                    
 discussion and that maybe the problem that we are having in getting           
 to say, `yeah, I really like that' is that we don't really know               
 what it is that we're being asked to like.                                    
 Number 853                                                                    
 CO-CHAIRMAN WILLIAMS understood Representative Davies' concerns               
 saying that he is concerned about comments in the letter like, `the           
 other forest users' and this is what we get beat up on, all the               
 time.  Chairman Williams referred to a map and said, "The Tongass,            
 we have 17 million acres of land and we have about 8.7 million                
 acres of timber land available to us to log."                                 
 MS. MAYER interjected she thought it was 1.7 million acres.                   
 CO-CHAIRMAN WILLIAMS continued, "All of these other user groups are           
 in there, tourism, commercial and sport fishing, seafood                      
 processing, mining, subsistence and personal use.  After all these            
 other areas have taken and looked at, and taken away from logging,            
 we won't ever be able to log 1.7 million and even part of that is             
 tied up in (indisc.) issue that we talked about in 1995 when the              
 Governor gave up our stand on that issue.  So, we might be down to            
 1.2 or 1.3 million acres of land that we can plan on.  We have a              
 large volume of fish and you know better than I, how much fish we             
 have left to sell yet.  So, the fish habitat apparently isn't hurt.           
 The deer on Prince of Wales - the subsistence people can take six             
 deer a year there.  Back in 1964, we could only take two deer.                
 It's there and I would hope that when the Governor comes up with a            
 letter such as this that is not really supportive  -- and I can               
 understand `the devil in the detail'.  `The devil in the detail' up           
 there in ANWR is something else, also.  And he is out there waving            
 the Alaskan flag and more power to him, but I would like to see him           
 also doing this for the timber industry.  I think we need it,                 
 Diane, and if there's anything that you need to take back to the              
 Governor is that he needs to understand what we are giving up here.           
 There's no more room for compromise.  We are on the edge of                   
 shutting down Southeast Alaska and I would hope that the Governor             
 understands that."                                                            
 Number 1001                                                                   
 MS. MAYER assured Representative Williams that the Administration             
 has spent an enormous amount of time on timber issues.   She had              
 worked on several and had been continually impressed by the                   
 Number 1052                                                                   
 DICK COOSE, Chairperson, Greater Ketchikan Chamber of Commerce,               
 Timber Issues Committee, read his testimony into the record:                  
 "The Ketchikan Chamber of Commerce has approximately 400 businesses           
 and individual members representing over 4,000 jobs.  Our members             
 represent the three primary industries that sustain our community:            
 timber, fishing and tourism.  We sponsor community events and                 
 support active committees through which we address issues which are           
 important to economic development.                                            
 "There is no single issue of greater importance to our members than           
 a strong economy.  There is no greater threat to our economy than             
 the reduction of the timber industry to our community and to                  
 Southeast Alaska.  Each year we poll our members to determine where           
 to focus our efforts.  Our number one issue continues to relate to            
 maintaining a strong timber industry.                                         
 "The Greater Ketchikan Chamber of Commerce supports a 15-year                 
 extension of the Ketchikan Pulp Company long term timber sale                 
 contract.  Ketchikan Pulp Company (KPC) has initiated a $200                  
 million investment program to upgrade 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, they must be reasonably assured that a            
 raw material supply will be available, the long term timber sale              
 contract is this assurance.                                                   
 "I know you have or will receive many facts and figures concerning            
 the economic impact of the KPC operation on the City and Borough of           
 Ketchikan, but let me state just a few:                                       
      * KPC assessed value equals 8.62 percent of the Ketchikan                
        Borough assessed value for 1995 or $78.9 million.                      
      * KPC property taxes to Ketchikan Borough for 1995 was                   
      * KPC payroll with benefits for 1995 was $53.6 million.                  
      * KPC total employees in March 1995 was 670.                             
 "You know that for each employee of a major industry like KPC there           
 are three additional jobs in the service and supply sectors and               
 that the income for these indirect jobs is four times the payroll.            
 This is an additional 2,010 jobs and $214.4 million of income                 
 benefit to our community.                                                     
 "Should Ketchikan Pulp Company cease operations in Ketchikan, which           
 other businesses will have to close, which and how many teachers,             
 store clerks, doctors, service persons, lawyers, and others will              
 have to look for work elsewhere.  I believe each of you know and              
 understand what happens to a community when a third of the jobs               
 "We believe that Ketchikan Pulp Company has been and will continue            
 to be a responsible business, neighbor, and citizen in this                   
 "We believe you realize that harvesting enough timber from 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.                                    
 "We have initiated a petition to Governor Knowles requesting his              
 support of the KPC contract extension.  Over 1,600 signatures have            
 been collected in three and one half days of effort in Ketchikan.             
 "The Ketchikan Chamber of Commerce supports and urge your approval            
 of House Joint Resolution No. 64."                                            
 Number 1274                                                                   
 WILLIAM MORAN, President, First Bank, testified, "First Bank is the           
 only commercial bank in Alaska with headquarters in Southeast                 
 Alaska and all our commercial activities are combined in this area            
 of the state.  We currently have eight branch offices located in              
 Sitka, Ketchikan, Prince of Wales, Wrangell, Petersburg and Juneau.           
 The bank has been in business since 1924 and as a result, we have             
 a previous history of economic development in Southeast Alaska and            
 a good understanding of what it takes to do business here."                   
 MR. MORAN made three comments in support of HJR 64 supporting the             
 15-year extension of the long term timber contract.  He stated,               
 "First of all, it is currently fashionable to talk about free                 
 markets when we talk about natural resource development in Alaska.            
 We generally need to recognize that the federal government                    
 exercises what amounts to a monopoly of control over the raw                  
 materials.  In the case of Ketchikan pulp mill, there are not five            
 or six significant sources of wood fiber competing to supply raw              
 materials at free market prices.  There is only one primary source,           
 and then some minor secondary sources of raw material.  The primary           
 source is the federal government, the Tongass National Forest.  As            
 a result, any entity contemplating a significant long-term                    
 investment in resource development needs a long term contractual              
 assurance that the necessary raw materials will be available on               
 reasonable terms.  There would not be a pipeline to Prudhoe Bay               
 without a long-term source of oil.  There presently wouldn't be a             
 pulp mill in Ketchikan if there had never been a long-term                    
 contract.  It is probably reasonable to assume that there won't be            
 future long-term significant investments without long-term                    
 commitments for sources of supply."                                           
 MR. MORAN continued, "Second, while there's not a free market for             
 natural resource based raw materials in Southeast Alaska, there's             
 certainly a free international market for investment capital.  No             
 responsible investors are going to commit $200 million to any                 
 project anywhere unless they are reasonably confident of an                   
 acceptable risk adjusted rate of return.  That corresponds with the           
 pulp mill's plans but at the local level, when we try to build new            
 hotels, hospitals or fund new schools, if there isn't a strong                
 underlying local economy then there isn't the access to the funds             
 that we need.  Along with that, if we look around at the Pacific              
 Northwest, state and communities are making long-term commitments             
 raising from property tax relief, favorable long-term leases of               
 public assets, tax refinancing of infrastructure in order to                  
 attract the same type of long-term job training capital investment            
 that Louisiana Pacific is willing to commit to a small town in                
 Southeast Alaska.   If we do not support their efforts by doing               
 those things that we can reasonably do to make Southeast Alaska a             
 profitable place to do business, then the investment capital and              
 the jobs that go with them, will find a more attractive home                  
 somewhere else."                                                              
 Number 1458                                                                   
 MR. MORAN further stated, "Finally, I guess it is easy to read the            
 handwriting on the wall.  If Louisiana Pacific stops investing in             
 the mill, the 2,000 for exploration of their current contract,                
 really becomes meaningless.  In a couple of years, the mill will              
 shut down and when it does, it probably won't open up again.  No              
 one will build another one; at least, probably not in my lifetime.            
 The bureaucracy and the government related support facilities will            
 continue to go on and on, but the people who are employed directly            
 or indirectly in the forest products industries, will become what             
 is conveniently known as redundant.  If you live around Ketchikan,            
 Alaska, or Sitka, Alaska, or Wrangell, Alaska, in fact, Wrangell is           
 a good case, if you have a chance, you should walk down the Main              
 Street of Wrangell.  There isn't an alternative source of                     
 employment that there would be if 500 jobs disappeared in Seattle             
 or a larger metropolitan area."                                               
 Number 1556                                                                   
 MR. MORAN commented, "Anyway, anyone who currently lives and works            
 and invests in Southeast Alaska that's been through the turbulent             
 times that we've had here over the years realizes that the minute             
 they see there's no long-term commitment to a vital forest products           
 industry, they'll start acting in their - I guess you'd call it               
 their own life self-interest.  Their individual decisions taken in            
 the aggregate will certainly result in unpleasant, unfortunate and            
 unnecessary long-term decline in the regional economy and I guess             
 the only growth industry would be for consultants holding seminars,           
 proposing unrealistic plans and develop a new value-added forest              
 products industry.  That seems to be the latest fad in Sitka and              
 Wrangell, anyhow."                                                            
 MR. MORAN concluded, "I'd like to make one last observation.  In              
 1954, we started harvesting the first trees for the pulp mill.                
 About 25 years later, we started pumping the first oil through the            
 pipeline.  In 2004, we'll be in the process of pumping the last few           
 drops of oil out of Prudhoe Bay, but in Southeast Alaska if we do             
 the things we need to do now, in 2004 we can be making plans to               
 start harvesting second growth timber and hopefully, we can be                
 talking about another extension of the long-term contract, an                 
 additional long-term investment in the state.  The Tongass National           
 Forest, I guess people have a tendency to look at it as just                  
 something that's to be used up, thrown away and I think those of us           
 who live down here, look at it as a renewable resource and                    
 something that will be here for generations to come (indisc.)."               
 CO-CHAIRMAN WILLIAMS asked if there were any questions of Mr.                 
 Moran.  Hearing none, he asked John Antonen to present his                    
 Number 1652                                                                   
 JOHN ANTONEN, Executive Director, Southeast Regional Resource                 
 Center, testified that the Southeast Regional Resource Center is              
 governed by school districts of Southeast Alaska and serves every             
 district in Alaska with educational services.  He stated, "You have           
 in your packet a survey of timber impacted schools and communities            
 in Southeast Alaska.  This survey was conducted by the Southeast              
 Regional Resource Center on behalf of the districts listed on page            
 1.  It discusses the impact of timber reduction on schools,                   
 communities and families and the significant problems that arise              
 for schools, communities, children and families in Southeast Alaska           
 because of reductions at Wrangell, Sitka and other rural                      
 communities.  The survey also was prepared for our Congressional              
 Delegation suggesting that the federal Forest Service, Department             
 of Agriculture, had some responsibility for those problems and                
 ought to have some fiscal responsibility to mitigate those problems           
 much like that commitment that was made to Oregon, Washington and             
 northern California when their timber industry had significant                
 MR. ANTONEN continued, "I guess I come before you to say that                 
 strong local economy - timber products economy - is important to              
 children and families and bad things happen when it goes away.  I             
 also say to you that as the state of Alaska perhaps reduces its               
 overall income or revenue to school districts, there's got to be a            
 strong economy out there, a strong industry so that it can support            
 the funding for schools, for communities, for families and                    
 children."  He welcomed any questions committee members had                   
 regarding the survey which was completed approximately two years              
 ago by a consortium of Southeast school districts.  He believed               
 those school districts in that consortium are in support of a                 
 strong industry; a strong timber products industry in Ketchikan.              
 CO-CHAIRMAN WILLIAMS asked if there were any questions of Mr.                 
 Antonen.  Hearing none, he called on William Brock to testify.                
 Number 1849                                                                   
 WILLIAM BROCK, Analyst and Project Manager, McDowell Group,                   
 testified that he has worked for the McDowell Group since the fall            
 of 1982.  His background is in economics, public policy and                   
 management.  He said, "Since 1973, the McDoweLl Group has conducted           
 over 800 research and consulting projects for private and public              
 sector clients.  I have authored and co-authored reports on the               
 economic impacts of tourism, seafood, forest products,                        
 transportation and government in Southeast Alaska, in addition to             
 conducting economic profiles of Juneau, Sitka, Ketchikan and other            
 Southeast communities.  The purpose of my testimony today is first,           
 to outline research the McDowell Group has conducted on the                   
 Southeast Alaskan economy as a result of declining timber harvest             
 on the Tongass.  And second, to address in general terms what could           
 result from further decrease in the Tongass timber harvest."                  
 Number 1927                                                                   
 MR. BROCK continued, "Let's begin with the economic impacts of                
 declining Tongass timber harvest between 1990 and 1994.  Between              
 1990 and 1994, the U.S. Forest Service data indicated a 40 percent            
 decrease in Tongass timber industry employment.  This equates to a            
 loss of over 1700 industry related jobs throughout the Southeast              
 Alaska region.  There's no way to track the exact location of these           
 economic impacts; the data just isn't available.  However, what we            
 have tried to do is take a look at Southeast Alaska economy in                
 different segments to see how they also fared during this 1990 to             
 1994 period.  What we did is we divided the Southeast Alaska                  
 economy into three separate micro-economies:  That of Juneau which            
 is primarily dependent upon government; other urban economies which           
 is comprised of Sitka, Ketchikan, Wrangell, Petersburg and Haines,            
 these communities are primarily dependent upon resources - natural            
 resources as well as government with a growing dependence on                  
 tourism; and finally, the rural economy of Southeast, which is                
 primarily dependent upon resource and government.  Between 1990 and           
 1994, Juneau's economy fared comparatively well.  We noted there              
 was about a 7 percent total employment increase, growing at about             
 2 percent annually.  About 1,000 jobs were added to Juneau's                  
 economy, most of these were in the service sector and the retail              
 sector.  In the other urban economy, things didn't fare quite as              
 well in the 1990 to 1994 period.  Collectively, the other urban               
 economy noted a 4 percent decline in employment.  That was for a              
 net loss of 640 jobs.  There was a 10 percent decline in real                 
 payroll which equated to about a net loss of $40 million.  Also,              
 during this period, Alaska Pulp Corporation's (APC) mill in Sitka             
 closed.  These resulted in a job loss of 400 individuals and $19              
 million in payroll.  At the time of the closure, APC was Sitka's              
 largest employer in the community.  While many components of Sitka            
 economy are healthy and strong today, estimates based upon the                
 Alaska Department of Labor (ADOL) indicate annual average                     
 employment in Sitka actually declined by about 375 jobs between               
 1993 and 1994.  In addition, based on ADOL data, payroll declined             
 as well, falling from $115 million in 1993 to about $100 million in           
 Number 2080                                                                   
 MR. BROCK said, "Wrangell was the community probably hardest hit by           
 the declining Tongass harvest.  In November 1994, APC was forced to           
 close the Wrangell sawmill, costing the community about 225 jobs.             
 This equates to about a full 20 percent of the local work force.              
 As with APC in Sitka, the sawmill in Wrangell was the community's             
 largest employer and was a heavy contributor to local taxes.  In              
 fact, according to the city of Wrangell, it made up about 20                  
 percent of local revenues to the municipalities.  Rural Southeast             
 also had a little bit of trouble between 1990 and 1994.  There was            
 a 4 percent decline in employment, 15 percent decline in payroll              
 which came out to about a $20 million loss in payroll overall                 
 during that period.  A 4 percent decline in personal income between           
 1990 and 1993 - 1993 was the most recent available data for                   
 personal data - and during this time period, there was about a 16             
 percent increase in transfer payments.  What that is, is Aid to               
 Families with Dependent Children (AFDC) payments, welfare payments,           
 unemployment, and those type of income sources, there was a noted             
 Number 2176                                                                   
 MR. BROCK asked, "What are some of the likely impacts from the                
 continued declines in Tongass timber harvest?  According to the               
 U.S. Forest Service, there's still about 2,500 direct and support             
 sector jobs in the industry.  These jobs would be at risk if                  
 further declines in the Tongass timber harvest occurred.  In                  
 addition, Ketchikan Pulp Company is at risk.  The closure of KPC              
 would result in probably the loss of up to 700 forest product                 
 related jobs in the community.  That's about $40 million to $45               
 million in annual payroll.  This represents about one-fifth of                
 Ketchikan's economic base.  In total, if KPC were to close, the               
 region could lose as much as 1,000 industry related jobs and                  
 approximately 700 jobs in the support sector.  As with Wrangell,              
 KPC also contributes heavily to the city coffers or the borough               
 coffers; the estimate is they contribute annually about 50 percent.           
 Let me rephrase that - my notes here have the Ketchikan Pulp                  
 Corporation accounts for about half the total assessed property               
 valuation in Ketchikan.  So, they are contributing heavily as far             
 as municipal revenues as well."                                               
 Number 2274                                                                   
 MR. BROCK concluded, "In addition, continued declines in the                  
 Tongass timber harvest could threaten sawmill operations in                   
 Ketchikan, Klawock and Metlakatla as well as logging companies                
 throughout the region.  In conclusion, further declines in the                
 Tongass timber harvest could likely result in significant                     
 additional job losses within Southeast.  While this occurs,                   
 Southeast would become increasingly more dependent on seasonal and            
 low paying jobs.  As a result, Southeast Alaska could lose                    
 significant ground in its efforts to build stable, year-round                 
 economies in the region."                                                     
 CO-CHAIRMAN WILLIAMS thanked Mr. Brock for his testimony.  He asked           
 John Sisk to present his testimony.                                           
 Number 2379                                                                   
 JOHN SISK, Former Director, Southeast Alaska Conservation Council,            
 thanked the committee for the opportunity to testify and                      
 distributed written statements that had been prepared for the                 
 previous day.  He informed the committee of his background which              
 included a degree in environmental biology, a masters degree in               
 forestry and he had worked in many different industries ranging               
 from lumber to tourism in addition to running a small business.               
 MR. SISK stated that he endorsed the positions of the Southeast               
 Alaska Conservation Council and the Alaska Environmental Lobby, who           
 are both strongly opposed....                                                 
 TAPE 96-47, SIDE A                                                            
 Number 001                                                                    
 MR. SISK continued..."prepared by initial presentation with the               
 idea that mostly address the KPC topic and not opposed to KPC's               
 operations.  I think the resolution is premature because I think we           
 need to get through the Tongass Plan, at least the next step of it.           
 We need to look at the landless Natives issue and see what that               
 means about timber supply and we need to take a hard look at where            
 we think our timber industry should be in the twenty-first century            
 and make sure we're tracking towards that.  That's not to say that            
 Ketchikan Pulp is not an important part of the economy.  It's not             
 to say that they might not be the player.  It's just to say that we           
 need to take a hard look at some of these things before endorsing             
 a resolution like this."  Mr. Sisk brought with him a piece of wood           
 he had found in his garage and said this is what this value-added             
 issue is all about.  He said, "This is a piece of wood that is made           
 out of little short pieces of vertical grain high value wood they             
 cut out of low grade logs - logs that as a whole are low grade, but           
 have pieces of good wood in them - finger jointed and laminated               
 together and it ends up being a high value-added, labor intensive             
 thing and you can further manufacture, retail and pre-retail                  
 products.  This is the kind of thing I really think that we need to           
 be thinking about.  This is happening right now in British Columbia           
 and the Northwest with logs that we're pulping here.  There's                 
 reasons why we've ended up here but when we look to the future, we            
 need to make sure we don't end up with our pulp being the tail                
 wagging the dog while the rest of the world leaves us in the dust."           
 Number 170                                                                    
 MR. SISK stated he thought the committee substitute puts a huge               
 cloud over the original resolution that KPC and concerned                     
 representatives and senators brought forth.  There were several               
 things he addressed.  First, it completely misrepresents the                  
 Tongass Timber Reform Act.  Second, it ropes so much into it that             
 instead of being a simple resolution about Ketchikan Pulp's                   
 contract, it becomes a resolution about Alaska Pulp Company, about            
 the Tongass Timber Reform Act, and about the overall timber supply.           
 If he were KPC, he would be a little nervous about that because it            
 quite frankly makes a really "nice fat target" for those                      
 individuals who would like to shoot at it.  He thought there were             
 environmental groups around that would do just that.  Additionally,           
 he thought a number of people would basically panic when they                 
 realize that the original resolution had been transformed into                
 something quite different.  He wondered what effect the scenario in           
 the committee substitute would have on the landless Natives effort.           
 The reason he mentioned that was because the Forest Service in 1991           
 stated that "420" was close to the maximum they could get out of              
 the Tongass and this resolution talks about going back to the                 
 industry we had a few years ago.  In that scenario, he didn't see             
 where landless Native claims would come from on the Tongass, unless           
 they were to come from national conservation areas.  He wasn't sure           
 that was the way landless Natives want to deal with the issue.                
 MR. SISK stated, "Looking at the Tongass Timber Reform Act - there            
 is nothing in the Tongass Timber Reform Act that has the number 420           
 in it.  That number is a Forest Service number they came up with              
 after the Reform Act and before it in their Tongass Planning                  
 process as one alternative.  Section 101 of the Reform Act says,              
 `Let the markets decide the timber supply based on taking care of             
 the stewardship requirements of law.'  That's been upheld."                   
 MR. SISK recommended that committee members take a hard look at the           
 accuracy of the committee substitute.  He thought something that              
 could be talked about and some progress made in discussing had been           
 replaced with something that is a huge target and a huge albatross            
 that would probably keep things polarized and will serve other                
 Number 448                                                                    
 WAYNE WEIHING, President, Tongass Conservation Society and Board              
 Member, Southeast Alaska Conservation Council, testified that he is           
 a 28-year Alaska resident and former 21-year employee of Ketchikan            
 Pulp Company.  He stated, "I'd like to speak in opposition to the             
 15-year contract extension that's being proposed.  At this current            
 time, Ketchikan Pulp Company is promoting economic fear and                   
 insecurity in Ketchikan.  It's a very real thing and it's very sad.           
 They're also promoting it in our state of Alaska.  I'd like to give           
 you a couple of examples here and a little bit of history.  In 1973           
 -- this is a news clipping from the Ketchikan Daily News and it               
 goes as follows -- `In 1973, the following first attempts to                  
 implement basic environment impact statement requirements, C. L.              
 Cloudy of Alaska Loggers Association, warned that the requirements            
 would cause complete pulp mill shutdown and shutdown of the                   
 remaining sawmills in Southeast Alaska.'  That's Ketchikan News,              
 April 19, 1993.  Another, on May 4, 1976, Ketchikan Daily News                
 reported, Ketchikan Pulp Company will close by July 1, 1977, but as           
 the paper explained the next day, the announcement wasn't news; it            
 was part of a publicity stunt.  The paper then criticized the pulp            
 mill for issuing false alarms one week before EPA pollution                   
 hearings and shortly before employee negotiations were due to                 
 start.  One editorial concluded that Ketchikan Pulp Company's                 
 crying wolf and playing with the fate of thousands of people.  God            
 help it.  Ketchikan Daily News, May 5, 1976.  In 1984, Martin Pihl            
 claimed that if the Forest Service didn't reduce the price of                 
 timber and allowed larger clearcuts, we're all going to pack up and           
 leave.  That's from the Juneau Empire, March 29, 1984.  In 1992,              
 the EPA proposed much tighter pollution controls for Ketchikan Pulp           
 Company's mill.  KPC's then President Martin Pihl, claimed that the           
 new pollution controls would seriously threaten the survival of the           
 mill or any pulp mill anywhere.  That's Ketchikan Daily News, April           
 17, 1992.  On June 26, 1995, Ketchikan Daily News announced that              
 KPC says it would close its Ward Cove sawmill for an indefinite               
 period starting Friday because it's running out of timber sold by             
 the United State Forest Service.  The same day it announced the               
 closure of the sawmill, the Ketchikan Daily News contained an ad              
 paid by KPC, which offered to sell approximately 3,000 board feet             
 of red cedar and 2,000 board feet of yellow cedar during the third            
 quarter of 1995."                                                             
 CO-CHAIRMAN WILLIAMS asked Mr. Weihing to repeat his remarks about            
 the red cedar and the yellow cedar.                                           
 MR. WEIHING reiterated that the same day the mill announced the               
 closure of the sawmill, 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.                       
 CO-CHAIRMAN WILLIAMS inquired if Ketchikan Pulp Company had done              
 MR. WEIHING responded affirmatively.  He said it was a "for sale"             
 ad in the Ketchikan Daily News.                                               
 CO-CHAIRMAN WILLIAMS inquired if the Ketchikan Pulp Company could             
 utilize that in the pulp mill, itself.                                        
 MR. WEIHING said, "I guess what I'm saying is that the cedar they             
 offered for sale could have been utilized in the sawmill."                    
 REPRESENTATIVE OGAN observed that a total of 5,000 board feet of              
 timber could be utilized in a heartbeat.  He remarked that was not            
 a significant amount and he didn't understand the relevance.                  
 MR. WEIHING said he was reading from an article in the Ketchikan              
 Daily News to give the committee an example of some of the                    
 MR. WEIHING continued with his testimony, "And one of the reasons             
 why that sawmill went down, and I think we looked at it when                  
 Senator Murkowski was here, while pulp prices were exploding, the             
 average market price for selling timber dropped 30 percent.  When             
 Senator Murkowski was in Ketchikan, the Ketchikan sawmill said they           
 had to shut down.  What they were shutting down for is they were              
 still running the chipper because saw logs were worth more in the             
 form of chips for pulp.  That's the only thing that determined                
 that.  There wasn't a shortage.  They had saw logs running through            
 their chipping."                                                              
 Number 777                                                                    
 CO-CHAIRMAN WILLIAMS said, "I could agree with that but a few years           
 back, prior to the time that Ketchikan Pulp put in the Ketchikan              
 sawmill, we were hearing the other side of the story that all                 
 they're doing is doing exactly what you're saying.  So what did the           
 pulp mill do?  They put the sawmill in to utilize these saw logs.             
 So, I don't understand where you're coming from.  I mean, here the            
 pulp mill has done that - they're utilizing it now - and then we're           
 getting cut off by the amount of volume."  He asked Mr. Weihing if            
 he supported the extension?                                                   
 MR. WEIHING responded that he did not.  He thought it was too open-           
 ended.  In his closing remarks, Mr. Weihing commented that                    
 Ketchikan Pulp Company has a history of corporate greed.  If they             
 would have put their profits back into pollution controls, they               
 wouldn't be in the fix they are now.  If they had negotiated with             
 the workers in 1984 when they terminated the labor agreement which            
 took the workers from $20 an hour to $12 an hour, they'd get a lot            
 more support from the people, including the workers that actually             
 work there.  If Ketchikan Pulp had done these things with their               
 profits instead of taking their profits to Portland and then crying           
 poverty.  He said, "It's a scare tactic; it was blackmail in 1976             
 and it's blackmail in 1996."                                                  
 Number 913                                                                    
 KELLY NOLLEN, Attorney, Sierra Club Legal Defense Fund, testified             
 the Sierra Club Legal Defense Fund is a nonprofit law firm that               
 represents citizens and enforcing laws designed to protect the                
 public health and the environment.  She said, "Our clients,                   
 especially those who live in Ketchikan near KPC's mill, are                   
 increasingly concerned about the huge amount of pollution illegally           
 generated by KPC and I appreciate the opportunity to express their            
 concerns.  We are adamantly opposed to the resolution before this             
 committee today.  Over the past 20 years, KPC has proven itself               
 unable to comply with pollution control laws.  The mill has an                
 extraordinary history of violating laws meant to protect public               
 health, jeopardizing the safety of Ketchikan residents and mill               
 workers.  The resolution being considered would reward the shameful           
 performance.  The KPC argues that an extension of its long-term               
 timber contract is necessary to allow it to finance new pollution             
 controls at the mill.  Such a rationale is not persuasive.  The KPC           
 has enjoyed the subsidies and economic benefits of a long-term                
 contract for 40 years and it has still failed to operate in                   
 compliance with the law.  Based on KPC's past performance, there is           
 no guarantee that 15 more years of subsidies will result in an end            
 to KPC's illegal pollution.  In fact, history shows us the opposite           
 will likely be true.  In addition, no other pulp mill in the                  
 country has the benefit of a long-term contract like KPC's but all            
 must operate in compliance with environmental laws.  Ketchikan Pulp           
 Company's mill has been unable to comply with the law even with a             
 large competitive advantage over other mills nationwide.  Instead,            
 KPC has continually emphasized profits over compliance with                   
 pollution control requirements.  Finally, KPC is not a small                  
 company with limited resources.  KPC's parent company, Louisiana              
 Pacific, is one of the largest forest products companies in the               
 world and earned nearly $350 million in profits in 1994.  Taxpayers           
 should not be asked to foot the bill for such a company to come               
 into compliance with environmental laws.  KPC's poor environmental            
 record is also a breach of its existing long-term timber contract.            
 The contract requires KPC to maintain adequate measures for                   
 disposal of its pulp mill effluents into operating compliance with            
 all applicable laws.  In December 1995, the Forest Service notified           
 KPC that its violations of the Clean Water Act constituted a breach           
 of these provisions of its existing contract.  Under this                     
 circumstance, it is especially inappropriate for the legislature to           
 support a contract extension and a corresponding continuation of              
 KPC's disregard for environmental requirements."                              
 MS. NOLLEN gave a brief overview of KPC's past history.  She said             
 their violations are not newly arisen in response to new                      
 environmental controls; they have continued through the `70s, `80s            
 and `90s.  Whatever the state of the environmental law has been,              
 they've been unable to comply.  She urged the committee not to                
 reward them for their past poor performance as a corporate citizen            
 and to send a strong message that compliance with environmental               
 laws is not contingent on continuing taxpayer subsidies in the form           
 of an extension of their long-term timber contract.                           
 CO-CHAIRMAN WILLIAMS asked Ms. Nollen if she was familiar with a              
 MS. NOLLEN responded she had seen the letter for the first time               
 just a few minutes earlier.                                                   
 CO-CHAIRMAN WILLIAMS referred to a statement in the letter with               
 regard to convincing the government to cancel these outrageous                
 contracts and asked Ms. Nollen if she still felt that way.                    
 MS. NOLLEN responded she had nothing to do with the drafting of               
 that letter.  She said she worked for that organization, but she              
 had just seen the letter.  Her understanding of her office's                  
 position is that they support a sustainable timber industry in                
 Southeast, but one that provides as many jobs as possible for each            
 board foot cut and one that is conducted in compliance with all               
 applicable laws.                                                              
 CO-CHAIRMAN WILLIAMS noted for the record that Representative David           
 Finkelstein was in attendance.                                                
 Number 1229                                                                   
 REPRESENTATIVE OGAN asked if it was a fair assertion that there had           
 been a tremendous amount of change in environmental laws in the               
 last couple of decades.                                                       
 MS. NOLLEN said she thought the laws have always been evolving, but           
 as stated earlier, she thinks that KPC has not complied with the              
 laws, whatever the provisions were over the past 20 years.                    
 Number 1278                                                                   
 REPRESENTATIVE OGAN asked if it was possible that maybe some of the           
 laws were evolving a little faster than a reasonable ability to               
 keep up with the laws and regulations?                                        
 MS. NOLLEN stated she thought that any company should have to                 
 comply with the laws, whatever they are at any point in time and              
 that most pulp mills do not ask for special long-term timber                  
 contracts in order to finance their ability to do so.                         
 REPRESENTATIVE OGAN asked if it was not true that it takes a                  
 tremendous amount of capital investment in time to come into                  
 compliance with the environmental laws as they change and sometimes           
 it doesn't always exactly coincide with when the law is passed.  He           
 asked if Ms. Nollen was asserting that KPC has never made any                 
 attempts to comply?                                                           
 MS. NOLLEN thought they had made attempts, but obviously over the             
 past 20 years, none of those attempts have been sufficient.  There            
 is no guarantee that any additional time period would result in               
 them coming into compliance.  She noted that KPC has operated under           
 a long-term contract for the past 40 years and has a poor record.             
 There is no guarantee that an additional 15-year extension would              
 result in compliance.                                                         
 REPRESENTATIVE OGAN said he was having a difficult time following             
 Ms. Nollen's logic.  He said they, as legislators, pass laws and if           
 someone is out of compliance, there are certain regulatory                    
 adjudicators that enforce the compliance.  He asked if that system            
 was broken?                                                                   
 MS. NOLLEN thought it had been broken in this case.  She noted that           
 KPC has paid huge fines - they paid $6 million last year, they                
 plead guilty to criminal violations and there are continuing                  
 Number 1348                                                                   
 KATHY LIETZ, Bookkeeper, Black Bear Cedar Products, testified via             
 teleconference that Blear Bear Cedar Products is an independent               
 cedar mill located near Thorne Bay who employs 10 people with an              
 annual payroll of a quarter million dollars.  She said                        
 unfortunately, due to circumstances beyond their control, they have           
 not run at capacity since 1992.  She provided background                      
 information for committee members saying, "The owners of Black Bear           
 Cedar came to Thorne Bay in 1986 to examine the availability of               
 cull red cedar logs.  At that time, what little cull cedar actually           
 came into (indisc.) was being either buried or burned due to lack             
 of (indisc.).  That was the beginning of a long and fortuitous                
 business relationship between Black Bear Cedar and Ketchikan Pulp             
 Company.  To be quite frank with you, KPC is our mainstay.  We                
 purchase at least 90 percent of our log supplies from them.                   
 They're close in proximity to our mill and the price is one we can            
 live with.  When we buy logs elsewhere, the logistics are more                
 involved and expensive.  Ketchikan Pulp has always been a good                
 neighbor to Black Bear.  We have brought in rounds of logs from               
 elsewhere and they have dewatered and loaded them onto our trucks.            
 When our mill burned to the ground in 1992 putting 10 people out of           
 work, they hired some of our crew.  They have helped us in so many            
 small and insignificant ways, it would be impossible to name them             
 all.  We are not the only ones benefitting from the generosity and            
 kindness of KPC.  The other three (indisc.) mills at Thorne Bay are           
 treated the same.  Our (indisc.) community are the benefactors of             
 a substantial amount of philanthropy bestowed by KPC."                        
 MS. LIETZ remarked, "The basic impact of KPC not getting an                   
 extension of the long-term contract is simple.  KPC would quite               
 likely cease operation in Southeast Alaska.  If they were to leave,           
 Black Bear and several others would follow.  For you see, we are              
 not in the logging business, but in the manufacturing business.  It           
 is not our job to make a log but to make something out of it.  I              
 assure you that there is not a single mill in this forest (indisc.)           
 financial resources to locate, purchase and log enough timber to              
 sustain their operation.  We depend on larger companies like KPC,             
 to do that for us.  Honestly, our (indisc.) is intertwined with               
 that of Ketchikan Pulp Company.  An extension for them is an                  
 extension for us.  Furthermore, you will hear from people who will            
 tell you that Southeast Alaska will be just fine after KPC is gone.           
 Those people are only kidding themselves.  There's absolutely no              
 question in my mind as to what will happen to Black Bear and our              
 community.  We will simply cease to exist.  Many businesses and               
 communities have come and gone in this state over the last century            
 and we will join them.  KPC is the largest employer in Thorne Bay.            
 In all, there are hundreds of jobs that can be linked either                  
 directly or indirectly to KPC.  Each and every person here is                 
 somehow touched by timber.  Some may say that eliminating KPC will            
 open up the industry to the little guy.  Let me attest to you, the            
 game would not change; only the players.  Instead of KPC, we would            
 have Boise Cascade, Weyerhauser, International Paper Champion or              
 some other big business.  It is anyone's guess as to whether they             
 would be as generous to us as KPC has been.  Thorne Bay was founded           
 by KPC - our city hall, fire hall and most of the homes were                  
 erected by KPC and its employees.  Any time the city of Thorne Bay            
 is in need, who do they ask for help?  KPC.  I can safely guarantee           
 that without KPC the communities of Thorne Bay, Coffman Bay and               
 (indisc.) would become virtual ghost towns.  I am certain that a              
 few people would remain, but not nearly as many as there are today.           
 I keep hearing that we need to diversify.  Value-added and tourism            
 are key words these days, yet to diversify first you must have                
 infrastructure.  Very few communities in Southeast have the                   
 infrastructure necessary to exist without the timber industry.  And           
 let's face it, we all know that if the mill closes, the Forest                
 Service (indisc.) their volume from the timber base.  That timber             
 should still be a factor in order to encourage new timber                     
 businesses to come in.  So far we've lost Sitka, Wrangell and                 
 (indisc.).  Nearly one-half of the timber demand has been removed             
 from the supply.  If we are to move forward, we must have                     
 direction.  The Forest Service needs to be directed to maintain a             
 stable timber supply to keep us going.  If KPC were to leave, that            
 volume would be (indisc.) as well.  Without the binding legal                 
 powers of a timber contract authorized by the government of the               
 United States, there is absolutely nothing to encourage the Forest            
 Service to provide ample timber to keep this industry alive.  It is           
 honestly that simply."                                                        
 MS. LEITZ concluded that Black Bear Cedar supports the 15-year                
 contract extension for Ketchikan Pulp Company.  Not only is it good           
 business for them, it is in the best interest of all Alaska.                  
 Number 1616                                                                   
 REPRESENTATIVE KOTT asked how many employees Black Bear Cedar                 
 currently has and the length of their relationship with KPC.                  
 MS. LEITZ said Black Bear Cedar currently has eight employees.                
 They are currently in a layoff status due to a lack of logs and               
 added it would be a two or three week layoff depending on their               
 timber supply.  Black Bear Cedar has had contracts off and on with            
 KPC continually since 1987.                                                   
 REPRESENTATIVE KOTT asked how many employees Black Bear Cedar has             
 when they are at full capacity?                                               
 MS. LEITZ responded that at full capacity, they employ 10 people.             
 Number 1690                                                                   
 CO-CHAIRMAN WILLIAMS thanked Ms. Leitz for her testimony and asked            
 Brian Brown of Silver Bay Logging to present his comments.                    
 BRIAN S. BROWN, Chief Logging Engineer, Silver Bay Logging Company,           
 left because of time constraints but submitted a written copy of              
 his testimony to committee members to be included in the committee            
 Number 1731                                                                   
 JACK PHELPS, Executive Director, Alaska Forest Association, Inc.,             
 remarked he wished the committee had been able to hear Brian                  
 Brown's testimony because he represents one of the logging                    
 companies, Silver Bay Logging, that contracts with KPC.  Silver Bay           
 Logging is the main helicopter logging company in Southeast Alaska.           
 Their ability to do helicopter logging which is very important in             
 terms of the environment and in terms of minimal impact on the                
 forest is exceptionally important.  He said, "Were it not for the             
 presence of KPC, the kinds of investments that it takes to log with           
 helicopters simply would not exist and that's a very important                
 issue with respect to logging in the Tongass National Forest."                
 Number 1782                                                                   
 MR. PHELPS read the following statement: "The resolution before you           
 today concerning the requested extension of Ketchikan Pulp                    
 Company's long-term contract, deals with the type of issue on which           
 the Alaska Forest Association would normally not take a position.             
 The matter of contracts is considered the business of each                    
 individual company, although I am certain many of our member                  
 companies, such as Silver Bay Logging, would enthusiastically                 
 endorse the continuation of the long-term contract.                           
 "My purpose today, speaking for the Alaska Forest Association, is             
 to point out to you the more technical issue of KPC's crucial role            
 as a key component in Southeast Alaska's timber industry.  We're              
 talking about an industry that has lost, due to governmental                  
 policies and environmental extremism, 42 percent of its work force            
 since 1990.  That's nearly half.  Just a few short 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, Ketchikan Pulp Company's dissolving pulp mill at               
 Ward Cove.                                                                    
 "The importance of that pulp to Southeast Alaska's economy and to             
 the forest industry in the state cannot be overemphasized.  The               
 need for a stable, year-round employment base in Southeast Alaska             
 was recognized back in the 1920s and it led to the establishment of           
 the long-term contracts in the 1950s.  Today, KPC is Southeast                
 Alaska's largest industrial employer, and the largest member                  
 company in our association.  Its 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 and service               
 industries throughout the region, such as you just heard about from           
 Kathy Lietz.                                                                  
 "The company provides local, value-added employment based on the              
 use of a local, renewable natural resource.  It employs some 450              
 people in the pulp mill, 250 people in related sawmills, and                  
 another 300 people in the woods.  That's value-added.  That's                 
 taking Alaska's natural resources and creating long-term good jobs;           
 jobs that support families in Southeast Alaska.  Those 1,000 jobs             
 are important not only for the families who directly depend on                
 them, but for the entire economy of the region.  The Alaska                   
 legislature, the Governor, and the Alaska congressional delegation            
 should make a priority of protecting those jobs.  Equivocation on             
 that issue is unbelievable to those of us working in this industry            
 and trying to maintain a living in Southeast Alaska.                          
 "The presence of the pulp mill in Ketchikan is important for                  
 another reason.  In sustaining any timber industry in any forest,             
 and the Tongass is no exception, it is always easy to sell the high           
 end logs.  There's always a market for the high end logs.  Finding            
 a market for the low-end timber and for the waste wood and by-                
 products of sawmill operations is a different matter.  With a pulp            
 mill in Southeast Alaska, we have the opportunity to utilize those            
 products here, to provide a market for those products here in                 
 Alaska and to create jobs from those products here in Alaska.                 
 Everyone, from our schools - you heard from John Antonen earlier,             
 to the local grocer benefit from that larger infrastructure.                  
 "In summary, Mr. Chairman, 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 fact, in a really healthy forest industry            
 here on the Tongass, we could easily maintain two, three or even              
 more such mills.  The entire region would benefit under that                  
 scenario.  Please continue to do what you can to help strengthen              
 and support Alaska's timber industry, including the Ketchikan Pulp            
 Company's operations in the Tongass National Forest."                         
 MR. PHELPS thanked the committee for the opportunity to testify on            
 this important matter and offered to answer any questions.                    
 Number 1981                                                                   
 TINA LINDGREN, Executive Director, Alaska Visitors Association                
 (AVA), testified that the Alaska Visitors Association is a                    
 statewide organization with over 600 members.  She stated she was             
 not suggesting to committee members whether this specific contract            
 of the pulp company should be extended, but wanted to make the                
 point that the tourism industry and the timber industry are not               
 mutually exclusive and in fact can work together.  The Alaska                 
 Visitors Association has long recognized that Alaska's economy is             
 supported by a multitude of industries from petroleum products to             
 mining, fishing, timber, as well as tourism and they have                     
 consistently supported a viable timber industry in Alaska.  The AVA           
 appreciates the fact that Alaska needs to diversify the economy,              
 especially healthy basic industries because so many supporting jobs           
 rely on those basic industries.  The AVA also endorses the multiple           
 use of forests.  They believe that timber harvesting and tourism              
 can co-exist within the country's largest national forest with                
 proper management.  There may be potential conflict with certain              
 areas; however, the AVA has consistently worked with the Forest               
 Service to try to identify where those areas might be to help                 
 resolve those conflicts.                                                      
 Number 2056                                                                   
 MS. LINDGREN stated the AVA does share some common concerns that              
 were raised in the resolution.  The need for businesses to be able            
 to plan ahead in order to justify capital investments.  This is               
 certainly a problem for businesses, especially those small                    
 businesses in tourism as well as KPC - she could certainly                    
 understand the need to be able to plan for the future.  Access to             
 public lands is another area of common concern.  There is                     
 tremendous pressure to further restrict access to public lands for            
 commercial purposes of all kinds.  Her third point was that both              
 tourism and the forest products industry in Alaska are renewable,             
 sustainable, regulated and compatible with the environment if they            
 are conducted in a responsible manner.                                        
 MS. LINDGREN said in conclusion that AVA would like to continue to            
 work with the timber industry, the legislature, the Administration            
 and the Forest Service to help alleviate uncertainly for businesses           
 whose livelihood depend on the forest and to minimize conflicts               
 wherever they may be.  She thanked Co-Chairman Williams for the               
 opportunity to testify.                                                       
 Number 2100                                                                   
 CO-CHAIRMAN WILLIAMS asked if there were any questions for Ms.                
 Lindgren.  He called on Sol Atkinson of Metlakatla to testify.                
 Number 2109                                                                   
 SOL ATKINSON, Council Member, Metlakatla Indian Community,                    
 testified on behalf of the Metlakatla Indian Community that they do           
 support the resolution relating to the extension of the United                
 Forest Service timber sale contract for the Ketchikan Pulp Company.           
 He said it is time for the state legislature and the Governor's               
 Office to recognize that something must be done for the timber                
 dependent communities in Southeast Alaska that seem to be ignored             
 in the rush to save the environment.  Metlakatla is for sound                 
 environmental policies, but they are for jobs, people and families            
 as well.  They applaud this effort to move the Congress to do                 
 something to bring some stability to our economy.  With a                     
 population of approximately 2,000 people, Metlakatla is a timber              
 dependent community, with an unemployment rate at the present time            
 of over 50 percent.  This is due to the unstable timber supply at             
 the present time.  A stable timber supply from the Tongass National           
 Forest is essential to their welfare.  In the last few years, in an           
 effort to improve their economic situation, Metlakatla successfully           
 established a small business administration timber sale purpose               
 program and started a small sawmill to provide jobs and revenues.             
 They have operated their mill profitably for three years and it               
 provides between 20 and 40 jobs.  They also depend on the (indisc.)           
 of their mill to the Ketchikan Pulp Company for an additional 100+            
 jobs plus the revenues.  Therefore, Metlakatla has become timber              
 dependent, but their new economic program is now threatened by a              
 lack of timber.  That is why Metlakatla supports HJR 64.                      
 MR. ATKINSON stated one thing is certain for now - the 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.  He said 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 forest in their industry.  In their view,            
 if the long-term contract for KPC is not extended, they are looking           
 at the last years of the timber industry in Southeast Alaska and              
 they cannot be happy about that.                                              
 MR. ATKINSON said that people in Metlakatla believe that Southeast            
 Alaska can sustain the timber supply without permanent harm to the            
 environment.  Also, they believe the timber industry holds the most           
 potential for long-term economic stability.  Mr. Atkinson stated              
 that by this testimony, Metlakatla is declaring its commitment to             
 stand with all right thinking people in Southeast Alaska to find a            
 solution to our economic problems.  Part of that solution must be             
 proper utilization of our forests for the good of all, which                  
 includes a stable timber supply.  They encourage any effort to move           
 toward that goal.  He said that HJR 64 is a step in the right                 
 direction.  He thanked Co-Chairman Williams for the opportunity to            
 Number 2368                                                                   
 GARY PAXTON, City Administrator, City & Borough of Sitka, testified           
 as the City Administrator, not necessary on behalf of the Assembly,           
 although he was confident his comments would reflect their position           
 as well.  The first point he wanted to make is if we had a timber             
 supply, we would have a timber industry in Sitka and in Wrangell.             
 He said, "Through money provided by Senator Ted Stevens, the Forest           
 Service had conducted an analysis for a timber industry in Sitka              
 and there were multiple opportunities to have a timber industry               
 ranging from a sawmill with (indisc.) inflator to laminated                   
 (indisc.) lumber if the supply was available."  Like Metlakatla,              
 Sitka's heritage and character are fully intertwined with the                 
 timber industry.  They are a blue collar town; they are a town of             
 independent working individuals who want to work for a living and             
 support their families.  The impact of the mill closure two and               
 one-half years ago has significantly shrunk their middle class                
 population.  His second point is the fundamental importance of a              
 timber industry to the socio-economic health of the communities.              
 His point is that timber jobs are needed to maintain their blue               
 collar tradition.                                                             
 MR. PAXTON said his second point was that he was a second                     
 generation Alaskan and in his view it has specific negative impact            
 on our Native community.  He said this year Sitka was a million               
 dollars short of funding their school district for the third year             
 in a row.  If Sitka had gotten the property tax that would have               
 been derived from the mill plus the sales tax of a $20 million                
 payroll, that wouldn't have been an issue.                                    
 MR. PAXTON said his third point was that community was being pitted           
 against community with the current limited supply.  His last point            
 was that both the litigation action in the appeal process....                 
 TAPE 96-47, SIDE B                                                            
 Number 001                                                                    
 MR. PAXTON continued ..."same numbers, the Tongass is certainly               
 able to sustain well over 350 million board feet (indisc.) or 120             
 million board feet that we used to have."  The final point he made            
 is that (indisc.) process of litigation on all offerings is                   
 damaging.  The second point he made on this final issue is that he            
 had grave concerns about the current (indisc.) analysis and the               
 proposal that will come out of that.  He did not believe the                  
 numbers will be anywhere near sufficient to provide the timber                
 industry from Sitka to Wrangell down to Prince of Wales and of                
 course to include KPC.                                                        
 Number 042                                                                    
 CO-CHAIRMAN WILLIAMS asked if the committee had any questions of              
 Mr. Paxton.  Hearing none, he asked the mayor of Wrangell to                  
 present his testimony.                                                        
 Number 063                                                                    
 DOUG ROBERTS, Mayor, City of Wrangell, testified that he is a                 
 lifelong resident of Wrangell and was born in Ketchikan.  He wanted           
 to advise the committee of some of the more positive times in                 
 Wrangell so everyone would understand what Wrangell was all about             
 a few years ago.  He said, "As a child growing up in Wrangell, we             
 made an annual tour of our two mills that we used to operate in               
 town - two larger mills and as you'd walk through the tour of the             
 mill, you'd always recognize familiar faces that ran the mill.                
 They were called residents of our community.  As we toured the                
 mill, there was always something that stuck in my head - something            
 that we were always proud of and that was the idea that the                   
 Wrangell sawmills produced more lumber than anywhere else in the              
 state of Alaska.  Wrangell was the lumber capital of Alaska.                  
 Nobody produced more lumber than our community.  Our longshoremen             
 had the distinction of being the most productive crews on the West            
 Coast, including down South, in terms of loading lumber onto ships.           
 I can remember the ships parked out in front of town, in both the             
 in town dock and the 6-mile mill had a port facility that was                 
 handling ships.  All materials being cut at our mills.  Something             
 that we were very proud of."                                                  
 Number 131                                                                    
 MR. ROBERTS continued, "Now all I can tell you about is the                   
 devastation of a proud community that once had probably the                   
 heritage of being one of the state's largest exporters of lumber              
 materials.  Now Wrangell's unemployment rate is up around 30                  
 percent; all our mills are shut down and you continually hear that            
 our mills didn't evolve through time and change economically to               
 changing lumber situations in the market or through the                       
 environmental process.  That's not true.  Our mills did evolve.               
 They did change; they did move along with the process.  They had              
 torn down both mills and had just recently built a new more modern            
 efficient mill that was a lot more environmentally capable of                 
 handling some of the problems of the changes.  It didn't matter -             
 the mill is still shut down.  We don't have the distinction of                
 being the timber capital of anything now."                                    
 MR. ROBERTS distributed a hand out on the economic situation in               
 Wrangell.  He said, "One of the things that kind of catches me                
 though recently that's most noticeable to me in the mixture of                
 industries is the dramatic change in the manufacturing and                    
 government sectors of the economic base.  In 1994, manufacturing              
 jobs comprised 29 percent of the available jobs.  Today, it has               
 dropped to 11.4 percent.  Likewise, government jobs comprised 47.4            
 percent of the economic base compared to 32 percent two years ago.            
 So this trend has been pretty quick to come upon us and we're no              
 longer a timber town; we're a government town.  I'm going to submit           
 this for your record.  This is supplied both -- state information -           
 - and the state doesn't even bother to track our unemployment                 
 situation in Wrangell and that's stated in there -- I think as of             
 1994 they quit tracking our unemployment situation.  We just had              
 one of our oldest restaurants in town close, we lost 20 more                  
 employment jobs and opportunities in the community.  One of the               
 things that we have implemented -- the only thing that we have to             
 offer anybody that is out of work as a result of the closures of              
 our mills and the displaced timber workers, longshoremen, and the             
 list just keeps going on down -- I can name a variety of road                 
 building contractors that are out of business - they're all out of            
 work -- is we have a career transition center that's basically                
 training good sound people that were ship sawyers and longshoremen            
 into being something that they weren't intended on being.  They               
 were sawyers, they were longshoremen - that's what they want to be            
 but now we're re-training them to be barbers and computer                     
 technicians.  That's all we have to offer these people at this                
 time.  We don't have any other solutions; we have no other jobs."             
 MR. ROBERTS continued, "I'm proud to be the mayor in my community             
 and it irritates me beyond words when someone comes up to me and              
 says, `Well, you've been given a sentence.'  That's not the case;             
 I knew the situation when I was elected mayor and I'm proud to be             
 in that position right now.  I see it as an opportunity to allow my           
 community to grow past the situation we are in.  We'll never allow            
 ourselves again to be reliant on one industry but I'm here to say             
 that I do support the Ketchikan Pulp Corporation.  The council has            
 not had time to consider the resolution but I can speak on behalf             
 of small business and large business that we can't afford to lose             
 anymore jobs and Ketchikan Pulp Corporation has a presence in our             
 community.  They do considerable work and we can't afford to lose             
 a single job.  I wish them all the luck in the world.  We're not              
 giving up on the timber industry, don't get me wrong.  We have                
 hopes that things are going to turn around and change, but on the             
 other hand we have more serious work ahead of ourselves."                     
 MR. ROBERTS referred to the social impacts and said, "I hear from             
 the environmental community and the Sierra Club Legal Defense Fund            
 that they're concerned about the social, economic, safety and                 
 health of communities but I've got a real social problem in my                
 community right now and there's no legal defense fund for their               
 protection or help.  We're going to be okay and we're going to                
 survive as a community.  We've had quite a bit of help from the               
 state and yourself, Mr. Chairman.  You've been a proponent of the             
 industry for a long time.  One other point I'm going to make is               
 that it's a timber supply issue that we have.  We have a small mill           
 that employs about 20 people and I mentioned yesterday at another             
 hearing I was at that this mill needs about 25,000 board foot a day           
 to operate.  And that's the way we live our lives in Wrangell now -           
 one day at a time.  That's how we exist.  That's not -- we don't              
 need -- we're just hoping we get a little shot of timber to keep              
 them going and we're failing miserably.  We've got a couple of                
 municipal tracts available to us right now that we're looking at              
 trying to find a way of getting timber to that particular operator            
 and the state has also got some Department of Natural Resources               
 land that could possibly allow him to operate for three months.               
 But it's a pathetic situation.  We're living one day at a time and            
 so is he.  We get the feeling that we're not allowed to be a                  
 community anymore; that we're almost asked to leave the state and             
 we're not going to leave."  He invited questions from committee               
 Number 397                                                                    
 CO-CHAIRMAN GREEN asked, "These 1994-95 unemployment figures - are            
 they just figures so that if somebody came from a fairly reasonable           
 job, say associated with the timber industry and then had to take             
 a job that is lesser, he wouldn't be unemployed and so therefore,             
 he wouldn't show up on these figures?  What I'm suggesting is even            
 worse than these figures show because of down grading of jobs."               
 MR. ROBERTS said that was a safe assumption and added it's hard to            
 track their unemployment.  Their best estimate is that it's over 30           
 percent, but their unemployment is compared together with                     
 Petersburg who is more of a fishery oriented community and who seem           
 to have a more stable employment, whereas Wrangell's isn't.  He               
 noted it would be nice if Wrangell could have their own employment            
 Number 440                                                                    
 CO-CHAIRMAN WILLIAMS asked what the effect has been of the                    
 Governor's program to restore jobs in Wrangell.                               
 MR. ROBERTS replied the Governor put together a task force that has           
 a great deal of potential.  He thought the Governor should follow             
 through and allow the task force to meet with the sectors of this             
 industry in order to sort some things out.  Mr. Roberts noted there           
 had been some dialogue between the Governor and industry people.              
 CO-CHAIRMAN WILLIAMS asked if there were anymore questions of Mr.             
 Roberts.  Hearing none, he asked Kate Tesar to testify.                       
 Number 493                                                                    
 KATE TESAR, Lobbyist, Alaska Services Group, read the following               
 statement into the record on behalf of Alaire Stanton, Mayor, City            
 of Ketchikan:  "The basic facts in support of this resolution are             
 contained within the resolution itself, which I wholeheartedly                
 support.  My husband and I moved to Ketchikan 42 years ago because            
 of his employment as a chemical engineer with Ketchikan Pulp                  
 Company.  We raised our family in Ketchikan, supported by one                 
 stable, well-paying job.  We bought property and built a house.  My           
 husband was promoted.  The kids graduated from Ketchikan High                 
 School, went away to college and earned their college money by                
 working at Ketchikan Pulp Company during the summers.                         
 "Our family story and many others 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 & Timber Company and FMC would not have been made unless           
 they had the security promised within those contracts.  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 1950s.  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 into 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.  This statistical and consensus information is                 
 readily available from the city, 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 interrelated                 
 sawmills and wood operations in southern 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 or five years ago.                                   
 "Finally, Mr. Chairman, I believe we should send copies of the                
 adopted resolution to all members of the United States 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 for that in the            
 national forest.  I would also stress that Ketchikan Pulp is a                
 value-added product.  The KPC and its related enterprises not only            
 utilize the whole log, but also the trash and scraps that otherwise           
 would 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 Ketchikan Pulp Company is to the               
 continuing economic and social well-being of our families and                 
 Number 630                                                                    
 REPRESENTATIVE DAVIES asked Ms. Tesar if the reference to the                 
 resolution in the first sentence of her statement was to the                  
 original resolution or the committee substitute.                              
 MS. TESAR responded it was to the original resolution.                        
 CO-CHAIRMAN WILLIAMS asked Ernesta Ballard from KPC to comment.               
 Number 650                                                                    
 ERNESTA BALLARD, Environmental Consultant, Ketchikan Pulp Company,            
 said there were a number of issues raised earlier about KPC's                 
 environmental record.  She directed the committee's attention to              
 the third tab in the blue book that had been distributed.  She said           
 this document was constructed in the fall anticipating some of the            
 questions that had been raised about KPC's environmental track                
 record and it documents KPC's entire environmental history; what              
 the regulations required at the time and what installations were              
 made.  She made a few comments to put KPC's environmental track               
 record in context.                                                            
 MS. BALLARD stated, "Prior to KPC's design and construction, the              
 pulping process of choice in the world was a calcium bisulfite                
 process.  This is more technical than you may wish to know, but               
 it's important for the record because the calcium bisulfite process           
 does not allow the recovery of spent liquor and therefore it's                
 discharged with the effluent.  KPC was designed - it was the first            
 pulp mill designed in North America and the first pulp mill built             
 with the magnesium bisulfite pulping process.  This was an                    
 intentional effort to reduce - and it reduced by as much as 50                
 percent - the pollutant load in the effluent because the magnesium            
 bisulfite process allows the complete recovery of cooking liquors             
 and they can either be recaptured and reused or burned for fuel.              
 This was the spirit with which the founders of KPC went forward               
 into the pre-regulatory era.  The first 15 years of KPC's operation           
 were before the passage of the contemporary environmental laws that           
 we operate under today.  So, from 1956 until 1971 with the passage            
 of the Clean Water Act, the discharges were unregulated but were              
 regulated voluntarily by the operators because of their intentional           
 design to use a recovery process.  I won't take anymore of your               
 time this evening to recount what is itemized for you in complete             
 detail in this book, but I would be happy to answer questions that            
 you might have at a later date about the specific regulatory                  
 history.  KPC's history of environmental control and environmental            
 compliance is comparable to industry in the Pacific Northwest with            
 which I was extremely familiar during my tenure as EPA Regional               
 Number 780                                                                    
 CO-CHAIRMAN GREEN asked when KPC made the switch over to using                
 magnesium bisulfite?                                                          
 MS. BALLARD responded that KPC was designed to use magnesium                  
 bisulfite at its inception; it never used calcium bisulfite.  She             
 pointed out that a calcium bisulfite mill will discharge about                
 300,000 pounds of BOD which is the biological oxygen demand entity            
 which can cause (indisc.) in a water body; 300,000 pounds, by                 
 contrast, KPC during its 15 years of unregulated discharge, before            
 the passage of the Clean Water Act, discharged about half that                
 Number 819                                                                    
 CO-CHAIRMAN WILLIAMS asked if there were any other questions for              
 Ms. Ballard.  Hearing none, he announced that he planned to take              
 two hours of public testimony the following day.                              
 CO-CHAIRMAN WILLIAMS thanked everyone for their participation and             
 adjourned the meeting of the House Resources Committee at 7:15 p.m.           

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