HOUSE RESOURCES STANDING COMMITTEE February 18, 1995 9:05 a.m. Ketchikan, Alaska MEMBERS PRESENT Representative Joe Green, Co-Chairman Representative Bill Williams, Co-Chairman Representative Scott Ogan, Vice Chairman Representative John Davies MEMBERS ABSENT Representative Alan Austerman Representative Ramona Barnes Representative Pete Kott Representative Eileen MacLean Representative Irene Nicholia OTHER LEGISLATORS PRESENT Speaker Gail Phillips Senator Mike Miller COMMITTEE CALENDAR Presentation on Timber/Forestry Issues WITNESS REGISTER JOE AMBROSE, Aide Senator Robin Taylor State Capitol, Room 30 Juneau, AK 99801 Phone: 465-3873 POSITION STATEMENT: Made comments and asked questions JIM AYRES, Chief of Staff Office of the Governor P.O. Box 110001 Juneau, AK 99811-001 Phone: 465-3500 POSITION STATEMENT: Made comments and asked questions CLIFF SKILLINGS, General Manager Alaska Lumbermen's Association 81 Phillips Lane Ketchikan, AK 99901 Phone: 225-0947 POSITION STATEMENT: Made comments and answered questions STEVE SELEY, JR., Owner & President Seaborne Lumber Co. P.O. Box 6157 Ketchikan, AK 99901 Phone: 225-2181 POSITION STATEMENT: Made comments and answered questions FRANK AGE, Owner & President Pacific Rim Cedar P.O. Box 1498 Wrangell, AK 99924 Phone: 874-2772 POSITION STATEMENT: Made comments and answered questions KIRK DAHLSTROM, Partner & Manager Viking Lumber P.O. Box 670 Craig, AK 99921 Phone: 755-8880 POSITION STATEMENT: Made comments and answered questions TROY REINHART, Employee Relations & Public Affairs Manager Ketchikan Pulp Company P.O. Box 6600 Ketchikan, AK 99901 Phone: 225-2151 POSITION STATEMENT: Made comments and answered questions ROBERT LINDEKUGEL, Conservation Director Southeast Alaska Conservation Council 419 Sixth Street, Ste. 328 Juneau, AK 99801 Phone: 586-6942 POSITION STATEMENT: Made comments and answered questions DAVID SALLEE P.O. Box 1219 Ward Cove, AK 99928 Phone: 247-9557 POSITION STATEMENT: Made comments JACK LEE, Past Chairman Tongass Sportfishing Association, Chapter 573 of Trout Unlimited P.O. Box 1081 Ward Cove, AK 99928 Phone: 247-8156 POSITION STATEMENT: Made comments DALE PIHLMAN, Representative Alaska Wilderness Recreation & Tourism Association P.O. Box 7814 Ketchikan, AK 99901 Phone: 225-3498 POSITION STATEMENT: Made comments BRUCE WALLACE P.O. Box 8572 Ketchikan, AK 99901 Phone: 225-6547 POSITION STATEMENT: Made comments BILL THOMAS P.O. Box 5196 Ketchikan, AK 99901 Phone: 225-4833 POSITION STATEMENT: Made comments K.A. SWIGER, Executive Director Stand Up! P.O. Box 23645 Ketchikan, AK 99901 Phone: 225-8627 POSITION STATEMENT: Made comments KATHI LIETZ, President Alaska Timber Trackers Thorne Bay, AK 99919 Phone: 828-3986 POSITION STATEMENT: Made comments ALAIRE STANTON, Mayor City of Ketchikan 334 Front Ketchikan, AK 99901 Phone: 225-3111 POSITION STATEMENT: Made comments DENNIS WATSON, Mayor City of Craig Craig, AK 99921 Phone: 826-3438 POSITION STATEMENT: Made comments DUANE GASAWAY, City Administrator City of Wrangell 4th Avenue Wrangell, AK 99929 Phone: 874-2642 POSITION STATEMENT: Made comments ERNESTA BALLARD, President Ketchikan Chamber of Commerce 705 Main Street Ketchikan, AK 99901 Phone: 247-0846 POSITION STATEMENT: Made comments PHIL JANIK, Regional Forester Region 10, U.S. Forest Service 709 W. 9th Juneau, AK 99801 Phone: 586-8806 POSITION STATEMENT: Made comments and answered questions FRED WALK, Director Timber Management U.S. Forest Service 709 W. 9th Juneau, AK 99801 Phone: 586-8806 POSITION STATEMENT: Made comments and answered questions RALPH LEWIS, President & General Manager Ketchikan Pulp Company P.O. Box 6600 Ketchikan, AK 99901 Phone: 225-2151 POSITION STATEMENT: Made comments and answered questions ACTION NARRATIVE TAPE 95-18, SIDE A Number 000 The House Resources Committee was called to order by Co-Chairman Williams at 9:05 a.m. Members present at the call to order were Representatives Green, Williams, Ogan and Davies. Members absent were Representatives Austerman, Barnes, Kott, MacLean and Nicholia. CO-CHAIRMAN BILL WILLIAMS welcomed everyone and made introductions. He thanked those present for taking the time on a Saturday morning to come together and help try to find solutions to the problems facing Southeast communities. He said the focus of the meeting is the forest products industry, particularly on the timber supply problem which has already resulted in the loss of many jobs. He stressed everyone needs to recognize there are many different interests and user groups in the Tongass National Forest. However, everyone also knows that the timber industry makes up a large part of the economy in Southeast Alaska. CO-CHAIRMAN WILLIAMS stated various panelists have been invited to help the committee learn about the problems, and hopefully to hear how solutions can be found. He said the committee wants to hear ideas from the different points of view represented on these panels. He pointed out that by listening and asking some questions, all who came to listen may be better able to find solutions to the problems facing the timber-dependent communities in Southeast Alaska. CO-CHAIRMAN WILLIAMS stated five different panels will be presenting testimony. They are the Independent Operators, coordinated by Cliff Skillings; the Long Term Timber Contractor, led by Ketchikan Pulp Company (KPC) President Ralph Lewis; the Grass Roots Community Panel, including representatives from the Southeast Alaska Conservation Council (SEACC) and Stand UP!; the Community Leadership Panel, including representatives from Craig, Wrangell, and Ketchikan along with the Ketchikan Chamber of Commerce; and the Regional Forester, Phil Janik and his staff. CO-CHAIRMAN WILLIAMS announced the meeting would begin with a slide presentation put together by the United States Forest Service (USFS). He stated the presentation provides a good history of land use in the Tongass National Forest. (May be listened to on tape 95-18, Side A, House Resources Committee Meeting, February 18, 1995, available in House Records.) SPEAKER GAIL PHILLIPS thanked everyone for attending and thanked Co-Chairman Williams for putting the meeting together in Ketchikan. She noted when Co-Chairman Williams asked if a meeting could be held in Ketchikan, she said yes on one condition--she be allowed to attend also. She stated it is important for people in Southeast Alaska to recognize and realize that the House of Representatives is committed to working towards economic security for the people in Southeast. SPEAKER PHILLIPS stated everyone has seen what has happened to the forests of Southeast Alaska over the years. She said with the economic crisis being experienced in this region, and with the mills that are closed down, anyone who states that 320 million board feet is enough to utilize is not looking at the economic reality of the area and what it means to the state. She stressed she will be there for whatever support is needed. SPEAKER PHILLIPS said the House of Representatives is taking a few small steps to correct the measure. She pointed out that Co- Chairman Williams introduced new legislation HB 121, a small forest bill called the salvage timber bill. She noted she lives on the Kenai Peninsula and the forests there are devastated with the spruce bark beetle infestation. This bill will allow moving up the schedule of timber sales on those devastated forests. She stated HB 121 is just a small step, yet the human outcry from people who think the forests are better off unattended and unproduced is amazing to her. SPEAKER PHILLIPS stated she read an article indicating that Washington State is in the process of revamping their entire forest practices act. She noted the flak taken over one little bill for dead trees is unbelievable. She stressed if Alaskans do not stand together strong to fight for their responsibility to develop the state's resources, the economic viability of the state will be lost. She said anyone coming into her office and signing the guest book will face a sign which reads, "Without production there is no economy and without economy, civilizations fail." She stressed she will not allow the civilization in Alaska to fail. JOE AMBROSE, AIDE, SENATOR ROBIN TAYLOR, stated Senator Taylor sends his regrets he cannot be present due to a death in the family. He said a lot of what is going on in Southeast is a matter of credibility and trust. He pointed out when the Knowles Administration's change in position on the habitat conservation areas (HCAs) became public, the Governor's Chief of Staff asked Lew Williams at the Ketchikan Daily News whether he thought the Knowles Administration could trust the USFS. Mr. Ambrose felt there is a pattern developing. MR. AMBROSE said the U.S. Fish & Wildlife Service (USFWS) announced on Thursday they had no scientific basis for establishing HCAs for the wolf. They also revealed there had been an agreement since December between the USFWS, the USFS, and the Alaska Department of Fish and Game (ADF&G) which ultimately would achieve the areas anyway. He noted the Clinton budget shows an introduction for timber harvest based on the establishment of HCAs, which are the areas everyone had been told no plan had been made. He commented the credibility factor is there. MR. AMBROSE stated when the President established his forest plan in the Pacific Northwest, it took 85 percent of the land base out of harvest. Congressional withdrawals removed 38 percent of what was available in the Tongass, other actions took that up to 63 percent, and if the 21 percent proposed for HCAs is added, the total is 84 percent which is within 1 percentage point of what the President has proposed for the Pacific Northwest. He did not believe that is a coincidence. Rather, he felt it was a concerted effort and what remains will not sustain the economy of the area. MR. AMBROSE said Mr. Janik told the Governor the USFS would make available 320 million board feet in the coming year, which everyone knows is not adequate to open the mill in Wrangell. He noted that amount is what will be made available and does not mean it will not be challenged and the timber supply will be further reduced by those challenges. He stressed the area is in a crisis and folks need to know, at least from Senator Taylor's standpoint, the agencies being dealt with are being less than candid. He stated Senator Taylor's office has asked on numerous occasions if the USFS or the agencies looking for the Goshawk had looked at established wilderness areas. From the top, they are assured they are. If one goes down a couple of notches and talks to someone who is actually doing the work, they say no--they do not have the budget for that. Rather, they are looking at areas where timber surveys are being conducted to prepare for harvest. SENATOR MIKE MILLER stated it was good to be back in Ketchikan as he spent a lot of time there during the campaign. He said during that time, he got a handle on some of the issues facing Southeast Alaska and Ketchikan specifically, especially the timber issues. He noted many people in the Interior would like to start a timber industry with the forest lands there. He pointed out the dynamics there are a little different--they are dealing with state lands versus federal lands, the trees in Southeast are much larger than in the Interior, etc. He felt many of the things learned in Southeast can be applied to Interior Alaska. SENATOR MILLER stressed a strong statewide economy is needed in order to make everything work. Not only is a strong timber economy needed but also needed is a strong mining economy, fishing economy, and tourism economy because they all work together to make a strong economy for Alaska so Alaskans can have a good living. He said he was born in Alaska and intends to stay in Alaska but he wants to make sure there are jobs so his children, should they choose to stay in Alaska, can also stay in the state and make a living. SENATOR MILLER stated there is a need to develop the timber economy in the state and he will do whatever he can in his position in the state Senate to do that. He thanked Co-Chairman Williams for the invitation and enabling him to continue to stay involved in the issues. JIM AYRES, CHIEF OF STAFF, GOVERNOR TONY KNOWLES, stated he was happy to be back in Ketchikan. He said he appreciated the previous speaker's talk about a strong sustainable economy, which is what the Governor talked about during the campaign, as did Senator Miller. He pointed out the essence of the issue is how to build a strong and sustainable economy. The Governor is committed to jobs and families. He hoped it would be possible to figure out how to get to a meaningful process which includes the communities, meaningful information, and concerned people to determine a way to have a sustainable fishing, timber, and tourism industry. CLIFF SKILLINGS, GENERAL MANAGER, ALASKA LUMBERMEN'S ASSOCIATION, thanked Co-Chairman Williams and Co-Chairman Green, and guests for giving him the opportunity to express concerns of the Small Business Administration (SBA) timber industry and its respectful federal timber sale program. He said he could not help but notice the fine wood products used to support picket signs that morning. He stated he was pleased to know that form of sign support will not melt in the rain. MR. SKILLINGS explained the Alaska Lumbermen's Association is an organization of SBA timber operators and Southeast Alaska businesses and individuals who wish to see a productive and viable SBA federal timber sale program on the Tongass. He asked committee members that while they listen to testimony, to remember just two aspects about the timber industry and respectful timber sale program. First, the 80 million board foot demand that will be heard is a real demand by the SBA timber industry. Eighty million board feet is an attainable target volume to subside the industry, agreed upon by both the SBA and USFS two decades ago; it is a volume that is processable by the regional SBA sawmills; and it represents an integral part of the entire Southeast Alaska timber industry as a whole. MR. SKILLINGS said the second aspect is HCA legislation, a regulatory action which has a devastating trickle down effect upon the SBA timber operators on the Tongass. HCAs deplete the timber harvest base from both the long term contract holder and the SBA independent timber operators. He stressed HCAs are causing a significant impact to the timber industry by deferring and canceling timber sales in both sale programs. In so removing certain sales from both programs, the SBA timber industry is affected the hardest when the USFS must remove prepared timber sales from the sale program and release them to the long term contract holder to meet contractual obligations. He stated this is simply not fair, especially when the sales removed are in the Ketchikan and Prince of Wales vicinity and any replacement volume is located in the Northern Chatham region. STEVE SELEY, JR., OWNER & PRESIDENT, SEABORNE LUMBER, thanked Chairmen Williams and Green and the committee for holding this public forum and allowing him to testify on behalf of the SBA timber operators on the Tongass. He stated he has spent 40 years of his life in Southeast Alaska--primarily the Prince of Wales Island and Ketchikan communities. He grew up on Prince of Wales Island in a timber harvesting family and in 1978, established Seley Incorporated. This company grew from a four man "jippo" operation to a multi-faceted timber business involving road construction, hi- lead logging, marine transportation, whole log chipping and sawmill operations. MR. SELEY stated in 1993, with the promise of a guaranteed timber supply from the federal government SBA timber sale program, he began the construction of the sawmill facility now operated as Seaborne Lumber Company. He said the SBA timber sale program was designed in 1973 to ensure that regional small business timber operators would have a supply of timber to meet the demand of their processing facilities, eliminating larger corporate intervention. This concept was formalized in an agreement entered into on March 18, 1977, between SBA representative Art Mason and then regional forester John Sandor and was called the "Agreement Between Department of Agriculture and the Small Business Administration For The Development and Operation of a Small Business Program In The Sale Of National Forest Timber Related Products". He pointed out this marked the beginning of the SBA version of a long term timber sale contract. The agreement stated that "the USFS and SBA have agreed to a set-aside program of approximately 80 million board feet of saw timber (average annual target volume) for the Tongass." MR. SELEY said in 1986, this agreement was amended to cause the USFS to follow closer the target volume of 80 million board feet, especially since the entire industry had just witnessed depressed timber volumes in the previous 1984 and 1985 timber sale years. It was again amended in 1993 due to two SBA mill shutdowns--Mitkof Lumber in Haines and Klawock Timber in Klawock--at which point the USFS stated they felt demand was significantly lower than the target volume of 80 million board feet. He stated the new amendment called for cyclical six month meetings between the USFS and SBA representatives to identify mill capacity and meet SBA demand. He noted that to his knowledge, these meetings have never involved regional SBA timber operators and the 80 million board feet demand still has not been met. MR. SELEY told committee members that with these agreements and legislative wording placed in the Tongass Timber Reform Act of 1990 to help support SBA timber operators, he proceeded to build a new sawmill facility to process timber harvested from the Tongass National Forest. He stated Seaborne Lumber now employs 31 loggers and 54 mill workers. The sister company, Seaborne Marine Service, employs an additional 20 men and women. He said his sawmill processes raw timber into cants, flitches, squares and produces chips from residual slabs and low quality logs. MR. SELEY stressed his primary concern lies with the current supply of SBA timber and the fact that the fiscal year 1995 timber sale schedule falls short of meeting the USFS commitment to the Small Business Administration and those who depend on that supply of timber. He said Seaborne Lumber has an annual saw log demand of 26 million board feet. In addition, Seaborne Lumber has the capacity to chip an additional 11.5 million board feet for a total need of 37.5 million board feet of timber. MR. SELEY stated Seaborne Lumber's operations have been severely affected over the course of 1994 due to a log supply shortage brought on as a result of extreme pressure from environmental groups striving to curtail the harvest of timber on the Tongass. The USFS's lack of desire, inability or lack of funding necessary to combat this pressure has resulted in a shortfall in meeting the SBA industry demand for logs. He said HCAs have posed the biggest threat to the SBA timber supply due to their impacts on the entire industry. Harvest areas have been deferred even though they have passed all National Environmental Policy Act (NEPA) gates, have been funded for the entire preparation period of 2-4 years, and are ready for immediate advertisement. He noted that HCAs have further posed a problem for the timber industry because when harvest areas are deferred or withheld from the long term contract holder, the USFS will remove timber sales from the SBA and independent timber sale pipeline to meet the long term sale contractual obligation and not replace the volume. He pointed out that today, the SBA pipeline is nearly empty. MR. SELEY gave an example of his company's need for timber. On December 1, 1994, they cut the last log in their yard and curtailed sawing operations. The Bushy Island Salvage Sale was bid on December 28, 1995. Seaborne Lumber was the successful bidder from six companies competing for the sale containing approximately 400 million board feet. The sale was awarded one week after the bid. Two days later, they had cutters on the island. Three days after that a camp had been mobilized and equipment was at the site. He said 31 days from the date of the bid opening, the entire volume had been harvested and all equipment and logs were removed from the sale area and delivered to Ketchikan. Unfortunately, the timber from the sale will provide only 3.7 days of cutting at his mill. MR. SELEY told committee members that Seaborne Lumber invested $1.4 million in 1994 to upgrade its facility, allowing them to expand their product line with higher valued lumber. These improvements include the latest technology in computerized set works to insure accurate sizing, a new carriage and drive system capable of operating three times faster than the equipment it replaced, helping reduce manufacture costs at that machine center, an edger with both shifting and gang saws that provide for efficient breakdown of cants to a multitude of semi-finished products, and a new trim station with the capability to accurately even end trim all lumber that is produced. In addition to the sawmill equipment, Seaborne Lumber designed and built a drum chipping system that will take a defective log end of any diameter up to six feet in length and cut it to chips acceptable for sale to Ketchikan Pulp Company, helping meet their fiber needs. He stressed that each additional machinery center not only adds to their flexibility and profitability, they also add jobs to the community. MR. SELEY stated the SBA timber industry is not restricted to certain sales as the USFS may think. The USFS has stated that the SBA industry does not have the capability to process the volume needed to meet the 50 percent SBA primary processing clause placed on all SBA timber sales. He said currently, Seaborne and Viking Lumber have chipping capabilities along with cutting facilities to insure that the 50 percent primary processing clause can be met by SBA owned companies. The USFS has stated the SBA operators cannot locate adequate funding to cover the cost of performance bonds, pre-roading, and harvest costs for larger sales. He pointed out that regional financial institutions such as the National Bank of Alaska and First Bank stand ready to assist SBA timber operators with their financial needs. Mr. Seley stated finally, the USFS has stated the smaller operators will have a harder time finding or creating markets for their products. He said the majority, if not all, regional SBA mills have contracts with one or several purchasers for the products they produce. MR. SELEY stressed there is a viable and thriving SBA timber industry in Southeast Alaska. He said the timber industry adds to community socioeconomic levels and provides employment for many Southeast Alaska residents. He stated the level of timber the USFS plans to offer the SBA timber operators over the next two years falls short of meeting the SBA processing capacity. The volumes for both years, as currently planned, will fail to meet the 80 million board feet promised which is so desperately sought. MR. SELEY said the three mills represented, if operated at full production levels, have the capacity to cut all 80 million board feet. However, there are 36 other smaller SBA classified processing facilities in Southeast Alaska who also seek to share in the federal SBA timber sale program. He stressed it is imperative the USFS adhere to an 80 million board feet yearly target volume so as to maintain the viability of the mills sector of the industry. He stated the mills have demonstrated the ability to survive and at the same time pay the highest average stumpage prices and continually upgrade and improve manufacture capabilities to meet the market demand for a variety of products. Coupled with this 80 million board feet demand should come timeliness of SBA timber sale offerings, sales areas located geographically equal to the total volumes sold off the Tongass and timber sales that are economically viable. He stressed without these demands met, the SBA timber industry and supporting operators will be eliminated. FRANK AGE, OWNER & PRESIDENT, PACIFIC RIM CEDAR, stated Pacific Rim Cedar owns and operates a sawmill facility in Wrangell. He said he came to Alaska in 1991 after his Oregon mill was forced to shut down following an extensive timber reduction due to the spotted owl legislation. He started Age Cedar Products in Wrangell with a small mill processing cedar shakes and shingles. He started with five employees and operated profitably until the high delivery cost of his logs created an uneconomical situation for his mill. In 1993, after reviewing market trends and congressional oversight to provide for an economical supply of timber to regional SBA timber operators, he created Pacific Rim Cedar with the purpose of manufacturing logs from the Tongass into marketable wood products. He explained his employment base has grown since 1991 from 5 employees to 14 employees encompassing milling, log transportation and sort yard operations. He noted currently Pacific Rim Cedar is the only operating sawmill in the township of Wrangell. MR. AGE told committee members over the course of 1994, Pacific Rim Cedar has made numerous upgrades in an attempt to produce a better product for a lower manufactured cost. These upgrades to facility and heavy equipment have cost in excess of $450,000. With these improvements, Pacific Rim Cedar was able to increase productivity approximately 15 percent. He stated the Pacific Rim Cedars milling operation relies heavily on the USFS obligation to provide an economically viable timber supply of 80 million board feet for regional SBA timber operations use. Pacific Rim Cedar has a saw log volume capacity of 10-12 million board feet per year annually. He said they are currently cutting spruce and hemlock but would prefer to be processing Western Red and Alaska Yellow Cedar should there be a shift in the USFS policy surrounding cedar export provisions. MR. AGE stated this shift in policy would need to require primary processing of all cedar in regional sawmills; essentially the same provisions as are found with hemlock and spruce. He said everyone is acutely aware of the timber supply problems facing all sawmills in Southeast Alaska. He noted his mill can flourish cutting only cedar which would leave the spruce and hemlock they are now cutting for other sawmills in the region. He stressed it is economically unfeasible to process these cedar logs and compete to sell the sawn products produced while cedar logs in their round form of similar quality are allowed to be exported. He said the export of cedar in the round must be stopped and those logs kept at home for manufacture in regional facilities. MR. AGE pointed out that over the last 10 years, industry has exported 430 million board feet of cedar or an average of 43 million board feet per year. An average mill can process approximately 3.2 thousand board feet of lumber per man per day. This represents 13,437 man days of employment exported to other areas each year. Converted to payroll, Southeast Alaska communities lost $2,526,000 in payroll last year alone and if that process is continued for the next 10 years, the region can expect to lose another $25,000,000. TAPE 95-18, SIDE B Number 000 MR. AGE stated Pacific Rim is here to beg the USFS to make good on their promise to provide the 80 million board feet required by the timber industry. He expressed appreciation for the opportunity to express his concerns regarding the timber industry. KIRK DAHLSTROM, PARTNER & MANAGER, VIKING LUMBER, stated Viking Lumber currently owns and operates the sawmill facility outside the town of Klawock. Viking Lumber purchased the Klawock Sawmill in June 1994. He thanked the committee for the opportunity to testify. He thought when he moved to Alaska eight months ago that his testifying before committees would be over, as he did not want to do it anymore. He told committee members he had been testifying for five years in Washington State trying to fight the spotted owl. MR. DAHLSTROM said his partners and him saw the potential for a thriving processing facility, putting people to work from surrounding communities and raising community economic levels. This whole idea was contingent upon a supply of timber that he presumed would be available due to prior SBA and USFS agreements and wording added to the Tongass Timber Reform Act (TTRA) language which directed the USFS to provide a supply of timber that would meet SBA market demand and mill capacity--a supply of 80 million board feet. He commented he should have known better. MR. DAHLSTROM stated he and his partners have had an old growth hemlock sawmill on the Olympic Peninsula of Washington State for 17 years--buying, logging, and processing USFS timber for the first 13 years. He noted that mill is still running because they have learned to survive on scraps and junk for the past four years. He said the cut on the Olympic National Forest has gone from 239 million board feet per year to 10 million board feet of scraps and junk because of the lies of the enviros and the attitude and gutlessness of the USFS. This loss of available timber has devastated the community where he was born and raised, forcing him to either become depressed and despondent or move to Alaska, risking everything he owned and try again. The small logging communities in Alaska have no idea what will happen to them if the USFS does the same thing in Alaska they did to the Pacific Northwest using the lies about the spotted owls and marbled murrelets. MR. DAHLSTROM said after purchasing the mill, spending $800,000 and six months on reconstruction, Viking began operation of the sawmill two months ago in December. He added their whole log chipping operation will start operating in April with an investment of over $2 million. These two operations will need 50-70 million board feet of timber to run at full production. He stressed the sawmill produces lumber for value added products. Every million board foot produced will put 20 people, yearly, to work in manufacturing plants, making doors, windows, and moldings. MR. DAHLSTROM pointed out that the SBA timber sale program was designed to alleviate the apparent one-sidedness that larger timber firms had on the timber industry in the mid-1970s. The program was devised by both the SBA and the USFS and provided that 80 million board feet was an extremely workable and agreeable figure for a timber sale program target for the SBA timber operators. In the process of agreeing that 80 million board feet would be the target volume, the SBA representative and Regional Forester engaged in a written agreement ensuring that the USFS would seek to meet 80 million board feet for SBA preferential bid. He said amendments to this agreement were made in 1986 and 1993 which parallel industry trends and accommodate the industry. He stressed a problem has always existed in the USFS's ability to meet this target volume. MR. DAHLSTROM stated a timber crisis was felt extremely hard in 1994 when the USFS became incompetent in meeting any SBA timber operator demand. Multiple sales from the Prince of Wales area were canceled, deferred, or removed and offered for contractual obligations to the long term contract holder. MR. DAHLSTROM said HCAs are both unwarranted and unnecessary. Land Use Designations II (LUD IIs) and wilderness land set-asides preserve massive habitat acres with the intent of deferring timber harvest in those areas. This further action is blatant preservation actions designed to protect two species which are currently not threatened or endangered. He stated this HCA action is being implemented even though it has (1) not been signed into action by the Regional Forester; (2) not proceeded through any formal Tongass Land Management Plan (TLMP ) amendment process; (3) and regarded by the USFS as nondetrimental to current timber harvest. He guessed when there is no current timber harvest, a federal regulatory agency can say their actions are nondetrimental to timber harvest. Number 130 TROY REINHART, EMPLOYEE RELATIONS & PUBLIC AFFAIRS MANAGER, KETCHIKAN PULP COMPANY (KPC), noted that in the audience was Ralph Lewis, President and General Manger, KPC; Allen Hayes, KPC Mill Manager; and Owen Graham, KPC Timber Manager. He stated KPC has almost 1000 employees, consisting of 5 logging camps, 2 sawmills, and 1 pulp mill. KPC sells their products to 20 countries and generates $40 million in annual payroll. He stressed one thing has not changed in almost four decades and that is KPC's commitments to Ketchikan, Prince of Wales Island, and the Southeast Alaska region. KPC is committed to being a continued part of the social fabric and economic reality of the region. MR. REINHART stated KPC has a partnership with the USFS--a partnership built on KPC's commitment to Southeast Alaska, through the creation of continuous year-round jobs and the commitment of the USFS to provide KPC with 8.25 billion board feet over 50 years at economical prices. KPC has and will continue to hold up its part of the partnership. He stressed KPC has built and operated a pulp mill, two sawmills, and all the camps and facilities needed to harvest the regions great renewable resource. He added that KPC's investment in the region, the people and facilities is not complete. MR. REINHART said in the next three years, KPC will invest between $60-70 million in its facilities. These investments will include an extended marine out fall to Tongass Narrows providing for better discharge of treated wastewater, process changes to create the world's first chlorine free dissolving pulp process and new pollution prevention measures, to contain any spills which may occur on its properties. He stated all these investments are a commitment to the future and continued operations of KPC facilities. MR. REINHART stressed a partnership is a two-way street. He said KPC cannot continue to operate its facilities on thin air. KPC requires a predictable, certain, and economically priced supply of timber. For the first 35 years of KPC's partnership with the USFS, the partnership was met. Over the last five years, the USFS has not upheld their part of the agreement. He noted three trends which have occurred over the last five years. First, in only two years out of the last six has the Tongass met the minimum annual contractual timber offering to KPC. Second, the amount of timber under contract has decreased significantly over the last five years to levels which leave KPC no flexibility due to weather or markets, and in addition, the amount of road construction to perform harvesting has increased. Third, the USFS timber offerings to KPC have been moved to the end of the fiscal year, which effectively means timber offerings are not accessible for another six to twelve months, due to timing restrictions and road building. MR. REINHART stated KPC is not asking for any more than is called for by KPC's partnership with the USFS. KPC is not asking for additional volume, but only the timber volume promised and contractually agreed to. He stressed KPC is committed to being part of this region's life style for years to come but only with the legislature's assistance in compelling the USFS to meet their commitment in KPC's partnership agreement will that be possible. MR. REINHART said he would use charts to outline KPC's contract with the USFS's past performance and needs for the future. He stated (referring to chart number 1) there are three very important numbers to consider. The first is 8.25 billion board feet, the total timber volume which KPC is entitled from the USFS per the 50- year contract which expires in the year 2004. He stated 192.5 million board feet is the average annual offering (at a minimum) that the USFS is supposed to provide KPC. He explained because of the shortfalls in offerings, the USFS must offer KPC 225 million board feet each year until the year 2004 to meet their 8.25 billion board feet contract volume commitment. MR. REINHART stated charts 2, 3, and 4 show the accomplishment record of the USFS over the last 10 years. He said in only two of the last six years has the USFS met the contract volume. Therefore, there is reason to be skeptical in the future. He noted of the 176 million board feet received last year, KPC was only able to harvest approximately 110 million board feet because a large significant part of the offering came at the end of the year. He told committee members the delay in USFS offerings has resulted in no flexibility for planning KPC's operations to keep the timber pipeline flowing and people working. He noted the current sale plan the USFS has given KPC this year continues to decrease in the amount of volume and the sales being offered are getting later and later in the timber sale program. A large part of the volume KPC will get in 1995 will again be in September and October when it is too late to harvest or begin building roads. MR. REINHART commented on the importance of having a timber pipeline, having extra timber in the pipeline enabling flexibility and the need to get the timber sale offerings earlier in the year. He said in 1989, KPC had to build .37 mile of road for each million board feet harvested. He stated through last year, KPC is up to almost three-quarters of a mile of road. He explained it takes longer to get access to the timber--previously it took a year to get all the roads in and now it takes two years to get all the roads in. He said that is why flexibility is so important and why the timber sale offerings are needed earlier. MR. REINHART stated chart 5 shows typical timing restrictions. The red area shows the times where KPC's operations are curtailed for varying reasons--inability to build roads or bridges, inability to actually harvest timber. He said it can be seen that if everything is overlapped--things like goat winter range, goat kidding restrictions, swan restrictions, wolf den restrictions, eagles, fish, etc., the only free window available starts in September which again causes problems with building roads and causes a flexibility problem. MR. REINHART told committee members that KPC works with the USFS to try to find ways to meet the intent of the timing restrictions, protect the resources and still keep its operations running and has been successful in some cases and not successful in others. He said the bottom line for the community is simple. Because of the lack of timber received from the USFS, the deficiency that is within the timber sale pipeline and the timing of those timber sales, people are out of jobs, the sawmill at Ward Cove is shut down due to lack of timber, most of the production at the hemlock mill in Metlakatla is down, and KPC is currently trying to find enough wood to provide work through April so as to prevent having a temporary extended shutdown at the pulp mill. MR. REINHART stated in 1993, KPC's pulp mill shut down for 100 plus days due to a lack of timber volume. In 1994, a shut down did not occur but only because KPC was able to purchase chips from the Wrangell Sawmill and pulp logs from the Sitka pulp mill. Now that the Alaska Pulp Corporation contract has been canceled by the USFS, this source of fiber supply has vanished. He said unless the USFS speeds offerings and begins to meet their commitments to KPC, more temporary closures may occur in the future. MR. REINHART pointed out that the leadership of the USFS is now taking steps to limit timber supply through HCAs. While no final decision has been made on HCA implementation, HCAs are being illegally implemented, taking over 400 million board feet of timber which could have been offered off the market. Even worse, the decision on HCAs was made on bad science. He stressed the science is weak for the idea of HCAs. He noted when HCAs are discussed, goshawks and martens are being talked about, if one follows the readings of the viable population committee (VPOP). Looking at the current assessment of goshawks being done by the USFS, they are showing that almost none of the telemetry points are appearing in the interior productive old growth. Rather, they are predominately found at the edge of openings created by clearcutting. MR. REINHART added that the Draft Plan Amendment map for HCAs shows that only 3 percent of located goshawk nests fall within the HCA system. He said in answer to the question do goshawks need large tracks of old growth, the answer is no. MR. REINHART stated marten are an introduced species to Southeast Alaska. Hence, there is no legal obligation for the USFS to manage for them. The National Forest Service Management Act implementing regulations call for ensuring habitat to have viable populations of Native and desired non-Native species. He said there are numerous Natives in Southeast Alaska who suggest marten have hurt the ptarmigan and grouse populations, species some Natives consider important. He stressed the bottom line is that the so-called evidence supporting an HCA strategy to ensure viable wildlife populations is crumbling beneath the USFS's feet and their hypothesis has been shown to be false. There is no evidence that an additional 21 percent of timber needs to be taken out of the Tongass timber base. MR. REINHART told committee members HCAs are not the only problem as the Goshawk Guidelines are also of concern. He said the HCA Plan Amendment calls for 8.4 mile circles around goshawk nests, with no harvest allowed within the 95 percent harmonic mean of the telemetered areas. He stated the October 1994 Goshawk workshop talked about having 2.9 mile radiuses of no timber harvest around the goshawk nests. He pointed out that current goshawk assessment underway by the USFS shows that few telemetry points reside in interior old growth. He added there have been active goshawk nests in second growth documented on Douglas Island. He stressed the bottom line is there is no scientific evidence showing that large tracks of land need to be set aside for the protection of the goshawk. MR. REINHART stated the only logical choice for Regional Forester Janik is to select the no action alternative in implementing HCAs. He said currently 400 million board feet of NEPA approved timber has been taken from the timber industry. He noted even if the USFS agreed there is no supporting evidence for HCAs and goshawk guidelines, they would point the finger at conserving biodiversity. He said the USFS would also point the finger at the Peer Review of the VPOP Report done a year ago as evidence that there is a need to do more for viable populations and biodiversity. He advised committee members to note that only two members of the VPOP committee visited Southeast Alaska. Their lack of background led them to discuss Southeast Alaska caribou and tundra on the Tongass National Forest. MR. REINHART stressed that common sense needs to be brought into the process. He felt there was too much agenda science. He said HCAs are based on the President's plan for the Pacific Northwest to lock up more timber on the Tongass National Forest. He noted that the 1979 TLMP, as amended by the TTRA, has 38 percent of the productive old growth in congressional withdrawals; of the 3.14 million acres of productive old growth outside of congressional withdrawals, only 1.94 million is suitable to consider for timber harvest--hence there is 1.2 million acres of timber that will not be harvested; therefore, about 63 percent of the productive old growth on the Tongass National Forest will never be logged. MR. REINHART said based on common sense, protecting 63 percent of the old growth on the Tongass National Forest is ample to meet the implementing regulations of the National Forest Management Act, for habitat to ensure wildlife viable populations and biodiversity, and the Endangered Species Act. KPC believes that is balance and suggests the American public voted out last November the nonsense everyone talks about in HCAs. MR. REINHART noted many people talk about whether the Tongass is overcut. He showed two graphs. The first showed the sustainable level of harvest which could be cut off the suitable timber lands on the Tongass National Forest. The second graph showed the percent of forested land on the Tongass which has been harvested. He said in 1952, 0.2 percent of the Tongass had been harvested, by 1972, it was two percent, and by 1992, 3.6 percent of the Tongass has been harvested. He stated the scare tactics of other groups that the Tongass is being overharvested is not true. MR. REINHART stressed that KPC wants to stay in Ketchikan and continue to be a productive part of it but help is needed to break the gridlock of overlapping environmental laws and frivolous lawsuits filed by preservationist groups. Number 375 ROBERT E. LINDEKUGEL, CONSERVATION DIRECTOR, SOUTHEAST ALASKA CONSERVATION COUNCIL (SEACC) stated SEACC is a coalition of 15 volunteer citizen groups in 12 Southeast Alaska communities. He noted one of the member groups in Ketchikan, the Tongass Conservation Society, could not be present. He said SEACC is dedicated to preserving the integrity of Southeast Alaska's unsurpassed natural environment, while providing for balanced, sustainable use of the region's resources. MR. LINDEKUGEL noted that SEACC understands the purpose of the meeting is to consider what can be done to solve what the timber industry calls a timber supply issue. SEACC believes, however, that the focus and format of this hearing prevents the committee from understanding the complexity of the issues confronting users of the Tongass and the interests of all users. He noted everyone has heard about how much productive old growth is in the forest. However, only 15 percent of the Tongass has the medium and large trees that fish, wildlife, the timber industry and all other forest users depend on. MR. LINDEKUGEL said the most endangered species on the Tongass are the workers and families who depend on a healthy ecosystem. He agreed that not a lot of the Tongass has been cut, but what has been cut is the most productive portion of the Tongass. He noted that SEACC has invited representatives from the tourism, commercial and sport fishing, and small timber operators to also speak, enabling the committee to understand the breadth of the issues and the complexity of trying to address those issues. DAVID SALLEE, KETCHIKAN, stated he was born in Ketchikan in 1941 and is a lifelong Alaskan. He said he logged in the area continuously for about 35 years, including a period of owning an A- Frame/cold deck logging operation. He stressed he is not comfortable with the present climate because it is too full of contention. He felt the small people have been wiped out. He commented that what is happening in the timber industry is a skimpy manufacturing program--timber is cut into baby squares or into pulp and is shipped overseas into other markets for remanufacture into finished products. MR. SALLEE stressed there is a need to start doing a lot more manufacturing of the state's dwindling timber resources. He would like to see more small mom and pop businesses and more cabinet mill little businesses. JACK LEE, PAST CHAIRMAN, TONGASS SPORTFISHING ASSOCIATION, CHAPTER 573 OF TROUT UNLIMITED, said his organization actively promotes fisheries, conservation, and enhancement and addresses issues that impact fisheries habitat and the recreation opportunities they offer. Unlike many fishing organizations, his organization has a fairly diverse membership and its board of directors has seats for sportfishers, charter operators, lodge and related businesses and agency representatives from ADF&G and the USFS. MR. LEE stated his organization views the value of the fisheries resource in terms of the $83 million spent on sportfishing statewide, with $61 million of that spent in Southeast. This translates into over 1100 full-time jobs, 950 of which are in Southeast. These are 1988 figures and have grown with the rapidly growing tourism industry that sportfishing is an important element of. MR. LEE stressed that sportfishers, like loggers and others, are being impacted by legislation such as the Endangered Species Act. He said there may soon be major cutbacks in king salmon harvest limits because of the problems with returns down south. He asked do people like it? Is it fair? Should the Endangered Species Act be done away with? He answered no to all points. He felt it would be far better to learn from the mistakes of others and avoid the problems which made this legislation necessary. Wise resource management and habitat protection will assure a more prosperous future for everyone, regardless of their chosen profession. MR. LEE said his organization is currently concerned with a local situation illustrating this point. Returns of wild steelhead have been alarmingly low for the past several years. The recent proposal by Senator Murkowski to allow the Landless Native Tribes to select land in LUD II areas could drastically increase the problems with steelhead returns. The LUD II areas were given protected status for their high recreation and high habitat value. He stressed many of these areas support major runs of wild steelhead, and logging them could push steelhead populations a step closer to threatened status. MR. LEE stated it is time to take off the blinders and deal with the impacts of logging before they become problems. He said if we cannot learn from watching the fiasco going on with the timber industry in the Northwest, there is not much hope. The TTRA and the establishment of LUD II areas was a good first step. The establishment of HCAs will also help avoid future problems. He stressed the timber industry must learn to coexist with fishing and tourism and their needs. To do this, they must learn to operate within the guidelines of recent reforms. He urged everyone to stop the finger pointing and name calling and work on realistic solutions. In the past, the timber industry has received assistance helping them stay profitable. He pointed out that if everyone begins to view habitat maintenance and a clean environment as part of the cost of doing business, perhaps some solutions can be determined that everyone can live with. DALE PIHLMAN, REPRESENTATIVE, ALASKA WILDERNESS RECREATION TOURISM ASSOCIATION (AWRTA), stated he was born and raised in Ketchikan and will make personal comments prior to commenting for AWRTA. He said he fished commercially for 20 years, primarily in Southeast Alaska and worked for the state for 5 years as a fisheries management biologist. Currently he is in the visitor industry. He expressed concern about overharvesting. He noted visitors are attracted to Alaska primarily because of its image as a land of scenic grandeur. However, as old growth timber is removed, the state has less appeal. He pointed out that old growth timber is disappearing at an alarming rate. MR. PIHLMAN said he appreciated having the opportunity to testify and noted the small time allotted to the visitor industry versus the timber industry. He felt the situation is indicative of the lack of appreciation for the economic contribution of tourism to the state's economy. For example, in 1993 the visitor industry created 15,200 jobs and the logging industry only about 3,185. Visitors to Alaska spend $1.5 billion, in contrast to the timber industry's contribution of $565 million to the economy. The tourism industry generated a payroll of $275-300 million while the timber industry produced a payroll of about $140 million. MR. PIHLMAN stated the visitor industry is 2-3 times larger than the timber industry. Continued clearcut logging is adversely affecting the visitor industry. He said on his tours he increasingly hears complaints about clearcut logging. He felt if excessive logging is not controlled soon, Alaska will be tainted as a wilderness tour destination and the appeal of a precious resource, wilderness, will be lost. He stressed wilderness is a resource and must be protected or the Alaska visitor industry will diminish in importance. MR. PIHLMAN said he bears no animosity toward the timber industry. He noted he and every member of his family have worked either in the timber industry or in a support industry. He told committee members he spent a considerable amount of time longshoring with Representative Williams. He stated he appreciates the frustration the timber industry faces as the timber supply declines. However, it is beginning to bear the brunt of years of highgrading and overharvesting. He urged everyone to take action to reduce overharvesting before irreversible damage is done to Alaska's tourism industry. MR. PIHLMAN noted AWRTA's comments. He said economically, some good things are happening in Southeast Alaska. Between 1989 and 1993 tourism in Southeast increased 43 percent, providing more business and job opportunities. He stated AWRTA is concerned about forest management practices that would adversely impact tourism businesses, especially those in the tours recreation category that rely on natural resources of the Tongass. The current level of harvesting will displace existing businesses and reduce the land base available for recreation and tourism development. The Landless Native bill in Congress would adversely affect Southeast scenic quality and visitor satisfaction. MR. PIHLMAN pointed out that tourism contributes more to the state's economy than the forest products industry. He said the tourism industry needs relief from the current high level of timber cuts before losing its market share in a domestic and global marketplace. AWRTA believes the Landless Native bill illustrates the need to thoroughly evaluate the landless Native issue and propose a comprehensive solution rather than the proposed piecemeal approach. He stated tourism companies should receive compensation for the loss of natural resources. Public policy decisions that allocate federal and state resources and affect other industries should be made for the benefit of the full public input. BRUCE WALLACE stated he is a 30 year resident of Ketchikan and has been a commercial fisherman for 25 years. He said he has also worked in construction, mining and at the pulp mill. He described one of the complications that any administrative decision will impact. He noted it is directly related to the long term industry viability. The commercial fishing industry has little or no disagreement with most of the sentiments expressed. However, the complication is based in salmon. He pointed out there are 2,900 catalogued salmon systems within Southeast Alaska. He added if that were expanded to include the drainages and an overlay is done against the USFS maps, one would find that salmon and therefore commercial fishing has a direct and ongoing relationship with the forest. That relationship complicates everything which is in an administrative decision within the USFS or the public and private land sectors which the state controls. MR. WALLACE said he was a member of the Board of Forestry for eight years. He stated whatever decisions are made, they must be made with the reflection of the complexity of the interaction between fish and forest. That basic relationship reflects what is Southeast Alaska, both from the community and from the resource base, and has to be a part of the solution. He stressed it is important to have an agreed data base and he felt that is a current problem on trying to determine a solution. He told committee members without agreed data, it is impossible to get a long term resolution to the problem. BILL THOMAS, KETCHIKAN, said he was present to give some viewpoints from the area of subsistence. He stated subsistence is probably the area having the potential for the greatest risk. In order for subsistence to survive, there must be good management, good stewardship, and responsible usage. Subsistence is a good model for the use of any resource. He told committee members if they handle subsistence like they handle their bank accounts, they most likely would be comfortable for a lot longer than they would otherwise. MR. THOMAS recalled the discussion about a sustained economy in Southeast and Alaska. At the same time, everyone hears about the demise of the economic struggles occurring in other parts of the country. He said Washington, Oregon and northern California are good examples. The conditions which have become a failure for them brings them to the only place they can salvage their livelihood, Alaska. He stated while Alaskans have been good stewards and hosts, he did not feel the state can continue to do that for every part of the Lower 48 that runs into an economic problem. He noted it was done with the pipeline and many jobs were created. However, when the pipeline was completed, a large part of the population was lost. MR. THOMAS stressed in the effort to be a good steward and provide good economics for everyone coming to the state to seek relief, it places a burden on the resources available in the state. He said he will not speak to any issue of support or nonsupport but stressed he is committed to supporting those efforts to preserve the availability and maintenance of subsistence. TAPE 95-19, SIDE A Number 000 K.A. SWIGER, EXECUTIVE DIRECTOR, STAND UP!, stated her organization is a grassroots community oriented group advocating economic stability and natural resource development. She said she is a Southeast Alaskan, born and raised. She told committee members through the pioneering spirit of her family who set their Alaskan roots nearly 50 years ago, she was raised to believe that Alaska is a land of opportunity where one can make a respectable living and enjoy the natural beauty and bountiful resources. She stressed the Tongass is home to those who have chosen to continue this pioneer spirit. MS. SWIGER stated her home, the largest National Forest in America, is 17 million acres of more than 1000 islands, and 11,000 miles of shoreline. Accomplishments in this unique area are exemplary. The visitor industry grows at a rate of 6.4 percent annually--over 400,000 in Southeast last year. She stressed these visitors are astounded by the abundance and variety of animals in the area's forest and water. She noted none of the over 400 animal species are endangered or threatened. She said Alaska has one of the most restrictive conservation management programs in the country. One- third of the land is designated wilderness and 80 percent of the old growth forest is forever designated to wildlife. She noted the forest provides a sustainable yield of wood products on less than one-tenth of its land base. Value is added to this otherwise over ripe commodity in the manufacture of pulp, cants, flitches, lumber, shakes, shingles, guitar backs, piano sounding boards, and artistic renderings. MS. SWIGER told committee members the Tongass is site to numerous fisheries enhancement projects, which are often the result of cooperative efforts between federal, state, private timber and fishing interests. Record catches have been enjoyed for many years culminating last year in an all around record of 74 million fish in Southeast. Two-thirds of that catch comes from southern Southeast, an area of concentrated timber harvest. She stated the forest has enormous potential as a source of hardrock minerals. She observed mining has enjoyed renewed interest this last decade. She noted that Greens Creek Mine on Admiralty Island is a model of successful development within a sensitive area, and added that the state has one of the largest known molybdenum deposits in the world. MS. SWIGER stated roads, transportation corridors, and service infrastructure have been developed in the state to support the base industries and communities which serve them. She stressed people are fortunate and proud to be part of such a richly unique region. She said, "show me other communities nestled in a National Forest with virtually no private land from which to develop a tax base...show me other communities whose seasonal and year-round economies are so interrelated...show me other communities developing the natural wealth of the region in accordance with humans and animals sharing the land. Show me other communities who must continually battle for existence with seemingly deaf-eared forces 3,000 miles away." MS. SWIGER said the people of the Tongass are proud of where they live. They have demonstrated their commitment to the land by investing their livelihoods there. The continued abundance of the resources demonstrates their successful management. They know what is best for the region. They know the forest can sustain a 450 million board foot yearly harvest, and that 320 million board feet is not enough to sustain the current industry. They know their wildlife, and where they roam. They know that 90 percent of the Tongass is more than enough for their comfortable existence. She stressed as the mills close and families are put out of work, it is hard to find credibility in a federal agency promising wood supply without adequate funding, and a state administration changing its policy contrary to affected populous leadership. MS. SWIGER told committee members that Stand Up! was forced into existence because of the desire to continue to live and work while using a small percent of the resources of the Tongass National Forest. Specifically, Stand Up! asks the committee for their help in getting the USFS to change their opinion that HCA withdrawals are insignificant to the region, to roll back the HCA implementations of June 30, 1994, and provide an adequate and reliable amount of timber to meet the needs of Southeast Alaska's forest products industry. KATHI LIETZ, PRESIDENT, ALASKA TIMBER TRACKERS ALLIANCE OF THORNE BAY, stated she came to Prince of Wales Island eight years ago to earn college money and immediately fell in love with all that Alaska had to offer and never went back to school. She met and married her husband on Prince of Wales Island and they have three children. She said they would love to stay in Alaska forever but are slowly realizing that the Alaskan dream they have is but a grim reality. MS. LIETZ told committee members that since 1990, she has been employed by Black Bear Cedar Products, a cedar shingle mill in Thorne Bay and handles all aspects of the office. She noted that Black Bear has seen some rough times. The company has weathered two fires and gone from three partners to one owner. In the 5 years since she has been at Black Bear Cedar Products, she has seen the business go from 12 employees and gross annual sales of nearly $1 million to the all time low in 1994 of 4 employees and gross sales of $300,000. She stated where the company previously depended on KPC for at least 90 percent of its wood, it now is searching and scraping for every log. KPC only provided 40 percent of Black Bear's wood last year. MS. LIETZ stressed Black Bear takes only cull cedar logs that would otherwise be burned or dumped and turns them into a quality finished product. She worries each day whether or not her job will be there when she gets to work. Black Bear Cedar Products works very closely with the other small mills in the area. They share business tips, wood information, and provide statistical support as much as possible. All of these businesses employ people who have families and live in communities in Southeast. She explained many spouses of timber industry employees are themselves employed in the timber industry or its support industries. Timber dollars touch every human life in the Tongass on a daily basis. MS. LIETZ stated the people whose livelihoods depend on the forest are being held hostage. Their futures are at the mercy of an over zealous green movement and a lockup mentality that is all the rage in places like New York, Washington, D.C., and Los Angeles. She asked are Sitka and Wrangell an ominous sign of what is yet to come in the remaining communities of Southeast? She stressed not if her friends, co-workers, families and she has anything to say about it. She said as always, the pleas of the people of the Tongass are being drowned out by the big money voices of the Sierra Club, Wilderness Society and their cohorts. MS. LIETZ wondered where the proverbial buck stops. When will families, jobs, communities and economic stability factor in? Will a human being ever be worth as much as a wolf or a goshawk? She felt her job, family and community are in more danger of extinction than any other species of life within the Tongass National Forest. She questioned where her family and thousands of others go? She said perhaps they can go into ecotourism, advertise in upscale magazines and entice the socially and economically elite to get back to nature in the wilds of Alaska. She noted they can rough it in a log cabin with no running water or electricity and only selectively harvested skunk cabbage leaves to wipe their privileged tushes with. She guessed her family could also sign up for welfare. They would have good medical coverage, subsidized housing and ample food stamps to feed them while they enjoy their hard earned unemployment. MS. LIETZ found it ludicrous that the state's Governor feigns concern for the people of the timber industry, yet he openly supports the proposed HCAs. She felt the HCA concept is rash, reactionary and scientifically unfounded. She said not nearly enough time or facts were put into a decision that has such obvious significant impact on so many lives. She stressed the USFS owes it to all the taxpayers they serve to do a full and proper study before implementing the HCAs. It is their job to be stewards of the lands, not gatekeepers. MS. LIETZ stated it was honorable of Mr. Janik to promise 320 million board feet of available timber in fiscal year 1995. She wondered if it truly could be done. She noted the fiscal year is already one-third over. Time coupled with budgetary restraints and reinvention plans will make the 320 million board feet goal virtually impossible to meet. She said the saddest part is that 320 million board feet is not nearly enough to operate those mills which are still in operation, much less reopen the Sitka or Wrangell mills. MS. LIETZ urged committee members not to forget that trees are a renewable resource. She agreed that an old growth stand is beautiful but so is a properly managed second growth stand. She urged committee members to remember there are thousands of people who depend on the forest for their livelihoods. They are counting on the USFS and government leaders to consider their well-being when listening to the outside pressures of the environmental movement. She stressed the people of the Tongass are counting on the legislature to make wise decisions about the future of the timber industry in Southeast. She said they are not faceless beings, but people like committee members. She urged the committee to help win the battle for the Tongass, which is a significant part of the war on the west. CO-CHAIRMAN WILLIAMS announced a recess. CO-CHAIRMAN WILLIAMS called the meeting back to order at 11:07 a.m. ALAIRE STANTON, MAYOR, KETCHIKAN, welcomed committee members to Ketchikan and the new Ted Ferry Civic Center. She stated what is being discussed is economic stability, which she has spoken on many times before. She stressed she was quite speechless, partly because she is not sure the legislature can do anything about the present situation, and partly because she wants to allow enough time for the next panel to talk to everyone gathered about what can really be accomplished in the Tongass. She noted the committee understands the situation and recalled the speakers thus far. MS. STANTON pointed out there are many people present who are part of the Stand Up! organization and asked them to stand. She stated not all of those folks work in the woods and not all of them work at KPC. Many of them provide the service support for the timber industry and for the rest of the people living in the community. She told committee members she came to Ketchikan to work for KPC in April 1954 and has remained in Ketchikan. She stressed her family now wants the community to have the stability they thought they were going to have when they first came here as representatives of the first year-round industry in the area. MS. STANTON said they have children and grandchildren in Ketchikan and would like for them to have jobs. She stated if the committee can help the community in talking to the federal government, the USFS, and Congressmen who also understand the situation fairly well, then she appreciates the committee being in Ketchikan. DENNIS WATSON, MAYOR, CRAIG, stated the Prince of Wales Island is the most highly impacted area in connection with the timber harvest in the Tongass. He mentioned he arrived 20 years ago and at that time there were approximately 1,000 people living on the island and Craig had 250-300 people. Today, the island has a seasonal high of 7,000 people and Craig has a seasonal high of 2,000 people. He said most of these changes are related to the timber industry. He stressed that timber supply is a major issue. MR. WATSON mentioned he is a commercial fisherman and noted that industry wants to be factored in because it is also connected with the health of the forest. He felt the two can coexist and can be healthy together but there must be some input at the local level. He hoped to see the state get in unison, from the Administration on down, on the way Tongass issues are going to be addressed. He said it is extremely naive to believe that once the federal government comes in and takes something it can never be returned. He stressed the timber industry, along with oil, has created the infrastructure on the island. He told committee members the contract paved the way for a lot of small folks to get in. Therefore, people cannot fight amongst themselves on how the issue is going to be addressed. Rather, everyone must determine a way to meet the needs of the communities, while still keeping everybody in business. MR. WATSON stated the Prince of Wales Island is a thriving area and percentage-wise is up there with the Mat-Su Valley. He said the island now has the infrastructure and facilities, getting the island near the 20th Century. He noted the monies received from the National Forest receipts--$400,000 for the city of Craig--is big stuff and added that money goes for schools and roads. He stressed the need for that to continue. DUANE GASAWAY, CITY MANAGER, WRANGELL, thanked the committee for the opportunity to testify. He said when Jack Ward Thomas visited Wrangell, they were told, "The USFS has no legal obligation and no intention of providing sufficient harvestable timber to supply the processors currently in the market". He noted thus far, that is the only promise the USFS has fulfilled. The Wrangell sawmill closed December 1 throwing 225 people out of work, disrupting their lives, families, and their 136 children in the Wrangell school system. MR. GASAWAY stressed the economic loss to the city of Wrangell is staggering. Wrangell has lost a $10 million annual payroll representing 33 percent of the total volume of dollars in the economy. It is anticipated there will be a $330,000 loss in school funding in the next budget. He said current unemployment is 15-20 percent now and is expected to rise to 45 percent as indirect jobs are affected. The city, commencing December 1, began to lose $40,000 per month in its utility fund. He stated 320 million board feet of timber is not sufficient to open the Wrangell sawmill and added it will not keep KPC running at full capacity. MR. GASAWAY told committee members that HCAs are based on science- it is called political science being manipulated to serve a political agenda. He said the environmental assessments in HCAs ignore the hardship on communities and people in Southeast Alaska. The environmental assessment is a perversion of the National Environmental Policy Act and the Endangered Species Act in favor of special interests and political gain. He stated the environmental assessment is a trojan horse in the federal administration's economic war being waged upon Southeast Alaska, its communities, and its people. People in Southeast know they must diversify their economy but they cannot do it overnight. MR. GASAWAY stated there is a need for immediate timber for the Wrangell sawmill to keep the community going while they diversify their economy. He said prior to leaving Wrangell the day before, he received a telephone call from Washington, D.C. and was informed that President Clinton's Office of Management and Budget had deleted from the federal fiscal year 1996 budget, Wrangell's proposal for an Army Corps recognizance study to expand the harbor. Therefore, as the community looks to other areas of the economy to expand, they find another front on which war is being waged upon. MR. GASAWAY said Wrangell and Southeast Alaska in general faces a crisis. He mentioned a group was in Juneau a week ago, today the committee is present to offer help, and he is there to reiterate the need for that help. He said on behalf of the citizens in Wrangell, he thanks the committee for the opportunity to speak. ERNESTA BALLARD, PRESIDENT, KETCHIKAN CHAMBER OF COMMERCE (KCC), stated the Chamber has approximately 400 members who collectively provide 2,500 local jobs. She said KCC is good at community participation and is respected and well known for presenting solutions to many community problems. She stressed KCC has struggled to stay abreast of the planning process on the Tongass. KCC has studied maps, read reports, and has testified at so many public meetings she can no longer keep track. She noted KCC does the same thing about bond issues, garbage disposal, traffic improvements, etc., but does not get the same results. Usually the results are a logical outcome of the analysis. Usually the results are based on a fair assessment of what is known, what it shows, who and what is affected, and what it will cost. She stressed that is not happening on the Tongass issue. MS. BALLARD said in HCAs, KCC sees management measures put forward that are based on a hypothesis. KCC sees an environmental assessment which proposes there is no significant impact to the withdrawal of 30 percent of the timber base but presents no quantification of the resulting economic loss. She said the assessment proposed 8 mile radiuses for foraging protection around goshawk nests but noted these birds are observed to hunt in open areas, not in the interior forest which has been placed off limits for their protection. MS. BALLARD stated KCC sees timber removed from the market pending the outcome of revisions to Environmental Impact Statements (EISs) --EISs they testified about, went to public hearings on, read the maps, and studied the charts on. She stressed these EISs are complete and now they are being revised. KCC sees the marten showing up in viable population studies as an indicator species, even though it is not native to Southeast Alaska and at the same time, KCC sees public employees eagerly moving goats from one place to the other perhaps so they can be protected in the future. MS. BALLARD noted PACFISH and in PACFISH, KCC sees the possibility of additional fish habitat protection at a time when record salmon runs are being experienced. Fortunately, KCC also saw the wolf proposal go down in defeat. She said these actions on the Tongass on the part of the USFS simply do not seem to be logically connected to the facts as observed. She wondered how does KCC participate as an organization representing 400 members, their 2,800 employees, and their families? How does KCC participate in a planning process that is spread out over so many fronts? How can KCC guess what the next issue will be? She stated if every decision is going to be revised before the ink is dry, how does KCC know where to look next? MS. BALLARD stated common sense says the Tongass is well managed. Fish, timber, and tourism industries are all sustained. Common sense says there is enough land set aside from harvest to provide habitat for wildlife. Observation supports this conclusion. She stressed it is only hypothesis that denies it. She said common sense says the community's well-being is discounted in the Tongass planning equation. An annual harvest of 320 million board feet is not enough to save the jobs provided by KCC's members and the families they support. MS. BALLARD said KCC urges the legislature and the Administration to demand rational management of the Tongass. She encouraged the legislature to ask for a planning process that is fair...ask that everything be put back on the table...ask for results that relate to facts, support planning, support multiple use, support sustained yield, and support timber harvest...ask for a no action decision on the environmental assessment, a withdrawal of the HCAs, and a restoration of the timber that has passed through NEPA...and then agree to participate in the next round of TLMP. MS. BALLARD stated KCC urges the USFS, when scoping for the TLMP, to be sure that alternative sources for wood products are addressed. Most of these are petroleum based and made from nonrenewable resources. KCC urges USFS to be sure that the impacts in Southeast Alaska are quantified to show what happens if 30 percent of the economic base is lost. KCC urges USFS to be sure that the global impacts of moving timber production to less developed countries are compared to the extremely successful environmental protections now at work on the Tongass. She said at least in that way, there will be a fair debate about the issues. What is being seen instead is a gradual dismantling of communities. Timber harvest on the Tongass is being stalled and set back in incremental actions which are each passed off as insignificant. The big picture is hidden. MS. BALLARD said KCC looks forward to an opportunity to participate in a fair planning process. She thanked the committee for the opportunity to express KCC's frustrations. She noted there is no private property base on which to build communities but the responsibility for education and public welfare and safety has been assumed. She stated it is desirable to be able to continue to provide these from the private sector tax base. PHIL JANIK, REGIONAL FORESTER, ALASKA REGION, USFS, stated he appreciates the opportunity to appear before the committee and provide information regarding the management and use of natural resources on the Tongass National Forest. He mentioned that with him from the USFS is Fred Walk, Timber Director; Fred Norbury, Ecosystem Planning and Budget Director; and Dave Rittenhouse, Forest Supervisor of the Ketchikan Area of the Tongass. He said the committee specifically asked him to address the timber program on the Tongass. He noted he will do so but added it is important that it be done in the context of the entire Tongass and in conjunction with the other related resources and programs. MR. JANIK told committee members the Tongass National Forest offers the Southeast Alaska panhandle beauty, value, and opportunities for people. Its value to people is diverse including economic, cultural, social, ecological, and spiritual. He stressed the forest is a complex of land, water, and living resources that represents a splendor unparalleled anywhere else in the world. It is a special place of intense local, national, and international interest and value. He noted that people come from everywhere to see its beauty and live the exceptional experiences the Tongass and all of Southeast Alaska offer. He stated the Tongass is a major contributor to subsistence use and lifestyles of rural residents and is extremely important to the cultural heritage of Alaska Natives. MR. JANIK stated the Tongass is also a working forest, rich in resources and opportunities having significant economic values, such as minerals, timber, fisheries, and tourism. Such resources and use opportunities contribute significantly to domestic and foreign economies and are of particular importance to the residents of Southeast Alaska and dependent communities. He mentioned a few highlights from the Tongass. About 80 percent of all salmon harvested in Southeast Alaska are produced in the streams and lakes of the Tongass, providing the major source of salmon to the sport, commercial, and subsistence fishers. Timber harvesting on the Tongass represents about 50 percent of timber harvested in Southeast annually. The Tongass has some of the richest mineral deposits and largest operations of its kind anywhere in the national forest system. MR. JANIK continued that the tourism industry and recreation use now draw over 500,000 visitors a year to Southeast. This use has doubled in the past 15 years. The Inside Passage is the most visited attraction in the state, much of this due to the beauty of the Tongass. In addition to simply Tongass-watching from a cruise ship or marine ferry, the Tongass offers 149 cabins for recreation and emergency use, 505 miles of hiking trails, numerous opportunities for canoeing or kayaking, helicopter tours, flight seeing, fishing, and other adventure sports and wildland experiences. He said the explosion of tourism in Southeast has exceeded all expectations of economic benefits to communities, while also challenging agency and communities in managing the increased use. MR. JANIK said given these exceptional opportunities on the Tongass, it is no wonder the Tongass is often an area of intensive debate over what ought to be the appropriate combination of uses. He stressed the USFS is bound by many laws which require that management of all forest resources be accomplished in a sustainable manner. The National Forest Management Act, Alaska National Interest Lands Conservation Act, Tongass Timber Reform Act, Multiple Use Sustained Yield Act, and the Endangered Species Act are examples of laws that directly or indirectly document the legal expectation of sustainability of all renewable resources. MR. JANIK told committee members that sustainability of all resources over the short and long term is fundamental to the multiple use mission of the USFS and the national forests the USFS has been entrusted to manage. Sustainability involves both land stewardship and land uses, not one or the other. He noted that land stewardship is a precursor to sustained land uses. He stated sustainability is achieved through the analysis and deliberation that occurs in examining and responding to the values, needs, and wants of people within applicable environmental laws. Sustainability is also the key to long term economic stability and predictability for natural resource industries and dependent communities. MR. JANIK explained it is the job of the USFS, with the help of all interests, and the state and other federal agencies to deliberate and assist in resolving resource issues. He said ideally, the forum for resolution should be open, inclusive, and constructive, with the participants helping shape the outcome in full appreciation of the governing laws, associated principles, values, needs, and wants of people and the applicable science. He noted that an assessment of risks is also part of meeting the sustainability test. MR. JANIK stated the timber management program of the Tongass is based on the Amended TLMP, which establishes an Allowable Sale Quantity (ASQ) of 4,500 million board feet of timber per decade. Under the National Forest Management Act, the ASQ is the maximum amount that can be offered and sold each decade. The amounts actually offered each year depend upon many factors such as the level of appropriations, the time required to prepare timber sales after appropriations are received, success in obtaining permits and rights of way, objectives for other resources, and the issues raised by administrative appeals and legal challenges. MR. JANIK added that the USFS is also required by the TTRA to seek to provide timber from the Tongass. Section 101 of the Act reads, "Subject to appropriations, other applicable laws, and the requirements of the National Forest Management Act of 1976, except as provided in subsection (d) of this section, the Secretary shall, to the extent consistent with providing for the multiple use and sustained yield of all renewable forest resources, seek to provide a supply of timber from the Tongass National Forest which (1) meets the annual market demand for timber from such forest and (2) meets the market demand from such forest for each planning cycle." MR. JANIK stated the USFS is required to provide a sustainable flow of timber from the Tongass National Forest within the limits of the law and regulations. He stressed the USFS is not only required to do so, but is also committed to doing so. He said that commitment includes USFS's contract obligation to KPC and timber for the independent program. It is part of USFS's job and an important part of the USFS multiple use mission. MR. JANIK said the actions the USFS has taken on the Tongass are for the purpose of ensuring the USFS meets the comprehensive sustainability test and does not contribute to taking any resource below the sustainable level. The actions are responsive to new information that suggests if precautionary measures are taken now, more severe and adverse effects can be avoided in the future. He stated the USFS's approach is one of prevention rather than costly correction. He noted the USFS has the opportunity to learn from the lessons in the Lower 48 and address concerns and symptoms earlier on so they do not develop into events over which the USFS may lose control. MR. JANIK stated concerns regarding some wildlife species on the Tongass were raised by an interagency committee convened by the USFS. The committee was convened to assess the condition and trend of old growth habitats and associated wildlife species on the Tongass. He said the committee recommended HCAs, or HCA strategy, as the best way to provide for old growth habitat requirements. Their evaluation and recommendations were peer reviewed by a separate group of scientists through an agreement between then Regional Forester, Mike Barton and Pacific Northwest Research Station Director, Charlie Philpot. He noted the peer reviewers endorsed the committee's work and also concluded that immediate management actions were considered necessary to preserve options while additional information was gathered and evaluated. The committee's assessment focused on all species associated with old growth habitat and did not just examine the goshawk and wolf habitat issues. MR. JANIK told committee members that more recently, the U.S. Fish & Wildlife Service (USFWS) received petitions for listing the Alexander Archipelago wolf and the Queen Charlotte goshawk under the provisions of the Endangered Species Act. As shown by their decision to accept the petitions, the USFWS indicated they were giving serious consideration to the points raised in the petitions. While the USFS was already evaluating the overall recommendations for old growth habitats, the petitions for listing of the wolf and the goshawk added to the significance of that evaluation. He noted that additional recommendations were received from a group of scientists regarding goshawk habitat. The petitions also led the USFS to recognize that interim measures could help prevent listing of these subspecies and thus avoid additional complications to the timber program that a listing could create. MR. JANIK stated in December, the USFS, the USFWS, and the ADF&G entered into a formal agreement that should help prevent listings. He said that group pledged to work together cooperatively on habitat and species management concerns, including the examination of available scientific information and its interpretation. He told committee members that the decision by the USFWS not to list the wolf as a threatened species is a success story coming from this commitment to work together. USFS believes their decision is correct and credible. Together, conservation issues can be addressed in a manner that reduces effects to industries and dependent communities and avoid the costly efforts to recover listed species. MR. JANIK explained the USFS is pursuing a three step approach that emphasizes prevention rather than correction. The three steps are: 1) Rescheduling of the 1994 and 1995 timber sales to preserve options for addressing scientific recommendations and wildlife concerns that have emerged; 2) preparing an amendment to the existing Tongass Plan with interim measures to guide project level activities until the Tongass Plan revision is completed; and 3) completing the Tongass Plan revision to directly address the resource concerns that have been raised and to address the socioeconomic implications. MR. JANIK stated with respect to the first part of the strategy, the USFS deferred offering part of the timber sale volume that had been prepared. The deferrals will help maintain planning options for consideration in the TLMP revision. He said the habitat approach adopted in the Plan amendment or the Plan revision may not allow all of these sale areas to be offered in the future. He noted that in June 1994, the USFS projected a 281 million board feet timber program for fiscal year 1994. By the end of the fiscal year, USFS actually delivered 307 million board feet of new offers and, with re-offers, put 337 million board feet on the market. USFS anticipates the fiscal year 1995 timber program to be at the 320 million board foot level to supply timber to the KPC long term contract and to the independent timber sale operators. MR. JANIK said the USFS exercised considerable flexibility preparing the fiscal year 1994 and fiscal year 1995 timber offering projections by carefully and thoughtfully identifying where HCAs and timber sale adjustments were permissible, so as to preserve planning options while delivering as much timber volume as possible. Examples of timber sales where such changes were incorporated include the Saginaw and Bohemia sales on the Stikine Area, the Shelter Cover sale in the Ketchikan area and the Northwest Baranof, Neka-Humpback, and the Hanus sales on the Chatham area. MR. JANIK stated the USFS will continue to exercise flexibility where possible. He said USFS's field people, of all disciplines, have worked side by side in meeting these challenges. They have spent many long days and weekends trying to be responsive to both the USFS land stewardship and land use obligations. He expressed appreciation for their efforts and personal sacrifices to get that job done. He noted the most recent example is the re-evaluation of the Luck Lake units on Prince of Wales Island. MR. JANIK said the USFS also recognizes that policies such as approval of the export of cedar and other tree species must be reviewed in the context of the domestic timber supply. He noted that the USFS is currently conducting such a review. He stated the Plan amendment process, part two of the strategy, is underway. A draft environmental assessment was circulated for public comment on September 30, 1994. The USFS received comments from over 2,500 individuals, groups, and agencies. He noted that the USFS is still evaluating those comments. Many of the comments are opposed to the USFS proposal. However, comments from the USFWS and the state of Alaska are generally supportive of the USFS's proposal, but the USFWS urges consideration of additional habitat management measures for both the wolf and goshawk. MR. JANIK added that the state of Alaska also emphasizes the importance of these issues to the timber industry of Southeast Alaska. He said the USFS remains convinced that some form of interim direction is needed to maintain the management options, minimize the risk to the timber industry, and prevent more serious impacts in the future. TAPE 95-19, SIDE B Number 000 MR. JANIK stated the Plan revision, the third part of the strategy, is also underway. He mentioned that the USFS plans to finish the revision as soon as possible, with a target date of June 1996. He said the USFS is in agreement with the many respondents to the environmental assessment that the Tongass plan revision effort is the appropriate vehicle to address these complex resource and socioeconomic issues. He told committee members the USFS has restructured the planning process to involve the USFS Pacific Northwest Research Station as a full partner in the revision. The USFS has also incorporated personnel from the USFWS, the National Marine Fisheries Service, and the Environmental Protection Agency in the full range of planning activities. MR. JANIK said the intent is to ensure that the USFS's decisions, with respect to the wildlife and fish issues, benefit from a broader interpretation of available scientific information. The viewpoints of the federal agencies that have statutory and regulatory responsibilities with respect to wildlife, fish, and the environment are considered as part of the scientific information. Involvement by the state is also expected, essential, and welcome. He added that informational open houses will soon commence and be conducted throughout Southeast Alaska. MR. JANIK said although the relationship between the wildlife issues and timber production on the Tongass have received the most attention, other issues are also being assessed in the revision. These issues include use of alternative timber harvest and silvicultural systems to accomplish forest management objectives and provide additional flexibility in issue resolution. He stated in the Tongass for too long, there has always been a decision faced as to either cutting trees or not cutting trees in terms of trying to meet environmental obligations. He explained the USFS has commenced a study and will be examining some alternative means of harvesting trees, whereby they might be modifying forest structure but not eliminating it over a course of a number of acres through the form of a clearcut. He noted the USFS is not going to get away from clearcutting but does want to have other options available for harvesting trees that might relieve some of the tension of that cut or no cut two way option. He noted that other examples are protection and sustainability of anadromous fish habitats, protection of the karst/cave resources on the forest, and wild and scenic river considerations. MR. JANIK stated he understands Sitka's and Wrangell's financial difficulties resulting from the closure of the Alaska Pulp Corporation mills. He said the USFS is going to try and help as best they can in two ways. First, the USFS will continue to try to get as much timber out on the market as possible. Second, the USFS is trying its best to bring forward through Forest Service sources community assistance funding. He noted the USFS well exceeded a $150,000 investment in 1994 in that regard and hopes that figure will be significantly higher in 1995, perhaps $1 million or more. He stressed the USFS does care and is very concerned about the situation. MR. JANIK stressed the USFS cannot do this job alone. The USFS intends to actively engage the other federal and state agencies, tribal governments, and interested publics. He said how the Tongass is managed should be determined through a collaborative process, and the USFS is committed to that kind of interaction. In addition to the open house information and listening sessions the USFS will conduct throughout Southeast Alaska, they welcome other interactive forums that might be suggested or arranged. Such sessions must be open to all interests so that the USFS meets the requirements of the Federal Advisory Committee Act. He stated from such sessions could emerge a better mutual understanding of people's expectations regarding timber supply, the demand for timber, wildlife conservation, and the feasibility of meeting those expectations. MR. JANIK mentioned that he had been told that during the deliberations associated with the TTRA legislation, the Southeast Conference played an instrumental role in bringing people together to interact, which helped lead to the resolutions achieved in that effort. He suggested perhaps a similar forum could be used to assist the USFS with the revision. He said the USFS is very encouraged by the cooperative spirit demonstrated by the federal and state agencies and by the partnership approach being emphasized by Governor Knowles in how government entities interact with each other and with the public they serve. The USFS is eager to participate in that kind of partnership. MR. JANIK stated during the meeting of December 8, 1994, that Representative Williams arranged in Ketchikan, he personally agreed to meeting quarterly with representative interests and members of the public in Southeast Alaska. He stressed the Forest Supervisors of the Tongass and he reaffirmed their commitment to participate in such regular sessions along with key members of their Regional Office and Forests. MR. JANIK recalled the letter of invitation for the hearing said the Resources Committee hoped the hearing would lead to a better understanding of how the state, the federal government, affected communities, and the timber industry could work together to solve problems facing timber-dependent communities in the region. He stressed the USFS is committed to such a collaborative approach. He suggested four ways the state, the legislature and/or state agencies can help the USFS. MR. JANIK said the first suggestion is establishing and helping the USFS with forums for public involvement, especially going through the TLMP revision process. Next, help the USFS review, in a broad sense, all of the federal and state permitting system processes the USFS is required to comply with as timber projects are moved through the various gates of approval. He said there has been discussion about forming a policy group, consisting of federal and state policy makers who will discuss some of the major issues which are particular challenges, as well as continuing and expanding state involvement in many of the studies needed to further interpret some of the science where there are voids. An example was mentioned earlier and that is because of limited funds, etc., many of the goshawk surveys are only being conducted in areas where there is a need to clear timber. Ideally, the sampling for goshawk nests should be Tongass-wide, in a statistically valid sampling process. He mentioned that the USFWS has indicated they would help pay for that process. CO-CHAIRMAN WILLIAMS thanked Mr. Janik for his presentation and his efforts to answer some of the questions in his letter of invitation. REPRESENTATIVE JOE GREEN acknowledged that he is coming from ground zero and stated all he knows about the problem is what he has read in the paper. He recalled that Mr. Janik had referred to a 4,500 million board feet of timber available per decade, then had mentioned the 320 million board feet available in 1995, and then related to the fact that the USFS is going to try and get as much timber available as possible but because that is going to be less than is necessary, Mr. Janik understands the financial difficulties in Sitka and Wrangell. He noted that Mr. Janik had said the federal government planned to try and come up with some funding to help the conditions. He asked if the USFS is only going to make two-thirds of timber available of what is necessary, would it not be more prudent to increase the amount of timber available and forget handing out dollars. MR. JANIK stated he did not mean to suggest in any way that the rural assistance program was a substitute for timber. The USFS fully recognizes that delivering timber to the market is the most crucial thing which needs to be done in terms of the USFS's ability to help the communities dependent on timber. He stressed he was only trying to point out that the USFS does care about the changes going on with Sitka and Wrangell and will do its best with regard to the rural assistance monies available. He hoped those monies, along with other monies coming from other sources, will help make a difference in terms of current challenges. MR. JANIK said in regard to the figures Representative Green quoted from his prepared statement--the 4,500 million board feet per decade is the Allowable Sale Quantity from the forest plan and is the maximum amount identified. He stated the USFS would like to try and achieve that level but has found they cannot achieve it because of other restrictions being dealt with. He pointed out the 320 million board feet for fiscal year 1995 is the best the USFS can do as projected currently. He said the USFS continues to look for other opportunities as they did in 1994 to determine if additional units can be released. MR. JANIK mentioned with the environmental assessment being finalized, and with some of the new technical information which has emerged since last September, the USFS may find some room for more flexibility but that remains to be seen. He stressed he does not want to mislead anyone. He reiterated the USFS is going to try its best to get as much timber out in the market as possible without running some of the risks mentioned earlier. REPRESENTATIVE JOHN DAVIES clarified the 320 million board feet for 1995 results from a judgment call within the USFS as to what is required to avert listings and is not a legal requirement. MR. JANIK responded the 320 million board feet is the USFS's interpretation of its legal requirements regarding the environmental laws they are compelled to follow and the USFS sees some risks if the USFS does not respond to the information in the fashion they have, then they would be vulnerable to that. He stated the 320 million board feet does relate to the USFS's ability to produce that level in complying with other regulations they are required to follow. He added the debate is that is a judgment call on what the law does require the USFS to do. REPRESENTATIVE DAVIES noted KPC's average annual 225 million board feet (to meet the contract) and the SBA 80 million board feet totals 305 million board feet and if another 60 million board feet was added for Wrangell, the total would be around 365 million board feet. He wondered if 365 million board feet is completely out of the question. MR. JANIK replied 365 million board feet for the fiscal year is not achievable. He said the 320 million board feet is the best the USFS can do unless some additional units can be found. He pointed out it is important to note there is not agreement between the USFS and KPC as to what the contract obligation is in terms of volume. He noted that the USFS had a recent contractor's decision on the obligation of the USFS delivery on the contract which is under discussion currently. He stated the part of the 320 million board feet which is identified for KPC for fiscal year 1995 is 220 million board feet and the other 100 million board feet is identified for offerings for the independent program. MR. AMBROSE asked Mr. Janik to explain to the committee that the 307 million board feet actually delivered by the USFS is not trees cut. MR. JANIK said the terms he used in his presentation basically meant that the USFS offered up for sale 307 million board feet of timber of new offerings. In addition to that, there was another 30 million board feet of reoffers. Therefore, the total offering to the timber market put up for sale was 337 million board feet for fiscal year 1994. He thought Mr. Ambrose's point was much of that volume was not immediately available for harvesting, depending on the time it was released. MR. AMBROSE stated there has also been an anadromous fish habitat assessment being prepared. He said it is his understanding the assessment has been through the Office of Management & Budget and is now back in Agriculture. He wondered if there is anything in that report which is going to require additional protections. MR. JANIK responded he may sound evasive when answering the question even though he does not mean to because the Appropriations Committee of Congress has asked the USFS to prepare that report. He said that came about as a result of Senator Stevens' amendment for the fiscal year 1994 which prohibited implementation of the PACFISH strategy being considered in the Lower 48. He added what came from that amendment, through conferencing, was an instruction to the USFS to conduct a study to see if additional protective measures were needed on the Tongass for anadromous fish and watershed integrity. He told committee members that report was completed and is moving through the approval process to delivery to the committee. He pointed out it would be very awkward to give the details of that report until the committee has a chance to receive it. MR. JANIK stated there is nothing in the report that indicates any kind of immediate measures to be taken of an emergency status. He said there are some things in the report the USFS will be examining in the TLMP revision through the normal course of that planning process which will involve full public disclosure and interaction. REPRESENTATIVE SCOTT OGAN noted that he offered a bill in the house, HB 83, which would require state agencies to scrutinize federal mandates and either negotiate with the federal government to implement changes in that mandate or possibly sue the federal government for changes. He asked Mr. Janik if he had the power to eliminate or modify any of the federal environmental laws to help implement the USFS's multiple use goals, what would those be and how would he change them. MR. JANIK replied he would not offer any suggestions on what should be eliminated, as many of those environmental laws and regulations were developed in good faith and with sound reasoning. He would suggest that through the various kinds of forums and interactions, the USFS can do a better job analyzing the science that is an interpretation of its obligations and bring a broader base to bear on that of all responsible agencies and interests as well as then deliberating and trying to find some resolutions to some of the issues. SPEAKER PHILLIPS recalled that Mr. Janik had commented on the contract which existed with KPC. She asked if it was extremely clear that the USFS does have a 50 year contract with KPC to provide timber. MR. JANIK replied yes. SPEAKER PHILLIPS recalled that Mr. Janik had said, "The Forest Service is bound by many laws which require that management of all forest resources be accomplished in a sustainable manner". She asked if Mr. Janik considers the USFS contract with KPC to be part of those laws which bind the USFS on their responsibility on the forest. MR. JANIK responded yes and added that a contract is a binding instrument. SPEAKER PHILLIPS asked if the USFS feels it is fulfilling the content of that contract on an annual basis. MR. JANIK said the USFS strongly believes it is meeting its obligations under the KPC contract. SPEAKER PHILLIPS recalled Mr. Janik talking about the USFS's desire to give grants to communities. She stressed the communities do not need grants, they need logs. She noted that Mr. Janik had clearly left out any written testimony that the USFS wanted to provide extra timber, should be providing extra timber, needs to be providing extra timber. She stated the only comment Mr. Janik made was the USFS may be able to give grants to these communities in the amount of $118,000. She stressed that amount of money does not sustain a community. MR. JANIK asked Speaker Phillips to consider the number of times he referenced the USFS's strong intent to deliver as much volume of timber to the market as possible. He stated he is fully aware that the USFS's ability to bring money forward is no substitute for timber on the market. CO-CHAIRMAN WILLIAMS asked Mr. Reinhart if KPC would be willing to continue to operate on the long term contract if the extension was beyond the year 2004. MR. REINHART stated KPC has a commitment to Ketchikan to go through the year 2004 and if a workable agreement can be reached for an extension, KPC would like to stay in the community and continue to operate their facilities. He said KPC believes in the community and Southeast Alaska. CO-CHAIRMAN WILLIAMS asked Mr. Reinhart to comment on Mr. Janik's comments about making timber available. He said this is a problem which the community has heard a lot about from KPC and the USFS. MR. REINHART said it is part of the shell game going on. KPC has many numbers and every time they start to discuss the numbers and begin to narrow the gap, the USFS comes up with a new way to present the numbers to keep people confused. He noted he had outlined the contract numbers which KPC believes that contract calls for, but the USFS continues to make the majority of the volume available in September. He stated even though USFS says they will give KPC 220 million board feet, if it comes late in the year, that is not what is going to go through KPC's mill. Last year, the USFS gave KPC 176 million board feet and KPC was only able to get 110 million board feet to the mill which does not keep their people employed, their sawmills running, their pulp mill running and the loggers in the woods logging. REPRESENTATIVE DAVIES said he appreciates the problem in regard to getting the timber offering late in the year the first time. He asked if that is a continuing problem. He wondered if the offering is always in September, would not the previous September go into the next year, etc. MR. REINHART said some of those delays do not delay KPC for a year but create delays of two years. Therefore, it becomes a compound problem. He stressed the USFS has not met their volume. One year the USFS gave KPC just under 50 million board feet and the next year they gave 167 million board feet. He stated KPC has such a small pipeline, they have no flexibility left and when those numbers are going up and down, KPC will always be behind. MR. AMBROSE observed that folks such as Mr. Seley--small businessmen that are independents looking for SBA sales--seem to be pitted against the long term contract, acknowledging the fact that a lot of the infrastructure provided helps the small businessmen out. He said there are those who contend that if the long term contract goes away, there will be lots of timber jobs based on operations of Mr. Seley's size. He recalled that Mr. Seley had said that someone from the USFS had told him he would have a hard time finding a market for his product. He wondered if Mr. Seley is out there by himself, is there a market there the USFS does not think is there now. MR. SELEY responded he is not sure who gave that statement and why. He stated there is not a problem for finding markets for his products. He said in regard to the KPC operation, he feels it is crucial that long term sale volume be provided because KPC is a buyer of chips, they plan to assist in the remanufacture of rough baby squares from his plant, they are one of the local buyers of pulp wood, etc. He stated KPC is the key part of the industry. He stressed there is not an argument between the majority of the independent sector and the long term contract. MR. AMBROSE wondered if he was correct that when the volume for Mr. Seley's part of the industry was going down, someone said there is not a market for his product. MR. REINHART stated perhaps he is talking about appraisal problems --some sales did not sell. He said KPC has sales which sometimes the USFS appraises as deficit sales and independent operators like Mr. Seley are not able to get those on the board because there is not a profit associated with them. He noted it depends on how the sales are put together. MR. AYRES asked Mr. Seley what prevents the state from having in- state processing requirements and is that something he would support. MR. SELEY said absolutely. He felt the only thing which stops more value-added in-state processing facilities is the commitment and the USFS's ability to keep a commitment for a viable supply of timber. MR. AYRES stated if there is a certain amount of timber available and there are going to be losers, why isn't it the logs drifting down the channel. He wondered why there is not a requirement for those logs to be processed. He stressed for every tree cut, there should be jobs in Alaska. MR. SELEY agreed. He recalled Mr. Age earlier stating his desire to manufacture cedar at his plant and if he manufactures cedar, he displaces what he is now cutting in spruce and hemlock for KPC. He felt industry will again take grips with that problem and develop the manufacturing capability for cedar. MR. AYRES felt that is something the state and the legislature could help with. He mentioned that someone slipped him a note saying the Supreme Court has said Congress has not authorized the state to require in-state processing so if the federal government does not authorize it, it cannot happen. CO-CHAIRMAN WILLIAMS said many of these things can happen today if there is a volume of timber available. The current problem is the amount of timber needed is not made available by the USFS. He stated KPC can consume 220 million board feet of timber and Mr. Seley's mill can consume 70 million board feet of timber. He stressed to get the value-added, there is a need for a volume of timber. SPEAKER PHILLIPS stated her question is for Mr. Janik and Mr. Reinhart. She asked what the process is when they are allocated a certain amount of board feet per year and they are unable to process that all in one year. She wondered if they can carry over to the next year that which they were not able to process. MR. REINHART said in days gone by, KPC and others had 2-3 years worth of operating volume within the pipeline and could adjust their operations depending on their volume needs, wildlife constraints, etc. He stated today KPC has 6-9 months worth of operating volume. He added KPC can carry its volume over and they previously had the surplus volume to do that. SPEAKER PHILLIPS gave an example. She said KPC was allocated 220 million board feet and because the offer came in so late in the year, they were only able to process 150 million board feet. She asked if KPC can take the additional 70 million board feet and stockpile it for the next year. MR. REINHART stated yes--it moves into the next year and KPC tries to develop it and work it into their timber program. FRED WALK, DIRECTOR FOR TIMBER MANAGEMENT, USFS, said when the USFS releases timber under the long term contract, they expect there be an appropriate amount of time for the road construction work and the harvesting to take place, and that time frame would be from 3-5 years before the timber the USFS offered would be all harvested, the contractual work completed, and the operation completed. CO-CHAIRMAN GREEN recalled that Mr. Janik had said the 320 million board feet was USFS's legal interpretation. He asked if that interpretation was made before the information about the goshawk was available--maybe the goshawk does not really live in the older forest and the information on the martens--which would have influenced their decision. MR. JANIK said the USFS has tried to be as responsible as possible in looking at what its legal obligations are and balancing that out with delivering as much timber to the market as possible. He stated the USFS will continue to examine those recommendations as it gets smarter about all the information, and wants to do that with a broader group of people than those who have been involved to date. He noted if the USFS does find additional flexibility through that kind of interpretation, it will be pursued aggressively. He stressed the USFS is wanting to provide and do its part for a sustainable timber industry in Southeast Alaska. He added the USFS is trying its best and is trying to prevent further adversity which could emerge if it does not take action now. MR. JANIK noted what he said about the finalization of the environmental assessment will be the next inning on that subject because the USFS does have additional technical information. MR. AYRES asked what keeps the state from requiring in-state processing. MR. JANIK felt that subject should be examined. He said there may be some federal implications but noted it is an area that should be looked at. MR. REINHART stated there are two parts to the export component. He said on federal lands for everything other than cedar, there are domestic manufacturing requirements. He noted that KPC does not export spruce and hemlock but runs it through their facilities. KPC has requirements set through regulations the USFS has. He commented in regard to the question about cedar--KPC has talked to Governor Sheffield, in his work at Wrangell, about KPC's interest in sawing some of that cedar. He noted there are some things which need to be done to ensure a timely progression, so the industry is not disrupted and the timber pipeline is not further disrupted. MR. REINHART said the second part is the land which the committee and Governor Knowles controls--the state forests. He stated that effort will have to be between the state legislature and the federal government because there are no requirements for domestic manufacturing. RALPH LEWIS, PRESIDENT & GENERAL MANAGER, KPC, stated he would like to address the cedar issue which has always been a KPC concern in terms of manufacture. He said the only thing keeping KPC from doing that is getting the red cedar into the market. Times have been changing and the restrictions and requirements on red cedar is disappearing in the Lower 48. Therefore, people are beginning to show interest in KPC's red cedar. He noted that previously, red cedar was on the very highest and furthest north was the lowest quality, so the only value was in the export of the logs. MR. LEWIS stated the red cedar higher value gave positive stumpage rates. He stressed exporting that cedar has bailed out timber sales. He said with the price going up, those sales are profitable. He noted there is a misconception that added-value brings more money to the stump and he stressed that is not necessarily true. If KPC processed red and yellow cedar, it would be less valuable to the USFS, not more. It would put more jobs in Alaska but would reduce the value. MR. LEWIS said if that is hard to believe, one needs to look at the hemlock and spruce which KPC cuts and processes in Alaska, where the private lands can export it. Those logs have $350-700 a thousand more value than processing them here in Alaska. He stated when people start talking about processing the wood, the return to the seller of the product is going to be reduced (the USFS). If that is going to be done, there will be below cost timber sales or small stumpage value sales. He stated the problem with it is the Lower 48 trying to stop the timber sales. He stressed there is a balancing act going on. TAPE 95-20, SIDE A Number 000 REPRESENTATIVE DAVIES said one of the things learned today is that the numbers mean different things to different people. He recalled that Mr. Janik had said 100 million board feet would be allocated to the SBA program. He asked Mr. Seley if that 100 million board feet means at least 80 million board feet. MR. SELEY stated there is a difference between the SBA program and the independent sale program. He recalled that Mr. Janik had referenced the independent sale program but did not recall him referencing the SBA program, which is a commitment between the SBA and the USFS. He said the independent sale program involves a volume of wood which gets thrown out and every time there is a shortfall on the SBA sale volume, the USFS says it could have been picked up through the independent program and if the USFS falls short on the KPC contract, they say it could have been picked up through the independent sale program. MR. SELEY said SBA operators have to have the 80 million board feet of SBA designated timber made available. Last fall, the sale of approximately 20 million board feet was sold in the independent sale program, purchased by a non-SBA firm with no manufacturing capability in Southeast Alaska. REPRESENTATIVE DAVIES asked Mr. Lindekugel to comment on the numbers being discussed and what those numbers mean from his perspective. MR. LINDEKUGEL responded supply issues are very difficult and what needs to be considered is that a small fraction of the forest is being talked about which supplies this volume to support a certain percentage of the jobs in the Southeast economy. He stressed that timber also supports other diverse aspects of the Southeast economy. He said his organization is willing to work with people in Southeast to determine solutions and recently worked on conceiving, received fundraising for and planned a workshop in Sitka on forest enterprises which will happen in early March. This workshop will focus on different options, given the fact that there is a smaller timber volume available and there is a need to maximize the job output from that volume. MR. LINDEKUGEL stated in addition, his organization has repeatedly gone to the table and gave committee members an example. He said his organization is very interested in working toward solving the problems. He noted Wrangell was hit hard by the Alaska Pulp Mill closure. He pointed out that 91 million board feet of timber came up on the block in September. Alaska Pulp Corporation (APC) elected not to bid on any of that timber and instead shut down its mill indefinitely. He said purchasers paid up to 50 times the dollar amount that APC was getting under its former long term contract. He stressed the Wrangell facilities can be used as a demonstration project for adding manufacturing capabilities which would produce more jobs. He noted there are many options to explore. MR. LINDEKUGEL told committee members that SEACC members live throughout the panhandle and depend upon the forest resources in many different ways and they want to be at the table, working with people to solve the problems that change brings. He stated change either has to be managed or it will control. A person can stay a step ahead of it, looking into the future and maintaining the options available or they can be cut out before they are explored. CO-CHAIRMAN WILLIAMS clarified that Mr. Lindekugel was saying there was enough time for APC to bid on the 90 million board feet of timber made available in September in order to keep the mill working throughout the winter. MR. LINDEKUGEL stated he does not know what kind of flexibility the APC had in terms of available timber supply. He said the APC received over 60 million board feet in close out activities on the long term contract after the contract was closed, which is about the volume APC cuts on a yearly basis. He said APC chose not to play the game. He stressed APC was willing to get the timber when they were paying $1.07 per thousand board feet in cash but was unwilling to go on the competitive market and bid for that timber. Therefore, that timber increased in value due to competitive forces. CO-CHAIRMAN WILLIAMS clarified that Mr. Lindekugel was saying that the 90 million board feet of timber made available in September was very good timber, was not a deficit sale, and the sale areas were available for winter type logging. MR. LINDEKUGEL responded he did not know if the areas were available for winter type logging. CO-CHAIRMAN WILLIAMS asked Mr. Lindekugel if he knew what type of timber was made available--deficit sale, good timber, etc. MR. LINDEKUGEL stated that APC claimed it was a deficit sale. Purchasers competed in a bidding process and raised the price of that timber 50 times over what the USFS appraised it. He stressed that fact suggests it was not a deficit sale. He said people are not going to bid on timber if they cannot sell it and manufacture it. CO-CHAIRMAN WILLIAMS clarified there is 90 million board feet of timber available for the sawmill now. He said if the USFS is going to turn down a bid 50 times more than what they appraised it at, there is something wrong with the system, unless they have not cut it already. He stated if the 90 million board feet of timber is available at 50 times more than the cost, that volume should be out and readily available for the sawmill. MR. SELEY stated the 90 million board feet was timber that was originally earmarked for APC under their long term contract. He said he cannot speak on their behalf but he felt their closure was a result of years of not receiving volume on a timely basis to keep their operation running. He stressed that 90 million board feet of timber was like asking them to take a 200 mile trip with 100 miles worth of gas in the tank hoping they would find a pump down the road. He noted it is too difficult to manage an operation with an unsteady supply of timber coming in spurts. MR. SELEY stressed if the industry gets the supply, it will make the commitment. He said he does not care how many million board feet his mill does or does not run--he works on dollars. He stated he has to have enough revenue to cover costs and perhaps a margin. CO-CHAIRMAN WILLIAMS thanked everyone for their participation. He said the committee was given a lot of good information and he hoped they could put it to use. He closed by referring back to a few opening remarks. He said Speaker Phillips spoke of the relationship between production, the economy, and civilization. He stated everyone heard today of the many, many people willing to risk their own futures to go into the forest products business in Southeast Alaska. He recalled that people spoke of trust and credibility. He stressed from his experience, trust is not possible among strangers. He noted that everyone present has gotten to know each other much better and added that trust may grow from the session because knowledge certainly has. He thanked everyone for their testimony. CO-CHAIRMAN WILLIAMS pledged to continue to talk to fellow legislators, the Administration, the Congressional delegation, Mr. Janik and all interested parties who have acceptable solutions to the concerns raised. ADJOURNMENT There being no further business to come before the House Resources Committee, Co-Chairman Williams adjourned the meeting at 12:40 p.m.