Legislature(1995 - 1996)
04/02/1996 04:35 PM House RES
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
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
SHORT TITLE: EXTENSION OF KETCHIKAN PULP CO. CONTRACT
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
absent.
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
purposes.
"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
operate.
"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
felony."
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
secure."
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
around."
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
industries."
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
it.
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
hearings."
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
commitment.
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
$675,000.
* 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
disappear.
"We believe that Ketchikan Pulp Company has been and will continue
to be a responsible business, neighbor, and citizen in this
community.
"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
testimony.
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
problems."
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
1994."
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
increase."
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
interests.
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
that.
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
inconsistencies.
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
letter.
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
problems.
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
file.
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
testify.
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
members.
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
data.
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
communities."
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
Administrator."
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
much.
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.
ADJOURNMENT
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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