TONGASS TIMBER REFORM ACT 

HEARING 

BEFORE THE 

COMMITTEE ON RESOURCES 

AND THE 

SUBCOMMITTEE OX RESOURCE COXSERVATIOX, 

RESEARCH, A.\D FORESTRY 

OF THE 

COMMITTEE ON AGRICULTURE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTH CONGRESS 

SECOND SESSION 

ON 

H.R. 3659 

A BILL TO AMEND THE TONGASS TIMBER REFORM ACT TO ENSURE 

THE PROPER STEWARDSIDP OF PUBLICLY OWNED ASSETS IN THE 

TONGASS NATIONAL FOREST IN THE STATE OF ALASKA, A FAIR 

RETURN TO THE UNITED STATES FOR PUBLIC TIMBER IN THE 

TONGASS, AND A PROPER BALANCE AMONG MULTIPLE USE INTERESTS IN THE TONGASS TO ENHANCE FOREST HEALTH, SUSTAINABLE HARVEST, AND THE GENERAL ECONOMIC HEALTH AND 

GROWTH IN SOUTHEAST ALASKA AND THE UNITED STATES 

26-689cc 

JULY 11, 1996-W ASHINGTON, DC 

Serial No. 104-92 

(Committee on Resources) 

Serial No. 104-38 

(Committee on Agriculture) 

Printed for the use of the Committee on Resources 

U.S. GOVERNMENT PRINTING OFFICE 

WASHINGTON : 1996 

For sale by the U.S. Government Printing Office 

Superintendent of Documents, Congressional Sales Office, Washington, DC 20402 

ISBN 0·16·053778-9 
COMMITTEE ON RESOURCES 

DON YOUNG, Alaska, Chairman 

W.J. (BILLY) TAUZIN, Lauisiana GEORGE MILLER, California 

JAMES V. HANSEN, Utah EDWARD J. MARKEY, Massachusetts 

JIM SAXTON, New Jersey NICK J. RAHALL II, West Virginia 

ELTON GALLEGLY, California BRUCE F. VENTO, Minnesota 

JOHN L. DUNCAN, JR., Tennessee DALE E. KILDEE, Michigan 

JOEL HEFLEY, Colorado PAT WILLIAMS, Montana 

JOHN T. DOOLITTLE, California SAM GEJDENSON, Connecticut 

WAYNE ALLARD, Colorado BILL RICHARDSON, New Mexico 

WAYNE T. GILCHREST, Maryland PETER A. DEFAZIO, Oregon 

KEN CALVERT, California ENI F.H. FALEOMAVAEGA, American 

RICHARD W. POMBO, California Samoa 

PETER G. TORKILDSEN, Massachusetts TIM JOHNSON, South Dakota 

J.D. HAYWORTH, Arizona NEIL ABERCROMBIE, Hawaii 

FRANK A. CREMEANS, Ohio GERRY E. STUDDS, Massachusetts 

BARBARA CUBIN, Wyoming SOLOMON P. ORTIZ, Texas 

WES COOLEY, Oregon OWEN B. PICKETT, Virginia 

HELEN CHENOWETH, Idaho FRANK PALLONE, JR., New Jersey 

LINDA SMITH, Washington CALVIN M. DOOLEY, Californil! 

GEORGE P. RADANOVICH, California CARLOS A. ROMERO-BARCELO, Puerto 

WALTER B. JONES, JR., North Carolina Rico 

WILLIAM M. (MAC) THORNBERRY, Texas MAURICE D. HINCHEY, New York 

RICHARD (DOC) HASTINGS, Washington ROBERT A. UNDERWOOD, Guam 

JACK METCALF, Washington SAM FARR, California 

JAMES B. LONGLEY, JR., Maine PATRICK J. KENNEDY, Rhode Island 

JOHN B. SHADEGG, Arizona 

JOHN E. ENSIGN, Nevada 

DANIEL VAL K:!SH, Chief of Staff 

David Dye, Chief Counsel 

CHRISTINE KENNEDY, Chief Clerk I Administrator 

JOHN LAWRENCE, Democratic Staff Director 

(II) 
COMMITTEE ON AGRICULTURE 

PAT ROBERTS, Kansas, Chairman 

STEVE GUNDERSON, Wisconsin 

Vice Chairman 

LARRY COMBEST, Texas 

WAYNE ALLARD, Colorado 

BILL BARRETT, Nebraska 

JOHN A. BOEHNER, Ohio 

THOMAS W. EWING, Illinois 

JOHN T. DOOLITTLE, California 

BOB GOODLATTE, Virginia 

RICHARD W. POMBO, California 

CHARLES T. CANADY, Florida 

NICK SMITH, Michigan 

TERRY EVERETT, Alabama 

FRANK D. LUCAS, Oklahoma 

RON LEWIS, Kentucky 

RICHARD H. BAKER, Louisiana 

MICHAEL D. CRAPO, Idaho 

KEN CALVERT, California 

HELEN CHENOWETH, Idaho 

JOHN N. HOSTETTLER, Indiana 

ED BRYANT, Tennessee 

TOM LATHAM, Iowa 

WES COOLEY, Oregon 

MARK ADAM FOLEY, Florida 

SAXBY CHAMBLISS, Georgia 

RAY LAHOOD, Illinois 

E (KIKA) DE LA GARZA, Texas, 

Ranking Minority Member 

GEORGE E. BROWN, JR., California 

CHARLIE ROSE, North Carolina 

CHARLES W. STENHOLM, Texas 

HAROLD L. VOLKMER, Missouri 

TIM JOHNSON, South Dakota 

GARY A. CONDIT, California 

COLLIN C. PETERSON, Minnesota 

CALVIN M. DOOLEY, California 

EVA M. CLAYTON, North Carolina 

DAVID MINGE, Minnesota 

EARL F. HILLIARD, Alabama 

EARL POMEROY, North Dakota 

TIM HOLDEN, Pennsylvania 

SCOTTY BAESLER, Kentucky 

KAREN L. THURMAN, Florida 

SANFORD D. BISHOP, JR., Georgia 

BENNIE G. THOMPSON, Mississippi 

SAM FARR, California 

ED PASTOR, Arizona 

JOHN ELIAS BALDACCI, Maine 

PROFESSIONAL STAFF 

GARY R. MITCHELL, Chief of Staff 

JOHN E. HOGAN, Chief Counsel 

VERNIE HUBERT, Minority Staff Director/Counsel 

J ACKIE COTTRELL, Press Secretary 

SUBCOMMITTEE ON RESOURCE CONSERVATION, RESEARCH, AND FORESTRY 

WAYNE ALLARD, Colorado, Chairman 

STEVE GUNDERSON, Wisconsin 

Vice Chairman ' 

BILL BARRETT, Nebraska 

JOHN T. DOOLITTLE, California 

RICHARD W. POMBO, California 

NICK SMITH, Michigan 

FRANK D. LUCAS, Oklahoma 

RON LEWIS, Kentucky 

MICHAEL D. CRAPO, Idaho 

HELEN CHENOWETH, Idaho 

JOHN N. HOSTETTLER, Indiana 

RAY LAHOOD, Illinois 

TIM JOHNSON, South Dakota 

JOHN ELIAS BALDACCI, Maine 

GEORGE E. BROWN, JR,Caalifornia 

CHARLES W. STENHOLM, Texas 

GARY A. CONDIT, California 

COLLIN C. PETERSON, Minnesota 

EVA M. CLAYTON, North Carolina 

DAVID MINGE, Minnesota 

EARL POMEROY, North Dakota 

TIM HOLDEN, Pennsylvania 

(III) 

CONTENTS 

Page 

Hearing held July 11, 1996 ........................................... ... ....................................... 1 

Text of H.R. 3659 ..................................................................................................... 61 

Statements of Members: Allard, Hon. Wayne, a U.S. Representative from Colorado .......................... 1 

Johnson, Hon. Tim, a U.S. Representative from South Dakota ................... 4 

Miller, Hon. George, a U.S. Representative from California ........................ 5 

Young, Hon. Don, a U.S. Representative from Alaska; and Chairman, 

Committee on Resources ...... ... .... ...... .... ... . . .... . . .... ........... .... ... . . .... .. .... ... .... ... 2 

Statements of witnesses: Ballard, Ernesta, Environmental Consultant, Barnes and Associates ........ 31 

Prepared statement ................................................................................... 164 

Cohen, Gershon, Alaska Clean Water Alliance, Haines, AK. .......... ............. 51 

Prepared statement .. ..... .... ...... .... ... ...... .... ... .. ............ ... . ..... .. .... ... ........ .. .... 245 

Estey, J. Scott, Vice President of Corporate and Investment Analysis, Jaakko Poyry Consultants, Tarrytown, NY .. .............................................. 43 

Prepared statement .... .. . . . .... .... . . .. . .. .. .... . . .... ... .. .. .... . . .. . .... .. .... .... ... .... .... ... . . . 167 

Graham, Owen, Timberlands Manager, Ketchikan Pulp Company ............. 30 

Hartley, Mark F., D.B.A., Associate Professor of Business Administration, 

College of Charleston, SC (prepared statement) .... ...... .... .......................... 252 

Horngren, Scott W., law firm of Haglund and Kirtley, Portland, OR .......... 21 

Prepared statement .. . .... .......... ....... .... ................................ ....................... 78 

Knapp, Al, The Industrial Company, Steamboat Springs, CO ................ ..... 45 

Leonard, George, U.S. Forest Service [retired], Virginia .............................. 20 

Lewis, Ralph, President, Ketchikan Pulp Company ...................................... 29 

Prepared statement .................................... ... ............................................ 89 

Lindekugel, Robert, Southeast Alaska Conservation Council, Juneau, AK. .. ......................................... ............................................... .. ..................... 48 

Prepared statement ................................................................................... 171 

Lyons, James R. , Under Secretary, Natural Resources and the Environment, U.S. Department of Agriculture ....................................................... . 8 

Prepared statement ................................................................................... 71 

Marby, Samuel A., Vice President of Government Affairs, Hercules, Incorporated, Washington, DC ............................................................................. 45 

Munson, Mary, Public Lands Associate, Defenders of Wildlife, Washington, DC ........... ............. ... .............................................. ................. ................. 55 

Prepared statement . . .. . . . . . .... . ... .. .. . .. .. .... .... ... .. .... .... .... ... . . .. . . .... . . . . . .. . . .. . . .. . . .. 248 

O'Donnell, Brian, Executive Director, Alaska Wilderness League, Washington, DC . .... . ... . .... .... .... ... .... .. .... .... ... .... .... . . ... .... .... . ... ... ...... .... .. .. ................. 56 

Roets, David L., Southeast Regional Sales Manager, Graseby STI, 

Waldron, AR .................................................................................................. 45 

Weihing, Wayne, Tongass Conservation Society, Ketchikan, AK ................ 50 

Additional material supplied: 

Lewis, Ralph D. (KPC): 

Attachment A-Excerpts from consideration of the Tongass Timber 

Reform Act .. .. .. . .. .. .. .. .. .. .. .. . .. .. .. .. .. . .. .. .. .. .. .. .. .. . .. .. .. .. . . .. . .. .. .. .. .. .. .. . .. .. .. .. .. .. .. 112 

Attachment B-Supplementary testimony .............................................. 119 

Attachment C-Ketchikan Pulp Company Permits and Reporting 

Procedures .............................................................................................. 160 

Lindekugel, Robert: . Attachments to statement ........................................................................ 193 

Resolutions and petitions ....................................... ................................... 203 

Communications submitted: Leonard, George M.: Letter of July 25, 1996, to Hon. Don Young ............... 270 

(V ) 
VI 

Communications submitted-Continued 

Lindeku!{el, Buck, and Bart Koehler (Southeast Alaska Conservation 

Counc11): Letter with attachment of July 15, 1996, to Katie McGinty 

Page 

(CEQ) ............................................................................................................. 268 

Lindekugel, Buck, (Southeast Alaska Conservation Council): Letter with 

attachment of July 23, 1996, to Hon Don Young ....................................... 272 
TONGASS TIMBER REFORM ACT 

THURSDAY, JULY 11, 1996 

HOUSE OF REPRESENTATIVES, COMMITTEE ON RESOURCES, JOINT WITH THE SUBCOMMITTEE ON RESOURCE CONSERVATION, RESEARCH, AND FORESTRY OF 

THE COMMITTEE ON AGRICULTURE, 

Washington, DC. 

The committees met, pursuant to call, at 1:03 p.m., in room 1324, 

Longworth House Office Building, Hon. Don Young (Chairman of 

the Committee on Resources) presiding. 

The CHAIRMAN. I want to welcome you to this joint hearing today 

for the Agriculture Committee and the Resources Committee on the 

Contract Extension Act of 1996. I'd like to introduce, representing 

the Agriculture Committee in Congress from the State of Colorado, 

Wayne Allard. 

STATEMENT OF HON. WAYNE ALLARD, A U.S. 

REPRESENTATIVE FROM COLORADO 

Mr. ALLARD. Thank you, Mr. Chairman. It is a pleasure to hold 

this joint hearing with you. Today's hearing should be interesting 

and informative to those who have never had the opportunity to 

visit the Tongass National Forest. 

As the largest national forest in the United States, it is unique 

in its natural diversity and beauty. However, with most issues involving our national forests, tensions exist between those who 

value that diversity and beauty and those whose livelihood is dependent on the wise use of its resources. However, between Under 

Secretary Lyons and Chairman Young, I am sure a solution to 

these tensions can be quickly found. 

The specific subject of today's hearing is Chairman Young's legislation to extend by 15 years the contract between the pulp company and the Forest Service for timber from the Tongass. The legislation would also make several modifications of the contract that 

are designed to make it more economically viable for the pulp company. The larger question surrounding the details of today's hearing are jobs and environment and is there a nexus between the 

two. Of course there'll be questions that we have all been struggling with for some time, but maybe today we can move closer to 

achieving that goal. 

Thank you, Mr. Chairman. I look forward to today's hearing. 

The CHAIRMAN. I want to thank the gentleman from Colorado. 

(1) 
2 

STATEMENT OF BON. DON YOUNG, A U.S. REPRESENTATIVE 

FROM ALASKA; AND CHAIRMAN, COMMITTEE ON RESOURCES 

The CHAIRMAN. July 13, 1989, and October 26, 1990. I remember 

those dates. I still hear the echoes of what was said on the Floor 

of the House on those sad days. 

Unfortunately Members who are not here but are still on this 

committee puffed as they plunged the Federal dagger into the 

hearts of the working people in the Tongass timber industry. They 

would not admit their actions, but I knew the fate of the working 

men and women in the Tongass after the votes on those days. They 

also said that timber would be there to meet industry needs. They 

said timber would be there for industry in double the amounts. 

They said they did not intend to drive the timber industry out of 

Southeast Alaska. I am talking about statements on the days when 

the House passed the Tongass Timber Reform Act. 

Groups that will be testifying today also made their views known 

about that legislation. They said the bill would have no impact on 

existing Tongass-dependent timber jobs. They said they did not intend to close the pulp mills and timber jobs would not be lost. I remember what was said on July 13, 1989, and October 26, 

1990, and in prior hearings as the Federal Government in Federal 

process with a Federal hand plunged the Federal dagger into the 

renewable resource timber economy and into hundreds of families 

in Southeast Alaska. It has taken almost six years to bleed the industry and the timber families. The industry is almost dead, but 

the hearts of families still beat faintly for yet another Federal hearing about the Tongass. 

This hearing is about H.R. 3659, a bill that extends by 15 years 

the only remaining long-term contract for timber from the Tongass 

National Forest. The Ketchikan Pulp Corporation holds that contract, the contract that was changed unilaterally under the 

Tongass Timber-changed unilaterally under the Tongass Timber 

Reform Act. I want to stress that, because the new Supreme Court 

ruling makes this a far-reaching legal liability of every taxpayer 

and this Congress. 

This bill does undo unfair, one-sided changes and saves the gov- ernment at least 357 million. It also adds 15 years to the term of 

the contract. It does nothing more. All of the wilderness areas Mr. Miller agreed to in 1990 are still 

there. The mandatory 100-foot fish stream buffers are left alone. 

The LUD II set-asides are left alone. The Tongass Timber Supply 

Fund so strongly opposed by Mr. Miller in 1989 is not reinstated 

by this bill. The 1980 wilderness set-asides are left alone. None of 

this is touched, even though I disagreed with the changes at that 

time and did not sign the conference report. Everything that was 

put in and signed by Mr. Miller, agreed to by Mr. Miller, agreed 

to by environmental groups, agreed by the environmental community, it is all there. It is still the same. This bill does not increase the timber harvest in the Tongass. Only areas open for harvest under the land plan are open for harvest under the contract. 

Today we are not here to discuss where harvesting will occur. 

The team of Congress and the Administration have already done 

that. This bill and this hearing is not about harvesting practices on 
3 

the Tongass, nor are we here to discuss the harvest level. The Federal land-planning process is doing that. We are not here to discuss 

the conditions of the harvest. This bill concerns none of these issues. This is not the usual Tongass debate. I suggest that if you 

want to debate any of these issues, save your breath for TLMP. 

I want to be very clear on that point, because testimony addressing any Tongass issues other than the contract extensions are not 

relevant. I hope that witnesses do not waste their time or my time 

on irrelevant testimony. It does not serve the process. It does not 

serve the committee's needs. It is irrelevant testimony that wastes 

time that Ketchikan doesn't have the time to waste. 

To me this is a moral issue. People said in 1989 and 1990 that 

the situation we face today in Tongass would not occur. When I 

look around this room, I see subjects in this room today that told 

me, sat down in my office and said this would not occur. I happen 

to know there are a few old-fashioned people who believe their 

word is their word is their word and a commitment is a commitment is a commitment. But now that I'm older it shows me very 

little. And that includes this Administration and those people within the Administration. 

KPC is the only large mill in the Tongass. It is responsible for 

employing 1200-plus Alaskans. KPC's new management has come 

to the Congress with a request. They want to improve their mill 

by building a chlorine free pulp process, the second such system in 

the nation. I want to stress the second such system in the nation. 

They want to make the facility more energy efficient. Doing so will 

cost about $175 to $200 million. They need a reasonably secure 

timber supply for 23 years to get financing for the mill improvements. Their only viable timber supply comes from Federal 

Tongass forest. Their timber request is well within the maximum 

sustainable harvest level for the Tongass, even the maximum allowed by the pending Tongass Land Plan Revision. Even with the 

extension, the independent timber program would still have to 

have an adequate supply for its needs. The Governor of Alaska and 

the State legislature support this extension. 

Frankly, my friends, this is a no-brainer. Unless someone does 

really want-does not want timber harvested in the Tongass, and 

I know all of those that do not want it harvested at all, we should 

pass this bill. 

This hearing is to address the contract changes in the bill. I encourage witnesses to keep their testimony and answers on the 

point. The contract changes ordered by the 1990 Tongass Timber 

Reform Act are in a large part responsible for the closure of the 

Alaska pulp mill. They are responsible for a 42 percent decline in 

Southeast Alaska timber jobs. I don't want to see that repeated by 

the performance at KPC mill. 

The unfair, unilateral contract changes ordered by TIRA still 

plague the Ketchikan Pulp Company. They are addressed in my 

bill and my intent is to make sure the contract is commercially viable and fair. 

Imagine if you owned a house backed by a Federal loan. What 

would you think if the government said we are going to change the 

terms of your loan, instead of six percent your interest rate is now 

eight, it will never go down but we can increase it again when we 
4 

want to, and, oh, by the way, your payment is now $1500 per month not $900 a month? What would you think if the government said tough luck if you do not like it, we are changing our contract 

to say that we can call your loan at any moment, even if you make 

all of your payments on time? What would you think? Is that fair? 

Would that help you plan for your family's future? Would that give 

you security? 

Well, that is exactly what the Federal Government, this committee, did to the Ketchikan Pulp Corporation. It is unfair and it is 

unjust. And under the U.S. Supreme Court doctrine, it is illegal for 

the government to change a contract without paying for damages caused by the breach. This type of action is precisely why the United States Congress and the Federal Department of Agriculture should not be making the decision on extending the KPC contract. 

The State of Alaska should do it, be here we are again airing this 

issue in the Federal arena. 

My other Tongass bill would give the State the power to control 

the Tongass, but we will talk about that bill another day in this 

committee. 

I want to stress one thing. If Ketchikan Pulp decides not to reinvest and shuts down their mill and will go to court and is in court 

now, and receives a payment, it is in the billions of dollars, dollars 

the taxpayers will pay, but it doesn't help the city of Ketchikan. It 

doesn't help the working families that reside in Ketchikan because 

it did not help them in Sitka. It will kill the industry. There will 

be no more logging in Southeast Alaska. 

And those that would like that, at least I wish they would be 

honest about it. At least the Sierra Club is honest. They don't want 

any more trees cut on the national forest and they have said that. 

They have finally come to the front and said what they want. Let 

us not play the charade that we are for a timber industry but we 

don't like this con. We are for added value, but we don't like pulp, the highest added-value product we have in the Tongass. I think it is very important that my colleagues, even to have the 

problem we have today in the Tongass. Mr. Miller and I have sat 

through this, I don't know how many years. Mr. Miller has made 

comments to me, as I said-you were not here, Mr. Miller, about 

not losing any jobs, about not having any mills shut down, about 

not having deletion of the timber supply. Yet the Forest Service 

keeps cutting back, back and back to where the mill no longer is 

a viable industry. 

In an area where I flew the other day 45 minutes out of the city 

of Sitka on my way to Ketchikan, all I saw was 45 standing minutes of flying at 105 miles an hour of dead trees, just dead trees. 

No live trees, dead trees. People forget that is what we want the 

pulp mill to do. People forget that is what we were told we would 

have an industry in 1989 and 1990. Both times people have said 

that. In fact, they have lied to us. The gentleman from South Dakota. 

STATEMENT OF HON. TIM JOHNSON, A U.S. REPRESENTATIVE 

FROM SOUTH DAKOTA 

Mr. JOHNSON. Thank you, Mr. Chairman. I simply have a statement that I would to submit for the record. And I suspect that the 
5 

ranking member, Mr. Miller, has a more extensive statement, but 

I will submit my opening statement for the record to expedite this 

hearing. Thank you, Mr. Chairman. 

[Statement of Ron. Tim Johnson follows:] 

STATEMENT OF HON. TIM JOHNSON, A U.S. REPRESENTATIVE FROM SOUTH DAKOTA 

Mr. Chairman, I appreciate your calling today's hearing, which will give the Members of the committees with jurisdiction over the Tongass National Forest the opportunity to examine the legislation that has been introduced by Congressman Young. 

I can understand the urgency and earnestness shown by the Chairman of the Re- sources Committee as well as the rest of the Alaska delegation and Governor 

Knowles regarding the future of the Ketchikan Pulp Company. KPC is an integral 

part of the economy of southeastern Alaska, and the company is facing some important decisions about how to modernize their plant and construct facilities to meet 

environmental requirements. While I believe that an extension of the current contract is a legitimate issue for 

discussion in regard to the future of the plant, I'm concerned about some of the 

other modifications to the contract contained in H.R. 3659. I look forward to a full 

airing of these issues today with the witnesses in attendance. Again, thank you for convening the hearing. I look forward to the testimony of 

the various witnesses and to working with Chairman Young on this issue. 

STATEMENT OF HON. GEORGE MILLER, A U.S. 

REPRESENTATIVE FROM CALIFORNIA 

Mr. MILLER. Mr. Chairman, let me just be somewhat brief as I 

am late, but let us see whether or not there is some opportunity 

in this hearing to sort of pull this issue and separate this issue 

apart. 

Currently this issue is being presented on its own, and that may 

be the situation, but I think that those who would suggest that it 

is this legislation or KPC shuts down, that may not be doing justice 

to the underlying issues. I also suggest that there needs to be some demonstration that in 

fact that this bill represents the margin of difference on whether 

or not that decision would or would not be made. And I don't know 

that that is the case. 

Thirdly, I would also suggest that we should not underestimate--

some members were not here in the Congress, but I think clearly 

the issue continues to resound. We should not underestimate the 

feelings of this Congress who were overwhelmingly bipartisanly expressed time and again about uncertainties over these initial contracts throughout the '80's and into the '90's when in fact the 

House voted numerous times within excess of 300 votes to cancel 

these contracts. 

We then arrived at a negotiated agreement, yourself and Senator 

Stevens and myself and the other supporters in the House that 

were supporters for the cancellation of those contracts during this 

process, that substantially changed the manner and method of operation on the Tongass Forest because there was a strong feeling 

in the Congress and among many in Southeast Alaska that in fact 

that the current practices were not sustainable. 

Louisiana Pacific, in my meetings with them last week, suggested that they believe that those practices were sustainable and 

they are sustainable today. That is a difference of opinion. Let us also remember what we did at that time. At that time 

there was-if you will remember, there was a very large national 

organization around the Tongass that was engaged in bringing this 
6 

to the attention of Congress, working to bring it to the attention 

of Members of Congress back horne in their districts. And their po- sition was flat out cancellation. And we made a decision at that 

time that what we would do is we would work with the people in 

Southeast Alaska, with the varied interests, and we would try to 

come to some kind of an agreement for the reform of the timbering 

practices on the Tongass. And that was in fact accomplished. That 

was accomplished with a great deal of input by yourself and by the 

senators from Alaska. 

What we have been handed in this legislation is an essentiala dual track, here. I won't reclaim that which they have sued for 

or force them to reclaim that which they lost in the Acts of Congress with the Tongass Reform Act. And what we don't know, what 

is not answered in this legislation is whether or not in fact this is 

all necessary for the economic viability of KPC. I would suggest 

that in fact this legislation-and I think some people suggested this also in the hearings yesterday in the Senate. In fact, this legislation substantially overreaches if it is to address that problem. 

But I think it is also very clear that this legislation as it is currently written, I would believe, is going to be not only unacceptable 

to a bipartisan majority in this House, but I think clearly already 

we have strong indications that this is strongly opposed at this 

stage by the Administration. And so I think that not only do we 

have to look at the contents of this legislation and the claims and 

the merits of those claims, I think you also better be careful about 

the process. If people believe for the moment that they can use the claims of 

the imminent shutdown as a reason by which we will slam dunk 

this legislation or somehow add this in conference committee to the 

Parks Bill or to some other vehicle, I think at that point you are 

probably just inviting a veto, and we would be no further along after these deliberations than we were before they began. And so with that, I look forward to the hearing, but I do so with 

a rather skeptical frame of mind at this point that this is the only legislation or this is the only means by which this company has the 

ability to stay in business. I have to tell you as one who represents 

a district-and I am sure many other Congressmen and Members 

of Congress share this. A lot of companies in this country have 

made some very difficult choices about whether or not they can 

continue to stay in business or not, and they didn't have the luxury 

and their workers didn't have the luxury of somehow believing that 

they could simply get the Federal Government to hand over the resources and to let them run in a manner that they would be able 

to run in a competitive economic atmosphere. 

And so I think that this bill is going to be measured and the 

claims here are going to be measured by what many Members have 

experienced in their own districts with respect to difficult and 

tough economic choices that companies have had to make and communities have had to make. Thank you. 

The CHAIRMAN. Thank the gentleman. I might suggest one thing. At least you are not shutting the door completely. I would like to 

see some suggestions on legislation. I know my goal is to keep the 

city viable, not a dying city like other cities in Southeast Alaska. 

Regardless of what testimony we heard, I can read the reports of 
7 

businesses. I can read the reports of what is happening. We are losing the young society in Southeast Alaska, and that is not healthy. 

Now the company no doubt, they will walk away and gain, 

through the courts at your cost and my cost, the taxpayers, a tremendous amount of money, but that doesn't keep the town viable 

and the people employed, and that is our main goal here. 

I wish people would understand one thing. If there was a shortage of trees, I would be the first one to say shut it down, but you 

and I know that there is not a shortage of trees. There is a tremendous abundance of trees in every forest; I don't have to tell you 

this. 

The gentleman from Oregon. 

Mr. COOLEY. I have no comments. 

The CHAIRMAN. Anybody else? We should get on. Mr. Janik has 

an important appointment. 

Mr. COOLEY. I have no comments at this time, Mr. Chair. I just 

wondered if we were going to put the witnesses under oath. 

The CHAIRMAN. I had not planned on doing that. It doesn't do a 

whole lot of good. 

Mr. COOLEY. It sure does. When you review it after one makes 

a statement here and at another hearing one turns around and 

makes another statement--

The CHAIRMAN. I understand, and I know what this is pointed 

at, but my thought at this time is we will not do that unless the 

gentleman from California has no objection. 

Mr. MILLER. Pardon? 

The CHAIRMAN. Do you have any objections? 

Mr. MILLER. To what? 

The CHAIRMAN. To putting them under oath. 

Mr. MILLER. I do have objection, becauseThe CHAIRMAN. Nothing too violently or I will do it. 

Mr. MILLER. No, you are entitled. They are just entitled to notice 

prior to the hearing that that would be the situation. I think that 

would be unfair to the witnesses. 

The CHAIRMAN. I understand that. 

Mr. COOLEY. Mr. Chair, please, does that imply that they may 

have not prepared to tell the truth when they got ready? 

The CHAIRMAN. I would beMr. MILLER. No, that same kind of notice that you would request 

if you were going to be put under oath or any other situation like 

that. 

The CHAIRMAN. Well, I--

Mr. MILLER. People are entitled to notice in this society. 

The CHAIRMAN. Well, the one thing about it, I have notified them 

before, everybody from this Administration, through this committee 

as I have said at times I will put them under oath. I just want you 

to know that. 

My first two witnesses are Mr. Lyons, the Under Secretary, and 

Mr. Janik, Regional Forester. And I would definitely like to thank 

Mr. Phil Janik for being here. I mean, I have had two hearings in 

the State of Alaska, but unfortunately one time he had a heart 

problem. The second time it may have been a heart problem, too. 

I am not exactly sure what it was, but it is nice to see him in 

Washington. 
8 

Mr. JANIK. Thank you. 

The CHAIRMAN. Mr. Lyons, you are first up. 

STATEMENT OF JAMES R. LYONS, UNDER SECRETARY, NATURAL RESOURCES AND THE ENVIRONMENT, U.S. DEPARTMENT OF AGRICULTURE; ACCOMPANIED BY PHIL JANIK, REGIONAL FORESTER, ALASKA REGION FOREST SERVICE; JIM 

PERRY, ASSOCIATE GENERAL COUNSEL; AND FRED WALK, 

ALASKA REGION TIMBER MANAGEMENT DIRECTOR AND 

CONTRACT OFFICER FOR KPC 

Mr. LYONS. Thank you very much, Mr. Chairman. Chairman 

Young, Chairman Allard, and members of the committee, I appre- ciate this opportunity to appear before you this afternoon. If I could 

beg the committee's indulgence, there is a memorial service begin- ning shortly for Mollie Beattie, Director of the Fish and Wildlife 

Service, who passed away recently. And I would like to be able to 

attend that, so I will present my testimony and then hopefully answer some questions, but if I could, I would ask I be able to depart 

soon afterwards. 

I am joined today by Phil Janik, who of course is the regional forester for the Alaska Region Forest Service; by Jim Perry to my 

right, who is the Assistant-excuse me, Associate General Counsel 

in the Department of Agriculture for Natural Resources; Brad Powell next to Phil, who is Forest Supervisor of the Ketchikan area of 

the Tongass; and Fred Walk, who is the Alaska Region Timber 

Management Director and Contract Officer for KPC. 

Let me State at the outset, Mr. Chairman, that the Administration strongly opposes Senate bill 1877, and they are concerned the 

bill unilaterally modifies provisions of the long-term timber sale 

contract with KPC and that it extends it for 15 years until the year 2019. In so doing, the bill undermines the Secretary of Agri- culture's authority to manage the resources of the Tongass National Forest, restricts the Secretary's ability to adapt to changing environmental information, provides special benefits to a private corporation and conflicts with certain existing law, including the 

National Forest Management Act and the Tongass Timber Reform 

Act. Of course, the same applies to H.R. 3659. 

Secretary Glickman has committed the Department to maintain- ing a sustainable timber flow to KPC in accordance with the terms 

of the existing contract, TTRA, and other relevant statutes. I would 

submit, Mr. Chairman, that we have and we will stand by our contractual commitments to KPC. 

We object to specific provisions of the bill. We object to the statutory modification of the existing long-term timber sale contract 

with KPC. The contract is almost 50 years old and is the subject 

of substantial litigation. In addition, a number of significant environmental laws have been enacted since the contract was signed. Section 2(b)(1) of the bill states that the contract acknowledges 

an intention on the part of the Forest Service to supply adequate timber after the completion of the contract for permanent operation of the purchaser's facilities. However, neither the original 1951 contract nor the post-Tongass Timber Reform Act contract obligate the 

Forest Service to grant or approve an extension of the long-term 

contract. 
9 

Language in Section 2(b)(3) states that KPC plans to make environmental and operational improvements to its facility. Language 

in Section 2(b)(4) states that 15 years is the minimum reasonable 

contract extension period necessary to allow for amortization of 

these improvements. The bill requires that the government continue a contractual relationship with KPC in order to assure that 

investments made by KPC can be amortized. An arrangement of 

this kind between the government and a private corporation to substantially reduce business risk associated with improvements made 

to a private facility is, to say the least, unusual. We are concerned 

that this may create a precedent. 

The bill contains provisions that are unclear, problematic, or subject to ongoing litigation. Section 2(a) contains problematic definitions, such as definitions of the contract, the term mid-market and 

proportionality. Language in Section 2(c)(2) concerning the sale offering plan would effectively put the contract above the land management plan. Language in Section 2(c)(3) and 2(e) would put into 

law volume requirements currently disputed in litigation. Language in Section 2(c)(4) requiring that contract stumpage rates not 

place the purchasers at a "competitive disadvantage to similar enterprises in the Pacific Nqrthwest" is legally inexact and certainly 

would lead to extensive litigation. Language in Section 2(c)(7) 

would compromise the Chiefs ability to terminate the contract to 

prevent serious environmental damage, serious damage to cultural 

resources or should the contract be significantly inconsistent with 

land management plans adopted or advised. These are provisions 

that are common to all timber sale contracts. 

I would submit, Mr. Chairman, that through the revision of the 

land management plan, we believe we will be better equipped to 

assure the sustainability of resources reflecting sound scientific information and extensive public input once the revision process is 

completed. We believe we will have better information on which to 

base decisions about future long-term commitments to the timberrelated industries in Southeast once the negotiation process is completed. 

One of the significant factors to be taken into consideration in 

any discussion with KPC related to contract extension is the pending litigation against the United States. KPC is currently pursuing 

four claims against the United States, claiming approximately $350 

million in damages. While KPC is suing the United States over the 

interpretation of the provisions of the original contract and the 

changes brought about in the Tongass Timber Reform Act, it is difficult for the Administration to consider entering into any new arrangement with them. 

We would welcome a broad-based discussion of future timber industry opportunities in Southeast Alaska, as well as discussion 

with KPC, but we object to the bill's attempt to circumvent the 

planning process, the conflicts it creates with Tongass Timber Reform Act, and the manner in which it obligates the resources of the 

Tongass to one company for one purpose only without a thorough 

analysis and additional discussion of options. 

This concludes my testimony, Mr. Chairman. We would be 

pleased to attempt to answer questions. Thank you. 

[Statement of James Lyons may be found at end of hearing.] 
10 

The CHAIRMAN. I know you are under a time restraint, Mr. 

Lyons, but I want to ask one question. You served here as a committee staff in Agriculture, did you not? 

Mr. LYONS. Yes, sir. 

The CHAIRMAN. Did you work on the TTRA? 

Mr. LYONS. Yes, sir. 

The CHAIRMAN. In your statement you object to Congress making 

unilateral changes in this bill. What is the difference from what 

you did in the TTRA and now? 

Mr. LYONS. Well, I believe, Mr. Chairman, that the circumstances--

The CHAIRMAN. Now you are the Under Secretary, and you were 

the staff at that time, but there is little difference. It is exactly the 

same thing. 

Mr. LYONS. I was staff to the House Agriculture Committee at 

that time, as you indicated, Mr. Chairman. At that time there were 

various and sundry attempts to do different things to the contracts, 

everything from termination to modification. 

The CHAIRMAN.·But the Congress did it, didn't it? 

Mr. LYONS. That is correct. 

The CHAIRMAN. The Congress did it. 

Mr. LYONS. However, under the circumstances, Mr. Chairman, 

the Secretary of Agriculture has administrative authority to rescind the contracts. For ten years it would haveThe CHAIRMAN. You are running out of time, but this is not a bit 

of difference. This is the difference between, you know, where you 

are sitting now and where you were before. You were assisted in 

those changes. You said there would be no attack on the timber industry. You said there would be no attack on-we'd have no loss 

of jobs. You were an instigator on the Agriculture Committee. You 

were the majority. Now you are on the executive side of it. There 

is not a bit of difference. 

I have no questions at this time. Anybody else have any questions? The gentleman from Idaho. 

Mr. CRAPO. Mr. Chairman, and Mr. Lyons, in your written testimony on page 2, you indicate Secretary Glickman has committed 

the Department to maintaining a suitable timber flow to Ketchikan 

Pulp Company in accordance with the terms of the existing contract and other relevant statutes. Does that mean you have committed beyond the term-that Secretary Glickman has committed 

beyond the term of the existing contract, or is this just saying he 

has committed to honor the current contract? 

Mr. LYONS. It would seem to me to indicate, Congressman, that 

we intend to fulfill our commitments under the existing contract. 

We have not addressed the issue of any commitments beyond the 

current term contract. 

Mr. CRAPO. So you are not saying-this legislation would extend 

for 15 years. You are not saying in this testimony that Secretary 

Glickman has committed to that part of this legislation? 

Mr. LYONS. He has not committed to an extension. 

Mr. CRAPO. But he does have-did I hear you just say earlier 

that he does have administrative authority to do so if he chooses 

to? 

Mr. LYONS. That is correct. 
11 

Mr. CRAPO. Do you have any information you can give the committee as to whether he is or the Department is looking at the impact on not only the pulp company but the economy of the region 

if the company is not allowed to continue to have a contractual relationship in this area? 

Mr. LYONS. Congressman, the contract as it currently stands expires in the year 2004. Our focus immediately is on completing the 

Tongass land management planning process, which will allow us to 

understand what constitutes a sustainable level of timber harvest 

on the Tongass. We feel, in fact, seven of the ten alternatives identified in that land management plan would provide adequate volume to meet what we understand to be the current contract obligations for timber to KPC-and that is in dispute. It is litigation with 

KPC-as well as a substantial volume of timber to address the 

independent sale program, the small business program on the 

Tongass. So we feel we can and we will meet our contract obligations. That option is open. 

Mr. CRAPO. And that would extend beyond the contract term if 

one of those documents were to work out to be acceptable volume? 

Mr. LYONS. Our view is there is sufficient volume that that could 

in fact be the case. Mr. CRAPO. All right, thank you. 

The CHAIRMAN. Any questions on this side? 

Mr. CooLEY. I have one, Mr. Chair. 

The CHAIRMAN. Mr. Cooley. 

Mr. CooLEY. Yes, can you tell us what the maximum harvest 

level is for Tongass right now? 

Mr. LYONS. If I could, Congressman, I would defer to Mr. Janik, 

who would be in better position to address that. 

Mr. JANIK. I will have to answer that in two parts. The current 

forest plan, the one we are operating under now, has a calculated 

allowable sale quantity of 450 million board feet. Over the past several years, we have been offering up approximately 300 to 320 to 

330 million board feet. That is the maximum we have been able to 

move forward through the system based on the additional requirements that we have been facing. 

The draft environmental impact statement that is out for public 

review right now as part of the revision identifies a calculated allowable sale quantity of about 357 million board feet, but that is 

qualified in the document in terms of what we believe will be economic to the timber industry, and that estimate, which is the more 

pertinent one in terms of the interest of the industry, is 300 million 

board feet. I believe the actual figure is 297. 

And it is based on that number that there is a statement in the 

environmental impact statement basically saying that that is 

enough timber to satisfy what we believe to be the contract obligation of the Ketchikan Pulp Company as well as provide about 100 

million board feet for the independent operators. The CHAIRMAN. The gentleman from Oregon, out of a little respect, Mr. Lyons has to leave. And he is excused. Mr. MILLER. Mr. Chairman, if we just might reserve to send 

some questions in writing to Mr. Lyons. 

The CHAIRMAN. And then-but you have Mr. Janik. He is the regional forester. 
12 

Mr. LYONS. Thank you very much, Mr. Chairman. 

Mr. COOLEY. Can you provide for the committee what is the requirement of the contract right now by KPC? 

Mr. JANIK. As Under Secretary Lyons stated, that number is actually in dispute. It is in litigation, but our contracting officer, who 

is Mr. Walk to my far left, has calculated that to be 154 million 

board feet as the minimum obligation to the Ketchikan Pulp Company. There is a maximum harvest limit identified in the contract 

for the Ketchikan Pulp Company of 192 million board feet. And the 

dispute, sir, is between those two numbers. 

Mr. COOLEY. OK, but under your new marvelous harvest under 

the alternative program, the Tongass land-plan revision-you're 

telling me now that you want to get 300 to 357 million board feet? 

Mr. JANIK. Even though that is not yet a decision, it is out for 

public review. The preferred alternative says that we are confident 

we can economically deliver right at about 300 million board feet 

a year. And that is the total for the obligation to Ketchikan Pulp 

Company and for the independent operators. The portion of that 

highlighted for the independents, and we do have a formal small 

business association agreement, is 100 million. 

Mr. COOLEY. But you are presently harvesting between 320 and 

330 board feet? 

Mr. J A.l\l" IK. We are offering out about that much per year to the 

timber industry, yes. That is what they've been able to do over 

about the past three or four years. 

Mr. COOLEY. OK, any higher than that? 

Mr. JANIK. This year with the prices having gone down, there are 

a couple of sales that have been offered up that have not been bid 

on, but prior to that, yes, that timber has been purchased or accepted by KPC in case of the contract and the release to them. 

Mr. CooLEY. That is all the questions I have, Mr. Chairman. 

The CHAIRMAN. The gentleman from California. Let me make an 

interruption here. Did you-Phil, you are not going to make a 

statement, are you? You are just open for questions? 

Mr. JANIK. I have no statement to make, if that--

The CHAIRMAN. No, that is fine. 

Mr. J ANIK. Thank you. 

The CHAIRMA.."l\1". But you are on the witness panel as one to testify. So go ahead, Mr. Miller. 

Mr. MILLER. Following onto Mr. Cooley's question, the 154 and 

the 192, this legislation would do what to those figures? 

Mr. J ANIK. As I understand the legislation, it would establish the 

192 as the required minimum. 

Mr. MILLER. And that is a matter that is being currently litigated? 

Mr. J A.l\l"IK. That is correct, sir. 

Mr. MILLER. As part of the litigation brought by the manufacturers of--

Mr. JANIK. That is correct. 

Mr. MILLER. That is one of the determinations as to what is the 

requirement, whether it is 154 or 192. 

Mr. JA.l\l"IK. That is correct, sir. 

Mr. MILLER. As I have had this problem somewhat described to 

me, and we go back to what Mr. Cooley said, Secretary Lyons' 
13 

statement was that the Secretary has the full intent to comply with 

the existing contract over the, you know, the remaining tenn of 

that contract. And your figures suggest that you are in compliance with that contract, but representatives of the other side-I hope I 

am framing this correctly. Obviously somebody can correct me in 

later panels. That is that it is really not happening because you are 

making it more difficult or more expensive to get the timber, your requirements on roads and other requirements-! don't know if I 

could enumerate, but roads seem to stand out as strong-that in 

fact you are simply making it impossible to extract and to bid on 

these sales, so the actual number is below that. How do you respond to that? I hope I've framed it. 

Mr. JANIK. I will attempt to do that. And if I may, sir, I may ask 

Brad Powell, the forest supervisor, to elaborate further. But as I 

understand what went on during the Tongass Timber Refonn Act 

with regard to the changes that occurred there, it was in fact to 

look at those long-tenn contracts, two existing at that time, and 

make that situation more competitive with the independent operator kind of situation. So therefore, if one does ask if it is more difficult or costly for the folks involved in the long-term contract to 

operate their timber program, I would say yes, as compared to 

prior to TTRA. 

Mr. MILLER. Is there any way to quantify what that has meant? 

Mr. JANIK. I think we have some stumpage rate figures and 

those kinds of things which do identify that. For instance, and 

please help me here, Brad or Fred, prior to TTRA, I believe, the 

rates were about two to two and a half dollars a thousand board 

feet. Now Ketchikan Pulp, I believe, is paying closer to about $48 

per thousand board feet. Is that a correct comparison? Mr. MILLER. That was the parenthetically accurate. It was also 

the intent of the legislation. 

Mr. JANIK. As I understood it, yes. 

Mr. MILLER. Widespread concern in the Congress that this resource was simply being essentially given away. Mr. JANIK. And the further comparison then is I believe that $48, 

as we calculate the rates, is attempting to make those rates comparable to what our independent operators would be looking at in 

tenns of bid offerings. Is that also correct? 

Mr. MILLER. And that is why and how. You do comparable bids 

or sales to arrive at that? 

Mr. JANIK. May I defer that to Mr. Walk? 

Mr. MILLER. Sure. 

Mr. JANIK. Fred, would you please take that question. Mr. WALK. Congressman--

Mr. ALLARD. Fred, would you identify your name for the record, 

please. 

Mr. WALK. My name is Fred Walk. I am the Director of Forest 

Management in the Alaska Region. The process that was imple- mented as part of the Tongass Timber Reform Act to meet the requirement that prices paid by the long-tenn contract holders be 

comparable to the independent purchasers-- Mr. MILLER. That is the law. 

Mr. WALK. Pardon me? 

Mr. MILLER. That is the law, you are saying? 
14 

Mr. WALK. Yes. 

Mr. MILLER. Yes, sir. 

Mr. WALK. The process that was implemented is to calculate an 

average of the prices paid by independent purchasers and then 

make periodic adjustments to the rates being paid by the long-term 

contract to become more comparable to independent prices. And 

those comparable price adjustments are made as we do the calculations periodically through the course of the year. 

Mr. MILLER. What would be the impact of the legislation under 

consideration? Have you had a chance to review that? 

Mr. WALK. We have looked at that. It is our view that the terminology in the proposed legislation would remove the periodic-the 

comparable price adjustment from the process. There would be no 

comparable price adjustments. 

Mr. MILLER. There is language that is on page 8 that says the 

rate shall be designated at a level that places the purchaser at a 

competitive disadvantage with similar enterprise in the Pacific 

Northwest and those rates should be the sole charges the purchaser shall be required to pay for timber provided. Do we know 

what that means? 

Mr. JANIK. We have examined that section very thoroughly. 

Again, if I may defer, I think Mr. Perry from the Office of General 

Counsel, in that we have received major advice from them on this 

particular section-Jim, would you please respond. 

Mr. PERRY. James Perry, Associate General Counsel. We have 

some real concerns regarding the comparison between the Pacific 

Northwest stumpage rates and those of Alaska. While we understand the purpose of the clause is to develop some equitability, we 

believe the clause would result in extensive litigation because the 

only way to determine some equitability would be to establish some 

panel of experts and then attempt-have to use a most equitable 

rate. So based on the past history of similar clauses in the current 

contract, we view that language as being a guarantee of litigation. Mr. MILLER. What-well, let us assume-do you have any indication or have you looked at this if you could meet the requirements 

of the language on page 8, would that take us closer to $2 or closer 

to $48? 

Mr. PERRY. I don't think I can evaluate that. There would be a 

number of variables in trying to measure equitability between the 

market in the Pacific Northwest and the Tongass, the type of timber, the type of product that was derived and then the market in 

which the product would be sold. So I am unable to give a prognostication about what the effect on price would be, but the only effect 

it could have would be a downward adjustment. 

Mr. MILLER. Mr. Chairman, if I just might-! know the light is 

on, but I just would like Mr. Walk to testify or to respond to that 

if he could, what the impact of that-have you looked at that to determine what the impact might be, approximately, on price and 

stumpage? 

Mr. WALK. Well, as Mr. Perry indicated, it would be very difficult 

to identify precisely a number. We see three parts of that particular section. One is doing the normal appraisal. The second is a comparison with the Pacific Northwest, similar enterprises in the Pa-
15 

cific Northwest. And that could have a dampening effect on the appraised rates. But the other part of that provision that would--

Mr. MILLER. Why would that be? 

Mr. WALK. The other part is that the rates shall be-similar 

charges the purchaser shall be required to pay would be the part 

that would go to the comparable price adjustments, so if the comparable rates for the Pacific Northwest similar enterprise was less 

than our appraised rates, then the stumpage charge would be lower 

than would be normally indicated by Alaska Region appraisals. 

Mr. MILLER. So you wouldn't be factoring in the cost of doing 

business in Alaska, is that what you are saying? Am I wrong? Why 

would that bring down that comparable price when you compare 

the Pacific Northwest? 

Mr. WALK. If the analysis between the similar enterprises in the 

Pacific Northwest indicated that the prices generated in Alaska 

would place the contract broker at a competitive disadvantage, we 

would have to reduce the rates to where that competitive disadvantage was--

Mr. MILLER. That clause says-! am sorry for belaboring the 

point, Mr. Chairman, but that clause says you take the cost of 

doing business in Alaska, you compare that to the cost of doing 

business in some facility in the Pacific Northwest. If that would 

place that facility at a disadvantage against others in the Pacific 

Northwest, you would have to reduce that price? 

Mr. WALK. You would reduce the priceMr. MILLER. Neither firm is doing business in Alaska? 

Mr. WALK. That is correct. 

Mr. MILLER. Or possibly getting the logs? OK 

Mr. WALK. Delivered log price. 

Mr. MILLER. OK. 

The CHAIRMAN. Thank you, gentleman. l jusi have one question. 

Why in the world-all we are seeking in thi.:., legislation is to extend the contract. It was written up the thir:gs :J1at you object t~>. 

You have legal counsel. I heard some questi oPs rtc">t quite answered 

here. Can you give us language back so \\"e can get the years we 

need? Why can't yo1 ; d0 that? 

Mr. JANIK. I believe our Under Secret~.t! ' was asked that very 

question in yesterday's hearing in terms of- -

The CHAIRMAN. Wel:i, it is not yesterday's hearing. I am asking 

you now. Why can't tha t be done? 

Mr. JA.N"IK. And I am going to respond, Mr. Chairman. The prob- lematic parts of this bill as we understand it deal with the provisions of the Tongass Timber Reform Act. And the Under Secretary 

and I myself will answer right here, sir, that if once we get past 

the completion of TLMP provision so we understand how big the 

woodpile is and how much flexibility we have to talk about any 

contractual relationship that might go beyond 2004, as well as any 

other conditions or provisions, we have stated already that we 

would be willing to entertain those considerations. 

The CHAIRMAN. Entertaining does not allow this company to invest. It goes back to the independent sales that you just said a moment ago, if this company shuts down, you will not have any independent sales unless you're high-grading. 

Mr. JANIK. Well, sir, we're-
16 

The CHAIRMAN. Congress tried to avoid that. What we are doing 

is set up a high-grade system. Mr. JANIK. Well, sir, we are doing a complete Tongass revision 

in September. That is the target for signing a record of decision. 

And again, it has been stated clearly that the bill as written is unacceptable. 

The CHAIRMAN. Well, let me interrupt you a minute, though, because you said how big the TLMP pile of wood is going to be. You 

stated it is going to be 297 million board feet. Mr. JANIK. That is currently what is under public review. That 

is not yet a decision. 

The CHAIRMAN. Are the woods going to grow smaller or larger? 

Mr. JANIK. I have no idea, sir. That was--

The CHAIRMAN. Who makes that decision? 

Mr. JANIK. I will make the ultimate decision. 

The CHAIRMAN. You will make that? 

Mr. JANIK. With recommendations from the forest supervisors 

after we review public comment. 

The CHAIRMAN. It gives you an awful lot of God power, doesn't 

it? 

Mr. JANIK. It gives me power I take seriously, sir. The CHAIRMAN. OK, the second thing is who-you control the 

cost of sales, do you not, the Forest Service? 

Mr. JANIK. Within certain parameters, sir. We have our appraisal system that we must comply with. Mr. Walk can address 

that. 

The CHAIRMAN. The company has nothing to do with it. Mr. JANIK. I am sorry? 

The CHAIRMAN. The company has nothing to do with it. 

Mr. JANIK. Fred, do you want to address that, or Brad? 

The CHAIRMAN. The company has nothing to do with it. You set 

the price. That is it. 

Mr. WALK. We determine the advertised price of the timber sale. 

On the independent program it is put out for competitive bidding 

and then the bidders determine the final price. We establish the 

minimum accepted bid. All of our timber sale appraisals in the 

Alaska region are developed using the residual value process 

whereby we collect costs and selling value data from participating 

industries, including the Ketchikan Pulp Company, and do analysis 

of their records. 

The CHAIRMAN. What I am trying to stress here is the companies 

and those biddings do not set the price. They bid or in the contract 

you set the price for the timber, is that correct? 

Mr. WALK. We set the price using data we collect from--

The CHAIRMAN. Now under the present contract, the price can 

only be adjusted upward, but not downward, is that correct? 

Mr. WALK. The long-term contract provides for an upward or 

downward emergency rate determination. 

The CHAIRMAN. Has it ever gone downward? 

Mr. WALK. Yes, sir. 

The CHAIRM.1\N. It has? 

Mr. WALK. Yes, sir. 

The CHAIRMAN. All right, what I am suggesting to you, Mr. 

Janik, is that you ought to be offering some suggestions to this leg-
17 

islation, not just criticism, as I told Mr. Lyons, suggestions on how 

to improve. The same thing for the gentleman from California. If 

there is a way we can improve this act, because all I am trying to 

do is keep the city alive-the company, with all due respects, as 

they did in Sitka-Mr. Miller, your friend George, you know quite 

well, Ishiama walked away. It didn't cost him a nickel. The company didn't-they just walked away from the town. Now it is slowly becoming an old city. 

Mr. MILLER. Would the Chairman yield? 

The CHAJRMAN. That is right. I will even give you a minute. I 

know you won't admit it. 

Mr. MILLER. Well, I just-on this point, because I think maybe 

it goes to the crux of the problem, and I think the reason that the 

Administration is having a problem responding here if', as I think 

Secretary Lyons pointed out, what are the ground rules. If the 

ground rules are that you are going to have consideration or entertainment, or whatever the words are you want to use, of contract 

extension, if the ground rules are it is going to be done within the 

Tongass Reform Act, that is one thing. If it is going to be done in 

the context of this legislation, it then starts providing rather substantial rewrites of the Tongass, that is a different thing. 

And that, as I understand it, the Administration is opposed to. 

And the question at some point, I think, that maybe will not be resolved at this hearing, but has to be resolved. The point is what 

are those ground rules. Is KPC prepared to live within the Tongass 

Reform Act? And does the Tongass Reform Act allow you to meet 

your contractual obligations? The fact that the cost is somewhat 

higher may or may not be relevant. It may or may not be, because 

it may go to the issue of whether we can open1te in that business 

environment. 

But by the same token, we have some obligation as the trustees 

here not to simply give away the public's resouc~es when in fact at 

one time or another-it may not be in this voh,me, but includir,g 

the market from time to time generates :1 suh:otantial amount of 

revenues from these very same resources. That •s the problem we 

are grappling with here. 

I think what is suggested by Mr. Lyons and what is suggested 

by myself and some others that are concerned is that this bill isn't 

about a simple extension of that contract so you could amortize 

your investment over some known period. It is more than that. And 

if those are crucial to the extension, then I don't know that the extension can be had from the testimony of Mr. Lyons or from what 

I understand the position is of the Administration. And that is 

the-at some point it has got to be sorted out. 

The CHAJRMAN. Mr. Miller, I can say one thing. If I thought for 

a moment this Administration was serious, really would consider 

and offer me some advice, I would be greatly pleased. Very frankly, 

my bill was started as any piece of legislature. You see something 

wrong with it, but I have yet to hear from the Administration what 

will make this work to keep that city alive. Now if they want to 

kill the city, tell me. That is all I am saying. If you want that city 

to go down, if you want the timber-don't tell me, Mr. Janik-! 

watched Sitka go down and it is down. 
18 

Now, which reminds me, what are you going to tell the Sitka 

sales that were canceled by the Forest Service? Is that ever going 

to be put up again? 

Mr. JANIK. Those sales, sir, have been retrofitted and offered up 

to the independent operators. And some of that buy has also gone 

to Ketchikan Pulp Company. 

The CHAIRMAN. But without the pulp mill, independent operators 

cannot exist. Mr. JANIK. We have always acknowledged the importance of a 

secondary facility in Southeast Alaska. 

The CHAIRMAN. That is where the pulpMr. JANIK. That is something-it could be the existing pulp mill. 

Yes, sir. 

The CHAIRMAN. No, what I am--

Mr. JANIK. And we recognize that importance, the Ketchikan 

Pulp Company. 

The CHAIRMAN. We agree it supports jobs. You know, I can take 

37 people and ship all the timber that is going to be cut under 297 

base board feet. I could ship that with 37 people and ship it to 

Japan. That is not a value-added. Or I could ship it to the Northwest, which they have lost it because of the spotted owl. I can do 

that, but that isn't board feet. 

Mr. MILLER. If the gentleman would yield one second, I think 

maybe we are establishing some parameters. The CHAIRMAN. They didn't deny a ten-year contract with Sea 

Alaska. That is one thing I didn't understand. 

Mr. MILLER. You know, when we did the negotiations on this forest and we were living in the midst of the storm that was brewing 

around the administration of this forest under the contract, the 

reason those negotiations worked was because we sort of rejected 

the extremes. You can keep talking about people who want to kill 

this town or what have you, but the history of these negotiations 

and our participation is that we have rejected that notion. The CHAIRMAN. You and I have a--

Mr. MILLER. And that is how you got the Tongass reform, but I 

don't-! am not prepared to accept that you have got to gut the 

Tongass reform to get at viable profits on this forest that is both 

sustainable and economically viable to the mill. 

The CHAIRMAN. And you can--

Mr. MILLER. And I haven't seen the show-me yet that that is the 

case. And that is all I point out, because, you know, you and I have 

been around this both privately and publicly, that I believe that the 

Reform Act also didn't apply to the commitment that we would provide the timber. That was the dual part of this arrangement. Otherwise, we could have just gone off and canceled the contracts or 

had you had the most votes, whatever, you could have just said we 

want to do business the way we were doing it in 1950. That didn't 

survive the Congressional process. 

This was a deliberate process and this was an intentional decision that the practices would be different and with the full knowledge that in many instances they would be more extensive but they 

would hopefully lead to this evaluation process and we would determine what in fact this would sustain. 
19 

The CHAIRMAN. Will the gentleman yield? We agree on that. One 

thing, remember, in my bill I do nothing about the Tongass Reform 

Act that you put in there. 

Mr. MILLER. Well, page 8--

The CHAIRMAN. Now I--

Mr. MILLER. [continuing]-if that is not the old comparable 

saleThe CHAIRMAN. I am not talking about that. I am talking about 

the buffer zones and all the rest of the stuff. We didn't change that. 

We didn't change any of the wilderness areas. We did not touch 

any of that. Now I am suggesting where you see what is wrong 

with the bill, give me some ideas to keep my town alive, you know. 

Mr. MILLER. And we will. 

The CHAIRMAN. Does anybody else have any questions? 

Mr. BALDACCI. If I had any time, I was going to yield it. 

The CHAIRMAN. No, I have already done that. Anybody on this 

side? I want to-Mr. Janik. 

Mr. JANIK. I just want to reemphasize, Mr. Chairman, that the 

Administration is willing to sit down and talk options. We say that 

here today. We said it yesterday. And the opposition is strongly 

based on the bill as written. 

The CHAIRMAN. My bill-what I am telling you is I want-you've 

got to live with high prices, not high prices, you work for the government I'll tell you that right now. Give us some ideas as quick 

as possible. Just don't snowball us on this. If you can get it today, 

I would love it today. If you can get it tomorrow, that would be better, but as far as I am concerned, that is about as long as we have 

got on this, because we have to have some suggestions. 

I want to say one thing. As I told Brad, you know, you have got 

a good man there. 

Mr. JANIK. He is a good man. 

The CHAIRMAN. At least he shows up at the hearings. It was a 

nice arrow in your back, but I will tell you up front the Forest 

Service this last week were sued by the environmental community 

again over the Tongass Reform Act. I mean, you guys are caught 

betwixt and between. We are upset because I want to keep my people employed. They are upset because you are keeping too many 

people employed. I am upset because we don't have a viable economy. They have got their economy and it is-you know, you are 

caught right between, and I have great sympathy. 

You heard me say the other day if I had my way, Mr. Janik 

would make all the decisions in Alaska, then we could really hammer him. Not by Dean Woods, not by Mr. Lyons, not by Jack Ward 

Thomas, not by Katie McGinty or Leon Panetta or Mr. Glickman, 

it would be made by you, but that is maybe yesteryear. But someday that is going to change and we are going to fix it so you will 

make the decisions. Then we can discuss it as we did in the past. 

You are excused. 

Mr. JANIK. Thank you, Mr. Chairman. 

The CHAIRMAN. Panel two: Mr. Leonard, George Leonard, United 

States Forest Service, retired; and Mr. Scott Horngren, the law 

firm of Haglund and Kirtley in Portland, Oregon, you two are up. 

George, you are up first. 
20 

STATEMENT OF GEORGE LEONARD, UNITED STATES FOREST 

SERVICE [RETIRED], VIRGINIA 

Mr. LEONARD. Thank you, Mr. Chairman. I am pleased to be before this committee once again to talk about the Tongass Forest. 

I would like to make just a few simple background statements with 

regard to the Tongass and then respond to any questions you or 

other members of the committee may have. 

I think it is important for this committee to be aware of the fact 

that the Tongass contains some of the most productive timberland 

in the world. The area of productive timberland planned for timber 

harvest on the Tongass is relatively small, only about five percent 

of the forest, 1.2 million acres, but that portion of the Tongass is 

particularly well suited for sustained-yield management of the timber and related resources. And for those members of the Agriculture Committee that are here, you know that if you are going 

to manage agricultural lands, you manage your best lands for agriculture, not your poorest. In this case, we ought to be managing 

the best land for timber production, and they are represented well 

on that 1.2 million acres on the Tongass. 

The productive nature of the Tongass has been recognized for a 

long time and the fact that there needs to be a market for that portion of the timber on the Tongass that is not suitable for the manufacture of lumber. In fact, there were proposals dating clear back 

to the '20's and '30's for the development of pulp mills. A major rationale for the timber sales that were made in the '50's, the two 

long-term timber sales that we are talking about here today, was 

employment. In the depression years of the '30's the mines in those 

small towns closed and also by the end of the late '30's there was 

a significant decline in the salmon fishery. Many of the small canneries had closed and there was substantial concern about the fate 

of the small towns in Southeast Alaska. 

The use of the available timber resource was the obvious answer. 

You had a very rich, productive timber resource. In fact, studies 

showed that you had a timber resource capable of supporting about 

five pulp mills at the time. In fact, four large pulp sales were offered over the years in the early '50's, and ultimately two pulp 

mills, the Ketchikan Pulp Mill at Ward Cove, just outside of Ketchikan, and the Alaska Lumber and Pulp Mill at Sitka. 

One other contractor was unable to build a pulp mill and that 

sale was substantially modified and reduced and was operated by 

Alaska Lumber and Pulp Company. And the fourth contract got 

tied up almost endlessly in environmental litigation and ultimately 

the purchaser concluded that it was not economical to go ahead, so 

that contract was canceled. 

Operations of the two pulp mills in Alaska did contribute significantly to the economy and stability of Ketchikan and Sitka and 

many of the other smaller towns in Southeast Alaska where logging camps or other subsidiary facilities were built. The operation 

of a pulp mill in Southeast Alaska is still essential to the economic 

stability of those communities. It is true, as Mr. Lyons said in his 

statement, that the recreation developments in Southeast have increased substantially. And fortunately the salmon fishery has recovered. 
21 

In fact, over the last decade we have had record harvests of 

salmon in Southeast, but both recreation and the salmon fishery 

are very much seasonal industries. You have two and a half to 

three months of employment in the summer season from those two 

industries. The only long-term, year-round employment, has been 

offered by the timber industry and particularly by the pulp mills; 

and I think that stability and continued operation of the pulp mills 

is essential. 

Mr. Chairman, I h·ave several suggestions to make about changes 

that I believe should be made in this legislation to improve it, to 

be made more workable from a technical standpoint, but I strongly 

believe it should be done. The CHAIRMAN. George, I am going to tell you, you are about 

ready to run out of time. And I was going to ask you that first 

question, what would you suggest. And when I come back to you, 

be ready for me. Mr. LEONARD. Yes, sir. 

The CHAIRMAN. If you don't mind. Scott, you are up next. 

STATEMENT OF SCOTT W. HORNGREN, LAW FIRM OF 

HAGLUND AND KIRTLEY, PORTLAND, OREGON 

Mr. HORNGREN. OK, my name is Scott Horngren. I am a partner 

in the law firm of Haglund and Kirtley in Portland, Oregon. I am 

testifying on behalf of the Northwest Forest Resource Council, a coalition of timber trade associations in the Pacific Northwest. Our 

firm has represented timber sale contractors in Federal contract 

claims cases. 

I am here today to discuss the implications of a recent Supreme 

Court decision decided July 1 entitled the United States versus 

Winstar Corporation as it relates to Forest Service contracts and 

the issues here. The Winstar case is a culmination of over half a 

decade of litigation over government contract liability for statutory 

and regulatory changes to minimum capital requirements for savings and loans. The Winstar decision has implications for contracts 

throughout the Federal Government and particularly for timber 

sale contracts. 

Federal timber purchasers are being bombarded by regulatory 

and policy changes like those that were at issue in Winstar, and 

these changes include adoption of the President's Forest Plan, adoption of PACFISH, INFISH, California spotted owl, Mexican 

spotted owl and Northern goshawk protection standards. 

The Winstar decision should leave little doubt that the government will be contractually liable to the timber purchasers for reduction or elimination of timber sold under the contract. I would 

first like to summarize the Supreme Court's decision in Winstar 

and then apply those principles to timber sale contracts. The Winstar Decision: During the savings and loan crisis in the 

mid-'80's, Congress enacted the Financial Institution Reform Recovery and Enforcement Act, FIRREA. The Act forbid thrifts from 

counting goodwill capital-good will as capital credits in computing 

the required minimum capital reserves. The plaintiffs in the case 

were three Federal thrifts, two of which were seized and liquidated 

by the Federal regulators for failing to meet the new capital requirements. The thrifts sued the Federal Government contending 
22 

that the Federal Home Loan Bank and the Federal Savings and 

Loan Insurance Corporation had breached their contract, promising 

that the thrifts could count this supervisory good will toward the 

regulatory capital requirements. 

The government raised many defenses, but the one I would like 

to focus on this afternoon is that the regulatory change was merely 

a public and general act that was a sovereign act, insulating the 

government from liability. The court rejected the sovereign act defense. Under the sovereign acts doctrine, s<1 long as the government's legislative or executive acts are public and general, they 

cannot be deemed to violate contracts between the government and 

private parties. The government maintained that the imposition of 

more stringent regulatory requirements under FIRREA was a public and general act and that the changes couldn't be considered a 

breach of the government's contract. 

However, the Supreme Court found it significant that the regulatory legislation was motivated by government self interest and 

that it was impossible to attribute a public and general character 

to FIRREA when the legislation had the substantial effect of helping the government out of improvident agreements. The court emphasized that the government may not force some people alone to 

bear the public burdens which should be born by the public as a 

whole. 

I believe the sovereign acts defense also does not apply to timber 

sale regulation. The actions of the Forest Service in screening existing timber sales and imposing these additional wildlife standards 

cannot occur as public and general acts, specifically the Winstar decision-given the Winstar decision, any past statements by Congress to assert the sovereign acts doctrine to avoid contract damages in timber sale cases is likely to fail. 

For example, regarding the Alaska Pulp and Ketchikan Pulp contracts, the House Committee on Insular Affairs wrote, "the committee considers termination of the long-term contracts to be an appropriate exercise of the Federal Government's power to protect the 

public interests and that, pursuant to sovereign act immunity, no 

damages will be paid to APC or KPC." 

Well, ultimately the contracts were unilaterally modified rather 

than terminated. The assertion of the sovereign acts doctrine is 

likewise ineffective. This is particularly true when the statute is directed at individual contracts despite self-serving legislative pronouncements to the contrary that the legislation is public and general. 

The Winstar decision holds that unless contracts explicitly provide otherwise, the government bears the risk of statutory and regulatory changes that preclude completion of the contract. This is 

the case with the majority of timber sale contracts in the West and 

will strengthen timber purchasers' arguments in their contract 

claims against the government. 

And I am not alone in my analysis of Winstar and how it relates 

to Federal contracts. The Forest Service's own analysis of the contract, the National Forest Management Act, and some contract 

cases dealing with timber sales support this conclusion. In an April 

27, '92, memo to the regional foresters, the Forest Service Chief interpreted the agency's timber sale contract to require compensation 
23 

for the difference between the contract price of timber and the market value regardless of whether the contract is modified, canceled 

or partially canceled for environmental reasons. 

The Chiefs interpretation is consistent with the regulation governing compensation for cancellation of contracts. And although 

later contract clauses have attempted to limit the compensation, 

those clauses aren't consistent with the governing regulation, so 

the Department of Agriculture has attempted to change the regulation. And, several years ago they proposed to change the regulation 

governing the compensation of timber purchasers for protection of 

threatened, endangered species and the environment. The U.S.D.A 

wrote that the difference between the government's liability under 

the current regulation and its liability calculated using the method 

in their proposed regulation is approximately $300 million. 

Consistent with the regulation--

The CHAIRMAN. Scott, how much more time do you need? 

Mr. HORNGREN. I am-I can wrap up here. All Ineed--

The CHAIRMAN. Wrap it up and then Mr. Crapo is going to ask 

some questions. 

Mr. HORNGREN. OK. Just to summarize, there has been Claims 

Court and Board of Contract appeals cases that are consistent with 

those regulations. And in conclusion, Federal timber purchasers 

will successfully rely on this new Supreme Court Winstar case in 

their claims against the government for breach of contract when 

the government's regulatory actions reduce or eliminate timber 

from their sales. And I would be happy to answer any questions. 

[Statement of Scott Horngren may be found at end of hearing.] 

The CHAIRMAN. Mr. Crapo, you are up to ask him a question. I 

will be right back. 

Mr. CRAPO. Thank you, Mr. Chairman. Mr. Horngren, can you 

first tell me, have you ever worked for the Alaska Pulp Corporation? 

Mr. HORNGREN. No, I have not. 

Mr. CRAPO. Have you ever worked for the Ketchikan Pulp Corporation? 

Mr. HORNGREN. No, I have not. Mr. CRAPO. And I assume that means you are not working for 

either of them now? 

Mr. HORNGREN. That is correct. 

Mr. CRAPO. And I know that you have gotten through with us 

what you think the Winstar case held. How is that applicable to 

the contract changes ordered by the Tongass Timber Reform Act? 

Mr. HORNGREN. I think it is applicable here because the Supreme 

Court held that an act will not be a public and general sovereign 

act if it has the substantial effect of releasing the government from 

its contractual obligations. And we heard testimony and discussion 

earlier today at this hearing that one of the major motivations and 

effects of the Act was to get the government out of a contract that 

they thought wasn't financially attractive. And if that in fact is the 

substantial effect of the legislation, which is clearly what TTRA 

was designed to do, then it will not survive the sovereign acts defense. 
24 

Mr. CRAPO. I assume, then, you agree that the Winstar precedent 

would apply to timber sale contracts as well as other types of government contracts? 

Mr. HORNGREN. That is correct. 

Mr. CRAPO. And does the case distinguish whether the claim of 

the sovereign act has to be an act by Congress or an act by the Administration, the Executive Branch or otherwise? 

Mr. HORNGREN. It doesn't matter. As long as it is in the legislation or the regulation, the effect is the same. 

Mr. CRAPO. Now C clause provisions are contained in most timber sales contracts, and these are provisions that justify the cancellation of the contract and certain prescribed damages to the replacement value of the timber and certain other facts, is that fair? 

Mr. HORNGREN. That is correct. 

Mr. CRAPO. And given the Winstar decision, if Congress or the 

Executive Branch terminates or unilaterally changes the terms of 

the contract outside the terms of the C clause provisions, do I understand correctly that the government would then, in your opinion, be in violation of the contract as held in Winstar? 

Mr. HoRNGREN. Well, it would be more than that, because they 

would be acting outside the contract and some of the timber cases, 

most notably the Davidson case recently, have held that if the action occurs outside the contract, then the purchaser wouldn't be 

just limited to the contract remedies and would be entitled to all 

common law remedies for breach. 

Mr. CRAPO. And again, I realize that you have addressed this, 

but does Winstar speak to whether the government can breach the 

contract or whether it would simply pay for breaches in contract? 

Mr. HORNGREN. It does not preclude the government from enacting new regulations and enacting laws, but it does require that the 

government pay for those changes. 

Mr. CRAPO. So how would a breach outside the C clause by the 

government affect the damages that-the assessment of damages 

that the courts would impose following the Winstar case? 

Mr. HORNGREN. I think it would increase the exposure to the 

government for damages by millions of dollars. 

Mr. CRAPO. And you mentioned the unilateral contract changes 

made in the TTRA, 1990 TTRA, and you cite the claim of sovereign 

act authority in the House committee report as a legal rationale offered as justification for termination of the contracts based upon a 

case called the Hedstrom case. What are the differences between 

Hedstrom, Winstar and TTRA contract payments? 

Mr. HORNGREN. I think the Hedstrom case was the basis for the 

conclusion in TTRA that they could unilaterally modify or cancel 

the contracts without any contract liability. And the Supreme 

Court in the Winstar case doesn't discuss the Hedstrom case, but 

it is unlikely that Hedstrom is still good law following the Winstar 

decision. 

Mr. CRAPO. Hedstrom was preceding Winstar? 

Mr. HORNGREN. Yes, it was a 1984 case, significantly a District 

Court case not a Federal Circuit case, and certainly not a Supreme 

Court case. Like Winstar, Hedstrom involved numerous contracts 

and parties and the substantial effect of the boundary waters canoe 

legislation in that case was to abrogate the contract. So it is very 
25 

possible that Hedstrom would not be good law after the Supreme 

Court. But even if Hedstrom still is good law, there are several significant distinctions between the TIRA and the Hedstrom case that 

make Hedstrom inapplicable, we believe. 

And that would concern first-in Hedstrom it involved creation 

of the boundary waters canoe area, and it was a wilderness act, 

general, didn't specifically cite any of the contracts. In contrast, 

TIRA singled out the APC and KPC contracts and were the basicthose contracts were the basic motivation for the TTRA, and directed-the legislation was directed at those contracts. 

And under Winstar, the sovereign acts defense wouldn't be applicable. 

Mr. CRAPO. Are you familiar with the CRS report on which the 

analysis of the House report that I referred to earlier was made? 

Mr. HORNGREN. Yes. 

Mr. CRAPO. And how would the Courts holding in Winstar affect 

the CRS report's analysis? 

Mr. HORNGREN. I think it invalidates it. And I think it does that 

because particularly the CRS assumption was based in part on the 

Hedstrom case. And the underlying assumption was just an act 

that had a public and general purpose could-you know, the government could invoke the sovereign acts doctrine and avoid contract liability. But the Winstar case changes that and says the act 

will not be public and general if it has a substantial effect on the 

contracts. And that is the case with TIRA. 

Mr. CRAPO. Thank you. Mr. Chairman, if I could ask just one 

more quick question of Mr. Leonard. 

The CHAIRMAN. You have got all the time you want. 

Mr. CRAPO. Thank you. Mr. Leonard, I am just curious. I come 

from Idaho and I know how long it takes to grow a tree to harvestable size in Idaho. How long does it take to grow a tree to a harvestable size in the Tongass area, if you know, and I am talking 

about on a sustainable yield basis where the cut levels will not exceed the ability of the forest to continue to grow and be managed 

properly. 

Mr. LEONARD. We have historically used rotation ages in Alaska, 

which is the time it takes to grow a marketable tree, in the neighborhood of 80 to 100 years. 

Mr. CRAPO. Thank you. 

Mr. LEONARD. But those are large trees. 

Mr. CRAPO. Thank you very much. 

The CHAIRMAN. Thank you. I thank the gentleman. I appreciate 

it. I know you may have another appointment, but don't leave until 

you have to because you'll just get a phone call. I see Mr. LaHood 

is trying to go; on behalf of the committee we deeply appreciate it. 

I may ask you to take the chair a little while, if you don't mind. 

Mr. LAHooD. I would be honored to do whatever you guys want. 

The CHAIRMAN. All right, thank you. Mr. Leonard, going to the 

specifics of the bill, and that is what I want to say, can you give 

me some of your recommendations. I know you said you had some 

and they were sure orally but also give them to me in writing. 

Mr. LEONARD. I will be pleased to do that, Mr. Chairman. Let me 

just go down some of the sections. Section 2(a)(l) is a definition, 

and it applies the scribner log rule to utility log. The scribner log 
26 

rule was developed to indicate the portion of a log that is suitable 

for the manufacture of lumber. And it is just not really applicable 

to utility logs, which by definition are not suitable for lumber. A 

better approach would be to define the volume requirements of the 

section in Section 2(c)(3) and 2(e) as 192.5 million board feet. That 

is the scribner per year. And this would make it clear that the Forest Service could then use whatever log rule or method was appropriate for charging them for the utility logs. Historically they have 

been charged on a gross basis. 

The CHAIRMAN. The Forest Service charge isn't here, but the Forest Service shouldn't object to that suggestion, would they? 

Mr. LEONARD. I would hope not, because it clearly gives them authority to charge for the utility logs. 

The CHAIRMAN. OK, go ahead. 

Mr. LEONARD. Section 2(a)(4) confuses the concept of mid-market 

test with timber appraisal. In Alaska the mid-market test was developed to try to define that portion of the timber that is economically available and should be charged to the company. It is a test 

of economic feasibility. 

The question of appraisal is a separate issue when you appraise 

to most current market where the mid-market test looks back over 

a longer period of time. I think that the language in this section 

should be clarified so that you apply the mid-market test to determine what timber may be released to the company and then you 

separately apply a normal appraisal to appraising and establishing 

the value that the company will pay-the price that the company 

will pay for that timber. 

As written, Section 2(c)(4) does not permit the Forest Service to 

recognize the unique requirements associated with this long-term 

sale. The requirement that they maintain and operate that pulp 

mill has some implications that aren't applicable to an independent 

sale. And I think the appraiser on that sale ought to be able to recognize those unique requirements. But also, it is important that 

the language there be rewritten so that the Forest Service can continue to collect KV, Knudsen-Vandenburg Act, funds to do any necessary reforestation work in the area or collect coop scaling deposits advise-its if that is requested by the government. Both these 

funds contribute significantly to the acceptability of operations 

under the contract and I believe they need to be maintained. And finally, Section 2(c)(6) authorizes the company to replace the 

existing pulp mill or convert it to other uses. I believe this is a desirable section, but I think experience has shown that the law and 

ultimately the contract need to be clear on what that process is. 

How long does the company have to replace that mill? They can't 

simply close the mill and say sometime 15 years from now we will 

replace it. And the contract needs to be clear as to what obligations, what contractual operations are acceptable during the period 

when the mill is being replaced. Is it permissible for them to continue logging? What happens to the utility logs? 

And then finally, there has been several references to the claims 

that are pending, potential claims corning out of the Tongass Timber Reform Act. In my judgment, most of the claims associated 

with the Tongass Timber Reform Act are claims that will be proved 

in the future sometime. I believe that there should be language re-
27 

quiring Ketchikan-assuming that this bill is passed-that would 

require Ketchikan Pulp to waive claims arising out of future operations or the future Tongass Timber Reform Act claims that 

haven't already been perfected. The CHAIRMAN. You heard testimony of the Forest Service. They 

oppose the contract extension. It does not allow them to preserve 

management options. Are you familiar with those terms? What do 

they mean? 

Mr. LEONARD. The concept of maintaining options is an important concept. I think when we do things, we want to preserve the 

option-as many options as we can. We can't, however, maintain 

options to the extent that you don't do anything. For too many people maintaining options has become a code word for don't do anything, leave the world like it is. And I think it is important that 

we go ahead and take the actions necessary to maintain these pulp 

mills. 

It is important to understand that if these pulp mills close, we 

lose some major options, major alternative actions in Alaska, the 

economics of operation, the employment that is associated with the 

pulp mills. If they are lost, then we lose some important options 

in Alaska that we shouldn't lose. 

The CHAIRMAN. Referring to the history of the long-term contracts, a lot of people don't understand it, but the reason for granting them in the first place-why was there a long-term contract? 

Mr. LEONARD. The major purpose in long-term contracts was recognition that if you are going to provide a facility that is equipped 

to produce pulp, that we are talking about major investments. We 

were talking about $100 million investments then. We are probably 

talking about $500 million investments today. And there must simply be stability of supply in order for that to happen. 

I think it is well to look at history elsewhere in the country. All 

of the pulp mills that have been built in this country outside of 

Alaska, with only one exception that I am aware of, have been built 

on the basis of a private timber supply or with an extremely diverse supply tied to the operation. The two timber sales based on 

long-term contracts in Alaska resulted in construction of both pulp 

mills, and one pulp mill at Snowflake in Arizona was built based 

on a relatively long, 25-year contract with the Forest Service in Arizona. All of the rest have been based on private timber supply. 

But private timber supplies don't exist in Alaska. At the time the 

long-term sales were made, all of the timber supply belonged to the 

public. There was a substantial transfer of some of that timber to 

the natives, but virtually all of that has gone into the export market and has not contributed to the economy there. 

The CHAIRMAN. George, they have stated-Mr. Miller may be 

aware of this, but most other people-and he and I don't agree on 

it necessarily, but most other people don't understand that if we 

hadn't had the long-term contracts, there would have been no pulp 

mills. Is that correct? 

Mr. LEONARD. I am certain of that. 

The CHAIRMAN. OK, if we hadn't had the pulp mills, none of 

those trees that are on saw logs would ever have been brought out 

of the woods; they would have been left laying on the ground like 
28 

we did in the past. In fact, they probably wouldn't have harvested 

an area like that, would they? 

Mr. LEONARD. I think that what you would have seen is what 

you had prior to those long-term sales pulp mills. Some small highgrade operations that went out for the very high quality spruce. 

And I think you probably could still have a little, but you are not 

going to see a general timber sale program. You are not going to 

see maintenance of the small, independent mills in Alaska without 

that big mill. 

The CHAIRMAN. Realistically, George, as you have been a Forest 

Service retiree, how can the Forest Service even think about having a sale now if there isn't a processing plant? How could anyone 

bid on a project or on a sale without using the pulp wood trees, too? 

I mean, would they just go in and take out the good trees? 

Mr. LEONARD. Well, in theory you could require that they be removed and they could go into the chip market, but putting those 

into the chip market not only doesn't meet your employment objectives, but it is going to return less value to the stump in that area 

and therefore make much of the area uneconomical. 

The CHAIRMAN. OK, I am bidding. I am the bidder. I am an independent entrepreneur. I'll hear later on from this group; I want to 

have an entrepreneur in the-logging investor. I am bidding on a 

stand of relatively good timber. The stumpage rate goes up, but I 

also have to take out the pulp wood trees to have them chipped. 

I don't get any money for that, so that means I have to bid awfully 

high and it makes it uneconomical, would that be correct? 

Mr. LEONARD. Well, you will get some revenue from the sale of 

the chips. The CHAIRMAN. But very little, not to pay the cost of--

Mr. LEONARD. Historically chips have not paid for removal from 

those remote market locations. 

The CHAIRMAN. I just-one last question and then I want to ask 

you if you have any questions. One of the things-they'll say-I 

want for the record. Do you think the long-term contract is good 

for the government? 

Mr. LEONARD. I think so. I think so. It permits utilization of a 

very valuable resource in Alaska. It meets the needs of those communities for year-round employment which is not supplied by the 

recreation or the fisheries industry. I think the two long-term sales 

did provide and ·have provided stability to those communities in 

Alaska and I think that is the public interest. 

The CHAIRMAN. The gentleman from California. He has no questions. The gentleman-Mr. LaHood. I want to thank-Scott, I want 

to thank you for bringing up the legal aspect of it. Mr. Crapo did 

cover it pretty well. I still don't think Congress recognizes the liability that was imposed upon it by the Tongass Reform Act, regardless of the language written in there. 

Mr. HORNGREN. Let me put it this way. Mter the Winstar case 

a week and a half ago, I now take those cases on a contingency because I think the company is going to--

The CHAIRMAN. And believe me, if lawyers take it on a contingency, there is a pretty good chance of winning. 

Mr. HORNGREN. Yes. 
29 

The CHAIRMAN. All right, I want to thank both of you for being 

here today. The next panel, panel three: Mr. Lewis, Ralph Lewis, Ketchikan 

Pulp Company; Mr. Owen Graham, Timberlands Manager, Ketchikan Pulp Company; Ernesta Ballard, Environmental Consultant, 

please take the stand. We will go right down the line. Mr. Lewis, 

you are up first. 

STATEMENT OF RALPH LEWIS, PRESIDENT, KETCHIKAN PULP 

COMPANY 

Mr. LEWIS. Very good. Thank you. I want to thank the Chairman 

and the committee members for the opportunity to present our 

case. I would like to start off a little bit just by introducing myself. 

My name is Ralph D. Lewis. I have resided and worked for Ketchikan Pulp Company for the last 30 years. I started down in the 

labor pool and worked my way up and was made president of the 

corporation two years ago. I am one that believes in safety of the 

environment and doing the absolute very best you can and looking 

forward and trying to-and in trying to look forward, trying to anticipate what the next turns are and try to meet them. 

The contract, as just stated before, was basically started up there 

to put some stability in Southeast Alaska. It has done-it has performed that job. It is still needed to continue that stability. It is 

the only year-round job, basically, that Ketchikan has. Also it 

would be helpful throughout Southeast Alaska on Prince of Wales 

Island and certainly Annette, where we have the only year-round 

employment on Annette Island, which is the only Indian reserve in 

Alaska. We have a lease with them. We lease that sawmill. 

We believe in the renewable resource that trees are that; that if 

properly managed, that you can be there forever and it's sustainable. We have seen the fish at an all-time high. The tourism has 

grown substantially, even with the lobbying that has gone on. A lot 

of people have said the tourism would be destroyed. It has not. It 

has grown. It will continue to grow. We fit together very well and 

always have. We have the local tourist groups and everybody else 

support us right along with the fishing groups. Unlike what was 

said back in the late '80's, that it was going to devastate that area, 

it has not done that. It hadn't done it at that time. I think that 

time has proven that it is a good fit. And we hope that the committee and the Chairman can see that, can see that we do have a place 

and would like to continue. 

I guess the main reason is to talk about the contract extension 

and those corrections. We are not contending nor have we intended 

to change any of the land use designations. We haven't changed 

any of the wilderness that was put in the TTRA. We haven't 

touched any of the other items. What had happened was after the 

TTRA was put into place, the Forest Service made unilateral contract changes. Those changes have already put APC out, who decided they could not operate under that contract change. It has 

done the same thing to us. Since 1991 we basically are a breakeven operation. I do not believe that that was the intention of the committee 

back in 1990, was to put us out of business, but they need to understand that those changes that were made is in fact putting us 
30 

out of business. We have come forth to try to have this operation 

continue. Part of that request is the 15-year extension which will 

allow us to make the capital and expenditures necessary to stay up 

with the marketplace. Our competitors are doing that. We must 

also do that. And, you know, other than saying that we have support of the governor and the rest of the town and the committee, 

that we hope the committee is listening to us and will help us continue, because we want it to operate. I want it to operate and we 

want the town to have some year-round employment. It will devastate it if we are gone. The CHAIRMAN. Are you through? 

Mr. LEWIS. I am through, sir. 

[Statement of Ralph Lewis may be found at end of hearing.] 

The CHAIRMAN. Thank you, Ralph. Mr. LEWIS. I am here for questions. 

The CHAIRMAN. Thank you for keeping within your time. I am 

going to go through the other witnesses. Then we will ask questions. Owen, you are up. 

STATEMENT OF OWEN GRAHAM, TIMBERL&""ffiS MANAGER, 

KETCHIKAN PULP COMPANY 

Mr. GRAHAM. Thank you. I am Owen Graham, the Timber Division Manager for Ketchikan Pulp Company. I have got a brief 

statement. I came primarily to answer questions. We have been short of timber volume since TTRA was enacted. And as a result, our mills have operated intermittently. This uneven, inadequate supply delivery of timber volumes harms the government also. The cost of preparing timber sales and administering 

those sales is higher because of the contract changes that were imposed. The Forest Service also has admitted that to me recently. 

Further, the cost of producing lumber and pulp in the mills has 

risen dramatically as a result of this intermittent operation. And 

as a consequence stumpage rates are down more than they would 

have been otherwise. 

I can't quite reach this. 

The CHAIRMAN. We can hear you. Mr. GRAHAM. You can hear me all right? The volume issues that 

we would like to see corrected include the amount of timber, the 

volume itself, the timing of that volume and the criteria for selecting that timber. For the first 40 years, the Forest Service agreed 

with us that the volume on our contract was 8-114 billion board 

feet overall and 192 million board feet per year. Only in the last 

two years has the Forest Service developed a new position that the 

contract volume is only 154. In addition, prior to the Tongass Timber Reform Act, we received fixed volumes at fixed dates, certain 

dates that we could rely on. Since then, the Forest Service has provided timber at random times and at random volumes, ranging 

anywhere from around 40 million per year to over 200 million per 

year. In addition, since the long-term sale was not marked on the 

ground ahead of time as is normally done for independent sales, 

the contract has selection criteria to assure that KPC receives economically viable timber. That is not a guarantee of profit, but a 

guarantee of an opportunity for profit. Similarly, the pricing of the 
31 

timber was intended to ensure an opportunity for profit. Since 

KPC's long-term sale contract has an upward rate redetermination 

clause that's not in any other contracts, any profit potential above 

the level allowed by the Forest Service becomes stumpage for the 

government. 

These changes we have asked for are going to benefit the government as well as allow KPC to continue. Thank you. 

The CHAIRMAN. Thank you, Owen. Ernesta. By the way, you used 

to sit at that table and testify many, many years ago. 

Ms. BALLARD. That was under a different name. 

The CHAIRMAN. Under a different name but welcome. 

STATEMENT OF ERNEST A BALLARD, ENVIRONMENTAL 

CONSULTANT, BARNES AND ASSOCIATES 

Ms. BALLARD. Thank you, Mr. Chairman. My name is Ernesta 

Ballard. I am an environmental consultant and the former administrator of Region 10 of the Environmental Protection Agency. Mr. Chairman, passage of this bill will allow KPC to continue to 

make improvements that are already underway to protect the environment. The public/private partnership which will be achieved by 

contract extension will enable KPC to continue building an improved outflow infuser, a chlorine-free bleaching process, a rebuilt 

power plant, which reduces the use of fuel and burns waste more 

efficiently, computer controls to conserve resources and chemicals, 

and increased waste water treatment. 

I would like to use the rest of my time this morning to address 

some of the allegations that have been made by opponents of this 

bill. 

The Superfund allegation: This is not true. KPC is not under 

Superfund review and does not appear on any Superfund list. Suggestions that KPC has applied political pressure in this regard are 

preposterous. 

The RCRA allegation, this is not true. Since the law's passage in 

1980, KPC has had no RCRA enforcement actions. 

The TSCA allegation, this is not true. KPC has properly managed and disposed of all PCB materials and as of this year will 

have no remaining PCBs on-site. 

The water quality allegations, these are not true. They are the 

contention of adversaries and are vigorously disputed by KPC. 

They have not been substantiated by regulators or the courts. 

The fish kill allegations; these are not true. The only fish kill for 

which KPC was responsible occurred 15 years ago, and it resulted 

from an accidental release of cleaning chemicals downstream of the 

water reservoir at Krile Lake and not at the pulp processing facility. 

The allegation that KPC is on the top of the Alaska Hazard 

Ranking Model, this is not true. The State recently concluded that 

KPC should probably be excluded from the ranked list because permits and review programs already in place adequately manage pollution control. 

The allegation that KPC has failed to properly study the health 

effect of air emissions on local residents, this is not true. KPC completed a comprehensive study of dozens of chemicals including 
32 

dioxin and showed that all were below the State's regulatory risk 

level. I will explain the boxes in a minute. 

The allegation that KPC is the worst polluter of the Northwest, this is not true. The allegation is based on KPC's response to the 

toxic release inventory, which quantifies discharges in a simplified 

chemical report. Adversaries have taken data out of context to 

make this comparison. EPA does not use the report in this way. 

The allegation that there is a dangerous buildup of dioxin in animals in Ward Cove, this is not true. KPC monitors for dioxin aE 

well as metals and many organic compounds. Almost all are at levels below action thresholds and sediment standards. Dioxin is 20 

times below the low risk level. 

The alarm raised by KPC's opponents is unsupported and unwarranted. State and Federal regulators are knowledgeable of the most 

minute details of KPC's operations. Those operations are conformed 

to 75 permits, emergency response plans and procedures. I have a 

copy here in the boxes on the table for the committee's review. In 

addition to these boxes are a dozen studies that are underway, including pollution preventions, silver mask balance, standard operating procedures and a Ward Cove settlement remediation plan. 

Further discussion of these materials is in the written testimony 

which is supplementary to Mr. Lewis' testimony and further sup- port for the rebuttal of the allegations appears in Mr. Allyn Hayes 

testimony, which we are submitting today. 

Thank you for this opportunity, Mr. Chairman. [Statement of Ernesta Ballard may be found at end of hearing.: 

The CHAIRMAN. Thank you, Ernesta. Those boxes are what? 

Ms. BALLARD. In the boxes are the 75 permits, operating proce· 

dures, emergency response plans which govern the operations ol 

Ketchikan Pulp and the additional documents describing pollution 

prevention measures, spill response, spill retainment and Ward 

Cove remediation. 

The CHAIRMAN. And these are all government documents? 

Ms. BALLARD. They are already in the public domain. The CHAIRMAN. Public domain, so that refutes a lot of the accu- sations, a lot of-I call them rhetoric that comes from certair 

groups I have heard in the last three or four meetings on differen1 

legislative packages. These have already been reviewed. They havE 

been submitted by the government and all parties concerned knov. 

they exist? 

Ms. BALLARD. That is true. The CHAIRMAN. OK, which reminds me. Let us see, you are fivE 

foot tall and weigh about 120 pounds. Those boxes, if you put therr 

all together, are about five foot tall and weigh 520 pounds, yot 

know. I would say this. In all due respects, you are probably more 

effective than they are with your testimony. I want you to knov. 

that, because you did work for EPA. You have been dealing witl: 

this project for many years, have you not? 

Ms. BALLARD. Some of those documents have my name on them 

The CHAIRMAN. It might be better later-! will probably be calling on you after some of the testimony given to maybe respond tc 

some of those comments. Ralph, what happens if we don't get the extension through-legislate--
33 

Mr. LEWIS. If we can't get this bill passed and the way things 

have gone on and the way things are continuing, we will probably 

in the very, very near future have to announce some kind of shutdown, permanent closure. 

The CHAIRMAN. OK, what would it take-and I am going to follow this through, be a manager. Let us say we don't change anything, but just adopt the present contract language that you are operating under till the year 2000-how long is the present contract? 

Mr. LEWIS. 2004. 

The CHAIRMAN. 2004. If we were extending existing language, 

what would be your position? 

Mr. LEWIS. The problem with the existing language is, as I have 

stated before, basically we have made zero money since TTRA. The 

changes that were put into that contract have severely damaged 

our ability to be able to make a just small return. We have not 

done that. And that is why we are here and trying to get that corrected. We are trying to put back the contract and the words that 

were in the contract, not everything, but those that gave us the 

ability of being able to survive and make a small profit. 

That has never been a large profit-making facility. A steady one, 

but not a large one. You know, I think it has averaged ten percent 

or less than ten percent from the very beginning. That goes on high 

and low years, so from something that you would have built in 

1954, that is not a large, huge money maker. It never has been. 

It wasn't produced to do that. It wasn't made to do that. 

The CHAIRMAN. What about the management changes in your 

parent company? I heard the testimony from Ernesta talking about 

chlorine-free pulp process. You have been operating without that 

and now you have decided to put that-is that a requirement of the 

government or is that something that you need to be competitive 

or what is the reason behind it? 

Mr. LEWIS. No, I think it is-number one, it is the direction the 

United States and following the whole of Eastern Europe is to go 

chlorine free. I think that our parent company our Samoa mill 

went chlorine free. They did that not having to do that, but knowing that that is the direction they wanted to do. We are the other 

mill and that was also a direction. We do have the new NPDS permits and the new permitting and the items are ahead of us that 

are telling us that we need to be chlorine free or somewhere at 

least certainly to be elementary chlorine free. 

The CHAIRMAN. Well, you have been under attack, your company, 

for a long time, especially by the Daily News and a few other newspapers that report on how dastardly you are. How does-what happens to the community when these attacks occur? 

Mr. LEWIS. Well, it is devastating. I mean, going back to the late 

'80's, you know, you have to be living on a small island. You have 

no other way off the island except by air. There are no road systems. You do have the ferry. Everything takes time. And to have 

in the halls of Congress bills passed to cancel your contract and to 

virtually put you out of business, when that starts, I guess the fear 

of all of that starts, the anxieties. You start wondering whether you 

should stay there or you should leave, whether you should make 

investments in your house, whether you should put a fence on, 

whether your kids are going to be able to go to college. And that 
34 

has been going on for a very, very long time and it is tough to live 

with. The CHAIRMAN. But I see four boxes of permits issued there and 

you have met most all of those requirements, have you not? 

Mr. LEWIS. Yes, and--

The CHAIRMAN. At what cost? 

Mr. LEWIS. Hundreds of thousands, millions of dollars. 

The CHAIRMAN. That might help. I have one more question. 

Owen, you said something I didn't ask the Forest Service about, 

supply of timber and how short you have been since TTRA. 

Mr. GRAHAM. Yeah. 

The CHAIRMAN. Are we-you are not receiving what was really 

intended in there? What is the problem? 

Mr. GRAHAM. No, we have been short, I don't know, an average 

of-it would depend on how far back you go, anywhere from 30 to 

50 million board feet per year from what our contract volume is. 

We have been getting 80 percent of the volume, but that other 20 

percent we need to operate those mills. And as a result of not having it, the mills have been forced to operate intermittently. We 

have had pulp mill closures and sawmill closures both. 

The CHAIRMAN. I keep hearing from the Forest Service they are 

putting it up, they are offering it. Why isn't it getting to the mill? 

Mr. GRAHAM. Well, they have been offering quite a bit less than 

what the contract allows for. 30 to 50 million feet, that is how 

much below the contract level their offer has been. In addition, because of changes the courts are making in the way they design 

their timber sales, it takes two to three years to harvest a timber 

sale. When they release timber to us, all we get is a piece of paper 

that says you can go into some remote area and move men and 

equipment in and build a campsite, place for the men to live, and 

then build roads and then harvest timber. All that takes two to 

three years. 

Consequently, we can only harvest each year about half of whatever our pipeline of timber is. Right now we have just under 300 

million feet of timber, but 250 of that 300 we received in less than 

a year, and so we can't harvest it at a rate greater than about 150 

million a year, which is 40 million below our contract level. The 

Forest Service--

The CHAIRMAN. What about lawsuits? 

Mr. GRAHAM. Pardon? Lawsuits are another concern. That is part 

of the reason why the Forest Service is unable to provide us with 

our full contract volume. Of the 300 million in the pipeline there 

is 105 million, I think, right now that is under a pending injunction. We are waiting to see what happens later this month. 

The CHAIRMAN. It is my-Mr. Miller, I am going to suggest that 

we are going to recess and go on with these three witnesses-when 

we come back, we will still be on the panel and Mr. Miller will be 

asking questions. We will recess now until approximately five minutes after three. [Recess.] 

The CHAIRMAN. The meeting will come back to order. Mr. Miller. 

Mr. MILLER. Thank you, Mr. Chairman. Mr. Lewis, in your testimony on page 2 you say that this legislation is crucial to the longterm survival of KPC. The first one is allow you to invest up to 
35 

$200 million in environmental, energy efficient and operational upgrades. How does that break down? Some of the environmental 

work you are already undertaking, is that correct, pursuant to the 

court decisions--

Mr. LEWIS. That is correct. 

Mr. MILLER. [continuing]-and your agreements with the Justice 

Department and others? 

Mr. LEWIS. Yes, that is correct. That is a small part of the dollar 

part of this, but those are some of them that we are doing. 

Mr. MILLER. And that is--

Mr. LEWIS. The spill containment. Mr. MILLER. That is financed how? · Mr. LEWIS. That is financed through Louisiana Pacific Corporation, who is our parent. 

Mr. MILLER. In your lOQ file that you refer to, Exhibit C refers 

to the pollution control related measures estimated costs up to $20 

million. That is encompassing possible cleanup at Ward Cove and 

compliance with Justice Department and what else? 

Mr. LEWIS. Yeah, that was the spill containment and basically 

taking all of our tanks that we have and building and lifting them 

all up and putting concrete foundations under them and putting 

concrete barriers around all of them in case there would be an 

earthquake and one of those tanks would split, that they would 

have been totally contained. 

Mr. MILLER. But that $20 million is a--

Mr. LEWIS. Combination economics. 

Mr MILLER. That is the environmental package? 

Mr. LEWIS. No. No, that is just the small part that we kind of 

call a consent decree. Some of those items we were doing already 

when we went through those negotiations. We were doing some of 

those and upon negotiations and with the Justice Department that 

we finish and complete those packages. But the rest of the environmental is doing the ECF, which is elementary chlorine free. That 

is not part of the consent decree. That project we are probably 

maybe 75 percent completed on, not tied together. We have outfall 

that is yet to be approved by the State. We have-and there is also 

a mixing zone. We have a lot of some of the other small items. We 

have-what we need to do is to upgrade all of our computerization 

for the ECF, which is--

Mr. MILLER. Just let me-l don't mean to cut you off, but there 

is--

Mr. LEWIS. Sure. 

Mr. MILLER. In terms of, like, chlorine free, the decision to do 

that was made some time ago, right? That part you sent away. 

Mr. LEWIS. Yeah, that part--

Mr. MILLER. '93? 

Mr. LEWIS. That was started-the project was started, I believe, 

in '94, late '94, and being spent during '95. It will be kind of set 

aside. And that is a part--

Mr. MILLER. I guess the question I sort of have is if the figure 

is $200 million, and I assume that is the environmental and the 

modernization. 

Mr. LEWIS. Uh-huh. 
36 

Mr. MILLER. And the boilers and so forth. But in accordance--

you made those decisions in '93, '92/'93, engineered them and started to make miniatures in '94/'95, I guess. What is the change here? 

Mr. LEWIS. The managing, I guess, of our long-term contract and 

the unilateral clauses that were changed and the, you know, promises that we thought that were made to be able to have a wood supply in front of us to be able to manage the timber base and to be 

able to go forward. That has not worked. And with that not working, has just made it more and more difficult to operate. And that 

is why we are in here. Number one, to secure the completion of all 

that money to go forward and also get a correction to the contract 

clauses. 

Mr. MILLER. But that-this $200 million would be financed how? 

Mr. LEWIS. How will it be financed? Well, basically it will be financed through banks through LP, who will have to go out and 

borrow the money. We still have to stand alone as an operation and 

be profitable or there will be no financing. You know, it is like any 

segment of a business, you have got to be able to stand on your 

own and pay your way or there is no financing. 

Mr. MILLER. Have you asked the State of Alaska for help? 

Mr. LEWIS. Yes, we have, and we have been working with the 

State through ADA and what we really got down to was the 

amount of money that we were needing. I think jointly we recognized that we needed an extension to that contract to be able to 

borrow those funds from the State. 

Mr. MILLER. So you will borrow what part of the--

Mr. LEWIS. There was about 50 million. About 50 million from 

the State, I think, was identified that the State could loan to us. 

Mr. MILLER. Have you gone to the legislature to get it to--

Mr. LEWIS. Oh, yeah, we have done that. 

Mr. MILLER. What happened? 

Mr. LEWIS. Well, number one, the period of time in which to pay 

it back and with the other expenditures, we needed more than the 

eight years. ADA was extremely uncomfortable with that eight 

years. It didn't look like we had the ability of being able to pay that 

money back. 

Mr. MILLER. Have you gone to Ketchikan? 

Mr. LEWIS. I am sorry? 

Mr. MILLER. Have you gone to the city for help in this financing 

or other packages? 

Mr. LEWIS. We haven't gone to the city at this time or anyone 

else. Again, you have to have the ability to be able to pay it back. 

I mean, they are not going to loan you money if you don't have the 

ability to pay it back. 

Mr. MILLER. Well, here is-I guess I am maybe not following this 

correctly, though, but apparently at some point, I haven't seen the 

date of it, at some point you penciled these transactions out over 

the remainder of this contract and said this doesn't work? 

Mr. LEwis. Correct. 

Mr. MILLER. And I am just trying to figure out how we apportioned a lease. I mean, I want to know, kind of, what the State of 

Alaska is prepared to do, what would they be prepared to do beyond what they are currently authorized to do. Ketchikan just got 

$25 million of Federal money . If this is an important resource, 
37 

why isn't Ketchikan trying to pony up some money to help an employer and receive-you know, the state of Baltimore spent $200 

million to try to attract 400 jobs in the baseball park. Why is this 

a Federal problem? I mean, because this bill goes beyond an extension. It goes to-the suggestion is that we have got to provide 

cheaper timber. We have got to provide other relief in this operation and we have got to take it out of the Federal treasury, if you 

will, however that translates into the Federal treasury. I want to 

know what the other beneficiaries are seeking to do here. 

Mr. LEWIS. Well, it's--

Mr. YOUNG. Will the gentleman yield? 

Mr. MILLER. One of the things-! think the Interior Department 

wouldn't force it because they can't commit to a local big city or 

even the State. I am surprised you got it out of either in a period 

of eight years. That is just not good business. 

Mr. LEWIS. We don't have--

Mr. MILLER. Well, nobody can, but you want us to commit to a 

23-year-old contract. 

The CHAIRMAN. We want an extension of 15 years so that they 

can go out and raise some money. 

Mr. MILLER. Well, I think-but I think that also brings the question as to what are others prepared to do. Why is all of a sudden 

a Federal--

Mr. LEWIS. It is the timber supply that is the problem. Mr. MILLER. Well, that is your contention, but that is based upon 

the fact that you have to go out and go to market rates and you 

have to borrow all this money from the bank. I am saying there 

are some rich cousins here. You have got $19 billion in the State 

fund. You have got $25 million grant. Mind you, $110 million to 

Southeast Alaska that was given when the original clause language 

changes were given and the bill-the consolation part of it Senator 

Stevens got $110 million a region. Does the region think this is important? 

The CHAIRMAN. We don't get into this argument--

Mr. MILLER. No, it is on my time and I want a better reason--

The CHAIRMAN. The Federal Government owns the timber. Mr. MILLER. I understand that. The CHAIRMAN. The Federal Government owns the timber and no 

one can participate until they know the Federal Government is 

willing to participate in the process. You can't go out and simply 

make wood. It is impossible. And by the way, I just got handed a 

little Associated Press deal, Jack Ward Thomas, that famous forester, says that the Federal Government at the minimum will be 

probably liable for $1.41 billion in Alaska because of negated timber contracts. That is the Chief of the Forest Service talking about 

the obligation of this government thanks to the Thomas Reform Act 

that you and I worked on. Mr. MILLER. Well, the response would be then to cut our losses 

rather than extend it 15 years. We got to cut our losses and let this 

contract run out and be on our merry little way. The CHAIRMAN. But you cut your losses and the company does 

all that, but you do not maintain the employment in that city, and 

I thought that is--
38 

Mr. MILLER. You know, if the threat of 1.4 billion or whatever 

the threat is, you know, that that is somehow going to drive this 

legislation or the threat to go out of business, I think the first thing 

we have to know as policymakers is kind of why is this taking 

place. You said it is a difference in the volume of timber being offered and what you could have previously had. The Secretary was 

here saying we are going to meet our contractual commitments 

under the contract. You are suing suggesting they are not. Somebody else is suing suggesting they are going too far. And so in the 

middle of all this, we are told that but for this legislation, this mill 

is going to close down. I say, well, how can that be if there are 

other people who have a vital interest, supposedly, in this city of 

Ketchikan, the region of Southeast Alaska and the State of Alaska? 

Where are they? 

Mr. LEWIS. And I guess the answer to that would be with the extension and having a timber base, they would be more than willing 

to probably loan us that money. 

Mr. MILLER. And that is what the Secretary is telling you, you 

are going to have the timber base. They just sat here an hour and 

a half--

Mr. LEWIS. No, they-what has happened is, you know, you have 

got to know one thing. There really wasn't any claims and there 

wasn't any filings in the court. This 1.4 billion came about through 

the contract changes that were unilaterally made to the contracts. 

That is where the 1.4 billion came from. It was from the arbitrary 

change in those contracts. And that is why we are in court. What 

we are trying to do here is to stop that. We only-all we have tried 

to do with this language is to put back those changes that were 

made in the unilateral contract, only on our contract, not on the 

lands, to stop those claims and at the same time show that what 

we need is a 15-year extension to be able to become modern, to be 

able to go forward. 

Mr. MILLER. With all due respect, that contract was reprehensible to the-repugnant to the American people. That is what I am 

saying. That is the only terms and conditions under which this bill 

can operate. As you saw in previous Congresses, the decision was 

that price was too high. Now maybe if there is a case here about 

unilateral alteration of the contract, maybe we have to just let this 

contract run out in 2004 and cut our losses in terms of public resource. 

Mr. LEWIS. You know, that doesn't help the people that are up 

there. That doesn't help anything else. The return to the government is in the hands of the Forest Service. The return in the government dictates the type of operation, sale operation that they are 

going to have, what the costs are going to be in removing that timber. Their choice has been--

Mr. MILLER. But you are pitting that against what you say is required in terms of your investment. If you have to make this investment, you cannot do so under the current rules and regulations. 

Mr. LEWIS. Under the--

Mr. MILLER. And the suggestion that-and all I am asking is are 

there other people that can chip into this in terms of the State, the 

region or the city, that can allow that to take place? 
39 

Mr. LEWIS. I mean, I don't know of anybody that is going to give 

you money without asking for it to be returned. I mean, who 

thinks--

Mr. MILLER. The government--

Mr. LEWIS. No, they get a return. They get $7 billion out of--

Mr. MILLER. Not--

The CHAIRMAN. The gentleman's time has run out. 

Mr. MILLER. That is not sound economics. 

The CHAIRMAN. I am not going to discuss that economics right 

now, because that has been argued over and over and over. 

Mr. LEWIS. That is the basis of--

Mr. MILLER. It's not that I'm going to demand you raise--

The CHAIRMAN. The public's own demand with all due respect is 

to extend the contract so in fact the city can survive. And the company, very frankly, with their stockholders chose to pick up and 

walk away now, they could do so. I have said this time and time 

again, but what we are trying to do is figure a way out where we 

can extend the contract. 

Mr. MILLER. With all due respect, that is what the owner of the 

Cleveland Browns said. 

The CHAIRMAN. Well--

Mr. MILLER. What I am saying is so then I want to know if this 

is so vital to the city of Ketchikan, they get $25 million from the 

Federal Government, the first thing they do is hire a consultant. 

Why don't they come to Louisiana Pacific and say is there something we can do in terms of community development, in tenns of 

economic development, to help you? 

Mr. LEWIS. The contract--

Mr. MILLER. If they give you Federal money they'll have no options. 

The CHAIRMAN. I am going to tell you one thing right off the bat. 

I don't care what they did with that money. I was never excited 

about that. I mean, that's welfare money. That is not work money. 

Everybody tells us we are going to start new businesses; we're 

going to go out and diversify the economy. And I keep saying where 

are you going to diversify? Unless there's timber there is no diversification. I don't care what they say. Unless you let us mine and 

they are not going to let us mine it. There is no other economic 

base in those communities. It does not exist today. You talk about 

fishing. Fishing cannot expand; it's exactly stable. That is State 

law and Federal law. You can't expand in any other arena. They 

talk about tourism. Right now tried it in Ketchikan we have seven 

boats and there during the summertime you can hardly walk the 

streets. You can't expand that. You have got a point here, but 

somewhere along the line we have to recognize that timber plays 

a vital role and we have to figure-if we can extend this contract, 

keep that town viable, that is what we are trying to do. 

And by the way, all due respect, you are a lawyer. You would 

never come to me and expect me to lend you money. I know you 

would never do that, but lend me money without some guarantee 

you are able to pay me back. You can't do it. You can't ask-the 

city of Ketchikan would do it in a second if--

Mr. MILLER. Mr. Chairman, with all due respect, I don't want to 

lend you the forest unless I know it is absolutely necessary. And 
40 

I have a company here that has a lower debt ratio than most of 

the people in their industry. I appreciate that this bill may be marginal, but the question is are there other concessions that can be 

made by others to increase the marginal capability of this bill. And 

if in fact there is a problem within the Tongass reform, that will 

be discussed too. But what we are stating-what we are being told 

here is it is a full rewrite of the Tongass, but I appreciate the buffer zones and not emasculating the fish. I mean, you have to try to 

keep some local base. It is this rewrite-we have to go back to $2 

timber or you guys can't play. Well, then we have got to ask ourselves is that a subsidy that the people of the United States desire 

to engage in. The answer may be yes from your perspective, and 

I don't know what my perspective is. It sounds a little rich to me 

when there are other people that can divvy up. This is how you end 

up with Federal deficits. It somehow becomes our problem. 

The CHAIRMAN. Well, you have got my bill. It will solve the whole 

problem. 

Mr. LEWIS. One thing, the 300 million that Mr. Janik had talked 

about earlier as being available or potential on the Tongass Land 

Management Plan, · that produces and should produce approximately a minimum of maybe $70 million into the Federal coffers. 

That is through income tax of the workers. That is through other 

taxes. That doesn't take the product and take it on and on and on 

in through the system. That just takes your very first vendors. 

That more than pays for the Forest Service's budget on handling 

the timber. Any stumpage that comes after that is a bonus. 

And the Forest Service can manage that number to the point 

that they want to. They can manage at the base rates. They can 

manage it to $100. They can manage it to $200. That is their 

choice. Their choice has been in the past to manage it to base rates, 

to management to minimums, because they have put as much protection into the environment as they can, as much protection out 

there as they can. They would rather take the stumpage money 

and put it back into the land. And all of us thought that was the 

way to go. We thought that is the way it should be managed. But 

instead, all of a sudden we get groups that came up that said that 

is not the way it should be managed. And it has confused all of us. It has confused every one of us, not to understand exactly what's 

wanted or needed. 

Mr. MILLER. And that is why we have gone through the process 

to determine. · 

Mr. LEWIS. Yeah, but what you guys did was turn around and 

assume that the $2 at base rate was something that we had something to do with, that we chose to do that, and turned around and 

unilaterally changed our contract. And that was wrong, because 

that is not what was happening. It was not in our power to do that. 

That wasn't something that we were doing. It was what the Forest 

Service was doing. And so we got blamed for it and we got turned 

around and you took away any profit that-any chance for us to 

make a dollar and have a return. And all we have asked to do so 

that we can continue to operate is to come forward and make those 

changes back so we can survive and have an industry. And right 

now the way it is going, it is very difficult. We can't survive with-
41 

out these changes. That is why we are here. We have no place else 

to go. 

Congress is the one that interfered with our contract, not us. The 

Forest Service and us had agreements. We made contracts. We 

made changes. We did this all along and it was only Congress that 

came in and made that change. 

Mr. MILLER. The bottom line, then, is that you cannot do business unless we give you 1951 prices 23 years from now? 

Mr. LEWIS. That is what you say 1951. I will go back and say 

the Forest Service can make that $50 or $100. Mr. MILLER. And there was an end to that contract. 

Mr. LEWIS. But they can go back and make that rate. They can 

make whatever rate they want. It is not a '54 contract. Those 

changes-we made, I don't know, 20 changes or something like that 

to the life of that contract.George Leonard was one that we used 

to go in and negotiate changes. And he was a tough negotiator. He 

would sit in there and say we need this and this and this changed 

and we would sit down and negotiate those changes. We need to 

meet NFDA. We would go down and meet those. We would make 

those changes all along. 

Somewhere along the line this thing got blown out of hand. We 

were told we never did this. We were told that all these things 

didn't happen. And all of a sudden, the next thing that you knew, 

we were in trouble. And we are back here asking for help. That is 

exactly what we are doing, because we need it. We have got our 

backs against the wall. And I want the people to work. I want them 

to have jobs and I want it to continue. That is my town. I have 

been there 30 years. My family were born and raised there. That 

is all we are trying to do. We are not trying to get any sweetheart 

deal. We are not trying to cut a deal or anything. We are trying 

to survive. 

Mr. MILLER. Well, I just-you know, it is like all the discussion 

earlier in the panel about what a wonderful environmental record 

you have, except, well, you know, the expenditures pursuant to consent decrees and guilty pleas. Let us just understand something 

here, that the question originally arose because people found, as I 

said, the contract unacceptable. And we made those changes. You 

can litigate those changes, but if what you are telling me is that 

this is the only place that there is relief is to go back to those forest 

practices and to go back to those prices, that that is the only place 

there is relief, then the question may be whether or not you just 

play this contract out in 2004. I mean, I don't understand that, but 

I guess that is the case. 

This is important to the town. This is important to everyone else 

who can stand around with their hands in their pockets saying 

what is the Federal Government going to do. 

Mr. LEWIS. I am saying we are not going to make it to 2004 

under the contract changes you made. We are not even going to 

make it. We are not going to make it there. That is why we are 

here. We are not going to make it. The CHAIRMAN. You know, and I might say to the gentleman 

from California, Ketchikan is doing everything in its power so that 

they can divest and get this $25 million they get a substantial 

economy, but they can't-there is nothing they can do until the 
42 

supplier of the timber can say listen, we can extend this contract 

and give you some stipulation, we are telling you what is wrong 

with this bill and say all right, can you live with this, this and this. 

That is all I am asking you. This is the starting point and I have 

yet to find out any-other than the fact that it can't work. Tell me 

what will work and then let us sit down and negotiate with Ketchikan Pulp and see if there is something that can work unless you 

want to kill the industry. 

Those of you who want to kill the industry-! don't , and I wishand frankly, I wish people would tell me and I would be glad towe could save a lot of time, but this gentleman, these gentlemen 

and this lady has a problem and that is to keep those people working, to keep the town viable. I could ask another question but we're about-afraid we'll run 

out of time here. Mr. MILLER. Well, I just- let me just ask you, in terms of the 

production of this facility over the last-go back a year from today, 

this quarter. What has been the production at the facility? 

Mr. LEWIS. Our production? About 480, 490. 

Mr. MILLER. But in terms of your capacity, mill capacity, that is 

what that translates to? 

Mr. LEWIS. We believe our mill--

Mr. MILLER. Fifty percent, 90 percent? 

Mr. LEWIS. Probably about 85, 90 percent. The CHAIRMAN. And that is in pulp? 

Mr. LEWIS. That is in pulp. Our sawmill, KSM, was down, I 

think, almost all of last year. Hemlock, our sawmill, was running, I think it was, one shift not all of last year. We-I think that has 

been the same for a couple years. In 1993 we were down almost 

100 days for lack of wood. And we would have been down another 

50 or 60 days except that APC went down and we bought wood 

from them. And basically that all came from the change in the 

wood supply and how we got our wood and where it was released. 

The CHAIRMAN. And these are added value projects you are talking about? This is your sawmill? 

Mr. LEWIS. Yeah, these are the sawmills that take the higher 

value. KSM produces lumber. Mr. MILLER. The sawmill was down 100 days? 

Mr. LEWIS. Down, if I remember-the pulp mill was down 100 

days, and I believe that when APC went down, the whole area was 

short of wood. APC went down and we bought some of their pulp 

logs. It kept us running or we would have been down another 60 

days or something like that, except the wood that we bought allowed us to work. And that is--

Mr. MILLER. And then how many other days due to reasons 

not--

Mr. LEWIS. Lack of wood? Well, the sawmills have been down-

! bet you the sawmills have only run-I am just guessing, but probably 40 percent, 50 percent of the time in the last three years. They 

never literally with wood, out of wood. Right now KSM just got 

started back up and went back down. It has been pretty rough on 

everybody. 

Mr. MILLER. The mill-how much of the time has the pulp been 

down due to lack of material and/or maintenance? 
43 

Mr. LEWIS. OK, the lack of material was what I just talked 

about. And maintenance, I would say, we usually average anywhere from 15 to 25 days, so I would say we were somewhere in 

that area. 

Mr. MILLER. They are your scheduled--

Mr. LEWIS. That is a year, yeah. That is scheduled maintenance. 

Mr. MILLER. Scheduled. Were you down more than you were 

scheduled for? 

Mr. LEWIS. Yes. We have had some upsets where we went down. 

We had some areas that we went down for four or five days and 

started back up. I mean, things like that. 

The CHAIRMAN. I want to thank the panel. You know, this is a 

hard nut to crack here, and I hope we can get some suggestions, 

as I told the Forest Service and even yourselves, so we can come 

to some solution to this problem. I happen to agree with you. I 

would not invest if I didn't have a supply in a chicken picking plant 

or any other kind of plant-if I knew they were short of a supply. 

If there was some private timber there, we wouldn't have a problem. We would have timber, not as convenient as-by the way, the 

mills in New York-if you want to have some fun sometime, go 

visit those 37 mills in New York and see what kind of contract they 

have, what kind of environmental qualities they have, too. This 

mill is ten times cleaner than that because we are a clean area. 

That is unfortunate. 

You are excused. I want to thank each one of you for traveling 

so far to testify to the committee. 

The next panel up is panel four: Mr. Scott Estey, Vice President 

of Corporate and Investment Analysis; Mr. David Roets, Southeast 

Regional Sales Manager from Arkansas; Mr. Al Knapp, The Industrial Company, Steamboat Springs, Colorado; and Mr. Samuel 

Mabry, Vice President of Government Affairs, Hercules, Incorporated, Washington, D.C. Would you gentlemen please take the 

witness stand. 

Mr. Scott Estey, you are up. I apologize for the long wait, by the 

way, but this is one of the problems we have when we have these 

hearings. It takes a long period of time. 

STATEMENT OF J. SCOTT ESTEY, VICE PRESIDENT OF CORPORATE AND INVESTMENT ANALYSIS, JAAKKO POYRY CONSULTING, TARRYTOWN, NEW YORK 

Mr. ESTEY. Thank you, Mr. Chairman. My name is Scott Estey. 

I am Vice President of Corporate and Investment Analysis with 

Jaakko Poyry Consulting North America. Jaakko Poyry provides 

management consulting and investment advisory services to the 

pulp and paper and forest products industry, as well to suppliers 

of equipment, raw materials, or capital to the industry. 

I have been retained by Ketchikan Pulp Company to provide testimony regarding typical financial return and project life requirements for capital expenditure within the pulp and paper industry. 

This testimony is made in light of KPC's request for an extension 

of its timber supply contract with the U.S. Forest Service, stating 

that the extension is required in order to ensure that fiber supply 

is available for a sufficient period of time to allow KPC to earn an 

adequate return on capital expenditures at its mill in Ketchikan. 
44 

As general background on the industry, pulp and paper is a capital intensive industry which requires not only large initial investments, but also significant on-going investments for the purposes 

of maintenance, environmental compliance and facility improvements. Additionally, the pulp and paper industry is commodity oriented, highly cyclical and typically realizes relatively low profit 

margins as a result of this. 

Expected rate of return, and the life of an investment project 

that is required in order for a company to earn that return, can 

vary significantly within the industry. In my experience, it is not 

uncommon to observe project returns ranging from negative to 

positive 30 or so percent and project life requirements ranging from 

five to 25 to 30 years. These are wide ranges, I know, and of the 

many factors that can potentially influence these measures, those 

having the most significant impact include; the timing of the expenditure relative to the industry cycle, the magnitude of the expenditure in terms of dollar volume, and the purpose or nature of 

the expenditure. 

Within my written testimony I have provided a rough categorization of investments within the industry based on the purpose of expenditure, and I have also provided ranges for expected rate of return, as well as for required project life or investment term that 

are typically experienced within the industry. I have used this as 

a reference in formulating my opinion as to the reasonableness of 

KPC's request. 

My knowledge of the capital program being considered by KPC 

is limited to the estimated aggregate value of the expenditure, approximately $200 million, the estimated completion of the expenditure, which is five to eight years hence, and a general description 

as provided by the company which described the expenditure as including bleach plant modifications necessary to allow the facility to 

produce elemental chlorine-free pulp, environmental equipment 

and facilities modifications, an upgrade of the power generation facilities and improvements in the mill's chemical recovery systems. 

Given the general description and magnitude of the investment 

project, it appears that the majority of the investment could be 

classified best as a major replacement and environmental expenditure. Based on my review of rate of return and project life requirements in the industry, it is within the range of expectations to require 15 to 25 years to allow for an adequate return on an investment program of this nature and magnitude. 

That concludes my testimony. Thank you. 

[Statement of Mr. Estey may be found at end of hearing.] 

The CHAIRMAN. Thank you, Jay. And I will move to David at this 

time, and I see the other two gentlemen probably will say we were 

going too late and they probably left or they'd be here. 
45 

STATEMENT OF DAVID L. ROETS, SOUTHEAST REGIONAL 

SALES MANAGER, GRASEBY STI, WALDRON, ARKANSAS; AL 

KNAPP, THE INDUSTRIAL COMPANY, STEAMBOAT SPRINGS, 

COLORADO; AND SAMUEL A. MABRY, VICE PRESIDENT OF 

GOVERNMENT AFFAIRS, HERCULES, INCORPORATED, WASHINGTON, DC 

Mr. ROETS. Thank you, sir. My name is David Roets. I am the 

Southeast Regional Sales Manager for Graseby STI. Graseby STI 

is an Arkansas based company. We manufacture continuous emissions monitoring systems for the various industries which require 

them. The largest industry which we serve or play a major role in 

is the pulp and paper industry. We have a business relationship 

with the Ketchikan Pulp Company and its parent company, Louisiana Pacific Corporation. 

The pulp and paper industry represents 85 percent of our company's income per year. With the down turn in the paper prices, it 

has been a very difficult past few years for the paper industry. This 

in turn has resulted in a reduced business flow for Graseby STI. 

Over the past three years, we turned our focus on the utility 

market, which resulted in a lot of work with very little return on 

investment. 

There are approximately seven major suppliers of CEMS in the 

United States. This represents a variable of approximately $100 

million a year industry which is very little known. With the delays 

of the enhanced monitoring rules and other environmental regulations, there is just not enough business left to keep these companies afloat. 

Every CEM which we sell makes a difference to our bottom line. 

The effects of a paper mill closing down are felt not just by the direct employees of that facility, but also by families all over the 

United States. 

Recently, Graseby STI has been exploring the possibilities in the 

Asian countries. What we discovered is that the rest of the world 

is beginning to follow the environmental standards that were set 

in the United States. This means that the environmental issues 

which are put forth in situations such as the one presented before 

you today can and will be stepping stones to the way future issues 

of similar nature are addressed. 

The importance of continuing to improve on the control of our environment is vital to our future and therefore should be pursued. 

Environmental regulations need to be implemented when necessary. However, they do not have to be so strenuous on the facility 

that it will cause them to virtually close down. 

The Ketchikan Pulp Company, to my company's knowledge, has 

always been an environmentally aware company and has taken 

measures to meet or exceed the environmental regulations governing their facility. I believe that the request for an extension of the 

Tongass timber contract by KPC should be granted for the 15-year 

period in order to allow them the financial resources necessary to 

bring their mill up to the environmental standards which we as a 

nation have set and continue to set. I further believe that in doing 

so, our government will make a statement to the rest of the world 

that they are willing to work with industry to meet the future environmental goals. 
46 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, David. If you have any connections, 

I have a gentleman from Arkansas that'll help us out. I will tell 

you that right now, because he is the one that is always saying he 

is going to veto things. It makes it very, very-an unlevel playing 

field. 

Scott, in your testimony now your investment-you have been 

asked to be--you were hired by Ketchikan Pulp. How many years 

do you think-15 years, is that unusual for an amortization of a 

loan such as $200 million? Is that short, long or in between? 

Mr. ESTEY. Again, it depends on where and how the funds have 

been invested, but it is not atypical at all. As I mentioned, I think, 

15 to 25 years, given the general description that I have of this 

project, is more than reasonable in terms of expectations of time required to not only repay, pay back, recoup investment, but also to 

earn an adequate return on that investment. 

The CHAIRMAN. That is-does that gear in the rates of borrowed 

money or is it usually borrowed at a fixed rate? 

Mr. ESTEY. Excuse me? 

The CHAIRMA.t'\l". Do they borrow at a fixed rate for that $200 million so that's geared into it so they have to pay the interest? 

Mr. ESTEY. Correct, yes, including your total cost of capital 

whether it is debt or equity. 

The CHAIRMAN. Is it usual for a pulp company to seek long-term 

contracts for investments? 

Mr. EsTEY. I would say it is usual-from the standpoint of fiber 

supplies, this is a particularly, you know, fairly unusual case from 

the standpoint that it is government lands that all or most of the 

timber would be coming off of. Fiber supply is a critical issue when 

companies are attempting to finance large projects, and it is typical 

that they need to show or prove security of that resource. 

The CHAIRMA.."<. How many new pulp mills are you aware that 

have been built in the last ten years? 

Mr. ESTEY. Pulp mills built? If we are talking about wood-based 

Kraft pulp mills, none in the United States. 

The CHAIRMAN. Most of our fiber-if these pulp mills continue to 

shut down it goes to David's company, they continue to shut down, 

most of our paper and fiber products will be coming from overseas 

such as our aut--

Mr. EsTEY. I missed the first part of the question. 

The CHAIRMAN. I am saying if there is no new plants being built. 

Mr. ESTEY. Correct. 

The CHAIRMAN. There are plants being shut down, according to 

David, is that correct? 

Mr. ROETS. That is correct. 

The CHAIR:\1AN. If we continue to shut those plants down, it 

means we become more dependent on our overseas fiber. 

Mr. ESTEY. That is correct. And I think what you are seeing is 

large pulp mills being built in places like Indonesia. Asia Pacific 

in general is a huge growth region, and they are beginning to become a dominant player in the world industry. 

The CHAIRMAN. Are they meeting the same standards required of 

Ketchikan Pulp? 
47 

Mr. ESTEY. I cannot speak in specifics on that, but generally no, 

the environmental restrictions and conditions they need to meet 

are not as stringent as in the U.S. The CHAIRMAN. I see David shaking his head. Is that correct? 

Mr. ROETS. That is correct. They are about 15 years behind us 

on environmental issues. 

The CHAIRMAN. So what we are saying in reality, because we 

have become more dependent, is we can pollute the rest of the 

world. Mr. ROETS. That is correct. 

The CHAIRMAN. But we can't improve upon our own, because my 

understanding is the mill is looking to put in over $200 million to 

upgrade the mill to make it viable. And $200 million at, let us say 

ten percent interest, that is a large interest payment. And yet 

we're backing this industry-for the oil industry, everybody supports the oil industry, too, you know. They want to send it overseas 

where we have to be dependent upon it and they can pollute everything out there before we can have the requirements here. But we 

know what will happen, just-maybe tell them we do things about 

that. 

David, how many plants do you serve? 

Mr. ROETS. We serve about 365 mills. 

The CHAIRMAN. Where are they mostly? 

Mr. ROETS. Most of them are in the Southeast. 

The CHAIRMAN. Southeast. 

Mr. ROETS. The majority of the mills, probably 70 percent, are 

in the Southeast part of the United States. There is probably-the 

remaining portion, basically, is on the West Coast, along the West 

Coast, and then the remaining mill in Alaska. 

The CHAIRMAN. One thing I just think I should ask you, both of 

you men. When I go into Arkansas and Georgia and Alabama, why 

do I smell that mill 24 miles away but Ketchikan I can't smell it 

down the street? 

Mr. RoETS. Because they haven't made all the environmental 

changes yet that Ketchikan has made. Ketchikan is a very environmentally aware mill. They strive very hard to keep a clean environment and not be emitting everything that some of the other mills 

typically emit. I mean, most of these mills are meeting the standards that are set forth for their State. 

The CHAIRMAN. For their State. 

Mr. ROETS. For their State. State of limitations--

The CHAIRMAN. And our mill is meeting the standards of the 

State and the Federal Government, is that correct? 

Mr. ROETS. That is correct, sir. 

The CHAIRMAN. And that means really this mill up here-to 

judge this mill compared to any other mill, like I have heard testimony about the mills in Canada, are much better. How would you 

rate the Ketchikan mill? 

Mr. ROETS. I would say the Ketchikan mill is far more advanced 

environmentally than the mills in Canada. The regulations in Canada are not as stringent as the regulations in the United States. The CHAIRMAN. What would-Scott, you are a lender now? 

Mr. ESTEY. I am not a lender, actually. We consult. The CHAIRMAN. I am putting the lender's hat on your head. 
48 

Mr. ESTEY. All right. 

The CHAIRMAN. It makes you feel good and now you are lending 

man too, but is there any way at all for-you heard Mr. Miller talk 

about the city being involved, the State being involved, is there any 

way as an investor you would invest without an extension of contract? 

Mr. ESTEY. I guess no. To me the security of that resource is valuable to the long-term viability of the mill, and therefore the ability 

to pay back loans. The CHAIRMAN. If you were advising the State permanent fund, 

for instance, you wouldn't advise to take that any of that money. 

In fact, there would probably be a lawsuit. I am surprised ADA got 

away with it. By a stockholder in the State fund, saying this is not 

a viable option here because there is no collateral. 

Mr. ESTEY. Right, I would advise no, essentially since there is no 

other source of fiber. 

The CHAIRMAN. OK. Anything you want to add? 

Mr. ROETS. No. 

The CHAIRMAN. I want to thank both of you for waiting very patiently. I do appreciate it. These things take a long time, but it is 

very, very valuable. Thank you, David. Thank you, Scott. 

Next we have panel four. Take your seats and I will be back in 

a minute. We have Robert, Wayne, Gershon, Mary and Brian. Robert, you are up first. 

STATEMENT OF ROBERT LINDEKUGEL, SOUTHEAST ALASKA 

CONSERVATION COUNCIL, JUNEAU, ALASKA 

Mr. LINDEKUGEL. Thank you. My name is Buck Lindekugel and 

I am the Conservation Director for the Southeast Alaska Conservation Council. Dave Katz, our Forest Plan Coordinator, is behind me 

to answer some-help answer some questions. I fell in love with Southeast Alaska when I was a commercial 

fisherman in 1980. I have .been a grassroots conservation lawyer 

working on Tongass issues since 1988. SEACC strongly opposes this latest assault on the 1990 Tongass 

Timber Reform Act. Since the fall of '94, and counting this month's 

scheduled hearings, the Alaska delegation has held an incredible 

14 hearings and pushed 11 separate pieces of legislation on the 

Tongass, all of them aimed at rolling back the Tongass Timber Reform Act and other conservation laws. Chairman Young; your footprints are over the bill to give away 

the Tongass and begin dismantling our national forest. You also 

want to hand over 200,000 acres of the Tongass to five new native 

corporations. 

The CHAIRMAN. Robert, I am going to stop you there. Now we are 

talking about extension of the contract. Let us talk about extension 

of the contract. This is not about the Landless people or anything 

else but the extension of the contract. If you don't want to stick to 

that script, I want to take questions. 

Mr. LINDEKUGEL. Well, sir, you know, I-if I may, sir, I respectfully disagree. Earlier in your statement you mentioned that--

The CHAIRMAN. We never talked about the Landless. Mr. LINDEKUGEL. No, you didn't talk about the Lan--

The CHAIRMAN. And that's what you--
49 

Mr. LINDEKUGEL. You talked about--

The CHAIRMAN.This bill-well, we'll leave it at that. Just continue, but you leave the Landless out. That is a separate piece of 

legislation. Is that agreed? 

Mr. LINDEKUGEL. I will go on, sir. This KPC extension bill is one 

of the most outrageous pieces of special interest, corporate welfare 

legislation we have ever seen and one of the most damaging pieces 

of legislation ever proposed on the Tongass. This bill embodies the 

attitudes and arrogance of the land skinners and robber barons 

that Teddy Roosevelt fought so well. This bill is also opposed by 

many Southeast Alaskans. 

I have got some resolutions from different organizations, communities and businesses opposing this bill that I would like to introduce into the record. 

[The information may be found at end of hearing.] 

Mr. LINDEKUGEL. You claim that Governor Knowles supports this 

bill, but the Governor is not supporting this bill. This bill does not 

even come close to fulfilling the conditions the Governor laid down 

for supporting a KPC contract extension. 

Your bill would reward a major corporate polluter for violating 

pollution laws. KPC has a long history of violating laws, clean air, 

clean water, labor, health, antitrust, you name it, they violate it. 

They've pocketed years of profits from breaking the law and now 

they want the American people to pay to clean up their act. 

Your bill would hammer away at the Tongass. It mandates 4.4 

billion board feet of new KPC clearcuts or a line of football-fieldsized clearcuts from Juneau, Alaska, to Washington, D.C., and 

back. This includes such places like Cleveland Peninsula, Honker 

Divide, Port Houghton, Ushk Bay. This cutting would occur regardless of the impacts to hunting, fishing, tourism, subsistence and 

other resources. 

This bill would place Louisiana Pacific's corporate needs above 

the needs of any other forest user; it will give L-P rights that it 

never had before; and, threaten jobs in other Tongass-dependent 

industries. 

Your bill would guarantee KPC 23 years of timber worth nearly 

$1-114 billion and price that timber at a fraction of its real value. 

It would hamstring the Forest Service's ability to protect the public 

interest by removing its authority to terminate this new contract 

because of environmental damage, and the contract would override 

the Tongass planning process. 

You said this bill is necessary to allow KPC to obtain financing, 

clean up its pulp mill. But after KPC gets the contraCt, your bill 

allows them to walk away from this albatross and replace it with 

a facility that provides fewer jobs. 

You said that KPC needs this contract because the Forest Service 

hasn't given them enough timber. The Forest Service has released 

plenty of timber to KPC. You have blamed the Tongass Timber Reform Act for the volatile business cycles that have driven timber 

employment down since 1990. What you haven't said is that L-P 

lost $22 million on pulp in the first quarter of 1996. L-P's pulp division lost money three out of the last four years. L-P's real problem 

is very weak international pulp markets. That is what L-P told its 
50 

shareholders. That is why L-P wants a new deal, and that is why 

it is holding Ketchikan hostage. You said the Ketchikan region is economically dependent on KPC 

and timber, but this isn't the 1950's. Today KPC directly provides 

just three percent of the region's jobs and less than eight percent 

of Ketchikan's jobs. Ketchikan is far less dependent on this pulp 

mill than Sitka was on the APC mill before it closed. Yet today, Sitka is doing fine. 

Southeast Alaska needs a new deal and a new direction, not LP. Our region needs a modern, high-value added timber industry 

that cuts less but produces more jobs for Southeast Alaska. Steve 

Seley's newly proposed remanufacturing plant and dry kiln on 

Prince of Wales Island is one of the kinds of businesses that we 

would like to see thrive. Finally, your bill is a misguided and heavy-handed government 

subsidized program. It deprives us of one of this country's greatest 

strengths, the free enterprise system. Instead of proposing policies 

that would bring the Tongass into the 21st century, you want to 

take us back to the 1950's. We urge you to stop this bill right here 

and right now. 

I have finished my statement. 

[Statement of Robert Lindekugel may be found at end of hearing.] 

The CHAIRMAN. Wayne, you are up. 

STATEMENT OF WAYNE WEIHING, TONGASS CONSERVATION 

SOCIETY, KETCHIKAN, ALASKA 

Mr. WEIHING. Thank you. My name is Wayne Weihing. I am 

President of the Tongass Conservation Society of Ketchikan. I am 

a 28-year resident of Alaska and a former 21-year employee of 

Ketchikan Pulp Company. During my employment at Ketchikan 

Pulp Company, I was union representative-union president representing approximately 300 members. On Monday, July 1, Ketchikan Gateway Borough Assembly 

passed a motion to earmark $1 million from its Southeast Alaska 

Economic Disaster Fund to be used for efforts to extend Ketchikan 

Pulp Company's timber contract for 15 years and to influence the 

TLMP process and to send people to testify at hearings here in 

D.C. to support Ketchikan Pulp Company and to allow the radical 

so-called wise use movement in Ketchikan a free hand to use whatever tactics necessary to obtain those goals. 

It is amazing to me to see those tax dollars from this economic 

fund now ricocheting back to Congress to be used to support a corporation, Ketchikan Pulp · Company. Ketchikan Pulp Company 

wants a contract extension. Meanwhile, the pulp workers at the 

pulp mill have not had a labor agreement with a contract since 

1984, that is 12 years ago, and are currently working for less 

wages than they made in the spring of 1984. 

Once again, Ketchikan Pulp Company is threatening to shut 

down their mill if they don't get their way. There have been a series of threats-of shutting down and leaving Ketchikan high and 

dry from KPC over the last 20 years. I really feel bad for the current employees to have that same threat held over their heads now 

as in years past. I will give you some examples. 
51 

In 1973, following the first attempts to implement basic environmental impact statement requirements, C.L. Cloudy of Alaska 

Loggers Association warned that the requirements would cause 

complete pulp mill shutdowns and shutdowns of the remaining 

sawmills in Southeastern Alaska. That was Ketchikan Daily News, 

April 19, 1973. 

On May 4, 1976 the Ketchikan Daily News headline screamed 

KPC will close July 1, 1977. But as the paper explained the next 

day, the announcement wasn't news, it was part of a publicity 

stunt. The paper then criticized the pulp mill for issuing false 

alarms one week before EPA pollution hearings and shortly before 

employee negotiations were due to start. One editorial concluded 

Ketchikan Pulp Company is crying wolf and playing with the faith 

of thousands of people. God help it. That was Ketchikan Daily 

News, May 5, 1976. 

During the 1983 EPA hearings, officials from KPC said the cost 

of installing water pollution control equipment would force them to 

shut down. KPC said it would consider both legal recourse and mill 

closure if the variance requests were denied. That was Southeastern Log, December 1983. 

In 1984, KPC's comptroller, later president Martin Pihl, claimed 

that if Forest Service didn't reduce the price of timber and allow 

larger clearcuts, we are all going to pack up and leave. That was 

reported in the Juneau Empire,March 29, 1984. 

In 1992, EPA proposed tighter pollution controls for KPC's pulp 

mill. KPC's president, Martin Pihl, claimed the new pollution controls would seriously threaten the survival of the mill or any pulp 

mill anywhere. That is Ketchikan Daily News, April17, '92. 

On March 12, 1996, Ketchikan Daily News reported KPC would 

close its sawmills in Ketchikan and Metlakatla from late March 

until after Memorial Day because of a shortage of timber. In the 

same article, the Ketchikan area forest supervisor expressed his 

personal opinion that the current shutdown had more to do with 

market conditions than supply of logs. Ketchikan Pulp Company has a track record of not being a good 

corporate citizen. Their latest effort and threats to get a 15-year extension or else they will shut down and leave town, this is the latest in a long line of abusive actions on KPC's part. And the extension of KPC's monopoly would continue the chronic environmental 

problems in my home area and prohibit any real possibility of having a viable secondary processing and manufacturing of finished 

wood products, which could be sustainable over the long run. It 

would also result in the heavy-handed clearcutting of important 

hunting and fishing areas that I depend on, like the Cleveland Peninsula. 

In closing, I strongly oppose your legislation. 

The CHAIRMAN. Thank you, Wayne, for keeping within the five 

minutes. Mr. Cohen, you are next. 

STATEMENT OF GERSHON COHEN, ALASKA CLEAN WATER 

ALL~CE,~NES,ALASKA 

Mr. COHEN. My name is Gershon Cohen. I am the Executive Director of the Alaska Clean Water Alliance. The Alaska Clean Water 

Alliance is a statewide nonprofit organization dedicated to the con-
52 

servation of Alaska's waters. ACWA works to ensure that activities 

in Alaska's rivers, lakes, estuaries, and marine waters protect public health, support the use of the ecosystem for food harvesting, and 

foster environmental and economic stability. ACWA tracks NPDES 

permits in Alaska to assure that discharges comply with State, 

Federal, and legal requirements and works to build alliances with 

fishing, subsistence, tourism, public health, and native groups 

across the State. Sir, you have my written testimony, and I will provide that for 

the record. I would like to instead use my time to respond to comments that were made by earlier testifiers. 

Mr. Chairman, I am not an attorney and I wouldn't want to at 

this time---

The CHAIRMAN. May I say that is probably the best thing you 

have got going for you. 

Mr. COHEN. Thank you, sir. I wouldn't want to testify as to what 

permit compliance means, but I am looking at the four bankers' 

boxes here of permits. And we have been told that Ketchikan Pulp 

Company has always operated in compliance with their permits. I 

am not sure how that statement can be made. There are many notices of violation, fines, consent decrees that they are operating 

under that in plain language, sir, to a non-attorney would say that 

they have not indeed operated within their permits. 

The CHAIRMAN. Could I ask you a question? 

Mr. COHEN. Yes, sir. 

The CHAIRMAN. Within the permits limits or in fact as a change 

took place, how much was the results of Federal regulations and 

other stipulations put into place that they were to be in compliance? 

Mr. COHEN. Sir, do you mean changes in law after the---

The CHAIRMAN. As a result of regulation. 

Mr. COHEN. Well, in the four years that I have been working for 

ACWA, the water quality standards for the State have in fact, in 

my estimation, become less tight, not more tight. 

The CHAIRMAN. Not State, Federal. 

Mr. COHEN. Well, sir, there have been changes to the Clean 

Water Act since that permit came into being for the mill. And they 

are in violation now of Clean Water Act requirements that everyone else in the country is having to follow. 

The CHAIRMAN. What type of mill-can I ask you this now? If we 

did a testimony-have you been around any pulp mills? 

Mr. CoHEN. Pardon me? 

The CHAIRMAN. Have you been around any pulp mills? 

Mr COHEN. Yes. 

The CHAIRMAN. Now if this mill compared to the one in Georgia, 

of the many that they have, compared to that, do they-is it cleaner or dirtier? 

Mr. CoHEN. I couldn't answer that. 

The CHAIRMAN. I think we ought to find that out. Go ahead. Mr. COHEN. To directly--

The CHAIRMAN. Go on with your testimony now, because you are 

supposed to be on open time. Go ahead. 

Mr. COHEN. OK. To directly address some of those comments 

made earlier, sir, with respect to Superfund, it is true that KPC 
53 

is not a Superfund facility at this time. However, the survey that 

was done in 1991 showed that they had a high enough ranking to 

be considered for Superfund. At the point when the numerical 

ranking is completed, it becomes a question that is brought to a 

committee that brings in other factors, some of them political, as 

to whether or not a site will actually be listed as a Superfund site. 

With respect to the talks of Substance Control Act, there were 

two PCB inspections in 1988 and in 1993. EPA complaints were issued as a result of each inspection. 

With regard to the Resource Conservation Recovery Act, there 

have been four State inspections in the past ten years, in '88, '91, 

'93 and '94. All have documented numerous violations. 

With respect to the State solid waste regulations, there have 

been four State inspections in '87, '90, '95 and '96. Three resulted 

in notices of violations. According to the Rivers and Harbors Act, in 1993 the Army 

Corps of Engineers issued a notice of noncompliance. They found 

that KPC knowingly violated the permit conditions by significantly 

exceeding authorized dredge amounts and failing to submit water 

quality reports. 

With regards to State water quality standards, they have been 

exceeded at least 94 times in the last year for color, chronic toxicity, manganese, copper, sulphur, residual chlorine and oil and 

grease. For the Clean Water Act, in 1994 there were unpermitted 

discharges of pollutants that occurred 19 times, totaling over a million gallons. Requirements for pH, fecal coliform, biological oxygen 

demand and total suspended solids are exceeded regularly. Ward 

Cove is on the State's list of impaired water bodies for accumulation of sediment, dissolved oxygen violations, color violations and 

elevated levels of toxic compounds. 

With regards to the Clean Air Act, there was a statement made 

in the hearing in Juneau a month ago; Senator Murkowski asked 

Mr. Sowyn, the CEO for Louisiana Pacific, to try to identify the 

contents of a vapor from some photographs, not unlike this photograph here, sir, that were taken of the mill site. And his reply was 

that the air emissions were steam. Well, in 1995 Ketchikan Pulp 

Company admitted emitting 25 million pounds of air pollutants. 

This included the following: sulfur dioxide, 8,100,000 pounds; sulfuric acid, 120,800 pounds; sulfur trioxide, 210,000 pounds; total reduced sulfur, 9 million pounds; formaldehyde, 11,000 pounds; hydrochloric acid, 569,000 pounds; chloroform, 68,000 pounds. 

The CHAIRMAN. Mr. Cohen. 

Mr. COHEN. And I could go on, sir. 

The CHAIRMAN. That's already in the record as part of your testimony. I've read it. 

Mr. COHEN. OK. 

The CHAIRMAN. You are out of time. 

Mr. COHEN. Can I make a closing statement, sir? 

The CHAIRMAN. You can make a closing statement. 

Mr. COHEN. Thank you. I would like to say that ACWA does not 

work, sir, on timber allocation issues, and we would defer to other 

individuals or organizations on such matters. However, we could 

not begin to consider supporting extensions to the timber contract 

unless four conditions were met. Number one, suspension of KPC's 
54 

opposition to the 1994 EPA permit; two, a complete cessation of 

KPC's discharge of toxic materials to the waters of Southeast Alaska; three, the timely completion and implementation of a site remediation plan for Ward Cove; and four, an immediate initiation of 

the refitting of the facility to allow the company to operate in compliance with all State and Federal pollution laws. 

Thank you for this opportunity. 

[Statement of Gershon Cohen may be found at end of hearing.] 

The CHAIRMAN. Would you-you are the one that first offered a 

suggestion on how to solve the problem. If we met all those requirements, then you would support it? 

Mr. CoHEN. Well, I would consider supporting, sir. I would have 

to see. 

The CHAIRMAN. You know, that is sort of like, you know, kind of 

walking to the door. The truth of the matter is you would have no 

problem with the allegation if we met all those requirements. You 

shouldn't have. 

Mr. COHEN. Well, sir, that is true. If they were ready to meet all 

water quality standards, State and Federal, at the end of pipe--

The CHAIRMAN. So what if we wrote into this law all the standards and gave them 15 years so they could borrow the money to 

do it? 

Mr. COHEN. Well, unfortunately, sir, what I have heard so far is 

that--

The CHAIRMAN. I am not saying what you have heard. I am saying we have the authority to do that. We have the capability of 

doing that. 

Mr. COHEN. Sir, would they be meeting these standards immediately or would they be meeting these standards three years down 

the line, five years down the line, ten years down the line? Would 

they be able to get consent decrees that would allow them to--

The CHAIRMA..~. I would grant them three years. You can't do it 

overnight. It would take a tremendous amount of money. It would 

take a tremendous amount of time. You just don't do it all overnight. You know, it took them awhile to get that plantMr. COHEN. Yes. 

The CHAIRMAN. [continuing]-if you check the record. So I am 

just curious. You would support it, then, if we had met your requirements for the extension of the contract? I am going to ask the 

rest of them the same question, you know, because that solves the 

environmental problem, does it not? . Mr. COHEN. Well, yes, sir. Please keep in mind that my-that 

number two is a complete cessation of KPC's discharge of toxic materials to the waters of Southeast Alaska. And we don't mean three 

years in the future or we don't mean with consent decrees that will 

allow it to continue. 

The CHAIRMAN. Oh, I understand. 

Mr. CoHEN. OK. 

The CHAIRMAN. OK. 

Mr. CoHEN. If they stop polluting the water, we would-you 

know, that is our concern, sir, is pollution of the waters of the 

State. 

The CHAIRMAN. Mary, you are up. 
55 

STATEMENT OF MARY MUNSON, PUBLIC LANDS ASSOCIATE, 

DEFENDERS OF WILDLIFE, WASHINGTON, D.C. 

Ms. MUNSON. Thank you. My name is Mary Munson, Public 

Lands Associate for Defenders of Wildlife. We are a national organization with over 150,000 members nationwide. I thank you for 

the opportunity to comment, and in the interest of time I will summarize my comments and ask that my full testimony be---

The CHAIRMAN. Without objection. 

[Statement of Mary Munson may be found at end of hearing.] 

Ms. MUNSON. The Tongass is owned not only by Alaskans but by 

all Americans, and the issues involved with Ketchikan Pulp Company's performance are of national significance and not simply parochial economic or jobs issues. The Tongass is one of the world's 

largest intact temperate rainforest, home to over 300 wildlife species, many of which depend on old-growth forests. All Americans 

have an interest in ensuring that present and future generations 

will benefit from recreation, beauty, and resources there. Congress 

has a duty to oversee its management by allowing only sustainable 

logging consistent with habitat protection. Extending the KPC contract on the terms of H.R. 3659 would be a violation of that duty. 

The National Forest Management Act requires that the Forest 

Service provide for the diversity of plant and animal communities. 

The Tongass Land Management Plan, which is now undergoing revision, is an attempt to create a blueprint for ensuring that logging 

activities in the Tongass are consistent with those legal requirements. 

Activities taking place under the KPC contract, including the annual volume of timber to be supplied, should be covered by a forest 

plan. So why isn't this proposed contract renewal taking place 

within the context of the TLMP provision? This bill would ride 

roughshod over the TLMP process and force the Forest Service to 

provide a high volume of trees regardless of the environmental, 

economic, recreational, social, and ecological costs. 

We believe the Forest Service simply cannot guarantee KPC the 

contractual volume, provide timber for independent contractors and 

still meet the requirements of NFMA to maintain viable populations. Significantly the definition of viable populations means 

only that there are enough individuals for that population to exist. 

It does not mean there will be enough individuals that will be left 

for subsistence, hunting, viewing, and other types of uses on which 

Alaskans and the rest of the country depend. As long as the KPC 

contract is in existence, timber will be the first priority and wildlife, along with the other forest resources, will take a back seat. 

The area yielding much of KPC's supply is the Prince of Wales 

Island. One of the last remaining unprotected wildlife habitats on 

the island is the region of Honker Divide. Pressure to fulfill the 

high-volume requirements of the extended contract would surely 

open these areas up to KPC logging. This would require building 

many roads into it to reach the denser, more economically worthwhile stands. Examples of wildlife whose viability could be affected 

include the Alexander Archipelago wolf, river otter, Franklin's 

spruce grouse, flying squirrel, and Vancouver Canada goose. I could 

go on. 
56 

The wolf provides a good example of how the contract threatens 

viability. Although hunting and trapping occurs in the Tongass, logging and road building provide major threats. The wolf survives 

by eating deer, which in turn depend on the diverse plant community of old-growth forests. Stands with large trees are critical in 

hard winters because the crowns intercept snow, making travel and 

feeding easier. Clearcuts not only hinder deer movement in the 

winter, but also eventually destroys the forage because even aged 

trees grow completely shading the forest floor. It takes 200 to 250 

years for old-growth forests to reestablish themselves, and in the 

interim the deer slowly disappear, and so does its predator, the 

wolf. 

Defenders has sympathy for anyone whose livelihood would be 

affected by the non-extension of the KPC contract, but there are 

thousands of employers throughout the country which also depend 

on timber supplies that don't get this special deal. And many of 

these employers are dependent upon resources that don't have a 

fraction of the ecological importance and national significance that 

the Tongass has. As discussed by the panelists, there are alternatives which would be much less resource-intensive and run by companies without abysmal records of pollution and contract violations. The argument that the company needs this contract in order to 

make necessary improvements to comply with environmental laws 

is outrageous. KPC has had years to make the necessary changes 

and declined to do so. So for this they shouldn't be rewarded by a 

bail-out, as represented by this bill. 

Logging in one of the American people's most important and valuable forests is a privilege, and it is important that it be done 

through the accepted forest planning and management process. 

The KPC contract must be considered as part of TLMP, not as a 

separate initiative which ignores the scientific analysis, ecological effects, and years of public input. For that reason, as well as the 

incalculable adverse effects on wildlife and wildlife habitat, we 

strongly oppose H.R. 3659. 

Thank you. 

The CHAIRMAN. Brian, you are up. 

STATEMENT OF BRIAN O'DONNELL, EXECUTIVE DIRECTOR, 

ALASKA WILDERNESS LEAGUE, WASHINGTON, D.C. 

Mr. O'DONNELL. Hello, my name is Brian O'Donnell. I am the 

Executive Director of the Alaska Wilderness League. Mr. Chairman, thank you for the opportunity to share the views of the Alaska Wilderness League regarding the proposed extension of the contract between Ketchikan Pulp Company and the U.S. Forest Service. 

The Alaska Wilderness League is a nonprofit organization founded in 1993 to further the protection of Alaska's incomparable natural endowment. One of our primary concerns is the sustainable future of Alaska's rainforest. 

The current legislation is of great concern to the Alaska Wilderness League. We believe that H.R. 3659 will cause irreparable 

damage to the wilderness values of the Tongass National Forest. 

Congress should not only refuse to grant a 15-year contract exten-
57 

sion, it should seriously consider immediately terminating the current 50-year contract. 

The future of the Tongass National Forest is of national importance. All Americans have a stake in its sound management. This 

national treasure, established in 1907 by President Teddy Roosevelt, contains some of the last expanses of pristine temperate 

rainforest in North America. As you know, the Tongass is home to 

the world's largest concentration of grizzly bears, bald eagles, and 

Sitka black-tailed deer. The Tongass is our nation's largest, wettest 

and wildest national forest. 

As some have stated here today, KPC has demonstrated little respect for the environment in Southeast Alaska. The Environmental 

Protection Agency's 1991 and 1992 Toxic Release Inventory Report 

ranked the Ketchikan Pulp mill as the number one toxic water polluter in the entire Pacific Northwest. KPC has chronically violated 

State and Federal environmental laws, and is violating these laws 

today. 

H.R. 3659 is of great concern to every American taxpayer. Over 

the past few decades, Tongass clearcutting has cost the American 

taxpayers hundreds of millions of dollars in subsidies. Extending 

KPC's monopoly contract for 15 years could dramatically increase 

the amount of taxpayer money being spent to subsidize the 

clearcutting of this national treasure. 

KPC's dismal environmental record and the cost to the American 

taxpayers are reasons enough to oppose H.R. 3659, however, the 

Alaska Wilderness League is most deeply concerned with the permanent loss of some magnificent, truly wild areas that would be 

sacrificed by fulfilling the existing KPC contract and by the possible extension by virtue of this bill. Several of these unprotected 

areas were designated as wilderness in the version of the Tongass 

Timber Reform Act which passed the House of Representatives in 

1989. These areas will be clearcut either during the remainder of 

the KPC 50-year contract or during the proposed 15-year extension. 

Ketchikan Pulp Company's bulldozers and chainsaws directly 

threaten the following areas. These special places deserve to be 

permanently protected. They include the Cleveland Peninsula, 

which supports highly productive populations of deer, brown bear, 

mountain goats and other wildlife. It is a favorite area for Ketchikan hunters and recreational users. 

East Kuiu, an area important to wilderness tourism operators as 

well as the communities of Kake, Point Baker, and Port Protection. 

Honker Divide, this critical wildlife area is the largest block of 

old-growth left on North Prince of Wales Island. Its canoe route offers spectacular recreational opportunities and is important to 

hunting and sport fishermen. 

Port Houghton, this bay located on the mainland north of Petersburg is of great importance to local commercial fishermen. One of 

its drainages, Sanborn Creek, produces large amounts of pink 

salmon. The undeveloped character of this area is essential to the 

livelihoods of local tourism operators. 

Ushk Bay, Deep Bay and Poison Cove, these bays contain important brown bear habitat and are visible to ferry travelers in Peril 

Strait. They are important to local hunters and recreational users. 
58 

Chicken Creek, this watershed near Hoonah is highly visible to 

cruise ship passengers and wilderness tourists who watch whales 

off Point Adolphus. It is also important to local subsistence users. 

And finally, Upper Tenakee Inlet, this area is important to local 

subsistence hunters as well as kayakers and other recreational 

users. It is also important brown bear habitat. 

The recreation, subsistence, wildlife, and wilderness values of 

these areas far outweigh their value as a short-lived source of pulp 

for KPC. AWL's Honorary Chairman, Former President Jimmy 

Carter, recently said this is a critical time for Alaska's wild lands 

and the A1nerican people must reaffirm our commitment to their 

protection. 

With this firmly in mind, AWL strongly opposes H.R. 3659. 

Thank you. 

The CHAIRMAN. Brian, in your testimony you mentioned Jimmy 

Carter. Just out of curiosity, Mary, have you been to the Tongass? 

Ms. MUNSON. Yes, I have. 

The CHAIRMAN. How long did you spend there? 

Ms. MUNSON. I spent several days there. I was--

The CHAIRMAN. Days. When? 

rvis. Mu NSON. Well, actually it was a couple weeks. 

The CHAIRMAN. When? 

Ms. MUNSON. Eight years ago. 

The CHAIRMAN. Eight years ago. Ms. MUNSON. Yes, it was being clear cut then. The CHAIRMAN. Do you--

Ms. MUNSON. I was taken by the Forest Service out--

The CHAIRMAN. Have you read the TLMP proposal? 

Ms. MUNSON. Yes, I have-well, I have-it is quite thick, but I 

looked through it. The CHAIRMAN. Have you read it, though? Both times I heard 

about Honker Divide. Do you know that is in the TLMP proposal? 

Does that mean that you are going to file lawsuits against the Forest Service under TLMP? 

Ms. MUNSON. No, the TLMP-that is just a proposal right now. 

It is not--

The CHAIRMAN. Under TLMP, that is part of the timber base 

which they are recommending. 

Ms. MUNSON. Right, recommending. We are still able to submit 

our comments about it. That is--

The CHAIRMAN. If they make the decision, what are you going to 

do? 

Ms. MUNSON. Well, when they make the decision, hopefully they 

will incorporate our comments in it. 

The CHAIRMAN. Oh, comments? 

Ms. MuNSON. Yes, our comments. will suggest--

The CHAIRMAN. Comments don't mean a thing because--

Ms. MUNSON. Comments can make changes--

The CHAIRMAN. [continuing]-they could cut that-if they make 

a decision to cut the area, what are you going to do? 

Ms. MUNSON. Well, hopefully we are going to be asking in our 

comments for them to change the preferred alternative, so it is--

The CHAIRMAN. If they haven't changed it and they put it in, now 

what are you going to do? 
59 

Ms. MUNSON. Well, then I would deal with it if it happens. The CHAIRMAN. How would you deal with it? Just like you dealt 

with Poison Cove, Brian? 

Mr. O'DONNELL. I am sorry? 

The CHAIRMAN. Just like you dealt with Poison Cove? 

Mr. O'DONNELL. We have not-our organization has not filed any 

lawsuits on the Tongass. The CHAIRMAN. But someone has filed a lawsuit on the Poison 

Cove. 

Mr. O'DONNELL. That is another organization. 

The CHAIRMAN. That organization-how many organizations do 

you think would file lawsuits in Southeast Alaska? 

Mr. O'DONNELL. I can only speak for our organization, and we 

haven't filed any lawsuits. The CHAIRMAN. Poison Cove has already had a lawsuit filed last 

week against them. Mr. O'DONNELL. But not by our organization. 

The CHAIRMAN. OK, but what if your organization did file that 

lawsuit--

Mr. LINDEKUGEL. Mr. Chairman. The CHAIRMAN. Yes. Mr. LINDEKUGEL. For the record, that lawsuit was filed by residents from Sitka. The CHAIRMAN. Oh, the-then it was organized. Mr. LINDEKUGEL. Friends of---

The CHAIRMAN. Robert, don't kid me. I know who it's filed by, but 

it's filed. That means that it can go forward. What I am concerned 

with is that every time the Forest Service comes up with a proposal, Defenders of Wildlife, Wilderness-Brian, you have been to 

Tongass, haven't you? 

Mr. O'DONNELL. Yes, I have. The CHAIRMAN. Do you live there? 

Mr. O'DoNNELL. No, I don't. The CHAIRMAN. When did you go there? 

Mr. O'DONNELL. I was there in August. 

The CHAIRMAN. August, last August? 

Mr. O'DONNELL. Last August. The CHAIRMAN. For how long? 

Mr. O'DONNELL. For about a week or so. 

The CHAIRMAN. A week or so. OK, just-1 like to find out if these 

expert witnesses have been there or not. One thing about it, Robert, you said the governor doesn't support this bill. 

Mr. LINDEKUGEL. Correct. 

The CHAIRMAN. He doesn't even support the extension? 

Mr. LINDEKUGEL. I didn't say that. 

The CHAIRMAN. Oh, well, you said he didn't--

Mr. LINDEKUGEL. I said he---

The CHAIRMAN. It says here I have-it says I have sent a letter 

to Mark Splining CEO Blue Tip System regarding extension of 

KPC's contract. I support a contract extension subject to the five 

principles offered in this letter and lists all those principles. Would 

you support it if you had the Governor support it, if we adopt these 

five principles? 

Mr. LINDEKUGEL. I am sorry, sir? 
60 

The CHAIRMAN. Would you support it if we adopt the five prin- ciples that--

Mr. LINDEKUGEL. No. 

The CHAIRMAN. You wouldn't? 

Mr. LINDEKUGEL. No. 

The CHAIRMAN. Now does the Governor support it or not? I have 

got to get this in the record, because the Governor has gone to 

Ketchikan-wore this little yellow ribbon that said I am supporting 

this. 

Mr. LINDEKUGEL. Well, if the Governor is supporting a bill, that 

is his job to come and tell you that. The CHAIRMAN. Well, I mean--

Mr. LINDEKUGEL. I don't want to speak--

The CHAIRMAN. Are you speaking for him? 

Mr. LINDEKUGEL. Certainly not. The CHAIRMAN. Well, you said that the Governor didn't support--

Mr. LINDEKUGEL. No. 

The CHAIRMAN. I have that letter signed on July 5 saying he supports it. It says in fact in line with these principles $700 million 

invested in KPC, I believe the sound and reasonable business principle is to provide an opportunity to amortize the investment, including the extension of contract to protect our area's water regional mills provide. So apparently he does support it. If he doesn't 

support it, I would just like to know it and I would like the people 

in Ketchikan to know that. So, I guess you're speaking-are you 

working for him now? 

Mr. LINDEKUGEL. No, sir. All I can say is that that letter does 

not say he supports this bill. 

The CHAIRMAN. It is as clear-if that is changed, why did he 

send it to the President? It says right here I'd support it. It says 

the Vice--Al Gore, Dan Wicksman, myself-where I got it. I mean, if he doesn't support it, I just want everybody to know that. I don't 

have any further questions. You guys are excused. And this hear· 

ing is adjourned. 

[Whereupon, at 4:30 p.m., the Subcommittee was adjourned; and 

the following was submitted for the record:] 
61 

l04TH coNGimss H R 36 59 2D SESSION 

• • 

To amend the Tongass Timber Reform Act to ensure the proper stewardship 

of publicly owned assets in the Tongass National Pon•st in the State 

of Alaska, a fair return to the United States for public timber in 

the Tongass, and a proper balance among multiple use intE~rests in 

the Tongass to enhance forest health, sustainable harvest, and the general economic health and growth in southeast Alaska and the United 

States. 

IN THE HOUSE OF REPRESENTATIVES 

JUNE 13, 1996 

Mr. YOUNG of Alaska introduced the following hill; which was referred to the 

Committee on Agriculture, and in addition to the Committee on Hesources, for a period to be subsequently determined by the Speaker, in 

each case for consideration of such provisions as fall within the jurisdiction of the committee concerned 

A BILL 

To amend the Tongass Timber Reform Act to ensure the 

proper stewardship of publicly owned assets in the 

Tongass N a tiona! Forest in the State of Alaska, a fair 

return to the United States for public timber in the 

Tongass, and a proper balance among multiple use interests in the Tongass to enhance forest health, sustainable 

harvest, and the general economic health and growth 

in southeast Alaska and the United States. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 
62 

2 

1 SECTION 1. SHORT TITLE. 

2 This Act may be cited as the "Environmental Im3 provement Timber Contract Extension Act of1996". 

4 SEC. 2. MODIFICATION OF WNG-TERM CONTRACT RE5 GARDING TONGASS NATIONAL FOREST. 

6 Title III of the Tongass Timber Reform Act (Public 

7 Law 101-626; 104 Stat. 4430) is amended by adding at 

8 the end the following new section: 

9 "SEC. 302. 1996 CONTRACT MODIFICATIONS. 

10 "(a) DEFINITIONS.-ln this section: 

11 "(1) The term 'board feet' means net scribner 

12 long-log scale for all sawlogs and all hemlock and 

13 spruce utility grade logs. 

14 "(2) The term 'contract' means the timber sale 

15 contract numbered A10fs-1042 between the United 

16 States and the Ketchikan Pulp Company. 

17 "(3) The term 'contracting officer' means the 

18 Regional Forester of Region 10 of the United States 

19 Forest Service. 

20 "( 4) The term 'mid-market criteria' means an 

21 appraisal that ensures an average timber operator 

22 will have a weighted average profit and risk margin 

23 of at least 60 percent of normal in a mid-market sit24 uation, representative of the most recent 10 years of 

25 actual market data. 

•HR 38118 m 
63 

3 

1 "(5) The term 'proportionality' means the pro2 portion of high volume stands (stands of 30,000 or 

3 more board feet per acre) to low volume stands 

4 (stands of 8,000 to 30,000 board feet per acre). 

5 "(6) The term 'purchaser' means the Ketchikan 

6 Pulp Company. 

7 "(b) FINDINGS.-Congress finds the following: 

8 "(1) On July 26, 1951, the Forest Service, on 

9 behalf of the United States, and the purchaser ento tered into a contract to harvest 8,250,000,000 board 

11 feet of timber from the Tongass National Forest in 

12 the State of Alaska. While the contract is scheduled 

13 to end June 30, 2004, it acknowledges an intention 

14 on the part of the Forest Service to supply adequate 

15 timber thereafter for permanent operation of the 

16 purchaser's facilities on a commercially sound and 

17 permanently economical basis. This legislation is 

18 necessary to effectuate that intent. 

19 "(2) A pulp mill or similar facility is necessary 

20 m southeast Alaska to optimize the level of year21 round, high-paying jobs in the area, to provide high 

22 value added use of low-grade wood and by-product 

23 material from sawmilling operations, and to main24 tain a stable regional economy. 

•HR 3659 m 
64 

4 

"(3) The purchase. plans to make emiron2 mental and operational improvements to its p•Jip 

3 mill, including conversion to an elementally chlorine 

4 free bleaching process, expansion of wastewater 

5 treatment facilities, relocation of the existing 

6 wastewater outfall, and improvements to chemical 

7 recovery and power generation equipment. Total 

8 capital expenditures are estimated to be 

9 $200,000,000, $25,000,000 of which the purchaser 

10 has already invested. 

11 "(4) Extension of the contract for 15 years is 

12 the minimum reasonable extension period to allow 

13 amortization of these environmental improvement 

14 and energy efficiency projects. 

15 "(5) Ketchikan is the fourth largest city in 

16 Alaska. Its economic and job base are eA"tremely de17 pendent upon the continuation of the contract, which 

18 provides the principal source of year-round employ19 ment in the area. The purchaser has stated among 

20 its goals and objectives the follo~ing: 

21 ''(A) Continuation of a long-term eommit22 ment to Ketchikan and southeast Alaska, in23 eluding maintenance of a stable Alaskan 

24 workforce, utilization of Alaskan contractors, 

•HR 3659 Dl 
65 

5 

1 vendors, and suppliers to permit those busi2 nesses to hire and maintain Alaskan employees. 

3 "(B) Participation in the Forest Service's 

4 land management planning process with other 

5 users so that the process may be completed ex6 . peditiously with maximum information. 

7 "(C) Adherence to sound principles of mul8 tiple-use and sustained yield of forest resources 

9 providing for the production of sustainable conlO tract volumes for the purchaser and the other 

11 timber operators in southeast Alaska and the 

12 protection and promotion of other forest uses, 

13 including tourism, fishing, subsistence, hunting, 

14 mining, and recreation. 

15 "(D) Protection of air, water, and land, in16 eluding fish and wildlife habitat, through com17 pliance with applicable Federal, State, and local 

18 laws. 

19 "(E) Commitment to continue to explore 

20 new processes and technology to maximize the 

21 use of timber harvested and increase the value 

22 of products manufactured in southeast Alaska. 

23 "(6) The national interest is served by a policy 

24 that accomplishes the proper stewardship of publicly 

25 owned assets in the Tongass National Forest, a fair 

•HR 3659 m 
66 

6 

1 return to the United States for public timber in the 

2 Tongass National Forest, and a proper balance 

3 among multiple use interests in the Tongass N a4 tional Forest to enhance forest health, sustainable 

5 harvest, and the general economic health and growth 

6 in southeast Alaska and the United States in order 

7 to improve national economic benefits. The national 

8 · interest is best achieved by fostering domestic forest 

9 product markets and by modifying the terms of the 

10 contract pursuant to subsection (c). 

11 · "(c) CONTRACT FAIRNgss CHANGES.-The contract 

12 is hereby modified as follows: 

13 "(1) EXTENSION.-The term of the contract is 

14 extended by 15 years from June 30, 2004. 

15 "(2) SAIJE 0I<'F'ERING PI..AN.-The contract 

16 shall include a plan describing the amount of vol17 ume, location, and the schedule by which the pur18 chaser shall receive the timber required by para19 graph (3) for the remainder of the contract term. 

20 The plan shall be coordinated with the Tongass 

21 Land Management Plan. 

22 "(3) VOLUME REQUIREMENTS.-The volume of 

23 timber required under the contract shall be provided 

24 in 5-year increments of 962,500,000 board feet, 

·HR 3659 m 
67 

7 

which the purchaser shall be obligated to harvest in 

2 an orderly manner, subject to the following: 

3 "(A) Until March 1, 1999, when the next 

4 5-year increment is provided to the purchaser, 

5 the Forest Service shall provide the purchaser 

6 with at least 192,500,000 board feet per year 

7 of available timber at a date certain each year 

8 and shall maintain a supply of timber adequate 

9 to insure the purchaser can reasonably harvest 

10 192,500,000 board feet each year. 

11 "(B) To ensure harvest in an orderly man12 ner, the contracting officer shall provide for the 

13 construction by the purchaser of roads in por14 tions of the 5-year increment area of timber in 

15 advance of the 5-year operating period by in16 eluding such roads in the environmental impact 

17 statement prepared for the 5-year operating pe18 riod. 

19 " (C) Timber selected for inclusion in the 

20 5-year increment shall meet the mid-market cri21 teria. 

22 "(4) APPRA1SAI,S AND RATES.-The contracting 

23 officer shall perform appraisals using normal inde24 pendent national forest timber sale procedures and 

25 designate rates for the increments of timber to be 

•HR 3659 m 
68 

8 

provided. The rates shall not be designated at a level 

2 that places the purchaser at a competitive disadvan3 tage to a similar enterprise in the Pacific Northwest 

4 and those rates shall be the sole charges the pur5 chaser shall be required to pay for timber provided. 

6 "(5) MEASUHEME~T <W PROPOHT!Ol'\AIJITY.-

7 The Forest Service shall measure proportionality 

8 using the following criteria: 

9 "(A) Measure for groups of all contiguous 

10 management areas. 

11 "(B) Measure proportionality by acres. 

12 "(C) Measure proportionality over the en13 tire rotation age. 

14 "(6) CmJVEHHION on REPLACJ<~MENT <w Pl: LP 

15 MI11L.-The purchaser may convert or replace, in 

16 part or in whole, its pulp mill with a facility the 

17 manufactures any other value added product that 

18 utilizes pulp logs as a raw material component. 

19 "(7) U:"i%ATI<~R.AL TEHMI:\A'fiON.-The nnilat20 era! termination clause of the contract is eliminated. 

21 "(8) ScnsEQVJ<~:w liODII<'ICATIOl'\8.-Any 

22 clause in the contract, as modified by this sub23 section, may be further modified only by mutual 

24 agreement of the Forest Service and the purchaser 
69 

9 

1 and may be so modified without further Act of Con2 gress. 

3 "(d) EFFECTIVE DATE l•'OR CONT~I\C'l' MODIPICA4 TI0:--/ .---

5 "(1) EI<'PBC'l'IVI<~ DATE.-The modifications 

6 made by subsection (c) shall take effect 45 days 

7 after the date of the enactment of the EnvironS mental Improvement Timber Contract Extension Act 

9 of 1996. 

10 "(2) MI:'\ISTBRIAL DCTY TO MODIFY TilE CON11 TRACT.-Not later than such effective date, the con12 tracting officer shall revise, as a ministerial function, 

13 the text of the contraet to conform with the modi14 fications made by subsection (c) and implement the 

15 modified contract. The contraeting officer shall 

16 make conforming changes to provisions of the eon17 tract that were not modified by subsection (c) in 

18 order to ensure that the modifieatiom; made by such 

19 subsection are implemented. 

20 "(e) TRANHITION TLVIBim SUPPLY.---Timber volume 

21 available or scheduled to be offered to the purchaser under 

22 the contract in effect on the day before the date of the 

23 enactment of the Environmental Improvement Timber 

24 Contract Ex-tension Act of 1996 shall continue to be of.· 

25 fered and scheduled under the contraet as modified by 

•HR as.~9 m 
70 

10 

1 subsection (c) along with such additional timber volume 

2 as is necessary to satisfy the timber volume requirement 

3 of 192,500,000 board feet per year.". 

•HR 3659 01 
FINAL 

71 

STATEMENT OF 

JAMES R. LYONS, UNDER SECRETARY 

NATURAL RESOURCES AND THE ENVIRONMENT 

UNITED STATES DEPARTMENT OF AGRICULTURE 

Before the 

Committee on Resources 

and the 

Subcommittee on Resource Conservation, Research and Forestry 

Committee on Agriculture 

United States House of Representatives 

Concerning H.R. 3659, the Ketchikan Pulp Company 

Timber Contract Extension Act 

July ll, 1996 

MR. CHAIRMAN AND MEMBERS OF THE COMMITTEE: 

Thank you for the opportunity to present the Administration's views 

on H.R. 3659, the Ketchikan Pulp Company Timber Contract Extension 

Act. I am accompanied today by: Phil Janik, Regional Forester of 

the Alaska Region; Jim Perry, Associate General Counsel of the 

Department of Agriculture; Brad Powell, Forest Supervisor of the 

Ketchikan Area of the Tongass National Forest; and Fred Walk, 

Alaska Region Timber Management Director and contracting officer 

for the Ketchikan Pulp Company contract. 

The Administration strongly opposes H.R. 3659. The bill would 

amend the Tongass Timber Reform Act to unilaterally modify the 

provisions of the long-term timber sale contract with Ketchikan 

Pulp Company (KPC) and extend it for 15 years until 2019. In so 
72 

doing, the bill undermines the Secretary of Agriculture's authority 

to manage the resources of the Tongass National Forest; restricts 

the Secretary's ability to adapt to changing environmental 

information; provides special benefits to a private corporation; 

and conflicts with certain existing laws, including the National 

Forest Management Act and othAr provisions of the Tongasa Timber 

R~form Act. 

Secretary Glickman has committed the Department to maintaining a 

sustainable timber flow to Ketchikan Pulp Company in accordance 

with the terms of the existing contract, the Tongass Timber Refor. 

Act, and other relevant statutes. If the United States decides to 

continue a contractual relationship beyond the year 2004 with KPC, 

we believe that the appropriate vehicle would be a new contract in 

accordance with the Tongass Timber Reform Act 

provided in H.R. 3659. 

not the one 

While the Department would welcome a discussion of timber-related 

opportunities for southeast Alaska, we strongly object to 

legislating an extension of the current KPC contract as provided 

for in H.R. 3659. Should the bill come to the President for 

signature in its present form or as an amendment to other 

legislation, we would recommend that he veto it. 

What the Bill Does 

We object to the statutory modification of the existing long-term 

timber sale contract with Ketchikan Pulp Company in H.R. 3659. The 

2 
73 

contract is almost 50 years old and is the subject of substantial 

litigation. In addition, a number of significant environmental 

laws have been enacted since t he contract was signed. 

Section 2(b)(l) of H.R. 3659 states that the "contract" 

acknowledges an intention on the part of the Forest Service to 

supply adequate timber after the completion of the contract "for 

permanent operation of the purchaser's facilities. " However, 

neither the original 1951 contract nor the post-Tongass Timber 

Reform Act contract obligate the Forest Service to grant or approve 

an extension of the long-term contract. 

Language in Section 2(b)(3) states that KPC plans to make 

"environmental and operational" improvements to its facility. 

Language in Section 2(b)(4) states that 15 years is the minimum 

reasonable contract extension period necessary to allow for the 

amortization of these improvements. H.R. 3659 requires that the 

Government continue a contractual relationship with KPC in order to 

assure that investments made by KPC may be amortized. An 

arrangement of this kind between the Government and a private 

corporation to substantially reduce business risk associated 

with improvements made to a private facility 

concerned that this may create a precedent. 

is unusua~~ We are 

The bill contains provisions that are unclear, problematic, or the 

subject of ongoing litigation: Section 2(a) contains problematic 

definitions, such as definitions of the contract, mid-market 

criteria, and proportionality. Language in section 2(c)(2) 

3 
74 

concerning the sale offering plan could effectively put the 

contract above the land management plan. Language in Section 

2(c)(3) and 2(e) would put into law volume requirements currently 

disputed in litigation. Language in Section 2(c)(4) requiring that 

contract stumpage rates not place the purchases at a "competitive 

disadvantage to similar enterprises in the Pacific Northwest" is 

legally inexact and would likely generate extensive litigation. 

Language in Section 2(c)(7) would compromise the Chief's ability to 

terminate the contract to prevent "serious environmental damage, 

serious damage to cultural resources" or should the contract be 

"significantly inconsistent with land management plans adopted or 

revised." 

Background 

Several fifty-year timber sale contracts were used in Alaska to 

promote rural development and economic stability. We believe that 

the long-term contracts in Alaska accomplished their objectives in 

facilitating the establishment o f a timber industry in Southeast 

Alaska and contributing to the early growth and development of 

Southeast Alaska's economy. 

The economic climate has changed dramatically since Ketchikan Pulp 

Company's contract was signed in 1951. Recreation and tourism now 

draw over 600,000 visitors a year to Southeast Alaska -- more than 

double the visitation in the past 15 years. Sport and commercial 

fishing are also significant elements of the economy of Southeast 

Alaska and one of the top producers of jobs and revenues. 

4 
75 

Statutory direction has also changed since Ketchikan Pulp Company's 

contract was signed in 1951: the Multiple-Use Sustained-Yield Act, 

the National Forest Management Act, the National Environmental 

Policy Act, the Ala$ka National Interest Lands Conservation Act, 

the Alaska Native Claims Settlement Act, and the Endangered Species 

Act, as well as specific legislative direction in the Tongass 

Timber Reform Act (TTRA) have been enacted. These laws have 

affected the way that we manage the Tongass and require the 

protection of certain resources and the sustainability of other 

resources and multiple uses of the forest. 

In addition, Mr. Chairman, public concern about natural resources 

has grown since KPC's contract was signed in 1951. More people in 

Alaska and around the nation are concerned about the sustainability 

of resources of the Tongass National Forest. They expect timber, 

recreation, fish and wildlife, as well as the other commodity and 

non-commodity resources to flow from the Tongass National Forest. 

Changes in the economy, in the law, and in public expectations make 

it increasingly difficult to reach consensus on how to manage the 

Tongass and find the balance between commodity and non-commodity 

uses. Committing resources through a legislated extension of the 

KPC contract as provided in H.R. 3659 would further limit 

management options on the Tongass and undermine our ability to 

balance these competing interests. 

Through the revision of the land management plan, the Forest 

5 
76 

Service has been working tirelessly over the last several years to 

build consensus on how to manage the Tongass National Forest. We 

are committed to completing the revision of the Tongass Land 

Management Plan in the near future. We believe that we will be 

better equipped to make decisions about future long-term 

commitments to timber-related industries in Southeast -- reflecting 

sound scientific information and extensive public input -- once the 

revis ion process is completed. 

Mr. Chairman , let me provide you updated information about the 

Forest Service's a bi lity to meet their timber volume commitment to 

Ketchikan Pulp Company's existing contract. From 1989 to 1994, the 

Forest Service offered KPC 935. 6 MMBF of timber. In that same time 

period, KPC harvested 926.9 MMBF. In 1995 the Forest Service 

offered KPC 157 MM8F and we are targeting 2 17 MMBF for 1996. Most 

of the 1996 program for KPC has been offered already -- indicating 

Forest Service efforts to meet KPC's concerns about early 

delivery. Forest Service figures indicate KPC currently has 295 

MMBF under contract, although as always, litigation may affect the 

availability of some of this timber volume to KPC. 

One of the significant factors to be taken into consideration in 

any discussion with KPC is the pending litigation against the 

United States. KPC is currently pursuing four claims against the 

United States claiming hundreds of millions of dollars in damages. 

While KPC is suing the United States over the interpretation of the 

provisions of the original contract and the changes that the 

Tongass Timber Reform Act made to the contract in 1991, it is 

6 
77 

difficult for the Administration to consider entering into any new 

arrangement with them. 

Conclusion 

Mr. Chairman, for the last half century, the Forest Service has 

worked with private companies in many ways to develop a stable 

economy in Southeast Alaska and to promote the long-term 

sustainability of natural resources. We believe that the mission 

of the contract -- developing an industry base and providing 

year-round employment to support socio-economic development -- has 

been accomplished. 

We would welcome a broad-based discussion of future timber-industry 

opportunities in Southeast Alaska, but we object to H.R. 3659 that 

circumvents the planning process, conflicts with the Tongass Timber 

Reform Act, and obligates the resources of the nation to one 

company for one purpose only, without a thorough analysis and 

discussion of options. 

This concludes my testimony. We would be pleased to answer any 

questions you may have. 

7 
78 

TESTIMONY OF 

SCOTT W. HORNGREN 

BEFORE A JOINT HEARING OF THE 

HOUSE COMMITTEE ON AGRICULTURE 

AND 

COMMITTEE OF RESOURCES 

REGARDING H.R. 3659 

July 11, 1996 
79 

My name is Scott Horngren. I am a partner in the law 

firm of Haglund & Kirtley of Portland, Oregon. Our firm 

r@presents timber sale purchasers throughout the west who hold 

Forest Service timber sale contracts. I am testifying on behalf 

of the Northwest Forest Resource Council, a coalition of timber 

trade associations comprised of over 90\ of federal t i mber 

purchasers in the Pacific Northwest. Our firm has represented 

timbe-r sale contractors in the United States Court of Fe<le ral 

Claims, the Federal Circuit Court of Appeals, and the 

Agricultural Board of Contract Appeals. 

I am here today to discuss the implications of the 

recent Supreme Court decision in United States v. Winstar 

Corporation, No . 95-865, l996 U.S. LEXIS 4266 (July l, l996), as 

it relates to Forest Service timber sale contacts. The Winstar 

case is a culmination of over a half decade of litigation over 

government contract liability for statutory and regulatory 

changes to minimum capital standards for saving and loan 

associations . These change& effectively caused the demise of 

numerous savings and loan associations including two of the 

pl.aintiff~: in Win&;tar. The Win~rtar decision h :<-. £ i_;npl i c ations 

throughout the government contracting field, and fo~ federal 

timber sale contracts in particular. 

Federal timber purchasers are be.i.r.q '>orr.barded by 

regulacory and policy changes . These changes include adopc1on of 

the Pres1denc · s Non:hwesc Forest Plan chat: essentially prohibits 

harvest in late success.i.onal reserves, establishes vast butter 

-1- \~ whk7 96 
80 

zone~ along fi~h and non - fish bearing streams, and impose~ severe 

restrictions on the seasons in which logging can occur. 

Similarly, the Forest Service in the inland west has adopted the 

Inland Native Fish Strate~r {!NF!SH), and the Pacific Anadromous 

Fish Strategy {PACFISH) _ A screening process for timber sales 

has been adopted, as well as California spotted owl, Mexican 

spotted owl, and northern goshawk protection standards. 

The Winstar dec i sion should leave little doubt that the 

government will be contractually liable to the timber purchasers 

for the reduction or elimination of timber sold under the 

contract . I'd first like to summarize the Supreme Court's 

decision in Winstar and then apply those principles to federal 

timber sale contracts. 

I. THE WINSTAR DECISION. 

During the savings and loan crisis in the mid-1980s, 

Congress enacted the Financial Institutions Reform, Recovery, and 

Enforcement Act of 1989 (FIRREA) _ The Act forbid thrifts from 

counting good will as capital credits in computing the requi red 

minimum capital reserves. The plaintiffs in the case were three 

faderal thrifts, two of which ware seized and liquidat•d by 

federal regulators for failing to meet the n~w capital 

requirements. The thrift~ sued the government contending that 

t he Federal Home Loan Bank Board and the Fedey·al Savings and Loan 

Insurance Corporation (FSLICl had breached the contractual 

promise that the thri!ts could count supervisory good will 

towards the regulatory capital requirements. The government 

-2- SM'R\ewh)c.'1196 
81 

argued rirs~ ~ha~ it was not liable because it had not 

"unmistakably" promised to refrain from regulatory changes on the 

face of its contracts with the thrifts. The government believed 

that to hold in favor of the thrif~s would essentially exempt t he 

thrifts from the regulatory authority. Second, the go vernment 

ma intained that the regulatory change was merely a public a n d 

ge neral "sovereign act" insulating the government from liability . 

The Supreme Court rejected both these defenses. 

First, the Court held that the "unmistakabilit::y 

doctrine" did not i nsulate the government from l i ability. 

Interpreting the government's contractual obligation to allow the 

thrifts to consider supervisory good will, essentially did not 

preclude ~he government's exercise of authority t o modify its 

regulation. Awarding the thrifts' damages for b r e a ch would not 

amount to a limitation on the government's authority to regulate 

the institutions. The Supreme Court held that to app l y the 

unmistakability doctrine to the thrifts would essentially 

compromise the government's capacity to make co tra~ ts. 

Second, the Court held that the sovere ign act s doctr ine 

was not a valid defen&~e . Under the soverei gn a(.:tr:; doctri ne, so 

long as the government's lagiQlative or exec~t ve a c ts are publi c 

and general, they cannot be deemed to violat" ~n e between 

the government and private parties. The gov ernmen t ma intained 

th ... t the impo:!!ition o f more <~tringe t r egulatory capital 

requi remente und'!:r F I RREA was a "publi c and g eneral act:" and t:bat: 

the changes could no~ b e considered a ~r ch ot t:he government's 

- 3-
82 

contract . The Supreme Court disagreed and held that the 

particular facts did not even warrant the application of the 

doctrine and even if the doctrine did apply, it was not 

sufficient to absolve the government of liability in a contract 

that allocated risks of the regulatory change to the government 

i n a h ighl y regulated industry. 

The Court rejected the government's distinction that 

its actions were regulatory rather than non-regulatory. The 

Court saw little clear distinction between the two and held that 

the government cannot avoid contractual liability merely by 

passing a "regulatory statute." The Court found it significant 

that the regulatory legislation was motivated by government self 

interest, and that it was impossible to attribute a "public and 

general" character to FIRREA when the l egislation had the 

substantial affect of helping the government out of improvident 

agreements. The government was not permitted to shift the costs 

o f meeting legitimate public responsibilities to private parti es. 

The Court emphasiz@d that th@ gov@rnm@nt may not forca ~orne 

people alone to bear public burdens which should be borne by the 

public as a whole. 

rr. APPLICATION TO PBPZRAL TrH»EB SALE CONTRACTS. 

Li~e the thrift industry, the timber industry, 

particularly during the last two decades, has been a highly 

regulated industry. The supreme courts noces chat chrirc 

programs were a federally conceived and assisced syscem to 

provide ciCizens with affordable housing runds through savings 

-4- SWH\ awh.lt7H6 
83 

and loans. Similarly, the federal timber sale program was 

designed to supply the raw material for domestic housing needs 

through the timber purchasers . 

While the Forest Service has not, to my knowledge, used 

the unmistakability doctrine as a defense in any pending timber 

sale contract dispute, the Winstar decision should dispel any 

thoughts of doing so . Clearly, compensating timber purchasers 

for the reduction or elimination of its contracted for timber 

would not preclude the government from exercising its authority 

to regulate activities on the national forests . Such regulation 

does not implicate the exercise of the taxing power or other 

unique governmental power. Rather, regulation of timber sales is 

more akin to supply contracts and as the Supreme Court stated , 

"no one would seriously contend that enforcement of humdrum 

supply contracts might be subject to the unmistakability 

doctrine." l.9..,_ at *71 . As in Winstar, awarding damages for 

breach would not limit the government's regulatory power, albeit, 

it would require the government to pay for the consequences of 

its regulation . 

Likewi&a, the aovereign Acts doctrine ~l5o doa~ not 

apply to timber aalee regulation . The actions of the Forest 

Servic:e in "screening" e:xieting timber ~a.le:s or imposing buffer 

strips in which harvest cannot occur are not "public and genera l" 

acts. 5pecifically, given the Win;tgr deciaion, any past 

statements by Congress to assert the sovereign acts doctrine to 

avoid contract damages in timber sale cases is 11xely to !ail . 

-5-
84 

For e x ampl e , regarding the Alaska Pulp a n d Ketchi kan Pulp 

contracts, the House Commi t tee on Interior and I nsul ar Affairs 

wr ot: e : 

The Committee c onsiders termination of t h e 

l o ng-term contracts to bE an appr~pr e 

exercise of the f e dera l go v ernment ' s powe r t o 

pro t e ct t he publi c int~ re.st and that . 

pursuant t o •s o v e reign act' immunity, n o d•m•ge s ghall be pai d t o ~n PC or KPC . 

H. P.. Rep. No . l 01· 84, l Olst Co ng . , Se e s. at 24 (Ju n e 1 3, 1989 ) 

Whi l e ult imately the contracts we re unilaterally modifi e d by 

Congr ~~ rather t han terminated, t he a!!!~e tion of the sove r e i gn 

ac ~ doc t rine i5 likewis e i neffective _ This is partic ular ly t rue 

when the statute i s direc ted at an individual contract despite 

>:el!'-l" er.v tng leg1 ,;.la.t1ve pronour.cement:s t:o the contrary that the 

leg 1sl a tion is "publ ic and general." 

The Winatar dec i s i on holds that unless contracts 

e xpl i citly provide othe rwis e, the government bears the risk of 

st.at utcry and regulatory changes that preclude compl eti on of t he 

con ac t. Thi s is the case for the majority of t i mber sale 

c ont r a cts i n the West and will strengt hen timber pur chaser' s 

cont ract clai ms against the gover nment . 

I atr. not alone in concluding that the Wi nstar case will 

r~> gt h,.n, rather than weaken the timbexc contractors' arguments 

tha t :;egulatozy changes a ffecting its contracts amoun~ to a 

nrea·:·:, . ·r his posit ion i s support:l'!d by thl'! Forl'!st Servi ce ' s own 

a n <.ly.si."l of i.ts contract , by the Na tional Forest Management Act , 

a n d by Pederal Court of Fedl'!ral Claims and Board of Con tract 

-6 - Sl&.\ awhk? 1'JG 
85 

Appeals de~isions in timber contract cases which refused to appiy 

the sovereign acts doctrine . 

The Forest Service Chief has interpre t e d the a.gency ' s 

timber sale contract to require compensat ion f or the difference 

between the contract price of the timber and .i ts market value, 

regardl ess of whether a contract is modified , canceled, o r 

partially canceled for environmental reasons. in an April 7. 

1992 memorandum t o Regional Forest~rs, the Chief n oted that · 

Recently several Regions have had a need to 

modify. partially cance l , or c:encel sales 

because of species listed under the 

Endangered Species Act or because ot. possibl e 

impacts to species considered sensitive 

within that Region. Questions have ;,.::.·!.l'en 

concerning pro~edures in contra~t 

mOdiftcacion, car..cellation, and i:!1e 

calcular::ion of purchas.,r compensat i <:n . The 

following provides ~ntormatjon and direction 

in these areas . 

The Chief noted that: 

In determining compensation, the plain 

meaning of the WO-C(T)9.5 (10/77) timber sale 

contract provision must be followed . This 

provision provides, i.n part, damages for. the 

differen~e between the contract value fc:z:· the 

deleted/uncut volume of timber and the v a lue 

of comparable timber sold within t!le sb: 

monthf' J? r "'c "'d :i ng cancelJation. 

This gcvexn:l'ent i nterpretatioi'l is consi.ste!lc with the 

regl.i.lati on at 36 C. F . R. § 223 . l16 gol ;· in<; compensation f o:: 

cancellation of contr'ict s. J>.l though li'lter contract clauses have 

attempted to limi t" comp~nsat. ion, t.ho~P, cJ au '3 es are incnnei::;tcn t 

with the c;overni·.-._g -regul?.ticn . Thu.s, rnnr e ce r:'E!ntly, the Uni.t>'.d 

States Department of Agriculture has re~ 1ested a change tc 3~ 

-7 -
86 

c. F. R. § 223 . ll6 , which still is the regulation governing timber 

s ale contract termination for cancellations of timber sales to 

protect threatened and endangered species and the environment . 

I n the President's Unified Regulatory Agenda, the U.S.D . A 

expl ained : 

It is not the Department ' s policy to prepare a nd offe r t i mber ealee which would jaopardize 

the survival of threatened or endangered 

wildlife species or which would cause a sensitive species to be listed. However, as more ecientific data is gathered, it is 

possible that some timber sales which were consistent with planning guidance at the time 

they were offered must be canceled in the 

l i ght o! new knowledge . During the l993 - l996 

period, this may happen with timber sales 

located in the habitat of the Mexican spotted 

owl, the northern goshawk, the marbled 

murrelet, and northern spotted owl . In these 

situations, the difference between the 

Government ' s liability under the current 

regulati on and its liability calculated using 

the method in the proposed regulation is 

approximately $300 million . 59 Fed . Reg. 

57003, 57026 (Nov . l4, 1994) . 

Regulatory changes affecting the management of national 

forests must be incorporated through the land and resource 

management plans. Congress gave the Secretary of Agriculture 

authority to revise existing contracts to be consistent with such 

plans. 16 U. S . C. § 1604(i) . However, "any revision in present 

or future permits, contracts, or other instruments made pursuant 

to this section shall be subject to valid existing rights . " .I.s;L. 

Thus, even before Winstar, the Forest Service had a difficult 

argument t h at it was not liable for regulatory changes affect ing 

timber sale contracts. After Winstak, the argument becomes 

extremely difficult, if not impossible . 

- 8-
87 

Finally, the sovereign acts doctrine has had little 

success as a defense to timber contractor's breach of contract 

claims. Summit Qontractors, AGBCA Nos . 81-252-l, 83-312-1, 86 - l 

BCA 1 18,632 held that deletion of timber to protect eagle and 

osprey nssts required the government to compensate the purchaser 

and the sovereign acts doctrine did not apply. The board held 

that although •the Forest Service had the power to modify the 

contract to prevent harm to the osprey nest, [it] was the 

nevertheless obligated to pay the contractor for any damages 

occasioned by the modification". ~at p . 93,629. 

Similarly, in Everett Plywood v United States, 227 Ct. Cl. 425, 

615 F . 2d 723 (1981) the court held that: 

"[E]ven where the Forest Service decided to 

repudiate some of its contractual obligations 

in order to protect the environment, it is 

neverthelsss liable to the contractor for 

damages caused as a result of such 

repudiation. 

More recently, the Forest Service was held liable for a 

deletion of timber from a sale to protect the marbled murrelet 

following the regulatory change listing the murrelet as a 

threatened and endangered species. The court in Pavidson 

Industries, AGBCA No . 95-166-1, 96-2, BCA f 26 . 299 (1996) held 

that the government was liable to Davidson for a deletion of 

timber from its contract for the marbled murre1et on the Siuslaw 

National Forest . 

Iri. CQ)JCLP'BIOII. 

In conclusion, federal timber purchasers will 

successfully rely on the winstar case in their claims against the 

-9-
88 

gover.nment fer breach of contract when the government's 

regulatory actions reduce or eliminate timber from cheir sales . 

The existing contracts, regulations, and court 

decisions already acknowledge the gov.,rnment'a obligation to 

c::>mper.sate the purchasers when their contrilcts are abrogated. 

The lii,nstar case only enhances t:he pu~·cnasers' position. 

- 1 Q... WH \:~ vt\A 1796 
89 

TESTIMONY BY 

Ralph D Lewis 

Preside:::.l 

Ketchlku.n Pulp Company 

BEFORE 

The House R<:sou1·ces Conunittee and 

The House Agrlcult-vrc Comm.lttee 

CONCERNING 

The Contract Extension and Environment Improvement Act of 1996 

Washington, DC 

July 11, 1996 

Mr. Chairman and members of the Committee: 

Thank you for this opportunity to testify. My name is Ralph D Lewis, and I am 

the President of Ketchikan Pulp Company (KPC). I have lived in Ketchikan, Alaska, and 

have been a KPC employee for 30 years. KPC can employ over 1,000 workers in our 

timber facilities, our Annette and Ketchikan sawmills, and our Ward Cove pulp mill and 

administrative offices. These workers produce a number of value·added timber 

products, including sawn lumber and our high·quality Tongacell dissolving pulp. KPC 

is the largest private employer In southeast Alaska. 

As a long·time, permanent resident of southeast Alaska, I am sincerely concerned 

about the economic health of the timber industry and the City of Ketchikan's socio· 

economic stability. Since 1990, Alaskans have lost over 42 percent of the forest 

products industry jobs in the Tongass National Forest. That is why we support passage 

of S. 1877 and H.R. 3659. 

Page 1 
90 

The currently robust Ketchikan economy was built, in large part, by KPC 

employees and long time Ketchikan residents. A strong KPC is absolutely crttical to 

maintaining the region's economic health. KPC is committed to continuing to provide 

the well-paying, year-round employment It has supplied for over forty years. To 

succeed, we need a stable timber supply. We depend on our long· term contract to 

provide that stability. I come before you today to ask that you give favorable 

consideration to a 15-year extension of our contract, as well as to fairness modifications 

to our contract. 

Accompanying me today are a number of key members of our management and 

environmental team. They include Troy Reinhart, Employee Affairs and Public 

Relations Manager; Owen Graham, Timber Manager; Allyn Hayes, Pulp Mill Operations 

Manager; Richard Leary, Controller; and Ernesta Ballard, an environmental consultant 

to KPC and former EPA Region 10 Administrator 

S. 1877 & H.R. 3659 

S. 1877 and H.R. 3659 are crucial to the long-term survival and competitiveness 

of KPC. This legislation will: 

a. Allow us to Invest up to $200 million In environmental, energy efficiency 

and operational upgrades; 

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91 

b. Make fairness modifications in the unilateral contract changes the Forest 

Service implemented in 1991; and 

c. Create a win · win situation where both the environment and jobs are 

protected. 

What this bill does not do Is: 

a. Make changes in land designations, stream buffers, other on-the-ground 

management goals, or the management direction of the Tongass National 

Forest. 

b. Change the amount of timber made available to KPC each year for 

harvest. 

A Short History of Ketchikan and KPC 

Consideration of this legislation requires an appreciation of the special 

circumstances that led to the KPC long-term contract. In 1947, when President 

Truman sJgned the Tongass Timber Act Into law, Ketchikan, Alaska, had streets paved 

with wooden planks. In the years since the early 1950's when the Ketchikan Chronicle 

headline read "Pulo Contract Let, • Ketchikan has changed a great deal. The vibrant, 

modem community we live and work in today is the direct result of an initial $54 

million investment that Puget Sound Pulp and Timber (PSPT) and American VIscose 

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92 

Corporation made to build the KPC pulp mill at Ward Covt. Since Initial start,.>p. KPC 

has made additional capital in vestments in excess of $325 m:lton. These companies 

would not have made the mvt:stmera were it no1 fOI the Jon~; cu,n co;nract signed with 

the U.S. Forest Service. That contract guaranteed KPC a stable. economic timber 

supply at sufficient quantities to recoup the necessary investment and envisiontd 

perpetual operation of the facility on the basis of Tongass National Forest timber after 

the initial 50 year term. 

As far back as 1920, the federal managers of the Tongass believed that pdp 

production represented the best use of southeast Alaska's extensive timber resources. 

Those forest managers recogmzcd that a lugh per::e1.cage cfTong2.ss timber co~Jsisted 

of overrnature and decaying trees, material useful on! r for pulp. In 19<:o, tLe Ct:iei of 

the U.S. Forest Service stated, "The establishment of 1:ew wood-115ing pl2.nts should be 

fostered energetically, as Alaska is badly in need of more industries." 

As the Second World War wound down, the federal government ardently 

broadened its efforts to attract a timber industry to southeast Alaska, in order to 

provide stable, high-paying. year-round employment to an economically 

underdeveloped territory. Despite its abundant resources. sou;.heast Alaska was at that 

time a land of boom and bust. Before the war, the economy depended on mining and 

fishing. After the war. fishing was in decline. artd the mining base was depleted. In an 

effort to establish astable economy and bring added population to America's "Northem 

Ramparts," the Forest Service offered long-tem1 (50 year) timber harvest contracts to 

entice Investors to the area. Regional Forester B. Frank Heintzelman wrote that the 

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Forest Service's "t1mber management policies provide that the ti1nber resources of the 

Tougass Natic.nal Forest shall be used for the upbuiiding and the support of permanent, 

mud em communities throughout Southeaslem Alaska." 

In 1948, in response to this federal effort, PSPT incorporated Ketchikan Pulp and 

?ape: Company. which submitted a bid to the Forest Service for the Ketchikan 

Pulplimber Unit. The government accepted the bid. Under its terms, the Forest 

Service would provide a 50-year timber contract, and Ketchikan Pulp and Paper would 

t; ~ obligated to bwlci a pulp mill at Ward Cove. In 1951, Ketchikan Pulp and Paper 

·:ornp<mr became Ketchikan Pulp Company, a joint venture between PSPT and 

American Viscose Corpor-.oUon, and fk,mcing proceeded fo r the construction of a mili 

to prod ;JC<! dissolving pulp. The mill was the first of Its kind to be designed and built 

ir. the United States. It used 3. state of the art pollution control and chemical recycling 

process. 

This was a risky venture; one embarked upon only because of the guarantees 

provided by a long-term contract. The federal government requires primary domestic 

manufacturing of all but a very small part of the timber we harvest. Because of this 

ar.d in order to support the financing necessary to build a pulp mill in an isolated region 

parated from the nearest state by 600 miles of foreign border (Canada), the Forest 

Service promised to supply KPC 8 1/4 billion board feet of economic timber over the 

50-year term. Construction began In May 1952; logging began on Prince of Wales 

lslar.d in July 1953; and the m!ll dedication took place on July 14, 1954. After 30 

Page 5 
94 

years of a concerted federal effort and an initial $54 million private investment, the 

modem Ketchikan economy began. 

KPC has met its end of the bargain with the federal government to provide a 

stable job base for the Ketchikan area. We are now asking you to ensure that the 

government meets its part of the bargain, and makes available the economic timber 

supply necessary for us to continue to provide the employment which Is the cornerstone 

of our economy. 

KPC Products and the Ketchikan Economy 

In the years since the pulp mill began operating, KPC has expanded its job base 

by operating sawmills in addition to the pulp operation. The original contract 

anticipated that sawmills would be added after the pulp mill was running. Sawmills 

allow better use of the resource by recovering high- quality logs for uses other than 

pulp. KPC currently operates two sawmills, Ketchikan Sawmill (KSM) at Ward Cove, 

and Annette Hemlock Mill (AHM) on Annette Island, which we run pursuant to a lease 

with the Metlakatla Indian Community. Assuming an adequate supply of raw 

materials, the sawmills have the capacity to process 130 million board feet of lumber 

annually on a two-shift basis. Both mills could run three-shift operations, if there 

existed a sufficient Umber supply. 

AHM produces rough-sawn spruce and hemlock cants and flitches which are sold 

and subsequently processed to form such Items as decorative doors, window frames, 

Page 6 
95 

and staircases. KSM Is a high speed log merchandizing facility which manufactures 

logs of smaller diameters Into high-quality, metric-dimension, planed lumber products. 

Approximately 90 percent ofKSM sawn products enter the worldwide structural lumber 

market as finished merchandise. The balance of the sawn material from KSM Is used 

for tight-grain cut stock or studs, sold in domestic markets. 

Throughout its history, the primary product of KPC's pulp mill has been 

ultra-pure dissolving sulfite "Tongacell" pulp, produced principally from hemlock fiber. 

Our customers process "Tongacell" into viscose and cellulose for use In the manufacture 

of a variety of products Including rayon fabric, carpets, draperies, sponges, cellophane 

packaging, pharmaceutical goods, food additives, rope, brush and broom bristles, 

Insulation, cosmetic products, rayon cord tires, paint, and furniture lacquers. 

The pulp mill has an annual production capacity of over 190,000 tons of90-plus 

percent pure cellulose pulp. Our pulp is sold both domestically and to foreign buyers. 

KPC is one of only eight stable suppliers of dissolving pulp worldwide. 

When the Forest Service provides a dependable supply of raw materials, we 

employ over 1,000 people to harvest, transport and manufacture these lumber and pulp 

products. Throughout the Ketchikan-Metlakatla-Prince of Wales area of southeast 

Alaska. our pulp. sawmill, and timber operations directly support the employment of 

an additional 1,500 people outside our company: contract loggers, road builders, 

longshoremen. and tugboat operators, among others. Overall, approximately 25 

Page 7 
96 

percent of the region's payroll is involved. directlr or :i~!' ct:v, wil'1 KPC cpenHJt:·ns. 

The bulk of the service and suppcrt industry depends on KPC's continued viabiH :y. 

In 1995, the average full·tlme KPC emploree earned approximately $45.000 in 

wages, not including benefits. In that year. KPC pald wages totaling over $40,000.000, 

again. not Including benefits. Benefits include full health coverage and retir nt. W t: 

have enj.:.yed a very stable work force. with the aYI~rage duration of an individual's 

employment being close to ten years. We hire over 90 percent of our employees locally . 

and the KPC work force refl ects southeast Ala<>ka 's population diversity. Approximately 

one· third of our employees are Alaska Natives. 

KPC puts more than $5,000,000 monthly into the Ket chikari-Metlakatla-Prince 

of Wales economy. Our operations are thP. cornerstone of southeast Alaska's timber 

industry in general, providing an assured ou tl et for residual ch ips and pulp-grade l;Jgs 

from independent sawmiH and logging operations, when tho'>e companies themselves 

have sufficient timber to operate. 

KPC 's manufactur..ng opera tions are a s ssen tial, Jf not rnore so , to sot.lf.hcast 

Alaska's ccon0my today as they were i ;l the 1950s. ,\gain, W <! have ful.fllled our end 

of the bargain we made with the Forest Service to provide yea r-round employment and 

bring prosperity to the Ketchikan area. KPC is the founda tion of our local economy. 

If KPC collapses. southern southeast Alaska collapses along with us. 

Page 8 
97 

The timber manufacturing facilities in Southeast Alaska face a unique set of 

circumstances that require unique solutions. First. the only major source of available 

tim her for our facilities is federnl timber from the Tongass National Forest. The Forest 

Service holds monopoly PO\"er over the timber supply. The small amount of private 

timber is normally exported as round Jogs to countries that have job protective pricing 

tha~ fa•mrs raw materials 0ver flr•lshed products. Timber harvested from Federal lands 

in Alaska, and in Alaska alom: among the states. must receive primary manufacture in 

Alaska, and is subject to a'idition:>l export restrictions. Second. the nearest domestic 

market for timber products !s 600 miles away with a foreign country (Canada) in 

between. This puts Alaska manufe.; turing at an extreme competitive disadvantage to 

forest products manufacturers In the Pacific Northwest. Third, the cost of 

manufacturtng In Alaska is much higher than in other parts or the world, In part 

because many of those other : egions outside the United States have much Jess strtngent 

environmental standards for manufacturtng facilities. These economic circumstances 

are similar to those that existed in the 1940s when the Ketchikan long-term sale was 

first proposed. 

Unllat-:o:ral Contract Changes 

The 1990 Tongass Timber Reform Act (TTRAl drastically and adversely affected 

the long-term agreement with the Forest Service which forms the basis for KPC 

operations. Not only did TTRA further reduce the available commercial timberland 

base which underpins the Forest Service's long-term volume commitment to KPC, it 

unilaterally altered a bilaterally agreed-to contract. The unilaterally modified timber 

Page9 
98 

delivery system has resulted In a continuing failure of the Forest Service to meet its 

timber volume commitment to KPC. TTRA also Irrationally altered the contract's 

pricing structure. 

It Is extremely costly to operate our pulp m111 on an intermittent basis, which Is 

why we require a steady, certain supply of raw material. Since the passage ofTTRA, 

the Forest Service has repeatedly failed to meet Its contractual requirement to make 

timber available in a timely fashion. Delays at every step of the timber-delivery process 

are now the rule rather than the exception. During calendar year 1993, the Forest 

Service released only 45 million board feet (MMBF) of new timber to KPC (147.5 MMBF 

below the contract standard). In calendar year 1994, the Forest Service released 176 

MMBF to KPC, but 40 MMBF was held up by an Injunction In litigation brought by the 

Sierra Club Legal Defense Fund. Shortly after the Forest Service canceled Alaska Pulp's 

contract In April 1994, it presented KPC with a revised timber release schedule. The 

Forest Service again revised the KPC Umber offertng schedule a year later. These 

changes are causing major problems for our operations. We have been forced from our 

Primary Sale Area, and the planned release volume has been substantially below that 

called for in the contract. 

New harvest restrtctions imposed since the passage of TTRA have slowed and 

disrupted our rate of harvest. It now takes us at least an additional year to build access 

roads and harvest the timber on a typical offertng. The pipeline of timber made 

available has averaged far less than that mandated by the contract. As a result of this 

failure by the Forest Service to meet Its contractual obligations, we have experienced 

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a cumulative shortfall in excess of 120 MMBF in the last two years, which has resulted 

in periodic shutdowns of the pulp mill and both sawmills. To make matters worse, 

these shutdowns have occurred during periods of high market demand for our products. 

and we were therefore unable to take advantage of high selling prices. We have been 

unable to make up the shortfall through independent Tongass National Forest sales or 

other Umber purchases. 

Prior to TrRA, the Forest Service presented us with specific 5-year Umber 

offerings and with general plans outlining the location and volumes of the timber to be 

supplied throughout the remaining period of the long-term sale. We were able to 

formulate rational, efficient operating plans based on a predictable timber supply. Now, 

the Forest Service proVides timber in smail individual offerings, revises their offering 

schedule at least once a year, and consistently fails to meet its own deadlines set forth 

in the offering schedules. We cannot plan and operate efficiently under this erratic 

system. 

We must relocate families, logging camps and related facilities much more 

frequently than in the past. These costly, time-consuming moves further delay timber 

harvest, and greatly increase its cost. This reduces the return to the federal treasury. 

Worse, this erratic system has a human cost. Many of our employees are no longer able 

to commute daily to work, but instead must live in remote bunkhouses separated from 

their families for extended periods. 

Page 11 
100 

Some of the most troublesome changes the Forest Service has implemented in 

response to TTRA involve unilateral modification of our pricing structure. First. the 

Forest Service excised from the contract all of the price mechanisms which formed the 

bargain under which KPC expended enormous sums of money to build its facilities as 

required by the long-term sale agreement. Again, all predictability and stability was 

eliminated. Second. the Forest Service imposed a system requiring a quarterly upward 

rate adjustment, purportedly based on rates paid on smaller independent timber sales 

in the Tongass National Forest, which is paid on top of the Forest Service's appraised 

value of the timber. Since its implementation, the Forest Service has frequently added 

this premium even at times when the market has collapsed as it did in 1991 and 

recently. This premium guarantees that our cost of timber will not be economic in 

relation to the market in which we must compete. 

These changes run directly counter to the original b!lateral contract. The 

government agreed to supply economically viable timber for the contract term. Based 

on this promise. we have spent. and continue to spend, vast sums of capital on our 

facilities. All of our capital investment decisions have relied on this contractual 

promise. Protections included in the contract (the "Puget Sound" clause and the test 

for equitable and competitive rates vis-a-vis other long-term pulpwood sales on the 

Tongass) were important to the original investors, and continue to be important. 

The recent pricing changes not only violate our contract, they are irrational 

because. among other things, they compare KPC, with its enormous capital 

requirements. to small independent operators with far smaller capital requirements. 

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101 

To meet its contractual obligations, KPC had to spend tremendous amounts of money 

to construct a pulp mill. SBA and independent operators have no such obligation. 

This brtngs me to the specific terms of the legislation being considered. Why is 

this legislation needed? I will try to explain why. 

Why a 15-Year Eztension? 

Fifteen years plus the remaining term of the contract is the minimum time 

required to recoup the planned investments alluded to earlier. KPC plans to invest up 

to $200 million over the next 5-8 years to continue to be environmental leaders and 

remain competitive in the world pulp market. To make these investments, the 

assurance of an adequate, economic supply of timber as well as a fifteen-year extension 

are needed. Changes necessary to enable the Forest Service to honor and e)( tend the 

contract must come through the legislative process. Such changes need to be 

accomplished in 1996; otherwise investment plans must be reviewed and the viability 

of KPC may be threatened. Strong, state-wide bipartisan support exists to maintain 

KPC as the cornerstone of a responsibly managed and diversified Alaskan forest 

products industry. 

KPC has begun an aggressive investment program that will tolal up to $200 

million to upgrade its facilities to ensure not only that it meets evolving environmental 

requirements into the next century but that it remains competitive in the world pulp 

market. Specifically those investments include: 

Page 13 
102 

• construction and start up of an Elemental Chlortne Free (ECF) bleaching process 

to eliminate the use of elemental chlortne at the mill; 

• equipment and process modifications to further reduce the toxicity level of the 

effiuent and to relocate the discharge point to improve dispersion; 

expansion of wastewater treatment facilities; 

• upgrade electrtcal power generation facilities to improve combustion efficiency 

and reduce costs; and 

• modernize chemical recovery systems for greater efficiencies. 

Why Contract Fairness Modifications? 

Those who enacted TTRA, and the environmentalists who supported it, 

expressed the belief that a viable, healthy timber industry would continue following its 

enactment. They said there was no intent to harm or destabilize the timber industry 

dependent on the Tongass. (A summary of those remarks is included with this 

testimony as Attachment A.) However, as explained earlier, TTRA and the unilateral 

modifications to KPC's long-term saie agreement that followed in its wake have had a 

devastating impact. At a minimum a few contract fairness modifications are necessary 

to restore the basic economic underpinnings of the long-term sale. In addition, a 

reaffirmation of the Forest Services's timber supply commitment is needed. Together 

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103 

these actions will lend stability to our operations by assuring timber supply at a fair and 

reasonable price which Is readily determined and not subject to manipulation. 

Sale Offering Plan 

The sale offering plan will allow KPC to efficiently plan harvest operations 

(remote logging camp installations, road construction, etc.). Further, the plan will 

provide a framework for the Forest Service to plan and manage completion of the NEP A 

process in a timely manner. Section 2(c)(2) of the legislation will make these 

modifications. 

Volume Requirements 

KPC's current contract allows for the harvest of 962.5 million board feet (MMBFJ 

every five years, which amount, on an annual basis, comes to 192.5 MMBF. S. 1877 

and H.R. 3659 continue that same volume level for the term of the 15-year extension. 

The 192.5 MMBF volume level was Intended to provide adequate supply for the 

pulpmill plus additional volume for associated sawmill operations. At the present time, 

the Forest Service appraises at least half of the volume supplied on the basis of 

processing at the sawmills. Section 2(c)(3) of this legislation maintains these volume 

supplies to KPC. 

Page 15 
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Appraisals and Rates 

Plior to the Forest Service Implementation ofTTRA in 1991, the KPC long-term 

sale agreement provided for both upward and downward stumpage rate adjustments, 

whereas independent sales have only downward adjustments. The upward adjustment 

mechanism in the long-term sale contract put a ceiling on the amount of profit that KPC 

was allowed to make. Any excess profit margin was returned to the Forest Service as 

Increased stumpage. Independent sales have no such ceiling. 

After the Forest Service imposed changes to the long-term sale contract, the 

Forest Service began charging what was termed "Comparab!lity Charges". These 

charges are delived from an Inaccurate and inappropliate analysis of what the 

independent sales stumpage charges were from a plior time peliod (not the peliod 

during which KPC was harvesting or processing timber). 

Further, the charges are greatly aiTected by speculation, skewed bidding, 

valiations in the species mix the independents harvest from time to time. and 

differences between the actual species mix and the Forest Service appraised species mix 

for both the long term and independent sales. In addition, the Forest Service makes 

only upward charges. The stumpage rates are never lowered even when the peculiar 

"comparability" formula indicated a downward adjustment is warranted. These charges 

have greatly reduced KPC's profitability to a point where its future is now in jeopardy. 

Section 2(c)(4) of this legislation corrects these problems. It allows KPC to remain 

Page 16 
105 

profitable, gives the federal government a fair economic return. and creates a long-term 

sale more like an independent timber sale. 

Proportionality 

The proportionality provision of TTRA was intended to insure that a 

disproportionate harvest of high volume timber stands was not harvested over a 

rotation for any group of contiguous management areas. In other words, it was to 

address congressional concerns over potential highgrading. The Forest Service has 

chosen to disregard the "over the rotation" direction and the "contiguous management 

area" direction. Further, the 9th Circuit Court of Appeals has decided that 

proportionality must be measured by volume rather than by acre. Consequently, the 

Forest Service must now spend millions of dollars each year to satisfy their own 

internal procedures as well as the 9th Circuit's rule for a provision that applies to only 

a portion of the annual harvests and accomplishes nothing other than to "assure" that 

which the Forest Service testified during heartngs preceding TTRA was being 

accomplished anyway. These new guidelines could cost the Forest Service up to 

$400,000 per timber sale to implement. Section 2(c)(5) of this legislation would correct 

this problem, ensure that the remaining 10% of the Tongass National Forest open to 

commercial harvest is managed using sound, state-of-the-art on-the-ground 

management tools, and save the federal government millions of dollars, while reducing 

litigation. 

Page 17 
106 

Conversion or Replacement 

This provision is intended to clarify KPC's right to accomplish the pulpwood 

processing and related employment goals with a more competitive and sustainable 

facility should that opportunity present itself in the future. Section 2(c)(6) of this 

legislation would make a clear congressional statement in support of allowing full and 

state-of-the-art manufacturing processes on the Tongass National Forest. 

Unilateral Termination 

Our bilateral contract with the Forest Service contained no clause dealing with 

unilateral contract termination at the whim of the Forest Service. Any right to 

terminate was governed by federal common law and, if invoked, would be dependent 

on the particular facts and circumstances involved. TTRA did Il2l. direct the Forest 

Service to include a unilateral termination clause, but in drafting the Unilateral Terms 

the Forest Service included a unilateral termination clause (Section B0.7). Section 

2(c)(7) of this legislation would correct this overreaching and return the contract to its 

original status while maintaining consistency with TTRA. 

KPC's long-term sale is not a federal procurement contract; hence there is no 

need for a clause paralleling the famillar termination-for-convenience-of-the-government 

clause in typical government contracting. While the Forest Service since the 1970's has 

included language In standard timber sales reserving the right to cancel for 

environmental reasons, no such reservation Is necessary here because of the particular 

Page 18 
107 

nature of this transaction. A standard Forest Service timber sale is a sale of specifically 

Identified timber. The KPC long-term sale is not; instead, it is a sale of a quantity of 

timber, not yet specifically identified on the ground, which can be selected from a broad 

area. If environmental concerns arise In a particular location, selection can be steered 

away from that area or. if timber has already been selected in that area, substitutions 

can be made. Our mutually agreed-to contract provided ample authority and flexibility 

for the Forest Service to address the concerns which the unilateral termination clause 

purportedly seeks to meet. The unilateral termination clause is simply unnecessary. 

Were the Forest Service to Invoke it, the practical effect of doing so would be a 

declaration that no timber whatsoever was to be sold from the Tongass National Forest. 

Needless to say, Section 2(c)(7) of the legislation is Important to us because we are 

reluctant to expend $200 million only to then have the Forest Service invoke the 

unilateral termination clause of the Unilateral Terms. 

KPC and the Environment 

Our opponents have raised the subject of our environmental record. It is true we 

have had problems In the past and for those we apologize. However, KPC has new 

management and we are excited about the future and are ready to move forward. 

I would be remiss If I did not address the many and exaggerated claims of the 

extreme environmentalists who have expounded repeatedly concerning KPC"s 

environmental record. I have attached a detailed analysis of KPC's comprehensive 

environmental program (see Attachment B). 

Page 19 
108 

Ketchikan Pulp Company complies with Federal and State laws governing 

environmental protection. Our operations are fully regulated and covered by 

approximately 75 different permits, plans, response procedures and mandatory reports. 

A list of these is attached to my testimony as Attachment C, and a copy of each is 

avallable here for committee review. These documents cover everything from logging 

camp storm water control, to alr emissions permits for our boilers and pulp mill waste 

water disposal permits. Some of these are permits to operate .. without a permit there 

can be no production. Also avallable for the Committee to review are twelve studies 

and work plans which are underway right now. These new programs are the measures 

agreed to in an enforcement action taken by the EPA, and settled in 1995. Part of that 

settlement was our plea to one felony and thirteen misdemeanor violations of the Clean 

Water Act. The information contalned in the plans and reports offered here today 

detalls our environmental compliance results and is avallable for your review. 

The clalms made by individuals and groups opposed to our continued operation 

are based on our own reported information. Their clalms attack our performance. vilify 

our people. distort our record and support their assault by presenting our own data out 

of the context in which it was originally reported. Our data is intemreted by our 

opponents without regard for the strict scientific methods which are mandated by 

regulation. Conclusions are reached which are based on the subjective values of the 

presenter instead of the objective measures which are established by law. Data are 

separated from regulatory reports. and rearranged without regard to the pumose for 

which they are collected. Information which is reported by KPC in the normal course 

of environmental compliance is manipulated and distorted by those who wish to shut 

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109 

us down, in order to illustrate theories which are intentionally designed to raise public 

alarm. 

I believe this Committee should have the opportunity to learn of the strict and 

comprehensive regulatory context in which resource protection is actually achieved at 

KPC. The supplemental testimony on Environmental Compliance at Ketchikan Pulp 

which is before you presents the full scope of regulatory control over our operations and 

waste management. You will see from reading the entire testimony that all 

containments of concern to State and Federal regulators are monitored. measured , and 

reported according to schedules set by the government. Reported quantities are 

regularly checked against the levels established by environmental law. Enforcement 

action is taken by regulatory agencies when appropriate. The reports which we 

provide, along with inspections by regulatory staff. provide the basis which 

demonstrates compliance, or. alternatively, on which enforcement action may be taken. 

Enforcement actions, too, are a matter of public record. 

The alarm raised by our opponents is unwarranted. State and Federal regulators 

are knowledgeable of the smallest details of our operation. They have available, 

through law, a full array of compliance and enforcement measures. KPC works 

cooperatively with our regulators to achieve the results expected by law. 

Our compliance and enforcement history is already a matter of public record. 

We are proud of our achievements, and accept responsibility for our shortcomings and 

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110 

mistakes. We have nothing to hide from the regulators. this Committee. or our 

community. 

Conclusion 

A 15-year extension with the revisions outlined herein and at the current average 

annual offering level of 192.5 MMBF per year, should be sufficient for us to properly 

amortize our capital requirements and allow us to continue to provide a reasonable 

return on investment to our shareholders and to provide economic stability for the 

Ketchikan area. This extension period is well within industry norms for borrowing the 

$200 million we will need. The need for an extension was recognized in the terms of 

the original contract, which stated the Forest Service intention to establish "the 

operation of the industry on a commercially sound and permanently economical basis" 

and "to alford an opportunity to purchase supplies of timber for permanent operation 

... " The existing long-term contract, therefore, presupposes a perpetual arrangement 

between KPC and the Forest Service for timber supply. 

The bottom line is: if S. 1877 and H.R. 3659 do not become law. KPC and its 

employees are at risk and face an uncertain future. We face decisions in 1996 that 

cannot be put olT into the future . These decisions must be made this year. 

KPC has met its contractual obligation to develop the economy and provide 

permanent, year-round employment for southern southeast Alaska. We want the 

government to meet its contractual obligation to provide a sufficient volume of 

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111 

economically via.ble timber in a timely fashion. This is the only way that KPC can 

continue to operate its production facilities and continue to provide jobs and economic 

stability for the communities of this isolated region beyond 2004. 

In summary. the KPC operations (pulp mill, sawmills and harvesting operations) 

are vital to the economic well-being of Ketchikan, the forest products industry in 

southeast Alaska, and the overall economy of Alaska. The manufacturing operations 

and the related jobs require an assured supply of economic timber. The contract 

extension and fairness modifications are needed to effectuate that timber supply 

assurance. 

Thank you again for this opportunity to testify. I would be happy to answer any 

questions. 

Page 23 
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ATTACHMENT A 

Excerpts from consideration of the Tongass Timber Reform Act and predecessor 

legislation (emphasis added): 

136 Cong. Rec. 517, 995·999 (daily ed. October 24, 1990). 

The conference agreement on H.R. 987 "protects key fisheries and wildlife 

!:l.!!.l!itill. And, importantly, the conference agreement retains ~ 

healthy timber industry.· S 17. 996 (statement of Sen. Johnston). 

136 Cong. Rec. S7729-S7819 (daily ed. June 12, 1990). 

"On March 7. Mr. President, the Committee on Energy and Natural 

Resources carne to a compromise solution for this, which I believe is fair 

to all interests, and serves well both the environment and the jobs lefi In 

Alaska.· 57730 (statement of Sen. Johnston). 

"This proposal sought to provide for a better balance between the 

commodity and noncommodtty resources of the forest while protecting the 

local economy from economic disruption." 57730 (statement of Sen. 

J ohnston). 
113 

"I think we reached a very reasonable compromise on this piece of 

legislation ... One would not want It to appear that somehow this 

legislation runs counter to the economic needs or desires of Southeast 

Alaska." S7735 (statement of Sen. Wirth). 

"I believe this is a balanced bill that will adequately protect this majestic 

national forest in Alaska while assuring a sustainable supply of timber for 

current and future needs." S7754 (statement of Sen. Bingaman). 

Act to Amend the Alaska National Interest Land Conseroation 

Act, to Designate Certain Lands in the Tongass National Forest 

as Wilderness, and for Other Purposes: Hearings on H. R. 987 

Before the Subcomm. on Public Lands, National Parks and 

Forests of the Senate Comm. on Energy and Natural Resources 

{pt. 3), 101st Cong., 2d Sess. (1990). 

··1 think it is important to state that H. R. 987 does not mean loss of 

Tongass timber jobs.· I d. At 119 (statement of K. J. Metcalf, Southeast 

Alaska Conservation Council). 

"No existing Tongass dependent timber jobs would be lost by 

comprehensive legjslat!on." Id. at 119 (statement of K. J . Metcalf, 

Southeast Alaska Conservation Council). 

2 
114 

"It has never been our Intention to close the pulp mill through H. R 987 

and I do not think that they would be closed.· !d. at 309 (statement of K. 

J. Metcalf, SOutheast Alaska Conservation Council). 

Based on Forest Service figures, "SEACC believes H. R. 987 would have 

no Impact on existing Tongass dependent Umber lobs." !d. at 348 

(statement of Bart Koehler, SOutheast Alaska Conservation Council). 

135 Cong. Rec. H3689-H3705 (daily ed. July 13, 1989). 

"The new wilderness areas will not affect the abiljty to meet industry 

demand in the Tongass." H3684 (statement Rep. Miller). 

" ... certainly it Is not the Intention, my Intention as the original sponsor 

of the Tongass Timber Reform Act, to drive the timber industry out of 

SOutheast Alaska." H3684 (statement of Rep. Mrazek). 

House Rules Committee Transcript (undated excerpt) 

"I am very much aware it is very easy to roll over the Representative from 

Alaska, because it is a throwaway vote for everybody else In the lower 48. 

This isn't about closing mills. This isn't about locking up the timber so 

they can't have it. This is simply saying we ought to engage in modern 

practices.· Id. at 50 (statement of Rep. M!ller). 

3 
115 

Senate Comm. on Energy and Natural Resources, Tongass Timber 

Reform Act. S. Rep. No. 261, 101st Cong., 2d Sess. (1990). 

reprinted In 1990 U.S.C.C.A.N 6232. 

•. . . the Committee has adopted an amendment In the nature of a 

substitute to H. R. 987, which seeks to Improve management of the 

Tongass by balancing the commodity and noncommodity resources of the 

forest In a manner which wt!l not harm nor destabilize the loca} 

economy." S. Rep. No. 261, at 31 (additional views of Senators 

Metzenbaum and Bradley). 

• Acts to Reform the Tongass Timber Supply Fund, and to Amend 

the Alaska National Interest Lands Conservation Act and for 

Other Purposes: Hearings on S.237 and S. 346 Before the 

Subcomm. on Public Lands, National Parks and Forests of the 

Senate Comm on Energy and Natural Resources (pt.2), 101st 

Cong. 1st Sess. (1989). 

"It js not my Intent to stop timber harvest on the Tongass National Forest, 

or to close the mills In Ketchikan and Sitka nor do I thjnk that w!l! 

. • Id. at 3 (statement of Sen. Wirth). 

"Senate B!l! 346 would not weaJ5en the timber lndustrv, but rather 

provides the best for all. The legislation provides protection for areas 

4 
116 

valuable to the wilderness recreation and visitor industry but it still 

1UQYil!_es latitude for increased timber harvest.· !d. at 131 (state of Dale 

Philman, Alaska Department cf Fish and Game). 

~y that the Tongass Timber Reform Act wil! not effect Tongass 

timber deDendent employment." I d. at 208 (statement of Joseph R. 

Mehrken, Southeast Alaska Natural Resources Center). 

"Senator w;rth's bill would remove fifty million board feet a year from the 

Tongass timber base for the nrotection of other forest values such as 

tourism, commercial fishing, and subsistence. Ih~!lU£m!l.!L!l.l~ 

the forest products jndustrv with 400 mill!Q..Il.~etlllear to harv~ 

··enough to preserve all current logging -related jobs based on past cutting 

levels.· Id. at 410 (statement of Mark Kirr:hhoff, Port Alexander). 

Act to Amend the Ataska National Interest Lands Conse!"Vation 

Act, to Designate Certain Lands in the Tongass Nationa l Forest 

as Wilderness, andfor Other Purposes: Hearings on H. R. 987 

Before the Subcomm. on Water, Power, and Offshore Energy 

Resources of the House Comm. on rnteriDr and Insul.ar Affairs, 

lOist Cong., 1st Sess. (1989). 

"If all 22 areas in H. R. 987 are permanently protected, the legislation 

would reduce the scheduled timber harvest by only 11 percent. That still 

5 
117 

provides enou"h timber for the Tongass d_ependent timb_cr in.ili!.illY.JQ 

continue at current levels and even to exoaud." Id. at 2:~ (statement of 

Larry Edwards. Southeast Alaska Conservation Council). 

··H.R. 987 IS JOB NEUTRAL. Passage of H. R. 987 will have no effect on 

the number of jobs in the Tonge>ss d~pendent timber industry of 

Southeast Alaska." Id. at 56 (statement of Larry Edwards. Southeast 

Alaska Conservation Council). 

Rep. Young: "What happens If the Sitka mill shuts down?" 

Larry Edwards. "It's not going to. I mean. we're not going to aiTect the 

li!:nD~ " I d. at 77. 

Acts to Reform the Tongass Timber Supply Fund. and to Amend 

the Alaska National Interest Lands Conservation Act and for 

Other Purposes: Hearings on S. 237 and S. 346 Before the 

Subcomm. on Public Lands, National Parks and Forests of the 

Senate Comm. on Energy and Natural Resources (pt.l), lOlst 

Cong .. 1st Sess. (1989). 

"S. 346 IS JOB NEUTRJ\1.... Passage of S. 346 will have no effect on the 

number of jobs in the Tongass dependent timber industry in Southeast 

6 
118 

Alaska.· Id. at 150 (statement of Larry Edwards, Southeast Alaska 

Conservation Council). 

• Act to Require Annual Appropriations of Funds Necessary to 

Support Timber Management and Resource Conservation on the 

Tongass National Forest: Hearings on H. R. 1516 Before the 

Subcomm. on Energy and the Environment of the House Comm. 

on Interior and Insular Affairs, lOOth Cong., 1st Sess. (1987); 

"We believe that a reasonable timber harvest program on the Tongass, 

coupled with adequate Investments In fish, wildlife and scenic resources, 

will build and support business ventures In Southeast Alaska that can 

maintain regional employment at current levels.· Id. at 675 (statement 

of Lonnie L. Williamson, Wildlife Management Institute). 

7 
119 

ATTACHMENT B 

Supplementary Testimony of Ralph D Lewis 

Environmental Compliance at Ketchikan Pulp Company 

Senate Energy Committee, July 10, 1996 

House Resources and Agriculture Committee, July II, 1996 

This testimony is offered to inform the Committee of environmental protection and 

compliance related programs, projects, activities and controls at the Ketchikan Pulp 

Company. While the testimony itself offers only a summary of each point raised, I am 

providing for the Committee copies of many documents which detail the compliance 

related activities at Ketchikan Pulp Company. 

Ketchikan Pulp Company complies with Federal and State laws governing environmental 

protection. These laws require the company to secure, from Federal and State agencies, a 

number of operating permits. Each permit requires the company to submit periodic 

reports. monitoring and measurement results and inspection reports to the issuing agency. 

All of these reports and data are part of the environmental compliance record of 

Ketchikan Pulp Company and are available for public review. 

Testimony has been offered in this and related proceedings by groups and individuals 

which is based on Ketchikan Pulp Company Company's reported information. Some of 

that testimony presents the information out of the context in which it was originally 

reported. Data have been interpreted without regard for scientific method, and 

conclusions have been reached based on subjective values rather than objective measures. 

Data have been separated from regulatory reports and rearranged without regard to the 

purpose for which they are collected. KPC's opponents have often manipulated and 

distorted data in order to illustrate theories which are designed to raise public alarm. 

Ketchikan Pulp Company and State and Federal regulators cannot similarly choose the 

method of interpretation that best accomplishes their goals. I believe that the Committee 

should have the opportunity to learn of the strict and comprehensive regulatory context in 

which resource protection is actually achieved at Ketchikan Pulp Company. 

My testimony today presents an overview of the full scope of regulatory control over 

operations and waste management at Ketchikan Pulp Company. You will see from 

reading the entire testimony that all contaminants of concern to State and Federal 

regulators are monitored, measured, and reported according to guidelines and schedules 

set by the government. Reported quantities are regularly checked against the action levels 

established by environmental law. Action is taken when appropriate. These reports along 

with inspections by regulatory staff provide the basis which demonstrates compliance, or, 

alternatively, on which enforcement action may be taken. Enforcement actions, too , are a 

matter of public record. 

I welcome the opportunity to offer this summary for the public record. The compliance 

and enforcement history of the Ketchikan Pulp Company is already a matter of that 

record. We are proud of our achievements, and accept responsibility for our shortcomings 
120 

and mistakes. We have nothing to hide from the regulators, this Committee, or our 

community. 

History 

Ketchikan Pulp Company (KPC) began operations in 1954 producing high quality 

dissolving pulp using a magnesium bisulfite pulping process that fully recovers cooking 

iiqucr chemicals. Most dissolving pulp mills of the era utilized the calcium based bisulfite 

process which did not allow recovery and reuse of cooking chemicals. 

The magnesium base process was chosen to meet the pollution control requirements of 

KPC's Timber Sale Agreement with the US Forest Service. The initial stage of water 

pollution control at the Ward Cove mill was accomplished through spent cooking liquor 

capture, evaporation and incineration in specially designed chemical recovery boilers. 

The mili was designed to operate continuously, twenty four hours per day, with 

shutdowns for scheduled and unscheduled maintenance. 

Wood fiber is supplied from logs that are generally unsuitable for lumber production, 

purchued wood chips and sawmill residues. Logs are debarked, chipped and then 

screened together with purchased chips and sawmill residues. 

Wood chips are cooked under pressure in nine batch digesters using cooking liquor made 

in the acid plant. Each cook takes about four hours. The cooked pulp is then processed 

in de-knotters and screening systems to remove uncooked chips and knots. The pulp fiber 

is separated from the spent inorganic pulping chemicals and dissolved organic material in a 

four-stage countercurrent rotary drum vacuum washing system. 

Bleaching of the washed and screened pulp is accomplished in six different stages using 

chlorine, caustic, hypochlorite and sulfurous acid. Pulp is to be washed on rotary drum 

vacuum washers after each stage of bleaching. Bleach plant effluent streams that are not 

tecycled are discharged either to a secondary treatment facility or an effluent 

neutralization system. 

T:1e fully bleached pulp receives final removal of fine dirt in centrifugal cleaners prior to 

dewatering and drying on a conventional pulp machine. The final product is cut and baled 

or wound into inini rolls and wrapped for shipment to customers worldwide. 

Collected spent cooking liquor is fed to multiple effect evaporator systems where water is 

removed to a degree that allows the material to susuiirl combustion. Condensates from 

the evaporation process are sent to a secondary treatment facility and the concentrated 

cooking liquor is burned in four chemical recovery boilers. 

Combustion of spent cooking liquor results in the generation of energy that is converted to 

steam, recovery of sulfur dioxide and magnesium oxide. Flue gases from the recovery 

2 
121 

boilers first undergo pa_rticulate remo•;al to collect magnesie~m frr.m tht fl y ash in the form 

of magnesium oxide (MgO). A small r-ercentage of makeup MgO ts combined with 

recovered MgO and is used as a base to reccver s:llfur dioxide from cooled flue gas in a 

series of absorption towers 

The recovered chen.icals, which have bc~n •·o1wertcd to magnesium bisulfite in this 

process, become a weak raw acid frc·m which cooking liquor is made by fortification with 

sulfur dioxide. Primary fortification is accomplished by burning molten sulfur to produce 

sulfur dioxide and absorbing it into weak acid in a packed tower. Final strengthening of 

the cooking liquor is accomplished through absorption of sulfur dioxide under pressure in 

an accumulator system using relief gases from the digesters. The entire recoverj process 

is essentially a closed loop system with only water and make up chemicals being added. 

In addition to the steam produced by the recovery boilers. 5team is supplied to the process 

by two multi-fuel p•>wer boilers and one oil fired boiler. Bark, sawdust, knots, primary 

and secondary sludges and oil are combusted in the mu!:i-fuel boilers which are equipped 

with electrostatic vecipitators to control air ernissions. The oil-fired package boiler has a 

wet scrubber for sulfur dioxide remove.! and a low NOx combustion system. 

Steam produced from the b;Jilers is :.;~ed t".mughout the manufactming process and i;, also 

used to gen~rate electricity for the operation A p<'ak total of 3 8 megaw;:tts of electricity 

can be produced from three turbine genemtOrs. Whici1, typi:l!!y generate 28 megawatts 

of electricity for p.-ocess needs. 

Dissolving-grade sulfite pulp is a very speciaJiu,d, high va!ue product. It is an extremely 

pure form ofcelluiosc tiber that he~ special properties b~c~use of the woori SiJecies used 

and the purification provided by the v• ocdses emploved at the mill. Th•;: product is used 

throughout the world h) manuf:.•:l•Jre ;; wide <ariety of high-value products including the 

following. 

Viscose Rayon--Ciorhi1:J, upholstery, curta;ns, carpeting, cellophane/packaging and 

sponges. 

Cuprammonium Rayon--Artificial kidneys, high-fashion clothing, women s 

undergarments, suit lining ami non-... ovens such as disposable protective clothing. 

Nitro Cellulose- -Dice, encapsulated electronic equipment .wd other moldable products, 

high-quality high-speed printing inks, explosives and high quality lacquers. 

Microcrystalline Cellulose-- Pill and caplets, dietary bakery goods, emulsifiers such as 

sandwich spreads and salad dressings, low-calorie ice creams and cosmetics. 

Carboxymethyl and Ethyl Cellulose--Emulsifiers for paints and coatings. 

3 
122 

Specialties--Formica, artificial leathers, molded luggage and laminates, tissue and specialty 

papers. 

Wastewater Management 

Wastewater treatment facilities at Ketchikan Pulp Company Company's Ward Cove 

facility consist of the following: 

(a) A 190 foot diameter primary clarifier that handles waste streams containing settleable 

solids. 

(b) A secondary biological treatment system consisting of a 9 million gallon aeration basin 

and two secondary clarifiers of 90 and 160 foot diameters. This system treats high strength 

dissolved organic waste streams. 

(c) A 5 chamber effluent neutralization system that neutralizes high and low pH waste 

streams. 

(d) Two large steam injected screw presses that handle dewatering of combined primary 

and secondary waste sludges prior to burning in the multi-fuel power boilers. 

NPDES Permit 

Wastewater discharge at Ketchikan Pulp Company (KPC) is regulated under National 

Pollution Discharge Elimination System (NPDES) permit No. AK-000092-2 issued by the 

USEPA for industrial discharges to Ward Cove, Alaska. This permit, issued in August 

1994, was issued for a period of5 years and is due to expire August 6, 1999. 

KPC's current permit regulates two separate industrial discharges, as well as intermittent 

stormwater outfalls originating from within the pulp mill complex, Ketchikan Sawmill, and 

the solid waste landfill. 

This NPDES Permit contains monitoring requirements for the following parameters at the 

indicated frequency: 

Parameter Freque119' 

Temperature Continuous 

Flow Continuous 

pH Continuous 

BODs Daily 

Dissolved Oxygen Daily 

TSS Daily 

ManRaDese Weekly 

Copper Weekly 

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123 

Chlorine Weekly 

Color Weekly 

Cadmium Weekly 

Chromium Weekly 

Nickel Weekly 

Zinc Weekly 

Total Hydrocarbons Weekly 

Sulfide Weekly 

Mercury Weekly 

Manganese Weekly 

Chronic Toxicity Monthly 

Production Monthly 

AOX Quarterly 

2,3,7,8,TCDF Quarterly 

2,3,7,8,TCDD Quanerly 

Acute Toxicity Quanerly 

Resin Acids Quarterly 

Fatty Acids Annually 

Chlorophenols Quanerly 

Guaiacols Quanerly · 

6-chlorovanillin Quarterly 

a-terpineol Quarterly 

5,6-dichlorovanillin Quarterly 

2-methyl-2- Quarterly 

cyclopenten-1-one 

3,4,5- Quarterly 

trichlorosyringol 

3-methyl-2- Quarterly 

cyclopenten-1-one 

Chloroform Quarterly 

Acetone Quanerly 

Methyl Ethyl Ketone Quarterly 

Methylene Chloride Quarterly 

Annual Annually 

chlorphenolic 

biocide nonuse 

certification 

In addition to the above , KPC is also required to monitor an internal sanitary waste 

stream on a biweekly basis for BODs. ISS, and Fecal coliform bacteria. 

Compliance with the above NPDES requirements at KPC involves a number of monitoring 

programs specified in the permit. The Clean Water Act specifies that monitoring is to be 

5 
124 

done by the permittee and reported to the regulatory agency. For all monitoring required 

by the NPDES permit, Ketchikan Pulp Company has developed Standard Operating 

Procedures (SOPs) which are in use and on file with EPA Region 10. The SOP's are 

developed from EPA approved testing and sampling protocols. EPA Region I 0 conducts 

an annual inspection of the KPC facility, and adherence to these SOP's is evaluated by 

EPA at this time. The mill produces a chlorinated organics report on a quarterly basis as 

required by the NPDES permit. The first report was produced during the fourth quarter 

of 1994. The report provides test results for a specific list of chlorinated organics for 

eight sample locations. Sample locations include the combined outfall (00 I), chlorination 

stage effluent, caustic soak stage eftluent, hot caustic extract eftluent, combined 

hypochlorite stage effluent, sulfur dioxide stage eftluent, bleached pulp from the bleach 

plant, and sludge from the rotary screen thickeners which are directly ahead of the sludge 

screw presses. 

Annual stormwater reports are required by the mill NPDES permit. Samples from three 

stormwater events are collected and tested for polycyclic aromatic hydrocarbons (PAHs) 

and benzene, toluene, ethylbenzene, and xylene (BTEX) in addition to conventional 

pollutants. The results for all sampling locations are averaged and presented in a summary 

table. 

The mill's NPDES permit, No. AK-000092-2, requires routine monitoring and monthly 

reporting for federally established standards on biochemical oxygen demand (BOD), total 

suspended solids (TSS), temperature, and pH. Many of the wastewater constituents, such 

as chronic and acute toxicity, AOX, chlorinated organics, metals, color, residual chlorine, 

sulfide, and total petroleum hydrocarbons, are routinely tested for and reported according 

to established frequencies. Other information such as production, eftluent flow rate, and 

stormwater runoff information are also submitted. 

For those parameters for which KPC is required to monitor continuously, appropriate 

monitoring equipment is installed and is operated according to the manufacturers' 

specifications with appropriate calibration. Backup apparatus are also installed to ensure 

continuous monitoring should the primary equipment fail 

For those parameters for which KPC is required to monitor daily, appropriate sampling is 

performed using a one time "grab" or 24 hour composites, and these samples are analyzed 

daily at KPC and/or contract laboratories for the required parameters. Some parameters 

are analyzed by KPC in-house following the approved Standard Procedures. For the 

majority of parameters, however, the analyses are performed by Columbia Analytical 

Services ofKelso, WA. These samples are collected on Monday mornings, and shipped 

for analysis to CAS under proper chain-of-custody control . The results are provided to 

KPC monthly for regulatory reporting purposes. 

All quarterly required parameters are monitored during intensive quarterly sampling events 

as required by the NPDES permit. This includes sampling of various bleach plant waste 

streams, outfall 001, sludge, and fully bleached pulp. The purpose of this program is to 

6 
125 

document current rates of formation of2,3,7,8-TCDD and TCDF, AOX, and to 

characterize the final effluent in terms ofTSS, and 2,3,7,8-TCDD and TCDF. 

During this sampling, concurrent monitoring for both acute and chronic toxicity is also 

required. Acute testing is performed using a specified protocol for a 96 hour static 

renewal testing with inland silversides as the test species. This testing is performed for 

KPC by Northwestern Aquatic Sciences (NAS) of Newport, Oregon. 

Chronic testing is required to be performed using either an echinoderm sperm cell 

fertilization test (Dinnel, 1987), or a bivalve embryo larval development test (ASTM E 

724-89). KPC is actively pursuing measures to reduce the chronic toxicity of the mill 

effluents. For this reason, KPC typically conducts both tests on all effluent samples. All 

of this testing is performed for KPC by Telonicher Marine Laboratories of Trinidad 

California. To date for NPDES Permit No. AK000092-2, KPC has spent approximately 

$250,000 dollars for chronic toxicity testing. 

In addition to permit specific monitoring and reporting, the National Pollutant Discharge 

Elimination System (NPDES) Form 2C provides a listing of conventional pollutants, 

metals, cyanide, phenols, volatiles, acid compounds, basic compounds, and other 

substances present in KPC's waste streams. The form is completed during the NPDES 

permit application period and is a matter of public record. 

Finally, KPC is required to implement several other programs to demonstrate compliance 

with NPDES Permit No. AK-000092-2. 

The first of these is the Best Management Practices (BMP) Plan. This was a new 

requirement for KPC and was made a requirement of the 1994 permit. The intended 

purpose of the plan is to minimize the generation and potential for the release of pollutants 

from the facility to the waters of the United States through normal operations and ancillary 

activities. This plan is being implemented by KPC. Additional employees have been hired 

to assure that BMP incident reporting, follow-up analysis and appropriate action occur. 

The second of these is KPC's stormwater monitoring program. Since KPC applied for 

federally required stormwater permits for all of its facilities, stormwater permits for both 

the KPC facility and the KSM facility are incorporated into NPDES Permit No. AK000092-2. Under this program, KPC is required to monitor COD, TSS, pH, oil and 

grease, PAll's, total hydrocarbons, benzene, ethylbenzene, toluene, and xylene three times 

per year at each respective storrnwater outfalL Also, during the summer months, KPC is 

required to monitor the BOD and dissolved oxygen content of each outfall twice per 

calendar month. Since the inception ofNPDES Permit No. AK-000092-2 in 1994, KPC 

has installed a comprehensive stormwater collection system designed to both reduce the 

number of outfalls and to increase the quality of the discharge from the KPC facility. This 

system is nearly complete and 1996 will be the first year in which monitoring of these new 

outfalls is to occur. 

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The third of these programs is the receiving water monitoring program The purpose of 

this program is to monitor the water quality of Ward Cove, which is the direct receiving 

water for KPC's two discharge pipes. This program is conducted every two weeks at 

twelve stations throughout Ward Cove and Tongass Narrows. Monitored parameters 

include sulfite waste liquor, dissolved oxygen, pH, salinity, temperature, Secchi disk 

depth, turbidity, and color. Dissolved oxygen, temperature , pH, salinity, and turbidity are 

monitored every meter for the first five meters from the surface of Ward Cove and then 

every five meters to the bottom. This pro tile is then repeated for each station from the 

bottom to the surface. For sulfite waste liquor and color, samples are collected from both 

I and 5 meters from the surface and analyzed. R&M Engineering of Ketchikan performs 

all of the sample collection and testing for KPC with the exception of the analysis of the 

color samples. This testing is performed by KPC' s internal compliance laboratory utilizing 

SOP's developed under the guidance of Standard Methods 21208 

The fourth of these programs is the annual sediment monitoring studies carried out at the 

same twelve stations throughout Ward Cove and Tongass Narrows. KPC is required to 

analyze appropriate sediment samples from each of these sites for all congeners of TCDD 

and TCDF, total organic carbon, PAH's, cadmium, arsenic, zinc, phenol, 4-methylphenol, 

benzoic acid, acid volatile sulfides, EOX, methyl mercury, and toxicity using marine 

amphipods, larval sanddollars and purple sea urchins. Procedures for this testing have 

been mandated by EPA guidance. Reports, which include thorough discussions of 

sampling and analytical methodologies and QNQC prqcedures, are submitted to the EPA 

on an annual basis. To date, two such studies have been conducted and submitted as 

required to EPA. 

The fifth of these programs is the annual bioaccumulation monitoring program conducted 

in the vicinity of the discharge. KPC's NPDES permit provides specific direction on how 

this sampling is to be done. Due to the absence of the specified organisms in Ward Cove, 

an alternative bioaccumulation monitoring program has been established by agreement 

between EPA and KPC. This involves the use of established protocols for 

bioaccumulation monitoring of both the sediment and the water column in the vicinity of 

the outfalL Reports, which include detailed presentation of sampling and analytical 

methodologies and QNQC procedures, are submitted to the EPA on an annual basis To 

date, two such studies have been conducted in Ward Cove and submitted to EPA 

The final program is a comprehensive study of solids deposition. This program is 

designed to provide information about the nature and extent of solids deposition in the 

receiving water originating from KPC's discharge. This study has been completed and has 

been accepted by the EPA. EPA advised Ketchikan Pulp Company that the report 

provides a level of effort and information far beyond that which was required by the 

permit. Through this study, KPC has shown that with respect to the company's current 

waste streams, very little deposition of solids occurs in Ward Cove This is due to the 

effluent treatment systems installed in past years. 

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Recent Enforcement 

Wastewater management at Ketchikan Pulp Company was the subject of a lengthy 

investigation by the United States Environmental Protection Agency which began in 1991 

In the spring of 1995 Ketchikan Pulp Company and the United States of America reached 

agreement and settlement of issues that arose from this investigation and which concerned 

environmental compliance. The agreement resulted in criminal, civil and administrative 

proceedings, and defined projects and related undenakings that are now being 

accomplished by Ketchikan Pulp Company. 

The Government charged Ketchikan Pulp Company with discharging pollutants in 

violation of the terms of its wastewater discharge permit and for discharging pollutants 

without a permit. Ketchikan Pulp Company entered a guilty plea to one felony and 

thineen misdemeanor violations of the Clean Water Act. 

The felony violation occurred in April 1990 when Ketchikan Pulp Company shut down for 

scheduled maintenance to its primary clarifier. During this shutdown, a ponion of 

collected solids from the primary clarifier were discharged into Ward Cove. The 

wastewater system in place at that time could not effectively remove all collected solids 

from the wastewater. The discharge of water containing any collected solids from the 

clarifier is prohibited per se, even if the solids discharged do not exceed any applicable 

total suspended solids effluent limitations in the permit. 

The misdemeanor violations occurred on thirteen days during a period from January, 1991 

through December, 1993 when Ketchikan Pulp Company negligently allowed wastewater 

containing magnesium oxide to overflow from two sewer manholes. The overflows 

occurred because the sewer piping from the powerhouse to the main sewer was too small 

to handle the volume of powerhouse wastewater, particularly during periods when high 

tides exened pressure on the sewer. The overflow flowed downhill into the waters of 

Ward Cove. Under normal operating conditions, effluent from the powerhouse is 

discharged through the permitted outfall "00 1". 

The conditions that gave rise to both felony and misdemeanor charges have been changed 

with new designs, installations, and programs which KPC believes have eliminated the 

potential for reoccurrence. 

Ketchikan Pulp Company was fined and placed on probation for five years with an 

opportunity for early termination after one year. 

Ketchikan Pulp Company obligations under the criminal proceeding include: 

Implement a program to improve the quality of wastewater discharges. 

There are presently three components: elimination of the use of elemental 

chlorine in the pulp process; evaluation of toxicity parameters; and 

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improvement of the discharge characteristics of the Company's wastewater 

outfalls. 

• Implement an environmental policy that sets forth the individual responsibilities 

of employees with respect to the environment. 

Ketchikan Pulp Company has instituted employee training that will provide 

employees at all levels with information about State and Federal environmental 

laws. More specific training in the monitoring, reporting and control required 

by law and permit will be provided for those with specific job responsibilities 

which include environmental compliance. 

• Prevent unpermitted discharges and implement management practices to 

prevent spills. 

KPC has developed an unpermitted discharge program to minimize the 

potential for non routine discharges. These issues are also addressed by several 

of the elements of the civil Consent Decree described below 

• Implement components of the Consent Decree as it relates to wastewater. 

For a description of all Consent Decree components, see below. 

• Implement the Environmental Compliance Program described in the presentencing report. 

This document is titled "Corporate Responsibility Program" and is attached. 

• Fine: $3 million; $175 million to be offset by expenditures for the projects 

described above. 

• Provide quarterly reports to the Court. Office of Probation, and the 

Department of Justice on the status of the implementation of the 

Environmental Compliance Program. 

The Company and the Government entered into a Consent Decree in order to settle the 

claims brought by the Government under the civil enforcement provisions of the Clean Air 

and Clean Water Acts. The Consent Decree provides for a substantial penalty, as well as 

the implementation of injunctive measures designed to remedy Ketchikan Pulp Company 

Company's noncompliance with the two Acts and to improve its compliance with State 

and Federal environmental laws. 

Ketchikan Pulp Company obligations under the Consent Decree 

Develop and implement the following 

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• Wastewater treatment operator certification: treatment plant operators must be 

State-certified, and documentation maintained. 

• Spill containment program: study the potential for spills, and design systems 

for preventing and containing spills; evaluate the feasibility of recycling 

treatment and non-wastewater disposal of spilled materials. Containment of 

spills will reduce the toxicity of Ketchikan Pulp Company Company's eftluent. 

• Water treatment plant discharge elimination: define, describe and plan for the 

steps which are necessary to prevent the direct discharge of filter backwash or 

basin drawdowns to the filter plant outfall. 

• Laboratory monitoring and improvement program: develop a standard 

operating procedure for testing BOD, and describe in detail the steps for 

laboratory analysis; identifY a single seed source for conducting all BOD 

analyses; develop a standard operating procedure for data entry review. 

• Ward Cove sediment project: develop a technical studies work plan to 

characterize sediments in Ward Cove; evaluate results; identifY alternatives for 

remediation, if necessary; and implement a remediation plan. This project is 

not to exceed $6 million. 

• Source test emissions from the recovery boilers: test for particulate matter and 

sulfur dioxide and take all steps necessary to correct if violations of the Clean 

Air Act are discovered by the testing. 

• Mass balance study for sulfur: conduct a facility wide mass balance study in 

order to reduce the discharge and emission of sulfur. 

• Environmental audit: retain an independent environmental audit firm to 

develop and conduct an audit that will focus on both compliance and 

effectiveness of compliance assurance systems and management structure. 

• Operations and maintenance program design a program of operations and 

maintenance procedures that will minimize pollution at the mill. 

• PoUution prevention study: identifY areas where discharges or emissions of 

pollutants, especially toxics, can be reduced including fugitive emissions, 

stonnwater and plant processes. 

• Civil Penalty: S3 .Ill million. 

The Company entered into a Compliance Agreement with EPA which achieves a 

settlement of any potential suspension and debarment issues with respect to Federal 

procurement and non-procurement activities which could have resulted from the entry of a 

guilty plea to the felony and misdemeanor charges. The agreement reflects EPA's 

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determination that the conditions that gave rise to the criminal convictions will be 

corrected by the many activities described in the Compliance Agreement and the related 

legal orders, and therefore, suspension or debarment is not necessary to protect the public 

interest. 

The term of the agreement is five years with an opportunity for early termination after 

three years. 

Ketchikan Pulp Company obligations under the Compliance Agreement: 

Develop and implement the following : 

• Statement of environmental commitment: includes all managers who will be 

required to sign a commitment to avoid illegal environmental acts. 

• Non-reprisal policy: protects those who report environmental problems from 

reprisal of any kind. 

• Ethics policy: contains a commitment to comply with environmental laws; 

ethical guidelines for daily business; policy governing conflict of interest; and a 

commitment to appropriate disciplinary action for violations of environmental 

laws. 

• Corporate disclosure policy: requires an anonymous and protected 

communication system by which environmental problems may be reported to 

the company president; investigation and follow-up actions must be 

documented. 

• Pollution prevention policies: references the studies to be performed under the 

Consent Decree, as well as the Best Management Practices plan required by 

the NPDES permit. 

• Corporate Responsibility Program: this is identical to the Environmental 

Compliance program developed in conjunction with the criminal proceedings. 

• Environmental management and engineering plan: describes the Best 

Management Practices plan which is mentioned also in connection with 

pollution prevention policy development. 

• Internal compliance audit schedule: sets a schedule of audits to be conducted 

over the term of the agreement. 

• Environmental compliance: reaffirms Ketchikan Pulp Company Company's 

commitment to full compliance. 

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• Training: requires extensive training in environmental compliance, ethics, and 

management practices. 

Ketchikan Pulp Company is currently on schedule to satisfy all requirements of the 

criminal, civil and administrative proceedings described in the previous paragraphs. 

Future Wastewater Management 

Ketchikan Pulp Company has planned for several years to relocate the discharge outfall to 

Tongass Narrows. EPA has issued a draft NPDES permit for the new location. This 

extended outfall is designed to provide improved dispersion of KPC' s discharge and to 

reduce the impact of mill operation on Ward Cove, which is currently listed as an impaired 

water body and has a Total Maximum Daily Limit (TMDL) for Biochemical Oxygen 

Demand (BOD). The permit must be certified by the State of Alaska under Section 40 I of 

the Clean Water Act. The purpose of the State certification is to assure that the discharge 

will meet all State Water Quality Standards. In the past, discharge permits were 

technology-based so KPC is now taking a giant step to meeting water quality standards in 

the receiving waters. Standards are designed to protect water use and establish 

parameters and controls for fecal coliform bacteria, dissolved gas, pH, turbidity, 

temperature, dissolved inorganic substances, sediment loads, toxics and other deleterious 

organic substances, color, petroleum hydrocarbons, oils and grease. radioactivity, total 

residual chlorine, and whole effluent toxicity. State water quality regulations contain 

provisions (under very strict guidance) for a mixing zone in which water quality standards 

may be exceeded. This permit, once certified, will be in effect for five years. 

ADEC has requested comprehensive technical and analytical information to support this 

new outfall describe how its discharge will affect water quality in Tongass Narrows. KPC 

and ADEC are working cooperatively with EPA to finish this certification and have set a 

schedule which contemplates certification in early 1997. 

Information provided to ADEC by KPC includes Human Health and Ecological Risk 

assessments of the impact of the new outfall to Tongass Narrows (2 versions), a baseline 

biological study of the new Tongass Narrows outfall location (2 versions), a baseline 

sediment study of the new Tongass Narrows outfall location (2 versions), Tongass 

Narrows outfall design and oceanographic conditions (2 versions), as well as responses to 

90 specific questions generated by ADEC. 

The Tongass Narrows permit is essentially the same as the current Ward Cove permit 

(AK-000092-2). Water column and sediment monitoring will be expanded to include 

coverage ofTongass Narrows. The State certification of the Tongass Narrows permit is 

planned to include a mixing zone. The Ward Cove permit was issued without a mixing 

zone because of a decision made by the State not to certify it under Section 40 I, but to 

concentrate on certification of the Tongass Narrows discharge. 

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In addition to this specific program for quarterly monitoring, KPC will continue to be 

required to maintain the following additional programs which were implemented with the 

present pennit. 

• Best Management Practices (BMP) Plan. This plan has been implemented by KPC and 

will continue to be in force after final certification of the Tongass Narrows permit. 

• Stormwater Monitoring Program. Under this program, KPC will continue to monitor 

COD, TSS, pH, Oil and Grease, PAl-l's, Total Petroleum Hydrocarbons, Benzene, 

Ethylbenzene, Toluene, and Xylene three times per year at each respective stormwater 

outfall. Also, during the summer months, KPC will continue to monitor the BOD and 

dissolved oxygen content of each outfall twice per calendar month 

Receiving Water Monitoring Program. The original purpose of this program was to 

monitor the water quality of Ward Cove, which is the direct receiving water ofKPC's 

discharge. This program will continue to monitor Ward Cove after the certification of 

the Tongass Narrows Permit and after the relocation of the outfall. 

• Annual Sediment Monitoring Studies. The annual sediment monitoring studies carried 

out at the same specific twelve stations throughout Ward Cove and Tongass Narrows. 

Currently, KPC is required to analyze appropriate sediment samples from each of these 

sites for all congeners ofTCDD and TCDF, total organic carbon, PAH's, cadmium, 

arsenic, zinc, phenol, 4-methylphenol, benzoic acid, acid volatile sulfides, EOX, methyl 

mercury, and toxicity using marine am phi pods, larval sanddollars and purple sea 

urchins. KPC is anticipating that this requirement will continue after certification of 

the Tongass Narrows permit. Procedures for this testing will continue to follow strict 

USEPA guidance. Reports, which will include thorough discussions of sampling and 

analytical methodologies and QA/QC procedures, will continue to be submitted to the 

EPA on an annual basis, if required. 

Annual Bioaccumulation Monitoring Program The annual bioaccumulation 

monitoring program is conducted in the vicinity of the discharge. KPC is anticipating 

that this requirement will change with the certification of the Tongass Narrows permit 

Current negotiations with ADEC have indicated that ongoing monitoring of the 

Tongass Narrows outfall location will occur, possibly including bioaccumulation 

monitoring. 

Air Emissions Control 

Overview 

Air quality issues at the KPC facility are governed primarily by the State of Alaska through the 

Alaska Department ofEnvironrnental Conservation (ADEC). State statutes and regulations 

are incorporated into the State Implementation Plan (SIP) Once approved by EPA, the SIP is 

enforceable under Federal law. The State does not yet have authorization to enforce all 

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appticable Federal Clean Air Act requirements. In the absence of applicable State standards, 

certain Federal air requirements (e.g., New Source Performance Standards) are enforced 

directly by the Environmental Protection Agency (EPA) in the absence of comparable State 

law. 

KPC has seven boilers at its facility which are used to generate power and recover chemicals 

from the pulping processes. KPC's powerhouse produces steam for process heating and to 

drive two 10,000 KWH turbine generators and one 18,000 KWH turbine generator. These 

boilers are the primary source of air emissions at the KPC facility. Emissions also result from 

the pulp production processes and the facility's wastewater conveyance system and treatment 

facilities. 

Regulatory Authority 

KPC is currently operating under the authority of a consent decree entered into between it and 

the State of Alaska in May 1995. 

In April 1995, KPC completed a study to satisfY 18 AAC 50.110. This section of the Alaska 

Administrative Code provides that "No person may permit any emission which is injurious to 

human health or welfare, animal or plant life, or property, or which would unreasonably 

interfere with the enjoyment oflife or property." The purpose of the study was twofold: (1) 

model ambient concentrations of pollutants (2) determine the risk that these pollutants pose to 

human health and the environment. The study was conducted using computer dispersion 

modeting and the most current information regarding health risks. It is common in the air 

quality field to attempt to predict the ambient concentration of pollutants using computer 

generated models. The modeled concentrations of pollutants can then be assessed to determine 

potential comptiance with the National Ambient Air Quality Standards (NAAQS) or 

alternatively, can be used to predict the risk posed to human and ecological receptors at the 

modeled locations. 

KPC's April 1995 study indicated that the facility had the potential, under certain worst case 

operating and meteorological conditions, to exceed applicable ambient air standards for sulfur 

dioxide and oxides of nitrogen. The study also indicated that the risk to human health posed by 

chloroform emissions merited further analysis. Based on these results, the State of Alaska was 

unable to renew KPC's air operating permit upon its expiration in May 1995. A then existing 

provision of State law required compliance with 18 AAC 50.110 as a condition for reissuance 

of an existing air operating permit. 

In May 1995, KPC entered into a consent decree with the State of Alaska to resolve ambient 

air and human health issues raised by the April 1995 study. The consent decree required KPC 

to undertake a comprehensive modeling analysis for fine particulate matter, sulfur dioxide, 

carbon monoxide, total reduced sulfur, nitrogen dioxide, lead, and chloroform. Based on the 

April 1995 study, ADEC pretiminarily determined that these pollutants had the potential to 

cause noncomptiance with the NAAQS or posed unacceptable risks to human health. The 

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consent decree also required KPC to develop and implement a program to monitor the ambient 

concentrations of sulfur dioxide and particulate matter. 

The follow-up modeling study was conducted during the summer of 1995 utilizing facilityspecific emissions data (as opposed to generic industry emissions factors) as well as a more 

refined dispersion model and health risk assessment model. 

The follow-up modeling study indicated that KPC's emissions were in compliance for certain 

standards but yielded inconclusive results with respect to sulfur dioxide and particulate matter 

With respect to these pollutants, the follow-up modeling indicated that the facility had the 

potential to exceed the NAAQS under certain worst case conditions. Under most 

circumstances, modeling is believed to be overly conservative in estimating ambient air 

emissions. One way to test this hypothesis is through ambient monitoring. 

KPC commenced its ambient monitoring program in February 1996 at two locations near the 

pulp mill facility. The monitors are programmed to assess ambient concentrations of 

particulate matter and sulfur dioxide. Thus far, the monitors have recorded one exceedance of 

the three hour standard for sulfur dioxide in June 1996 This exceedance occured in June 

19%. It resulted from an operational upset at the pulp mill which released approximately 

twenty-five pounds of sulfur dioxide into the ambient environment. KPC recognizes that this 

operational upset could recur and intends to install a scrubber to capture sulfur dioxide 

emissions at the source. 

The consent decree also required KPC to undertake a comprehensive modeling and health risk 

assessment of chloroform emissions. KPC tested emission sources at its facility to determine 

the concentration of chloroform emitted under typical operating scenarios. This data was then 

incorporated into a computer model to determine potential ambient concentrations of 

chloroform resulting from KPC's processes. From this, KPC conducted a refined health risk 

assessment utilizing a range of probable receptor variables. After extensive review by ADEC 

and air toxicology consultants retained by KPC, the State of Alaska determined that the risk of 

increased cancer posed by KPC's chloroform emissions was acceptable and within the State's 

risk level of one in one hundred thousand (1/100,000). Moreover, anticipated process changes 

to KPC's bleach plant (ECF conversion, discussed above under Recent Enforcement) are 

expected to significantly reduce chloroform emissions (up to 40%) thereby further lowering the 

potential risk to human health posed by chloroform emissions. 

The existing consent decree incorporates by reference numerous provisions from the expired 

air permit. In effect, it is the functional and legal equivalent of an air operating permit and has 

been treated by KPC and ADEC as such. 

Currently, ADEC is in the process of finalizing the most recent draft air operating permit The 

permit is expected to be issued in the summer of 1996 

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Sources and Emissions Controls 

As discussed above, emissions from the KPC facility result primarily from two multi-fuel-fired 

power boilers, one oil-fired package boiler, four chemical recovery boilers, two acid plants, 

nine digesters, bleach plant, wash plant, water treatment facility, miscellaneous storage and 

process tanks, and associated equipment and activities. These sources and the specific stacks 

or vents through which emissions are released to the ambient environment have been approved 

by ADEC and are subject to extensive and comprehensive monitoring and reporting 

requirements. 

Package Boiler. KPC's oil-fired package boiler was constructed in 1988 and is rated at 153 

million Btu per hour. This source was constructed after the promulgation of applicable Federal 

New Source Performance Standards (NSPS) and is regulated primarily by EPA under the 

regulatory standards found in 40 C.F.R. part 60. The NSPS impose limits for sulfur dioxide, 

nitrogen oxides, and opacity. NOx is limited to 0.300 lb/tvl:MBtu. A Dynawave Scrubber was 

installed to ensure compliance with a requirement to remove 90 percent of sulfur dioxide. In 

addition, the concentration of sulfur dioxide is limited by regulation to 500 parts per million 

(ppm). 

The boiler has continuous emission monitors (CEMs) on the scrubber inlet which measure 

nitrogen oxides, sulfur dioxide, oxygen and opacity At the outlet, CEMs measure sulfur 

dioxide and oxygen. In the future, it will be a permit requirement to conduct visual readings 

(using a "certified eye" aka Method 9) for opacity during certain maintenance procedures and 

during startup scenarios when it is feasible to do so. 

Power Boilers. The two multi-fuel boilers (power boilers) are regulated primarily by ADEC. 

They typically bum No. 6 low sulfur fuel oil, bark, sawdust, knots, waste treatment sludge, 

paper, used sorbent pads, and used oil. The power boilers have limitations on sulfur dioxide, 

nitrogen oxides and opacity. The sulfur dioxide is limited to 500 ppm. Nitrogen oxides are 

limited under a facility wide limit of863 tons per year calculated on a monthly rolling basis. 

This limit was established to ensure compliance with Federal Prevention of Significant 

Deterioration (PSD) requirements. 

Each power boiler is equipped with a mechanical fly ash collection device followed by an 

electrostatic precipitator (ESP) for control of particulate emissions. Each boiler has pressure 

recovery staged combustion burners low to help control NOx burners and CEMs to monitor 

nitrogen oxides, carbon monoxide, sulfur dioxide, oxygen, and opacity. 

Recovery Boilen. KPC's four recovery boilers are used to recover chemicals from the pulping 

process as well as generate power to operate the facility. Emissions from KPC's four recovery 

boilers are sent to two separate absorption systems to collect and recycle sulfur dioxide. The 

reclaimed sulfur is used in the process. To control particulate emissions, the recovery boilers 

have multi-clones as well as six Brinks canisters. Each Brinks canister contains 28 filter 

elements which are packed with polyester. fibers that trap and control particulate emissions. 

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KPC is in the process of conducting a trial to bum secondary sludge (generated in the waste 

water treatment facilities) in the recovery boilers. Although it is dewatered using a device 

called a screw press, it is nonetheless quite moist and can be difficult to bum. Currently, 

primary and secondary sludge is mixed with wood waste and burned in the power boilers. The 

high moisture content of sludge has the potential to cause emissions problems. KPC believes 

that burning sludge in the recovery boilers will obviate the need to dispose of it in the power 

boilers and allow for a better fuel mixture in the power boilers. It is believed that these changes 

will improve the power boilers' emissions characteristics. 

KPC has extensive reporting requirements to ensure that governmental agencies and citizens 

have comprehensive, up to date information on the facility's air emissions. Under Federal law, 

KPC is required to immediately report certain gas leaks to appropriate State, local, and national 

authorities. KPC is also required to report sulfur dioxide and chlorine releases under its air 

pennit/consent decree. ADEC also requires KPC to verbally report within 24 hours any 

emission control equipment failure or emission control unit bypass, process upsets that may 

cause exceedances of applicable air requirements, and opacity exceedances which last for more 

than twenty minutes. Under the proposed air operating permit, KPC will be required to report 

any releases of mist or foam from the wastewater treatment systems which have the potential 

to migrate off-site. KPC is implementing engineering measures which the Company believes 

will eliminate the potential for off-site transport of foams and mists from the wastewater 

treatment system. 

KPC submits quarterly reports to both EPA and ADEC. These reports contain comprehensive 

data on operations and air quality processes including 

• number of hours or operating days for emission sources; 

• tons of air-dried pulp produced; 

• amount of steam produced by the boilers; 

• amount of No. 6 low sulfur fuel oil used; 

• amount of heavy red liquor solids burned in the recovery boilers; 

• type and quantity of any paper, charcoal, and used oil spill absorbent material 

burned in the multi-fuel boilers; 

• sources test results for the power boilers and the package boilers; 

• percent of the time the ESP fields are energized; 

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• daily calculation of fuel-bound sulfur based on oil usage, 

• amount of nitrogen oxides produced in the package boiler, power boilers, and the 

Komatsu log loader; 

• opacity results; 

repairs that were undertaken which affect emissions; 

• sulfur dioxide emissions form the recovery system, 

• concentration of sulfur dioxide in the Brinks stack, 

• particulate emissions from the recovery system; 

source test results for the Brinks stack; 

• reports of when diesel is burned in the package boiler; 

• nitrogen oxides emissions for the package boiler; 

• operating parameters for the ESP and Brinks systems; 

• a summary of all verbal and written excess emission reports; 

• opacity incidents that violate State standards; 

• instances where the three hour average for sulfur dioxide exceeds 500 ppm, 

instances where the sulfur dioxide removal on the package boiler is less than ninety 

percent for greater than three hours; 

• the total sulfur dioxide emitted as excess emissions; 

instances where air pollution control equipment was bypassed; 

Enforcement 

When the package boiler was constructed in 1988, EPA determined that KPC did not follow 

all the mandatory pre-construction requirements found in 40 C.F.R. part 60. These allegations 

were settled by consent decree. The consent decree was entered with the court in September 

1995 and is discussed in greater detail above under NPD ES Penn it. 

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In March 1995, KPC received a NOV !Tom the State of Alaska alleging that it exceeded 

app~cable opacity and particulate standards and associated reponing requirements The 

exceedances were determined to have been caused by Brinks Canisters (emission control units) 

that, due to age and design problems, were no longer effective in ensuring compliance v.ith 

particulate emission limits applicable to the recovery boilers This matter was settled v,ith 

ADEC and resulted in the payment of a penalty ofS21,908 to the State as well as a schedule to 

install an additional (seventh) Brinks Canister KPC believes that the additional Brinks Canister 

will give it more flexibility to perform maintenance and related activities on existing Brinks 

Canister(s) without compromising the pollution control effectiveness of the system 

As discussed above, the existing consent decree was entered into by ADEC and KPC m ~lay 

1995. In addition to the projects, studies, and reponing reqUJrements imposed upon KPC by 

the decree, ADEC also has the authority to seek stipulated penalties for violations of consent 

decree conditions ($5,000 per violation) and exceedances of opacity limits ($500 per violation) 

ADEC has assessed stipulated penalties for opacity exceedances 

KPC has retained an outside consulting/engineering firm to study its powerhouse and 

determine ways to improve boiler performance and minimize opacity exceedances In the 

context of permit negotiations with ADEC, KPC proposed to incorporate a number of the 

consultant's recommendations into the consent decree and/or penmit as enforceable conditions 

When the draft penmit is finalized, KPC will be required to implement a number of the 

recommended measures ranging from enhanced powerhouse employee training to engineering 

and equipment improvements. These are designed to improve the operating performance of 

the boilers and reduce the potential for opacity exceedances 

Solid Waste Management 

KPC currently operates two contiguous solid waste landtills located adjacent to the pulp 

mill at approximately Mile 9, North Tongass Highway. These two landfills, the Ash 

Landfill, and the Wood waste Disposal Site, are regulated by the ADEC Solid Waste 

Program and are thus subject to regulation under 18 A.i\C 60 Landfill leachate. as well as 

stormwater, are also regulated under the existing KPC l\:PDES permit 

Both landfills are managed in a series of lifts, with impermeable membranes installed 

between lifts. Both landfills also have a leachate collection system that routes landfill 

leachate to the pulp mill secondary treatment system prior to discharge. 

The Ash landfill is permitted to accept solid wastes under Solid Waste Permit Number 

9113-BAOOS, issued by ADEC on April 13, 1995 The permit expires on December 31, 

1998. The Ash Landfill permit restricts landfilled materials to boiler ash, flyash, calcium 

filtrate, hogged fuel mixed with rock and din, and primary/secondary waste water 

treatment sludge. Materials specifically restricted from the landfill by the permit include 

waste oil, oily waste, domestic sewage sludge, material pumped from septic tanks, fish 

processing waste, and hazardous and potentially hazardous materials 

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In addition to leachate collection and treatment, the Ash Landfill permit requires monthly 

visual monitoring of the site to ensure that permit requirements are not being violated, and 

requires that records of waste volumes be maintained . All landfill leachate and stormwater 

testing conforms to requirements specified in 18 A.I\C 70 020(c) 

The Wood waste Disposal Site was previously permitted to accept wood waste under 

Solid Waste Disposal Permit Number 9213-BAOOl This permit was issued on October 

27, 1994, and expired on December 31 , 1995. Although landfilling of \.\.:JOd waste at the 

site has been discontinued, on May 17, 1996, KPC received authorization by ADEC to 

temporarily dispose of38,500 cubic yards of wood waste at the site. 

Although landfilling wood waste at the site has been discontinued since expiration of the 

permit, leachate and stormwater collection, monitoring, and treatment has continued 

concurrently with the Ash Landfill. 

On March 5, 1996, KPC received a Notice of Violation (NOV) for the Wood waste 

Disposal Site permit. The NOV specifically requested the following action: 

investigate, and if necessary, extinguish waste combustion; 

completion of a Visual Monitoring Plan; 

• completion of a Landfill Closure Plan; 

completion of a Surface Water Monitoring Plan; 

completion of a Surface Water Corrective Action Plan, 

• final plans for the SWL6A leachate control structure; 

• submission of as-built drawings for the SWL4 leachate control structure. 

KPC has addressed, or is in the process of addressing, each item specified in the NOV. 

The landfill was investigated for evidence of combustion. No evidence of combustion was 

noted by KPC or ADEC personnel during a recent ADEC inspection. 

The Visual Monitoring Plan has been completed and is currently being implemented. The 

Landfill Closure Plan is currently being completed and will be implemented upon approval 

by ADEC. The Surface Waster Monitoring Plan is being revised to meet requirements of 

the Solid Waste Permit, as well as requirements specified in KPC's NPDES permit. In 

addition, KPC is addressing procedures for corrective action for any surface water stream 

that may be impacted by a leachate release. Final plans for the SWL6A and SWL4 

leachate control structures have been submitted to ADEC. Construction of both 

structures is complete. 

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As part of the requirements of the Solid Waste and NPDES permits, weekly monitoring of 

streams in the vicinity of the landfill area is currently being conducted. Currently, three 

streams and one background location are being monitored for flow rate, temperature, pH, 

conductivity, salinity, dissolved oxygen, turbidity, total suspended solids, BOD, COD, 

tannin and lignin, oil and grease, benzene, ethylbenzene, toluene, and xylenes (BTEX), 

BNAs, and dioxins and furans. Weekly monitoring of these parameters has indicated 

detectable concentrations of only one BTEX compound, toluene. Toluene was detected 

in 16 of23 samples collected since December 15 , 199 5. One dioxinlfuran congener, 

specifically 2,3,7,8-TCDD, was detected in only one of23 samples collected since 

December 15, 1995. 

In addition to the requirements discussed above, KPC submits an annual volume and 

leachate analysis report to ADEC. Included in this report are waste volumes and a 

summary of analytical results of the leachate monitoring. 

Ward Cove Maintenance Dredging 

Periodic maintenance dredging within Ward Cove is required to ensure maritime access to 

the KPC loading and unloading facilities. Pursuant to the Clean Water Act, the US Army 

Corps of Engineers regulates dredging subject to a requirement that the Alaska 

Department of Environmental Conservation (ADEC) provide a certification before permits 

are issued. ADEC ensures that KPC's dredging will not create violations of State water 

quality standards. 

KPC performs various marine activities in Ward Cove, including the transport of log rafts 

using tug boats, delivery of wood chips using tugs and barges, and shipment of pulp using 

large ocean-going ships. In order to perform these activities, it is necessary to maintain 

sufficient water depths within Ward Cove to allow ship and barge traffic. Even though 

KPC has systems and equipment to minimize the loss of settleable solids in Ward Cove, 

navigable depths are· compromised over time by the build-up of settled materials generated 

during the course of normal operations and from normal Ward Creek drainage. It is 

therefore necessary for KPC to dredge selec1ed areas of Ward Cove as a means of 

maintaining navigable water depths. 

In 1990, KPC applied to renew an expired dredging permit. The application contemplated 

the dredging of about 15,000 cubic yards of sediment from areas in front of the pulp mill 

and sawmill. In response to the application, ADEC requested that KPC perform 

extensive sampling of the sediments to evaluate their properties before it would certify the 

permit. Due to the time required to develop and provide the data, the Corps of Engineers 

did not issue the permit until September 1992. Pursuant to the permit, KPC dredged 

about 38,000 cubic yards in the first part of 1993. The Corps of Engineers and ADEC 

determined that KPC had exceeded the permitted annual dredging quantity. The Corps of 

Engineers agreed to settle the matter without litigation in exchange for KPC contributing 

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$22,000 to the funding of a local fish hatchery. The resolution of the State issues was 

likewise achieved without litigation by the payment of a fine of $12,500. 

Ketchikan Pulp Company spent approximately $70,000 during the 1995 dredge period on 

a program to monitor water quality standards during dredging operations. The results of 

the program were shared with ADEC and EPA and indicated that KPC's dredging does 

not cause or contribute to violations of water quality standards. 

Authorization for KPC to perform maintenance dredging was received via a dredging 

permit issued by the US Army Corps of Engineers District of Alaska. The current terms 

allow KPC to dredge 15,000 cubic yard per year. Stipulations exist stating the dredged 

material will be placed in a specified site for dewatering, then transported in covered 

trucks to an upland landfill. The time limit for completing work under the current permit 

is March 31 , 1997. 

By Federal law, the final dredging permit cannot be issued until a State of Alaska Section 

40 I Water Quality Certification has been issued or waived, and a Coastal Zone 

Management consistency determination has been completed. KPC has currently stopped 

the review clock for the determination issued by the Alaska Division of Government 

Coordination to negotiate provisions with various State of Alaska resource agencies. The 

40 I Certification issued by the Alaska Department of Conservation, is pending resolution 

of several issues: 

I. Identification of a suitable disposal site for the dredged material. 

2. Approval of a Ward Cove water sampling plan to assure compliance with 

Alaska State Water Quality Standards, and 

3. Definition of a practical time frame during which dredging will have a minimal 

effect on migrating salmonids, which will likely be the month of January. 

KPC plans to conduct a maintenance dredging program after resolution of these issues. It 

is expected that this will occur in January 1997. 

Log Transfer Facilities 

Ketchikan Pulp Company operates an extensive logging operation. Logs are transferred 

from sort yards and collection points at log transfer facilities which are regulated by the 

US Environmental Protection Agency (EPA) pursuant to the Clean Water Act. The 

agency issues permits to log transfer facilities as part of the National Pollutant Discharge 

Elimination System (NPDES) program. KPC holds several such permits for its log 

transfer facilities. These permits generally place restrictions on how logs may be loaded, 

unloaded, and stored. Some permits also require monitoring to ensure that the deposition 

of bark does not cause environmental degradation. Monitoring of the waters for oil 

sheens at all KPC operated log transfer facilities is performed and logged on a daily basis. 

This is an NPDES permit stipulation. The United States Coast Guard and the Alaska 

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Department of Environmental Conservation are notified immediately by phone with a 

written follow-up report when KPC is responsible for a spill of any size to the water. 

Debris is not allowed to accumulate on, or beneath log transfer structures. Thorne Bay 

and the Annette Hemlock Mill both have permitted annual dredge activities. Thorne Bay's 

dredging is strictly monitored as required by State, Section 40 I certification stipulations. 

General Stormwater pennits (NPDES) are held by either KPC or the United States Forest 

Service for each Log Transfer Facility. These stormwater permits have requirements for 

monitoring which are implemented in a pollution prevention plat\ specifically for each Log 

Transfer Facility. · • · · i' ./ 

Pollution Prevention 

Pollution prevention activities have been unofficially underway for many years at KPC. In 

the past, these activities have been carried out informally due to the absence of a 

requirement for specific pollution prevention activities in the State of AlasiCa. These 

activities include, but are not limited to, the use of non-toxic antifreeze, vegetable baSed 

hydraulic oils, recycle of lead batteries, burning waste oils and substitution of nonhazardous materials for hazardous materials. ·Recently however, KPC has been required 

to conduct a pollution prevention study by ConsenrDecree No. A9!2-587~CV . 

KPC is in the process of conducting this study at the present time. The due date for 

completion is March 27, 1997, at which time EPA Region 10 will make determinations for 

implementation of any recommendations which appear in the final report. Currently, KPC 

has completed about 50% of this study, and has just completed the preliminary evaluation 

of alternatives as specified in the following draft workplan: 

The goal of pollution prevention is to identifY manufacturing and management process 

changes that will prevent the formation of pollutants, thus eliminating the need to remove• 

them through various treatment processes. Pollution prevention focuses on all media;· 

therefore, the transfer of a pollutant from one medium (e.g., water) to another (e.g., air or 

land) is not a preventive measure and is not considered an acceptable alternative for 

purposes of this study. The pollution prevention study is focused on KPC's key 

production processes, su.ch as. pulping and bleaching; and other on-site areas that may be 

responsible for the production and.possible release of hazardous compounds (particularly 

chlorinated organics) to the environment. 

KPC's commitment to pollution prevention dates back to the mill's initial construction. 

At that time, in the early 1950's the company decided _to install a system for complete 

recovery of pulping chemicals. This decision was made at a time when other similar mills · 

were achieving much less. Other accomplishments since the mill's startup include . 

installation of a log bundle crane to reduce debris loss in Ward Cove, conversion from 

hydraulic to mechanical debarking to reduce water consumption, and expansion of 

evaporation capacity, washing improvements, and boiler modifications to further improve 

spent sulfite liquor (SSL) recovery. 

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This commitment to pollution prevention continues today. KPC is in the fi nal design stage 

of a major bleach plant modification that will allow elemental chlorine free (ECF) 

bleaching and will result in a significant reduction in the formatio n of chlorinated organic 

compounds. Other studies and designs are currently in progress to implement spill 

containment and close up the screen room, both of which should aid in reducing the 

toxicity of the mill's wastewater. The pollution prevention study is another step in KPC's 

ongoing process of minimizing the amount of waste generated by its manufacturing 

operation. 

KPC's Pollution Prevention Study will be patterned after EPA guidance documents 

provided by Region 10 ,Handbook on Pollution Prevemion Opportunities for Bleached 

Kraft Pulp and Paper Mills, EPA 600/R-93/098, June 1993 and Model Pollution 

Prevention Plan for the Kraft Segment of the Pulp and Paper Industry, EPA 910/9-92-

030, September 1992. In addition, KPC's study will incorporate an approach similar to 

those used by the states of Washington (WAC 173-307) and Texas (TAC 335, Subchapter 

Q). 

KPC routinely collects a significant amount of analytical data to document chemical 

purchases and releases to the environment (air, water, solid waste,) This existing 

information will form the database for the pollution prevention study. 

Chronic Toxicity 

Chronic toxicity is defined by the panicular bioassay tests performed on an effluent. The 

rationale behind toxicity testing is to measure the combined effects of all individual 

components of an effluent in terms of biological toxicity to a selected aquatic life form or 

life stage. KPC is committed to reducing final effluent chronic toxicity. 

In previous attempts to identify specific sources of chronic toxicity at KPC, researchers 

were able to narrow the contributors of the greatest chro nic toxicity to a small number of 

sources and to identify broad classes of chemical constituents that may account for the 

measured toxicity. Based on this internal research, a number of preliminary conclusions 

have been reached: 

• Different compounds may account fo r toxicity to different marine test 

organisms; i.e., what is chronically toxic to sea urchins may not be toxic to 

oysters or mussels (and vice versa). 

• Chronic toxicity in the mill internal effluent streams cannot be added and 

subtracted, as is the case with more conventional contaminants such as 

BOD and TSS. The synergistic or antagonistic effects of multiple 

compounds when mixed together may result in increases or decreases in 

the combined toxicity. This makes the study of individual contributing 

sources very difficult, and the results of internal effluent stream studies are 

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inconclusive without verification using some type of simulated pilot plant 

testing. 

• Compounds or classes of compounds th at may be responsible for the mill's 

chronic toxicity include residual chlorine, chlorinated organic compounds, 

color or lignin fragmentation products, aldehydes, resinous compounds, 

and sulfur compounds. Residual peroxide from the future ECF bleaching 

sequence may also contribute to toxicity. Results indicate that KPC's 

chronic toxicity is not related to a single compound 

Major sources of chronic toxicity are thought to be the chlorine stage 

filtrate, screen room effluent, hot caustic stage filtrate, evaporator 

condensate, and in the future , the peroxide stage filtrate. 

Attempting to identify the specific compound(s) responsible for toxicity has 

proven to be a very inefficient process for reducing the mill's chronic 

toxicity. KPC will continue to seek a better understanding of the causes of 

toxicity and will follow developments in this field . Until cause-and-effect 

relationships are better documented, KPC will measure the chronic toxicity 

levels for different combinations of process changes and wastewater 

treatment steps in search of the best result that can be achieved, regardless 

of a precise understanding of the chemistry involved. Effect on final 

effluent toxicity will be considered when selecting pollution prevention 

alternatives. 

KPC is committed to reducing final effluent toxicity as defined by the test procedures 

specified in KPC's NPDES permit and State water quality regulations. Over the past two 

years, KPC has performed a series of studies to identify effluent streams and classes of 

compounds which appear to impact chronic toxicity. The pollution prevention study will 

build on that work by exploring pollution prevention opportunities for those classes of 

compounds identified in the earlier studies 

Spill Prevention and Containment 

Spill prevention measures have been developed and are aimed at addressing the following 

materials: 

• pulping chemicals including cooking liquor, spent cooking liquor, and 

magnesium oxide; 

• mineral acids; 

• caustic (sodium hydroxide); 

• polymers; 

• chemicals delivered and unloaded from rail cars; 

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• chemicals used in the bleach plant such as chlorine, sodium hypochlorite, 

surfactants, and defoamer; 

• materials used and stored in the maintenance shops and "stores" areas, such as 

oils, fuels, solvents, defoamers, and polymers; 

• wastewater, foam, and defoamer spilled outside of the wastewater treatment 

system; 

• oil, diesel fuel, fuel oil, boiler feed chemicals, caustic and sulfuric acid in the 

boiler building and turbine building. 

The measures developed to address potential spills were divided into two categories: 

prevention and containment. The spill prevention measures include over 60 specific 

measures which can be categorized as: 

• a program of installing instrumentation and control improvements, such as 

tank level sensors and alarms, pipeline pressure sensors and alarms, 

chlorine detectors, and non-discharging liquor density monitors; 

• modification of operating procedures and methods; 

• improved labeling program for piping and equipment; 

• installation of a standby power system to operate critical loads during 

power outages; 

• installation of additional equipment, such as instrument air compressors, 

pumps, and a vent line separator; 

• rerouting piping, panicularly overflows, to more appropriate locations; 

• installation of paving and curbing as appropriate to prevent migration of 

spilled material out of the immediate area of a potential spill; 

• installation of drip pans to collect oil and fuel from pipes and hoses in the 

wood room, the boiler house, and in the machine room; 

• root cause analysis of process upsets and spills to . 

The spill containment measures were consolidated into 20 projects briefly described as 

follows: 

Project I - Liquor tank containment 

Project 2 - Digester/accumulator area pump station 

27 

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146 

Project 3 -Heavy red liquor pump station 

Project 4- High liquor com~m di,ersions 10 spill 1anks 

Project 5 - Magnesium ox1de unloading are3 cor.1ainmem 

Project 6 - MagnesiUm oxide slaking 1ank and day lank containment 

Project 7- Screw pre>s poiyn,er tank containment 

Project 8 - Fiiter plant polymer tank containment 

Project 9- Containment for rail car unloading and tanks south of the bleach plant 

Project I 0 - Auto shop furnace oil double wall tank 

Project II -Containment for small tanks inside 1he bleach plant 

Project 12 - Double containment piping for sulfuric acid and caustic 

Project IJ - Cenuat storage area for totes and barrels 

Project 14 - Small containment systems throughout the mill for barrels and totes in use 

Project 15 - Comainmen! for the secondary trea1ment defoamer tank 

Project 16 -Containment tor the phosphoric acid 1ank 

Project 17 - Containment tor the sulfuric acid tank 

Project 18 - Containment for the sulfuric acid and caus1ic day tanks in the turbine building 

Project 19- Oil containment on the first floor of 1he turbine building 

Project 20- lmprmed containment tor fuel oil and diesel on the iirst tloor of the boiler 

building 

Components ofthe spiil prevention and containment program are included in both the plea 

agreement arul the Civil Consent Decree as well as KPC' s Best Management Practices 

(BMP) Plan. The study and prehmmary designs were completed and submitted to EPA in 

January, 19%. Many of the projects have been started and many are already complete. 

Final designs for the spill containment proj ects, along with an implementation schedule. 

will be submitted to EPA in September. 1996. The final implementation of the spill 

prevention a11d containment measures is expected 10 be compiete in September. 1997 

Ketchikan Pulp Company also maintains Operations :-.1anuals for !'.1arine Transfer 

Facilities and Facility Response Plans for each camp Spill Prevention Control and 

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Countermeasure Plans are maintained for each of the camps, the Thorne Bay Sort Yard 

and the Annette Hemlock Mill. 

Resource Conservation and Recovery Act 

The Resource Conservation and Recovery Act ( 1970) mandates that hazardous waste will 

be treated, stored, and disposed of so as to minimize the present and future threat to 

human health and the environment. RCRA is a regulatory statute designed to provide 

"cradle to grave" management of hazardous waste by imposing requirements on 

generators and transporters of hazardous waste. The Hazardous and Solid Waste 

Amendments of 1984 (HSW A) mandated waste minimization and a national land disposal 

ban program. Congress has declared that the generation of hazardous waste is to be 

reduced or eliminated as expeditiously as possible, and land disposal should be the least 

favored method for managing hazardous waste. For facilities operating in the State of 

Alaska, this program is regulated by the Environmental Protection Agency. There have 

been no regulatory actions filed regarding hazardous waste management at KPC. 

Ketchikan Pulp Company operates several facilities that have the potential for hazardous 

waste generation at different generation rates and volumes. The pulp mill complex 

currently operates under a Large Quantity Generator (LQG) status, although actual waste 

generation levels would often qualify it for Small Quantity Generator (SQG) status. A 

large quantity generator is one which generates over I 000 kilograms of waste in any 

calendar month, or exceeds a storage volume of hazardous waste of 6000 kilograms at 

any time. KPC's camps, sawmills, and helicopter hanger currently operate under a 

Conditionally Exempt Small Quantity Generator (CESQG) status. This level of generation 

specifies generation of up to but less than I 00 kilograms of hazardous waste in a calendar 

month. 

As a large quantity generator of hazardous waste, KPC's pulp mill complex is actively 

involved in waste minimization and source reduction programs. All waste streams are 

reviewed for source reduction and recycle possibilities. Ketchikan Pulp Company currently 

recycles a large number of waste streams, including but not limited to. antifreeze, crushed 

oil filters, batteries, light ballasts, and paint solvents. KPC has eliminated several waste 

streams through the substitution of less toxic or non-toxic material. 

Ketchikan Pulp Company Company's pulp mill complex generates a variety of 

wastes that represent the following waste codes: 

0001 Unlisted Hazardous Wastes Characteristic oflgnitability 

0002 Unlisted Hazardous Wastes Characteristic ofCorrosivity 

0003 Unlisted Hazardous Wastes Characteristic of Reactivity 

0004 Unlisted Hazardous Wastes Characteristic of Toxicity- Arsenic 

0005 Unlisted Hazardous Wastes Characteristic of Toxicity- Barium 

D006 Unlisted Hazardous Wastes Characteristic of Toxicity- Cadmium 

0007 Unlisted Hazardous Wastes Characteristic of Toxicity- Chromium 

0008 Unlisted Hazardous Wastes Characteristic of Toxicity- Lead 

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148 

0009 Unlisted Hazardous Wastes Characteristic of Toxicity· Mercury 

DOll Unlisted Hazardous Wastes Characteristic of Toxicity· Silver 

0019 Unlisted Hazardous Wastes Characteristic of Toxicity- Carbon 

Tetrachloride 

0026 Unlisted Hazardous Wastes Characteristic of Toxicity· Cresol 

0028 Unlisted Hazardous Wastes Characteristic of Toxicity· I ,2 

Oichloroeththane 

0035 Unlisted Hazardous Wastes Characteristic of Toxicity· Methyl Ethyl 

Ketone · 

0039 Unlisted Hazardous Wastes Characteristic of Toxicity· 

Tetrachloroethylene 

0040 Unlisted Hazardous Wastes Characteristic of Toxicity- Trichlorethylene 

F002 The following spent halogenated solvents; all spent solvent mixtures/blends 

containing, before use, a total of ten percent or more (by volume of one or 

more of the below listed halogenated solvents or those listed in FOO I, 

F004, FOOS, and still bottoms from the recovery of these spent solvents and 

spent solvent mixtures). 

a) Tetrachlorethylene 

b) Methylene Chloride 

c) Trichloroethylene 

d) l,l,l,Trichloroethane 

e) Chlorobenzene 

f) 1,1,2-Trichloro-1,2.2-trifluroethane 

g) 0-0ichlorobenzene 

h) Trichlorochloromethane 

i) I, 1,2 Trichloroethane 

F003 The following spent non-halogenated solvents and solvents: 

a) xylene 

b) acetone 

c) ethyl acetate 

d) ethylbenzene 

e) ethyl ether 

f) methyl isobutyl ketone 

g) n-butyl alcohol 

h) cyclohexanone 

i) methanol 

FOOS The following spent non-halogenated solvents and the still bottoms from 

the recovery of these solvents: 

a) toluene 

b) methyl ethyl ketone 

30 
c) carbon disulfide 

d) isubutanol 

e) pyridine 

U019 Benzene 

U21 0 Tetrachloroethene 

U226 I, I, !-trichloroethane 

149 

In 1994 and 1995 these materials accounted for over 25 tons of hazardous waste legally 

transported to an off-site treatment storage and disposal facility where most were burned 

for energy recovery, solidified, or extracted. 

KPC expects the current rate of reporting generation of hazardous waste to remain 

constant or increase to some degree during 1996 and 1997. This is due primarily to 

obsolete and outdated materials being sent off-site for disposal. However, beyond 1997, 

the company expects the generation of hazardous waste to decrease substantially. 

Hazardous waste at Ketchikan Pulp Company Company's camps, sawmills, and the 

helicopter hanger continues to be reduced, recycled and burned on-site for energy 

recovery. Used oil is also burned on-site in the power boilers for energy recovery. These 

facilities are also currently reducing supplies of obsolete inventories and may experience a 

brief increase in waste generation activities for 1996. Waste codes traditionally found at 

these facilities include 000 I, 0002, and 0008 as a result of on-going mobile-equipment 

maintenance activities. 

KPC reports all waste generation activities in the Biennial Hazardous Waste Report as 

required by sections 3002, 3004, and 3007 of the Resource Conservation and Recovery 

Act and Alaska Statutes 46 03.302 and 46 03.305 Completion of this report fulfills both 

the State of Alaska Hazardous Waste Report and the Federal Biennial Report for each odd 

calendar year. In addition, KPC submits a waste minimization questionnaire as a 

supplement to the State of Alaska's Annual Hazardous Waste Report. In 1995, Alaska 

reduced it's Annual Hazardous Waste Report's annual submittal requirements to biennial 

submittal to correspond with the Federal reporting requirements. 

KPC has also been aggressive in reducing its non-hazardous waste. A Recycle Process 

Improvement Team ("Recycle PIT") has been charged with increasing recycle rates and 

decreasing wastes for off-site disposal. Ketchikan Pulp Company became a Charter 

Member of EPA's Voluntary Wa$teWi$e program in 1994. This program fosters 

industry's innovative efforts to pledge and meet goals for reduction and recycle of nonhazardous wastes. 

Oil 

The oil spill resulting from the Exxon Valdez in Prince William Sound, Alaska in March 

1989 catalyzed the enactment of oil spill prevention and discharge programs by several 

regulatory bodies. 

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Ketchikan Pulp Company Company's transportation and storage of petroleum products at 

its pulp mill complex, camps, sawmills, and helicopter hanger have resulted in several 

plans to address these recent regulations 

Applicable regulations include 

18 AAC 75 

• 40 CFR 110 

• 40CFR 112 

• 40 CFR 114 

• 33 CFR !53 

• 33 CFR !54 

• 33 CFR !56 

These regulations establish guidelines for procedures, methods and equipment, and other 

requirements necessary to prevent the discharge of oil from transportation and nontransportation-related on-shore and offshore facilities into or upon the navigable waters of 

the United States or adjoining shorelines 

Programs developed to meet the regulations include Operation Procedures, Product 

Transfer Procedures, Storage and Containment Programs, Notification Procedures, 

Equipment Lists and Inspections, Line Testing, Health and Safety Response Training, 

Identification of Environmentally Sensitive Areas, and Emergency Wildlife Management 

Procedures. 

KPC is required to develop several spill scenarios for its operations and to regularly 

conduct response drills for those scenarios in order to be ready if a spill actually occurs. A 

quarterly notification exercise must be conducted by all EPA and USCG regulated 

facilities as well as aboard manned vessels and unmanned barges. The quarterly biannual 

Emergency Procedures Exercise must be conducted by manned vessels and unmanned 

barges. The Equipment Deployment Exercise must be conducted by all EPA and USCG 

regulated facilities and vessels. The annual Tabletop exercise must be conducted by all 

EPA and USCG regulated facilities and all vessels. One Tabletop exercise over the 

triennial cycle must evaluate the worst case discharge scenario An annual Unannounced 

Exercise requirement must also be met. 

KPC utilizes the following plans to fulfill planning requirements 

EPA Facility Response Plan 

• KPC Oil Discharge Prevention and Contingency Plan 

• USCG Facility Response Plan 

• KPC Facility Operations Manual 

• KPC Spill Prevention Control and Countermeasure Plan 

• KPC Emergency Response Plan 

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• Oil Discharge Prevention and Contingency Pl an for KPC's oil and supply delivery 

barge. 

• USCG Response Plan for the barge. 

TSCA 

The Toxic Substances Control Act (TSCA) enacted in 1976 provides EPA with the 

authority to require testing of chemical substances entering the environment and to 

regulate them where necessary. Programs under TSCA gather information about the 

toxicity of chemicals and the extent to which people and the environment are exposed to 

them. Polychlorinated Biphenyls (PCBs) are regulated under TSCA. The EPA regulations 

that accompany the law set specific standards regarding PCB manufacturing and use. 

Ketchikan Pulp Company does not manufacture PCBs, but is considered a generator of 

PCB waste. Prior to the mid seventies, PCBs were commonly used in transformers and 

capacitors because of their excellent heat transfer characteristics. PCBs were also 

commonly found in some petroleum products. 

Processing, distribution and the use ofPCBs are prohibited except in a totally enclosed 

manner. A transformer or capacitor is an example of an allowed totally enclosed system. 

Over the course of several years, Ketchikan Pulp Company has replaced PCB containing 

transformers and capacitors with more updated systems. The PCB fluid inside the units as 

well as the "carcass" of the units are disposed of in permitted disposal facilities. Ketchikan 

Pulp Company ships them off-site accompanied by a manifest similar to the manifest used 

for hazardous wastes in the RCRA program. 

Several shipments of PCB contaminated material have been made off-site in recent years. 

As of Spring of 1996, all PCB enhanced transfo rmers and capacitors have been 

successfully removed from operations and from locations at Ketchikan Pulp Company. An 

annual report to EPA early in 1997 will successfully close this program for KPC. 

CERCLA 

Section 302 of the Emergency Planning and Community Right-to-Know Act (EPCRA, or 

Title lii ofthe Superfund Amendments and Reauthorization Act (SARA) of 1986), Public 

Law 99-499 requires reponing of a release of a regulated substance above the Federally 

mandated 24 hour Repottable Quantity (RQ) that is not "federally permitted" or 

"continuous in nature" . This reporting requirement is for releases expected to travel 

beyond the plant boundaries. 

In the 1986 legislation, Congress specified an initial one pound RQ for all SARA 

"Extremely Hazardous Substances (EHS)"except for those substances which were already 

CERCLA hazardous substances with established RQs. In May, 1996 an EPA final rule 

was published which increased the reportable quantities for over 200 substances. 

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Ketchikan Pulp Company voluntarily chose to report the releases due to the potential 

exposure to persons off-site. Since January I, 1996 Ketchikan Pulp Company has 

reported under Section 302 of EPCRA over sixty releases to the National Response 

Center for sulfur dioxide and chlorine gas. None of the sulfur dioxide gas releases 

approached the 500 pound RQ, and none of the chlorine gas releases approached the I 0 

pound RQ. In conjunction with the State air permit which is to be issued soon, KPC has 

agreed to report sulfur dioxide releases which exceed 2 S pounds in a twenty hour period. 

Submission of the Tier One, Emergency and Hazardous Material Inventory Form, is 

required by Section 312 ofthe Emergency Planning and Community Right-to-Know Act 

(EPCRA, or Title III of the Superfund Amendments and Reauthorization Act of 1986), 

Public Law 99-499. The purpose of the form is to provide State and local officials and the 

public with information on the general types and locations of hazardous chemicals present 

at a facility during the past year. 

A Tier Two form may be substituted for a Tier One form. The Tier Two form provides 

detailed information and must be submitted in response to a specific request from State or 

local officials. 

In 1996, Ketchikan Pulp Company filed Tier Two Reports for 

• Ketchikan Pulp Company Mill at Ward Cove 

• Flight Department 

Ketchikan Sawmill 

• Shelter Cove Camp 

• Marguerite Bay Log Transfer Facility 

• Annette Hemlock Sawmill 

Tuxekan Logging Camp at Labouchere Bay 

• El Capitan Logging Camp at Coffman Cove 

• Naukati Logging Camp 

• Polk Inlet logging Camp 

Thorne Bay Logging 

These reports were provided to local fire officials, the Local Emergency Planning 

Committee, and the Alaska Department of Environmental Conservation. 

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153 

Submission of Form R, the Toxic Chemical Release Inventory (TRJ) Reponing Form, is 

required by Section 313 of the Emergency Planning and Community Right-to-Know Act 

(EPCRA, or Title III of the Superfund Amendments and Reauthorization Act of 1986), 

Public Law 99-499. Reponing is required to provide the public with information on the 

releases of listed toxic chemicals in their communities and to provide EPA with release 

information to assist the Agency in determining the need for future regulations. Facilities 

must report the quantities of both routine and accidental releases of listed toxic chemicals, 

as well as the maximum amount of the listed toxic chemical on-site during the calendar 

year and the amount contained in wastes transferred off site. 

Chemicals reported on Form R include hazardous chemicals used and hazardous chemicals 

generated in the manufacturing process (as defined by 40 CFR 372.65) in excess of the 

threshold planning quantities listed in 40 CFR 370.20. Form R also includes any 

information on hazardous substances above the threshold planning quantity in storm water 

and in wastes that are sent off-site for disposal. 

A completed Form R must be submitted for each toxic chemical manufactured, processed, 

or otherwise used at each covered facility as described in the reporting rule in 40 CFR Part 

372 (originally published February 16, 1988, in the Federal Register). 

Section 313 ofEPCRA requires that reports be filed by owners and operators of facilities 

that meet all of the following criteria. Ketchikan Pulp Company Company's Pulp Mill 

Complex meets the submission requirements presented below: 

• The facility has I 0 or more full-time employees; and 

• The facility is included in Standard Industrial Classification (SIC) Code 2611 

and 

• The facility manufactures (defined to include importing), processes, or 

otherwise uses listed toxic chemicals in quantities greater than the established 

threshold in the course of a calendar year. 

Facilities that must report under section 313 of EPCRA are required to develop reasonable 

estimates of the amounts oflisted chemicals released from the facility . Additional 

monitoring is not required by section 3 13, however facilities are required to consider all 

available data. including that developed under other environmental regulations. Facilities 

are required to document data developed and to maintain records for three years from the 

date that the report is submitted . 

Until 1995, TRI reporting was required for 368 chemicals and chemical categories. On 

November 30, 1994, EPA promulgated final rules that added 286 chemicals and chemical 

categories to the Jist of toxic chemicals for which reporting is required, and provided an 

alternate threshold for some reporting. The addition of these chemicals and chemical 

categories almost doubled the number of toxic chemicals subject to TRI reporting. 

35 
154 

Section 3l3's purpose is to make information available on the amount of specific toxic 

chemicals released to the environment from manufacturing facilities. EPA is required to 

make this information accessible on a computerized database. The Toxic Release 

Inventory (TRI) database became available in June 1989 through the National Library of 

Medicine's TOXNET system. EPA also is providing information on microfiche, computer 

tape, CD-ROM and diskette for analysis by interested organizations and individuals. 

Annual reports have been prepared by EPA to summarize release data by industry, region 

and chemical. 

Ketchikan Pulp Company is required to develop reasonable estimates of amounts of 

chemicals released. KPC has historically relied on pulp mill specific data. If it has not 

been available, Ketchikan Pulp Company has referred to industry data, specifically the 

National Council For Air and Stream Improvement for the Pulp and Paper Industry's 

(NCASI) SARA Release Reporting documents. The report allows for estimates based on 

monitoring data or measurements, estimates based on mass balance calculations, estimates 

based on published emission factors, or estimates based on engineering calculations or best 

engineering judgment. 

Separate section 313 reporting thresholds apply to manufacturing, processing and 

"otherwise using" section 313 chemicals. Manufacturing and processing thresholds are set 

at 25,000 pounds per year. The "otherwise use" threshold is I 0,000 pounds per year. 

Any chemical that meets any of the three reporting thresholds must be reported for all 

activities at the facility. Of the 600 reportable chemicals, KPC only manufactures, 

processes or "otherwise uses" 9 chemicals in volumes that require reporting under 

Section 3 13. 

Ketchikan Pulp Company currently provides reports for the following nine chemicals: 

• Nitric Acid 

• Phosphoric Acid 

• Chlorine 

Chloroform 

• Hydrochloric Acid 

• SulfuricAcid 

• Ammonia 

Methanol 

• Formic Acid 

36 
155 

Of those nine chemicals, two (Nitric Acid and Phosphoric Acid) are not discharged to the 

environment unless an unanticipated spill or release occurs. Nitric Acid has been 

successfully eliminated from pulp mill operations since 1989. Phosphoric acid, a 

feedstock for the secondary aerobic treatment system, was released to the environment in 

one reporting year over the last six years due to an unanticipated spill or release. 

Chlorine is released to the environment in air emissions. This chemical's release ordinarily 

results from production activity in the Bleach Plant of the Pulp Mill facility unless an 

unanticipated spill or release provides alternative avenues to the environment. 

Chloroform release amounts continue to decrease. This reduction in reported chloroform 

levels is based on recently available emission measurements taken at the mill. Originally, 

KPC used estimated values presented in the NCASI publications which include Kraft pulp 

mills as well as sulfite pulp mills. Ketchikan Pulp Company Company's sulfite pulp mill 

produces significantly less chloroform than a Kraft mill. With actual measured data 

available, Ketchikan Pulp Company has reported significant reductions in releases of this 

material. This material is expected to continue its decreasing trend with conversion to the 

Elemental Chlorine Free bleaching process in 1997. 

Ketchikan Pulp Company has accomplished a dramatic reduction of hydrochloric acid 

releases. An average two million pounds of hydrochloric acid was calculated as released 

in the wastewater effluent each year from 1989 to 1992. In late 1993, with the addition of 

an Effluent Neutralization System (ENS), KPC successfully reduced hydrochloric acid 

discharges to less than 1,000 pounds a year. Technical documents suggest hydrochloric 

acid may be released in the effluent as a function of pH. (Hydrochloric acid concentration 

is inversely proportional to the pH of the effluent.) 

Release of sulfuric acid to the environment is another by-product emission from the 

powerhouse and is directly related to the sulfur content of the fuel burned. Technical 

documents suggest sulfuric acid aerosol is inadvertently produced as an impurity in oil 

combustion in boilers. The reported release values for sulfuric acid continue to decrease 

from the early 1990's to present through the use of low sulfur fuels. 

Releases of ammonia to the environment show a significant decrease over the last few 

years. This reduction in ammonia emissions is based on recently available emission 

measurement data. Originally, KPC used the values presented in the NCASI publications 

which allow for the reporting of either un-ionized or total ammonia. In prior years total 

ammonia has been reported. For 1994, Ketchikan Pulp Company reported un-ionized 

ammonia. The combined outfalls and better effluent pH control with the Effluent 

Neutralization System have provided assurances of consistent and acceptable pH ranges 

over the course of the year. The pH of the effluent directly impacts ammonia release. 

Reported methanol releases over past years show a slight increase in fugitive releases and 

a slight decrease in air releases. This is a result of improved mill-specific data. Water 

releases show a significant decrease in methanol. This is a result ofbetter pH control of 

the combined outfalls by way of the Effluent Neutralization System. 

37 
156 

For the first time, KPC reported the manufacture of tormic acid as a by-product of the 

pulping process under the Form R for the 1994 reporting year. Once this material is 

manufactured, it tends to adhere to the pulp fibers. It remains with the product and human 

exposure to the substance does not occur under normal conditions of use. 

Ketchikan Pulp Company is a charter member and continuing participant in EPA's 

voluntary 33/50 program which fosters industry's innovative efforts to pledge and meet 

goals for reduction of TRI chemical releases. Ketchikan Pulp Company continues to 

regularly review guidance documents and mill specific data in order to anticipate future 

reporting responsibilities. 

Alaska Hazard Ranking Model 

The Alaska Hazard Ranking Model was developed as a tool to allow ADEC to prioritize 

contaminated sites for cleanup actions under Alaska's Oil and Hazardous Substances 

Pollution Control Regulation. 18 AAC 75, and the state's Underground Storage Tank 

Cleanup Regulation. 18 AAC 78. The model is designed to be used in the evaluation of 

sites where contamination has occurred, and contaminating activity has ceased. 

The Hazard Ranking Model has several limitations that are important to understand. First, 

the Ranking Score derived by the model does not consider the actual human health impact 

of a site, only the potential for impact; therefore, a high score does not mean that human 

health impacts such as cancer and chronic health conditions have been observed that can 

be attributed to the site. Second, although the model does identify site specific conditions 

such as the relative toxicity and volume of the contaminants present, and the proximity to 

potentially affected plant, animal and human populations, the model is not a risk 

assessment. A relatively high Ranking Score based on agency tile data alone does not 

demonstrate that a site poses any threat to human health or the environment, or that 

immediate action is warranted. Third, the model has no way to incorporate the actual or 

potential benefits of management practices or remediation programs which may have been 

implemented to address potential exposure pathways. 

The Ranking Score compiled by ADEC incorrectly combines contaminants, contaminated 

media, and exposure and release pathways to develop a "composite" ranking score. The 

instructions which are part of the Model instruct the user not to score a site in this manner 

in several different places. Multiple contaminants and multiple source sites are accounted 

for using the Multiple Sources or Contaminants Value in the model. The method used by 

ADEC seriously overstates the resulting score. 

38 
157 

Worker Safety 

Ketchikan Pulp Company follows regulations established by the Federal Department of 

Labor, Occupational Safety and Health Division. The State of Alaska has adopted the 

Federal Regulations listed in 29 CFR From January I, 1993 through June 28, 1996 five 

inspections of the Ward cove pulp mill facilities were conducted by State OSHA These 

were both in response to complaints filed by employees and unannounced inspections. 

These five inspections resulted in eleven citations and Ketchikan Pulp Company paid a 

total of $15,000 in fines. These inspections are further detailed below 

Three inspections occurred under the Process Safety Management Standard established in 

Federal law. This standard sets regulations for every process phase of highly hazardous 

chemicals. Such chemicals are in daily use in the pulping process which operates 

continuously, twenty four hours per day, seven days per week. These inspections were 

the result of chemical releases that either could have or did result in employee exposure to 

chemicals. These investigations resulted in a settlement with OSHA in which Ketchikan 

Pulp Company agreed to abatement procedures, and the potential fine was reduced by 

60%. 

One inspection resulted from an employee complaint regarding the Perrnit Required 

Confined Space Entry standard. As host employer on a work site, KPC a~so has 

responsibility for independent contractors working on the site. The complaint came from 

a contractor employee. The citation that resulted from the inspection was a "paperwork 

citation" that was classed, "Other than Serious" and carried no monetary penalty 

In !993 an incident involving the improper removal of asbestos by a contractor resulted in 

a State OSHA inspection. This incident resulted in a $7,000 fine 

Prior to 1993, there were numerous asbestos inspections at KPC as a result of employee 

complaints. In 1988, a settlement agreement was reached with the Department of Labor 

that established a new asbestos abatement management program at the Ward Cove facility 

In 1992 OSHA inspected the facility and determined that all of the required procedures 

had been implemented 

In the period from January 1993 through June, 1996 there was one Federal OSHA visit at 

the milL Federal OSHA has jurisdiction over waterfront facilities along with the US Coast 

Guard. Five citations were issued. The basis for the citations was employee failure to 

wear Personal Protective Equipment when working on the barge, and management failure 

to enforce the rule requiring that the equipment be worn The fine was $4,000. 

KPC cooperates voluntarily with the Training and Consultation Section of the Department 

ofLabor. Between 1991 and 1996 there have been five voluntary compliance inspections 

at Ward Cove. During a voluntary compliance inspection, representatives from OSHA 

and KPC inspect the facility for deficiencies and items that could lead to a citation if not 

corrected. 

39 
158 

There have been ten OSHA inspections of other Ketchikan Pulp Company facilities 

including the Annette Hemlock Mill. Ketchikan Saw Mill. Shelter Cove logging camp, 

Thome Bay Sort Yard and Shop and the Ward Cove wood room. Five were voluntary, 

one resulted from an injury, and three resulted from or complaints. The injury related 

inspection resulted in a fine of$16.000. A total of$4,000 was paid in fines as a result of 

all other inspections. 

Ketchikan Pulp Company has a proactive safety management program which includes cash 

safety awards to employees. Over $1 million has been spent on proactive programs since 

1991. 

Employee Training and Development 

Ketchikan Pulp Company involves employees throughout all divisions in discovering and 

fixing the root causes of compliance problems, and seeking solutions which are designed 

to prevent the recurrence. Planning for environmental compliance is now integrated with 

planning for product development, process changes. and power plant operations to be sure 

that production is achieved without compromise to environmental results. 

Ketchikan Pulp Company has had success in involving employees in several company wide 

efforts to improve performance. The Total Quality Commitment program trains each 

employee in how to contribute to product quality. The STOP program trains each 

employee in how to recognize and stop unsafe acts in the workplace. The Company 

believes that knowledge of environmental requirements accompanied by the daily ex-ercise 

of individual good judgment on the part of all employees will achieve the commitment and 

momentum necessary to achieve good results. 

Ketchikan Pulp Company has introduced an Environmental Compliance program that 

includes engineering, construction, process changes, material substitutions and employee 

training. Employee training is a key element of the program. A comprehensive training 

program for KPC was developed in December. 1995. The program includes job-specific 

training for KPC' s production personnel and general environmental sensitivity/awareness 

training for all management, administrative and operations personnel The training 

program was developed in two stages: 

I. Corporate Responsibility/Business Ethics/Environmental Overview Training. 

2. Mill Operations Training for Environmental Compliance 

The first stage represents training requirements that apply equally to all KPC personnel 

with emphasis on Corporate Responsibility. This training was completed for all company 

employees in June, 1996. The second stage involves training requirements that apply to 

all mill operations personnel. This stage is currently underway. 

40 
159 

An employee handbook was developed and distributed to all employees. The handbook 

embodies KPC's Corporate Environmental Policy Statement, defines KPC management 

responsibilities as well as environmental responsibilities expected from all employees. 

Ketchikan Pulp Company encourages its employees to voice concerns about suspected 

environmental problems or operating conditions that may adversely affect compliance. 

Employees are urged to repon any concerns and are guaranteed protection from 

retribution for expressing concern about a problem. Efforts by co-employees or 

supervisors to retaliate against employees for reponing suspected problems will not be 

tolerated and will result in discipline. The company will not tolerate effons to discover the 

identity of employees who choose to repon anonymously. 

Ketchikan Pulp Company has an open door policy in regard to reponing environmental 

concerns. Employees are encouraged to express concerns to their supervisors, Operations 

Manager, Industrial Relations Manager or the Environmental Manager. If employees are 

not satisfied with the reporting at these levels, they are welcome to meet with the General 

Manager. 

If any employee is uncomfortable reponing environmental concerns to a supervisor or 

manager, KPC has retained an outside service to take confidential reports about suspected 

environmental problems. This service was selected to ensure that reports are strictly 

confidential. This "800" number service has been instructed to relay concerns to 

management for follow up but not to reveal the identity of the caller. 

41 
160 

Ketchikan Pulp Company 

Permits and Reporting Procedures 

1996 

Location 

Draft Air Quality Operating Pulp Mill Complex 

Permit #9513-AA003 

Consent Decree with the Pulp Mill 

State of Alaska 

Federal New Source Pulp Mill Package Boiler 

Performance Standards 

Federal New Source Annette Hemlock Mill 

Performance Standards 

ACOE Dredging Permit R- Ward Cove 

730053 

ACOE Dredging Thorne Bay Thorne Bay 

14 

Maintenance and Operating Naukati Log 

Manual 

Biennial Hazardous Waste Pulp Mill 

Report 

Waste Minimization 

Pollution Prevention 

Supplement: 

Annette Hemlock Sawmill 

Coffman Cove 

Flight Department 

Ketchikan Sawmill 

Labouchere Bay 

Naukati Log 

Thorne Bay 

316 Health Permit 

Coffman Cove 

Naukati Log 

Shelter Cove 

Thorne Bay 

ACOE Log Storage Permit Thorne Bay 

Clarence Strait 21 

ACOE Log Storage Permit Thorne Bay 

Clarence Strait 53 

ACOE Log Transfer Facility Coffman Cove 

Permit 

ACOE Permit NPAC)-OP Naukati Log 

ATTACHMENT C 

Type 

Air 

Air 

Air 

Air 

Dredging 

Dredging 

Drinking Water 

Hazardous Waste 

Hazardous Waste 

Hazardous Waste 

Hazardous Waste 

Hazardous Waste 

Hazardous Waste 

Hazardous Waste 

Hazardous Waste 

Health 

Health 

Health 

Health 

Log Storage 

Log Storage 

Log Transfer 

Moorage 
161 

Tuxecan Passage 6 

ACOE Float Camp Moorage Marguerite bay 1 Moorage 

N-890511 

ACOE Permit NPACO-OP·P Naukati Log Moorage 

Tuxecan Pass<19_e 3 

Facility Operations Manual Marguerite Bay Oil and Chemicals 

Facility Operations Manual Shelter Cove Oil and Chemicals 

Facility Response Plan 

Coffman Cove Oil and Chemicals 

Labouchere Bay Oil and Chemicals 

Marguerite Bay Oil and Chemicals 

Naukati Log Oil and Chemicals 

Shelter Cove Oil and Chemicals 

Thorne Bay Oil and Chemicals 

Fuel Transfer Operations Naukati Log Oil and Chemicals 

Manual 

KPC Emvergency Response Pulp Mill Oil and Chemicals 

Plan 

KPC EPA Facility Response Pulp Mill Oil and Chemicals 

Plan 

KPC Facility Operations Pulp Mill Oil and Chemicals 

KPC Oil Discharge Pulp Mill Oil and Chemicals 

Prevention and Contingency 

Plan 

KPC USCG Facility Pulp Mill Oil and Chemicals 

Operations Manual 

Naukati Logging Naukati Log Oil and Chemicals 

Spill Prevention Control and 

Countermeasure Plan 

Ma~guerite Bay Oil and Chemicals 

Naukati Log Oil and Chemicals 

Polk Inlet Oil and Chemicals 

Pu!QMill Oil and Chemicals 

Thorne Bay Oil and Chemicals 

Tier II EPCRA Report 

Annette Hemlock Sawmill Oil and Chemicals 

Coffman Cove Oil and Chemicals 

Flight Department Oil and Chemicals 

Ketchikan Sawmill Oil and Chemicals 

Labouchere Bay Oil and Chemicals 

Marguerite Bay Oil and Chemicals 

Naukati Log Oil and Chemicals 
162 

Pulp Mill Oil and Chemicals 

Shelter Cove Oil and Chemicals 

Thorne Bay Oil and Chemicals 

Solid Waste Disposal Permit 

#9213-BA001 Pulp Mill Solid Waste 

#9313-BA001 Thorne Bay Solid Waste 

#9113-BA005 Pulp Mill Solid Waste 

NPDES Stormwater Thorne Bay Sort Yard Stormwater 

NPDES Stormwater Thorne Bay Waste Yard Stormwater 

NPDES Stormwater Pollution Thorne Bay Stormwater 

Control Plan 

NPDES Stormwater Pollution Naukati Log Stormwater 

Control Plan 

Wastewater Disposal Permit 

#9413-DB007 Shelter Wastewater 

Cove 

#AK-000092-2 Pulp Mill Wastewater 

#AK005252-3 Draft Pulp Wastewater 

Mill 

#9510-DB004 SM Floating Wastewater 

Camp 

#9510-DB010 SM 3 Wastewater 

Floating Camp 

#9610-DB001 SM 3 Wastewater 

Floating Camp 

#9213-DB020 Coffman Wastewater 

Cove 

#9313-DB021 Naukati Log Wastewater 

#9413-DB007 Shelter Wastewater 

Cove 

Consent Decree with United Pulp Mill All media, 

States Government Environmental 

Audit 

Compliance Agreement with Entire Company Corporate 

EPA Responsibility. 

Environmental 

Awareness 

Best Management Practices Pulp Mill Operating 

Plan Procedures 

316 HealthPermit 

Coffman Cove Health 

Naukati Log Health 

Thorne Bay Health 
163 

Marguerite Bay Water Use Marguerite Bay Water 

Permit 

Construction Operation SM 3 FloatingCamp Water Treatment 

Certificate 

Operation Maintenance SM 3 Floating Camp Water Treatment 

Manual 

Water Treatment Shelter Cove Water Treatment 

Construction 
164 

Testimony of Ernesta Ballard 

Senate Energy Committee 

July I 0. 1996 

My name is Ernesta Ballard. I am an environmental consultant, and was formerly 

Regional Administrator of the Environmental Protection Agency. In my testimony I am 

going to focus on the serious allegations that have been made about KPC' s environmental 

compliance. In my view, the time has come to set the record straight. 

Ketchikan Pulp Company operates only with the specific permission of both State and 

Federal environmental agencies. KPC operations are regulated by at least 75 different 

permits and plans which cover everything from logging camp stonnwater to hazardous 

waste disposal. 

The allegations of KPC' s opponents attack their performance, vilify their people, and 

distort their record . They present data out of the context in which they were originally 

reported and without regard for the strict scientific methods which are mandated by 

regulation. They reach conclusions which are based on subjective values instead of the 

objective measures established by law. In these presentations information has been 

manipulated and distorted in order to support theories which are intentionally designed to 

raise public alarm 

The Felony and Misdemeanor Violations of the Clean Water Act 

Wastewater management at Ketchikan Pulp was the subject of a lengthy investigation by 

the linited States Environmental Protection Agency which began in 1991 In 1995 KPC 

paid a fine of $4,250,000, and agreed to complete capital projects in lieu of an addiiional 

fine of $1.750,000. Available for Committee review are twelve studies and workplans 

describing additional projects required by the settlement. 

KPC has paid a heavy price for the mistakes of the past. Money and management time 

have been heavily invested in achieving change. The enforcement action achieved the 

intended result of dramatically increasing corporate awareness of environmental 

responsibility. 

Ward Cove Fish Kills 

It has been alleged that KPC eflluent kills fish in Ward Cove. There have been no 

reported fish kills resulting from KPC's eflluent. The only fish kill for which KPC was 

responsible resulted over fifteen years ago from an accidental release of a cleaning 

chemical downstream of the water reservoir at Connell Lake. 

Toxic Release Inventory 

A regulatory report which is filed annually by KPC has been used by opponents to support 

a theory that the pulp mill is among the so-called "worst" polluters in the Pacific 
165 

Northwest. Submission of Form R, the Toxic Chemical Release Inventory is required by 

the Emergency Planning and Community Right-to-Know Act. 

The reponing of hydrochloric acid on Form R is one of the best examples of data which 

must be properly interpreted to be understood. From 1989 to 1992 following Form R 

instructions, KPC reponed that they discharged 2 million pounds of hydrochloric acid 

even though it is not used anywhere in the pulp process. This figure was an anomaly of the 

reponing process. In late 1993 KPC installed an effluent neutralization system which 

reduced the reponed discharge of chloride ion as hydrochloric acid which is now more 

properly reponed at less than l, 000 pounds per year. 

To my knowledge, EPA does not use Form R in the way it is abused by KPC's opponents 

The Form collects information for future use and is not a compliance measurement tool. 

Nonetheless, KPC's opponents continue to cite the old Form R data in a manner which 

completely distorts the truth. 

Health Effects of Air Pollutants 

Some have asserted that Ketchikan Pulp has not complied with Alaska laws protecting the 

enjoyment of life and property 

In Aprill995, KPC completed exactly such a study for the State of Alaska. The purpose of the 

study was to detennine the risk that air pollutants might pose to human health and the 

environment. 

The study looked at the impact of dozens of chemicals including dioxin and showed that only 

chloroform merited further analysis. KPC completed a health risk assessment of chloroform 

which showed that the human health risk was within the State's regulatory risk level. 

Resource Conservation and Recovery Act 

Testimony has suggested that KPC is not properly regulated by the Resource Conservation and 

Recovery Act (RCRA) because the State of Alaska lacks adequate funding to enforce the law. 

Alaska does not enforce this very important environmental law: EPA does. KPC reports all 

hazardous waste generation activities to EPA in the Biennial Hazardous Waste Report as 

required by the Resource Conservation and Recovery Act. In addition, KPC submits a 

waste minimization questionnaire as a supplement to the State of Alaska's Annual 

Hazardous Waste Report 

Ward Cove Sediments and Bioaccumulation ofToxics 

Testimony has been given citing KPC' s evaluation of water and sediment quality in Ward 

Cove. KPC monitors for dioxin as well as metals, methyl mercury, toxicity and many organic 

chemicals. Some have been detected at some Ward Cove sampling stations, but at levels lower 

than the action thresholds established in sediment standards. Concentrations of dioxin are 20 

2 
166 

times lower than the standards and weU below the threshold considered low risk for fish. Some 

compounds have been detected at levels which will be addressed in the Ward Cove remediation 

plan. 

Alaska Hazard Ranking Model 

KPC's score on the Alaska Hazard Ranking Model has been cited as evidence of threats to 

public health from the mill. The Hazard Ranking Model was developed as a tool to allow 

the State to rank sites where contamination has occurred and contaminating activity has 

ceased. It is inappropriate to apply to an ongoing operation. 

The model has no way to incorporate the benefits of management practices or remediation 

programs which have been implemented by the site owner. The State has acknowledged 

that permits and review programs already in place properly manage the contaminants of 

concern and are rescoring the facility accordingly. 

Conclusion 

KPC' s environmental record contains evidence of serious problems which include the 

enforcement action which I have already described. They have already been punished, and 

have already paid a heavy price. They deserve the same opportunity as other industrial 

enterprise to accept responsibility for their mistakes and to move on with their future. 

I have only been able to cover a few of the fabrications ofKPC' opponents. The alarm 

they have raised is unsupported and unwarranted. State and Federal regulators charged 

with enforcing environmental regulation and protecting public health are knowledgeable of 

the most minute details ofKPC operation. They have available a full array of compliance 

and enforcement measures. 

KPC' s compliance and enforcement history is already a matter of public record. They 

accept responsibility for their shortcomings and mistakes. They have nothing to hide from 

the regulators, this Committee, or their community. Thank you for the opportunity to 

testifY today. 

3 
167 

WRIUEN TESTIMONY OF J. SCOU ESTEY: H.R. 3659 

INTRODUCTION 

Ketchikan Pulp Company (hereinafter "Ketchikan" or "the Company") has 

retained Jaakko Poyry Consulting North America (hereinafter "Jaakko 

Poyry") to provide testimony regarding typical financial return and project 

life requirements for capital expenditure within the pulp and paper 

industry. The request for testimony was made in light of the Company's 

request for an extension of its timber supply contract with the USFS in 

order to ensure that fiber supply is available for a sufficient period of time 

to allow the Company to earn an adequate return on capital expenditures 

at the Company's pulp mill in Ketchikan. 

PULP AND PAPER INDUSTRY INVESTMENTS 

Pulp and paper is a capital intensive industry which requires not only large 

initial investments, but also significant on-going investments for the 

purposes of maintenance, environmental compliance, and facility 

improvements. Additionally, the pulp and paper industry is commodity 

oriented, highly cyclical, and typically realizes relatively low margins. 

Expected rate of return, and the life of an investment project that is 

required in order for a company to earn that return, can vary significantly 

within the pulp and paper industry. In Jaakko Poyry's experience, it is not 

uncommon to observe project returns ranging from negative to 30+%, and 

project life requirements ranging from 5 to 25 years. 

Of the many factors that can potentially influence these measures, those 

items having the most significant impact include; the timing of the 

expenditure relative to the industry cycle, the magnitude of the 

expenditure, and the purpose of the expenditure, which, within the pulp 

and paper industry, can be roughly categorized as follows: 

• New Mill or New Production Line 

• Major Rebuild 

• Productivity and/or Margin Enhancements 

• ReplacemenUMaintenance 

• Environmental 

New Mill or New Production Line 

The capital intensive nature of the pulp and paper industry is most evident 

when reviewing the investment requirements of a new mill or production 

line. As a reference point, a greenfield, or new, market pulp facility with a 

production capacity of 500,000 metric tons per year of bleached softwood 
168 

kraft pulp (BSKP} would require a capital investment of approximately US 

$900 million, or $1 ,800/annual ton. The historical trend selling price for 

BSKP is approximately US $680/ton. 

Experience within the industry indicates that companies investing in new 

mills or production lines can typically expect to achieve a real, after tax, 

internal rate of return between 10% and 15%, and will require a project life 

of between 20 to 30 years in order to realize that return. 

Major Rebuild 

Major rebuilds of pulp and paper assets are typically designed to result in 

a significant increase in the productive potential of a mill, or to facilitate 

the conversion of an asset to the production of a higher valued grade. A 

major rebuild typically can require an investment on the order of 20% to 

50% of the investment requirement to build new capacity. 

While a major rebuild will often result in a significant increase in the 

remaining life of a facility, in most cases the project life will be somewhat 

less than would be expected with new capacity. As a result, experience 

indicates that companies will typically require a more significant rate of 

return, perhaps 15% to 20%, in order to compensate for the added 

uncertainty around project life. With this type of major rebuild investment, 

a company will usually require a project life of 10 to 20 years to realize 

return expectations. 

Productivity and/or Margin Enhancements 

Expenditures falling within this classification are minor capital projects 

relative to new investment and major rebuilds, and are typically 

undertaken in order to realize the full productive potential of a facility, 

resulting in incremental sales volume and/or improved profit margins. 

This type of expenditure can be further segmented to include productivity 

enhancement, cost reduction, and quality enhancement expenditures. 

Productivity enhancements result in incremental capacity and an 

improved revenue stream. Often, productivity enhancements are 

accomplished without increasing the annual fixed costs of the facility, and 

therefore have the added benefit of reducing the operating cost per unit of 

production. 

Cost reduction expenditures result in improved profit margins while having 

little or no impact on the capacity of a facility. An example of this type of 

expenditure would be an increase in the level of automation at a facility 

which results in a permanent reduction in the level of required personnel. 
169 

Expenditures for quality enhancement may result in improved profrt 

margins through an increase in the realizable selling price, or may simply 

allow a facility to maintain its competitiveness in a market which is 

experiencing increased quality demands from its customers. 

In general terms, the relatively low capital requirement for this type of 

expenditure, in combination with a relatively minor impact on the life 

expectancy of a facility, result in rate of return expectations of 

approximately 20% to 30%, and a required project life of 5 to 15 years. 

ReplacemenVMajntenance 

This type of capital expenditure includes the replacement of components 

or equipment as required to maintain productivity, cost structure, or 

product quality. By definition, these expenditures do not enhance the 

sales volume or margin potential of a facility and therefore are difficult for 

companies to justify based on rate of return expectations. 

Large investments which result in the total replacement of a major section 

of a production line can be referred to as a major replacement. Since this 

type of replacement will often result in a significant increase in life 

expectancy of a facility, similar to a major rebuild investment as described 

above, but is not typically made for the purpose of significant improvement 

in revenues or margins, companies will typically require a project life of 15 

to 20 years to realize an adequate return on the investment. 

Environmental 

Capital expenditure for environmental purposes within the pulp and paper 

industry is often required in order to maintain compliance with 

environmental regulations. In this regard, environmental expenditures are 

similar to maintenance expenditures in that they have no direct impact on 

the sales volume or margin potential of a facility and therefore are also 

difficult for companies to justify based on rate of return expectations. To 

the degree that environmental expenditures are required in order for a 

facility to operate and realize the full potential of prior investments, the 

expected rate of return will be lower, and the required project life to realize 

that return will be longer than expectations for new construction or a major 

rebuild. 

KETCHIKAN PULP COMPANY'S REQUEST FOR EXTENSION 

Jaakko POyry's knowledge of the capital program being considered by 

Ketchikan is limited to the aggregate value of the expenditure, US $200 

million, the estimated completion of the expenditure, 5 to 8 years hence, 

and a general description as provided by Ketchikan, which described the 
170 

expenditure as including bleach plant modifications, environmental 

equipment and facilities modifications, an upgrade of power generation 

facilities, and a modernization of the chemical recovery systems. 

Given the general description and magnitude of the investment project, it 

appears that the majority of the investment could be classified best as a 

major replacement and environmental expenditure. Based on the above 

review of rate of return and project life requirements, it is within the range 

of expectations to require 15 to 25 years to allow for an adequate return 

on an investment program of this nature and magnitude. 
171 

Southeast Alaska Conservation Council SEACC 419 6th Street, Suite 328, Juneau, AK 99801 

(907) 586-6942 phone (907) 463-3312 fax 

email: seacc@alaska.net 

STATEMENT OF ROBERT LINDEKUGEL, CONSERVATION DIRECTOR accompanied 

by DAVID KATZ, FOREST PLAN COORDINATOR 

REGARDING H.R. 3659 THE ENVIRONMENTAL IMPROVEMENT TIMBER 

CONTRACT EXTENSION ACT 

JOINT HEARING BEFORE THE HOUSE COMMITTEE ON RESOURCES AND 

SUBCOMMITTEE OF THE COMMITTEE ON AGRICULTURE 

JULY II. 1996 

Mr. Chairman. and members of this Committee: 

My name is Robert Lindekugel, and I am the Conservation Director for the Southeast Alaska 

Conservation Council (SEACC). With me today is David Katz, our Forest Plan Coordinator, 

who can help answer any detailed questions you may have. Thank you for the opportunity to 

panicipate on one of the panels testifying before you today. I respectfully request that my 

written statement and accompanying materials be entered into the official record of this 

Committee hearing . 

Founded in 1970, SEACC is a coalition of 15 local citizen, volunteer conservation groups in 

12 Southeast Alaska communities, from Ketchikan to Yakutat. SEACC's individual members 

include commercial fishermen, Alaskan Natives, small timber operators and value-added wood 

manufacturers, tourism and recreation business owners, hunters and guides, and Alaskans from 

all walks of life . SEACC is dedicated to preserving the integrity of Southeast Alaska's 

unsurpassed natural environment while providing for balanced, sustainable use of our region's 

resources. 

This is the first hearing conducted by this Committee on H.R. 3659, the "Environmental 

Improvement Timber Contract Extension Act. " Senator Murkowski did conduct Energy and 

Natural Resources Committee field hearings in Ketchikan and Juneau, Alaska , on May 28 and 

May 29, 1996, on the subjects of the Tongass Land Management Plan and a "possible 

extension" of the Ketchikan Pulp Company (KPC) 50-year contract more generally. 

However, we need to point out that those testifying at the May 28 and May 29 field hearings 

were not testifying to the provisions of this bill because the bill had not yet been introduced. 

We suspect that if these Committees beld hearings in Alaska on the specific provisions of this 

bill, a great many Alaskans would vehemently oppose this bill . 

LYNN CANAL CONSERVATION, Haines • FRIENDS OF GLACIER BAY, Gus~V\IS • FRJENDSOFBERNERS BAY, Juneau 

WRANGELL RESOURCE COUNCIL • AL\SKA SOCIElY OF AMERICAN FOREST DWEllERS, PoiDt Bater • PEUCAN FORESTRY COUNCIL 

ALASKANS FOR JUNEAU • NARROWS CONSERVATION COAUTlON, Pc1ersburg • TONG ASS CONSER VA llON SOCIETY, Kecdlilun 

CHICHAGOF COl'~ERVA TION COUNCIL. Teulr.ce • JUNEAU GROUP SIERRA CLUB •SITKA CONSERVATION SOCIETY 

TAKU CONSER VA llON SOCIETY. Jyoeaw • PRINCE OF WALES CONSERVATION LEAGUE, Cnia • YAKUTAT RESOURCE CONSERVATION COUNCIL 

printea on recyctaa popet 0 
172 

Simply put. this bill is one of the most outrageous pieces of special interest. coroorate 

welfare legislation we have ever seen and one of the most dama&ing oieces of legislation 

ever prooosed for Southeast Alaska and the Tongass National Forest. SEACC strongly 

opooses this bill. 

Even the name of this bill is an insult and double-speak at its worst. The Delegation's 

and L-P's proposal will damage the environment and threaten the Tongass. a national 

and international treasure. 

We are sure we will hear time and time again today that the recent Supreme Coun decision in 

United States v. Winstar Corp. et al., No 95-865. (July 1, 1996) is relevant to the unilateral 

modifications made by Congress to the two Tongass 50-year pulp contracts in the 1990 

Tongass Timber Reform Act. Some may take the view that this decision limits the ability of 

the Congress or the Administration to modify or terminate a contract. Because KPC and 

Alaska Pulp Company have both filed lawsuits alleging that the Tongass Timber Refonn Act 

breached the contracts or was a "taking" of contract interests, this is not the time or place for a 

debate on the relevance of this recent decision on ~ Congressional actions. 

It is SEACC' s position that the relevancy of the Winstar Corp. decision is the wrong question 

to focus on here. Instead, Congress should carefully consider whether it is good public policy 

for Congress to take any action today that may tie its hands in the future . The proposed bill 

will adversely affect the public interest by constraining the Forest Service's discretion to 

manage and protect public resources on this nation's largest national forest, the Tongass 

National Forest. We believe Congress should avoid even taking the risk of giving KPC an 

argument that might constrain a future Congress from taking an action it finds necessary to 

protect the public's interest in forest resources. 

Our bottom line is that KPC does not need a ~ long-term contract to obtain timber. KPC is 

pushing for this bill because it does not want to pay fair market value , like other Tongass 

timber operators, for Tongass timber. It wants Congress to shield it from the inherent risks 

that come from competing in the free market. We find it hard to believe that Americans 

would support such an action by this Congress. 

The Alaska Delegation's frontal assault on the Tongass National Forest. 

This is the latest attack in an unprecedented assault that began in the fall of 1994. Counting 

this hearing and the Senate hearing scheduled for July 17, 1996, the Delegation has held 14 

hearings on 11 pieces of legislation. All of these actions have been aimed at rolling back 

the Tongass Timber Reform Act, increasing clearcutting, and giving over the Tongass, a 

national and international treasure, for exploitation by private commercial concerns. 

Chairman Young, your footprints are all over the bill to giveaway the Tongass, dismantle 

our national forest system, and the effort to hand over 200,000 acres of the Tongass to 

five (5) ~ Native for-profit corporations as an amendment to the Presidio Bill. 

2 
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Background 

Louisiana-Pacific Corporation (L-P) is holding the workers at its Ketchikan Pulp Company (KPC) 

subsidiary and the people of Ketchikan hostage. KPC still has eight years of timber remaining on 

its SO-year monopoly Tongass timber contract, which expires in 2004. But L-P is demanding an 

immediate re-write of that contract, with unheard-of new governmental concessions and taxpayer 

subsidies, ostensibly to help the company obtain fi nancing for a court-ordered environmental 

cleanup and other "improvements" at the aging and polluted KPC pulp milL Otherwise the 

company threatens to shut the pulp mill down. 

KPC has used this scare tactic many times before. (See Attachment I.) KPC has threatened 

closure at least seven times since 1973. most often to prevent the imposition of pollution controls. 

Th e threat to c/m;e KPC ;_,. generated entirelv from L-P. 

Developments at L-P. In the wake of scandal. major class-action and shareholder lawsuits. and 

market problems related to its oriented strand board siding, as well as major environmental 

problems resulting in civil and criminal penalties at several facilities including KPC, L-P has been 

replaci ng its top corporate management and re-focusing the company. At its last annual meeting, 

the company reportedly described its new strategy as focusing on its core business, doubling the 

size of the company by the year 2000 and reassessing the competitiveness of its mills.1 

In the last four years plus one quarter, L-P lost $64 million on its pulp division, and lost $22 

million on pulp in the first quarter of 1996 alone. The pulp sector lost money in 1992, 1993, 

and 1994, and the first quarter of 1996. The pulp division lost over twice as much as it made. 

Current weak pulp pri ces may be below KPC's product ion cost 2 The KPC mill is the largest 

toxic water polluter in the entire Pacific Northwest, and last year received the largest 

environmental fine ever assessed against a facility in that region--over $6 million in civil and 

criminal penalties, including a felony. KPC faces a costly environmental cleanup And the largest 

part of its workforce is without a labor agreement and has been so for 12 years 

The bottom line appears to be an extraordinary sweetheart deal to induce L-P to remain in 

business in Ketchikan. So the company has asked for one It is using its threat to shut down to 

see what it can leverage out oft he federal government and the American taxpayer. 

For its part. the Alaska Delegation is doing "whatever it takes" to get the company to stay. This 

bill would allow the company to operate virtually whatever operation it wanted, and force the 

Forest Service to sell L-P a guaranteed amount ofTongass timber, at "whatever price it takes" to 

keep the company competitive with mills in Washington and Oregon. 

1"Stump Talk, " Pacific Rim Wood Market Reoort, May 1996 at 16. 

2Ataska Department of Labor, Alaska Economic Trends, May 1996 at 19. 
174 

The Delegation is touting proposed legislation as a 15-year KPC contract "extension." But in 

testimony before this Committee on May 28 and 29 in Ketchikan and Juneau, L-P CEO Mark 

Suwyn made it clear that L-P would not be satisfied with its current contract terms, and required 

a new contract, starting right now. 

The Delegation also claims that Governor Knowles supports this bill. Is the Governor here 

supporting this bill? The answer is no! This is not his bill, it is your bill. The Governor said he 

could support a contract "extension" .1!!!! only if several conditions were met. Furthermore, this 

bill does not embody anything dose to the conditions the Governor laid down in his letter 

to L-P. 

SEACC strongly opposes this bill because it: 

Replaces the current KPC timber contract, set to expire in 2004, with a new, 23-year 

monopoly contract starting right now and continuing through 2019, with the 

intention to continue in pernetuity. 

States Congress' intent to keep KPC in business, at a profit, pennanently. 

Mandates increased clearcutting, regardless of impacts to any other Tongass 

resource. The bills force the Forest Service to provide an average of 192.5 million board 

feet (mmbt) yearly to KPC, and require KPC to cut it, regardless of impacts to commercial 

and sport fishing, hunting, subsistence, tourism, recreation, fish and wildlife habitat. ~ 

is 33 .5 mmbfhigher than KPC's 15-year average annual cut of 159 mmbf This means a 

mandate for a total of nearly 160,000 acres ofclearcuts--130,000 football fields of 

clearcuts, or 5,650 football fields of clearcuts a year--in the heart of the world's most intact remaining temperate rainforest. This totals a line of football-field-sized clearcuts 

from Ketchikan to Washington, D.C.--and back. This would severely damage key fish and 

wildlife areas important to Ketchikan residents and other Alaskans--Cleveland Peninsula, 

Honker Divide, East Kuiu, Port Houghton, Poison Cove, and other areas. 

Allows L-P to shut the pulp mill down, and replace it with a different facility (if the 

facility uses pulp logs for any part of its process), even if the new facility provides 

fewer jobs. This would undermine the federal government's basic interest in the 50-year 

contract, which is the provision of local jobs. A basic premise for this bill is L-P's 

claim that it must have time to amortize the costs of adding pollution upgrades and 

improvements to the pulp mill. But in fact, the bill would allow kP to shut the pulp 

~ 

Guarantee that no matter what kind of mill KPC decides to run, the Forest Service 

must provide KPC timber at a rate that does not place the company at a 

"competitive disadvantage" to a similar mill in the Pacific Northwest, 
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This extraordinary concession could force the Forest Service to sell Tongass oldgrowth trees for the price of PNW raw materials such as recycled newspapers or 

sawmill waste-or even give refunds to keep KPC competitive. This open-ended 

government subsidy could cost American taxpayers billions of dollars. 

Extend the current contract term by 15 years and make the new contract effective 45 days 

after passage of the bill. 

Requires the contract to include a 23-year schedule ofKPC timber sales through 2019. 

The Forest Service must prepare this binding 23-year schedule within 45 days without 

opportunity for oublic involvement" and once in place the Forest Service cannot change· 

this plan unless L-P agrees 

Requires the Tongass Land Management Plan (TLMP) Revision to conform with the KPC 

plan. The current TLMP Revision draft does not contemplate any such schedule or 

requirement for KPC timber sales. This provision would delay the new Tongass plan ·and 

require yet another draft of the olan. This means the KPC contract and logging schedule 

will control all future Forest Service Tongass planning. 

Eliminates the Forest Service's right to terminate the contract for serious 

environmental damage, or because it is significantly inconsistent with the Tongass 

Land Management Plan, unless L-P agrees. This is a provision of every Forest Service 

timber contract and basic to responsible management of public resources. But, if the 

Forest Service and L-P agree, they can change (or worsen) the contract terms without 

Congressional approval. 

Eliminates the TTRA requirement for KPC to pay rates comparable to those paid by 

independent Tongass timber purchasers and gives KPC new timber quality and price 

advantages over independent timber purchasers. 

This bill. and a new KPC contract, would tie the hands of the Forest Service and substitute the 

corporate needs of a single favored company for the principles of balanced multiple use 

management of public lands embodied in the Tongass Timber Reform Act, the National Forest 

Management Act, and the Multiple-use Sustained Yield Act. The bills are the most extreme 

example of corporate welfare of which we are aware. This is oublic policy at its worst. 

The bill rolls back the Tongass Timber Reform Act. 

Section 101. Section 101 of the Tongass Timber Reform Act ("Tongass Reform Law" or 

"TTRA") replaced Section 705(a) of the Alaska National Interest Lands Conservation Act 

(AN!LCA), which the Forest Service interpreted as requiring the agency to offer 450 million 

board feet (mmbt) of timber a year, regardless market conditions or cost to the taxpayer. 

Throughout the 1980s, acting under this mandate the Forest Service put up millions of board feet 

of timber which did not sell because of weak international pulp markets; but preparation and 
176 

administration of these and other sales cost the US Treasury over $50 million a year. At the same 

time. the timber program threatened many Tongass special fish, wildlife and recreation areas. 

The Tongass Reform Law replaced this unwise and costly mandate with a flexible instruction 

authorizing the Forest Service to sell timber in response to market demand, but only to the extent 

consistent with the National Forest Management Act and all other applicable forest management 

laws, and only "to the extent consistent with providing for the multiple use and sustained yield of 

all renewable forest resources. "'--including fish and wildlife and the commercial, sport, and 

subsistence uses thereof 4 

Your bill would tum back the clock, and reinstate inflexible, unnecessary and costly logging 

mandates. It would also institutionalize this mandate as part of the Tongass Land Management 

Plan. This contractual logging requirement will require the Forest Service to emphasize satisfying 

KPC's long-term contract over other multiple uses of the T ongass and over the sustainable 

management of fish and wildlife, hunting, sport and commercial fishing, and subsistence. 

Section 301. Section 30 I of the Tongass Reform Law modified the KPC long-term contract. 

Congress unambiguously expressed its intent behind imposing these unilateral modifications to the 

contracts in Sec. 30 1(b)(J)· 

[l]t is in the national interest to modify the [long-term contracts]. .. in order to assure that 

valuable public resources in the Tongass National Forest are protected and wisely 

managed. Modification of the long-term timber sale contracts will enhance the balanced 

use of resources on the forest and promote fair competition within the southeast Alaska 

timber indust_ry . 

These unilateral modifications, which your bill seeks to roll back, were based upon 

recommendations from the Forest Service's own internal review team following their investigation 

into the 1981 antitrust sca ndal ~- in which KPC was convicted of utilizing its contractual 

advantages to monopoli ze the Tongass timber indu stry. Thus, your bill rewards a monopoly 

for monopolizing the industry and illegally driving others out of business. 

Your bill effectively repeals (among other TTRA subsections): 

TTRA Sec. 301Ccl!J). in which Congress sought to modify the long-term contracts "to resemble, 

to the greatest possible degree. short-term, independent sales." (TTRA Conference Report at 

I 8.) By reinstating 5-year plans and other special considerations for KPC, S. 1877 again makes 

two classes of citizen in the Tongass timber industry and harms the interests of independent · 

timber operators. 

JTRA Sec. 30 1(c)(3 ), in which Congress sought to end the "back-log" and "pick-and-choose" 

abuses under the 50-year contracts. As noted in the Conference Report (at 18), this provision 

3Tongass Timber Reform Act Sec. 101 . 4Tongass Timber Reform Act Conference Rcpon. 

6 
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was intended to "prevent the long-term contract holders from harvesting only the better quality 

timber while continuing to accrue large backlogs of uncut, lower quality stands." 

TTRA Sec. 30l(c)(8), in which Congress instituted an adjustment intended to assure that the 

long-term contract holders would pay stumpage prices comparable to those paid by independent 

purchasers, and assuring similar profitability criteria. The bill repeals this comparison and replaces 

it with a different "comparability" clause keeping KPC competitive with mills in the Pacific 

Northwest. The bill also provides for a "mid-market" test of profitability which was never in the 

KPC contract, and which independent operators do not enjoy. 

L-P wants its timber prices lowered despite the fact that in 1995 it paid less than ha1fwhat 

independent purchasers paid for Tongass timber.> From 1991-94, independent operators 

on the Ketchikan area paid in cash $97 per thousand board feet of To11gass timber, while 

KPC paid just $7 in cash. 6 

The bill jeopardizes Tongass fish and wildlife, and their commercial, sport 

and subsistence uses. 

The bill would (a) set a KPC logging mandate over 33 mmbfper year higher than KPC's 15-year 

average annual cut; resulting in a huge cumulative amount oflogging--4.4 billion board feet; (b) 

set a 23-year timber sale schedule that could not be changed without KPC approval; and (c) 

prevent the Forest Service from ending the contract for environmental damage or inconsistency 

with the Tongass Land Management Plan. Taken together, or separately, these measures 

seriously threaten fish and wildlife populations on the Tongass. 

Every credible study of Tongass fish and wildlife over the last several years indicates that 

more habitat must be urotected, not less. These studies include: 

A Proposed Strategy for Maintaining Well-Distributed Viable Populations of Wildlife 

Associated with Old-growth Forests in Southeast Alaska--Report of an Interagency 

Committee, May, 1993 . The so-called "Viapops Report," commissioned for use in the TLMP 

Revision and carried out by wildlife scientists from the Forest Service, the Alaska Department 

of Fish and Game, and the US Fish and Wildlife Service, identified the need for a network of 

no-logging wildlife setasides, called Habitat Conservation Areas or HCAs, distributed across 

the forest, in order to provide for viable, well-distributed wildlife populations as required by 

the National Forest Management Act of 1976. 

Review of Wildlife Management and Conservation Biology on the Tongass National Forest: A 

Synthesis with Recommendations, March, 1994: US Forest Service Pacific Northwest 

Research Station, Corvallis, OR. This "blue-ribbon" Peer Review of the Viapops Report as 

5US Forest Service. 1995 Tongass Timber Supply and Demand Report at iv. Counting cash payments and 

roadbuilding, KPC paid Sl21 per tbousand board feet, independents forest-wide paid $279. 

6SEACC calculation from Forest Service Alaska Region timber shop data. Counting total payments, including 

roadbuilding. KPC paid less than half the independent stumpage charge ($84 per thousand board feet vs. S 166 for 

independents). 
178 

well as existing Forest Service wildlife conservation approaches was mandated by Congress in 

mid-1993. This review by nationally known experts endorsed the HCA approach but said it 

needed to go farther, including protecting more land from logging, to adequately provide for 

viable wildlife populations. 

Yiapops Committee "Reconciliation Memo," May 1994. This response by the interagency 

biologist committee to the Peer Review of its work accepted many of the Peer Review's 

findings and embodied them in a further series of recommendations to protect additional lands 

from logging pending adoption of a comprehensive wildlife conservation strategy in the 

TLMP revision and completion of necessary scientific studies. 

Aradromous fish Habitat Assessment--Report to Congress, January 1995, US Forest Service 

Pacific Northwest Research Station (AFHA Report). This extensive review of salmon and 

stcelhead habitat condition and management practices on the Tongass concluded (with 

emphasis added): 

"Current direction for anadromous fish habitat protection on the Tongass National Forest 

is less than fully effective, and additional protection is needed to make timber harvest more 

compatible with maintaining high-quality fish habitat and long-term conservation of 

anadromous fish stocks." AFHA Synthesis Reoort at I I. 

"Current procedures for fish habitat protection are now applied primarily on a project-area 

basis; consequently, the much more important cumulative effects of timber harvest on fish 

habitat in a watershed are not fully assessed". AFHA Synthesis Report at 8. 

"[For the Tongass watersheds in which logging is allowed], 72% of these watersheds 

were classified as healthy, and 28% had conditions with reduced condition." An 

Evaluation of the Effectiveness of Current Procedures for Protecting Anadromous Fish 

Habitat on the Tongass National Forest, September 1994, US Forest Service Fish Habitat 

Analysis Team at 15 (included in the AFHA Report). 

"The long-term conservation of a harvestable surplus of salmon and steelhead across the 

Tongass is essential to the economic future of Southeast Alaska." AFHA ~ 

Report at I. 

Despite this evidence that less logging, not more, is needed to protect fish and wildlife, your bill 

would prevent the Forest Service from curtailing KPC logging even if it were shown to be 

necessary to protect these vital forest resources, which provide the basis for commercial fishing 

and tourism, the two largest private employers in the region. 

The Forest Service presently cannot protect subsistence in the face of any timber sale, 

often because of obligations to provide timber under the KPC long-term contract. 

Subsistence is protected under Title VIII of ANILCA. A new contract with a mandated 
179 

logging level would tie the Forest Service's hands and cause the loss of traditional 

subsistence areas. Over 80% of rural Southeast Alaskans engage in subsistence hunting, fishing, 

or gathering. 

7 Under ANILCA, federal actions are to have the least adverse impact possible on 

subsistence. But the Forest Service has gone so far as to develop a boilerplate disclaimer 

describing the fact that subsistence resources may be impacted, but that the agency has no choice 

but to do so because of its timber commitments. Extending the contract and mandating a higher 

KPC cut, as the bills do, will harm subsistence uses. 

The bill will prevent the development of a modern, high-value-added, secondary-processing 

timber indu•try based on the free market by keeping log prices artificially low and 

hindering independent operators from getting a timber supply. 

The new contract will prevent competition for logs and give L-P enormous price breaks, keeping 

the price of logs artificially low. This both cheats American taxpayers out of a fair return on their 

resources and diminishes any incentive to add value through additional manufacturing. 

Between 1992 and 1995, the Forest Service emptied the independent sale pipeline to give 

independent sales to KPC under its contract. The Forest Service transferred six sales comprising 

190 mmbfofindependent sales to J<PC. With a new KPC contract, independent operators 

will continue to be second·class citizens. 

Case in Point: the Control Lake/Honker Divide timber sale. The Control Lake/Honker 

Divide timber sale on Prince of Wales Island is not within KPC's "primary sale area," and as such 

is available for independent operators. It includes the region known as Honker Divide, one of the 

most important wildlife habitat watersheds in the Tongass. with critical habitat for wolves, four 

species of Pacific Salmon, an internationally known run ofsteelhead trout, and an outstanding 

wilderness canoe route. Conservationists, independent timber operators, Alaska Natives, 

biologists, and other area residents collaborated to propose a 40 mmbf timber sale that would 

have constituted the largest independent timber sale on the Ketchikan Administrative Area, and 

would also have stayed out of Honker Divide. But driven by demands of the KPC contract, the 

Forest Service has made clear that it will very likely give this sale to KPC, and cut a much higher 

amount of timber (the agency's draft preferred alternative contained 182 mmbf) from the area. 

This will take timber away from independents and harm Honker Divide at the same time. With its 

higher mandated cutting level, a new KPC contract raises the likelihood of further cutting in this 

sensitive area. 

While this bill goes way beyond a contract "extension," a 15-year KPC contract extension 

by itself would be devastating for the Tongass. The leverage provided by a long-term 

contract makes it extremely difficult to gain fair consideration for other resources that 

would be harmed by logging --even when that logging would violate the law. 

7William Alves, Residents and Resources: Findings of the Alaska Public Survey on the Imoortance of Natural 

Resources to the Quality of Life of Southeast Alaska. Anchorage, AK: Institute of Soeial and Economic Research, 

University of Alaska, 1979 at V-4. 

9 
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At its average cutting rates under KPC's current contract, extended 15 years beyond 2004 to the 

year 2019, the 23 years of timber that would be cut would equal 3.7 billion board feet. Honker 

Divide, Cleveland Peninsula, Port Houghton, East Kuiu, Poison Cove, and other 

magnificent Tongass wildlands are all scheduled for cutting by KPC. The Forest Service will 

continue to be unable to protect subsistence areas, threatening the way of life of Alaska Natives 

and other rural residents. The agency will be unlikely to implement critical watershed analysis and 

conservation measures recommended by the AFHA Report. The agency is unlikely to take 

additional steps to conserve huntable populations (not just "viable" ones) ofTongass wildlife 

recommended by the Interagency Biologist Committee or the Peer Review of their Habitat 

Conservation Area plan 

An extended KPC contract by itself will harrn other T ongass dependent industries such as 

commercial and sport fishing and tourism, by clearcutting and removing the resources they rely on 

for their health--namely the forest. As stated in the AFHA report: 

"Should freshwater habitats be degraded for long periods. salmon and steelhead stocks 

will eventually be confronted simultaneously with low marine productivity and degraded 

freshwater habitat. The likely result of such double jeopardy could be high, long-terrn risk 

of extinction ... The overall risk to Southeast Alaska fisheries and the people who depend 

on them is determined in part by the total number of watersheds degraded. "8 

A contract "extension" would make such a result far more likely by placing contract requirements 

before watershed protection. 

Rewarding a comorate polluter for violating the law. 

One reason KPC has a high pollution cleanup bill is because it has violated, avoided and 

• evaded environmental laws for so long. After failing llS! to fully comply with the Clean 

Water and Clean Air Acts, after over 445 violations of pollution laws, and after pocketing 

the profits that came from its illegal acts, KPC is trying to force the American public to pay 

for its cleanup. KPC is a chronic pollution law violator. In addition to their criminal and civil 

pleas last year. they have been sued for another 200 violations of the Clean Water and Clean Air 

Acts, and have just reported exceeding pollution limits under their consent decree. (Please see 

our May 28, 1996 written testimony at page 8, submitted to this Committee, as well as testimony 

submitted by the Alaska Clean Water Alliance.) 

L-P still is not coming clean with the public. (Please see our first Supplementary Statement to 

the official record of the May 28 ad 29, 1996 hearings.) L-P's CEO, Mark Suwyn, and its 

pollution consultant made what can only be characterized as inaccurate and misleading statements 

about KPC pollution that indicate they are still trying to cover up or hide from the public the 

severity of KPC's pollution problems. This is unfortunate, because public health, public resources 

, and the future of the Tongass are at stake. This behavior should not be rewarded. 

8AFHA Rcpon. Synthesis Rcoort at 4. 

10 
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L-P has other serious civil and criminal pollution violations as well. As revealed in L-P's 

most recent Securities and Exchange Commission quarterly filing (form I 0-Q, period ending 

March 31 , 1996)(hereinafter "March 1996 L-P 10-Q"): 

The United States Department of Justice has stated its intention to seek civil penalties 

from KPC for Clean Air Act violations at the Anette Island hemlock mill. 

In March 1996. an "information" was filed in the US District Court for the Eastern District of 

Washington charging L-P with two misdemeanor counts related to alleged record-keeping 

violations in connection with the disposal by an independent contractor of transformers from a 

mill owned by L-P in 1991. 

In June 1995, a grand jury returned an indictment in the US District Court in Denver, CO. L· 

P has been charged with 23 felony counts related to environmental matters at its Montrose, 

CO oriented strand board mill, including alleged conspiracy tampering with opacity 

monitoring equipment, and making false statement under the Clean Air Act. The indictment 

also charges L-P with 25 felony counts of fraud relating to improper use of a trademark as a 

result ofL-P's alleged tampering with the procedure for the independent certification of its 

OSB product performance. 

L·P has been named a defendant in at least 12 purported.class actions tiled in various 

jurisdictions, as well as numerous non-class action proceedings because of alleged unfair 

business practices, breach of warranty, misrepresentation, conspiracy to defraud, and other 

theories related to alleged defects, deterioration or failure of OSB siding products. In 

addition, four other OSB-related actions have been brought between July 1995 and February 

1996. 

L·P has also been sued by its stockholders for failure to disclose or improper disclosure 

related to the above matters. 

International Paper (IP), former employer ofL-P CEO Suwyn, sued L-P in January 1996 

claiming that Suwyn's employment with L-P violated a previous employment agreement he 

had with IP. 

The Delegation's, and L-P's arguments will not Oy. 

The Delegation and L-P have advanced several arguments in support of these bills: 

I. Delegation/L-P Claim:. L·P must have a new contract because the Forest Service hasn't 

given them enough timber. According to CEO Suwyn, the shortfall in timber over the last two 

years was 120 mmbf 9 The Forest Service's shortfalls are what has caused KPC to lose money 

90ral testimony before this Committee, June 29, 19%, Juneau, AK. 

]] 
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every day of 1996.

10 KPC personnel commonly blame "timber shortages" for periodic mill 

shutdowns 

The Facts: This is not what L-P is telling its shareholders. ln its most recent SEC 

quarterly report, the company states: 

Pulp sales dropped 47 percent in the first quarter of 1996 over first quarter 1995. 

Prices decreased an average of approximately 11 percent while volume decreased 

approximately 41 percent. World-wide pulp inventories were high at the beginning 

of 1996 and remained high through the first quarter, creating verv weak pulp 

markets. Production volume was 60 percent of capacily in the first quarter of 1996 

compared to 90 percent in the first quarter of 1995. The decreased volume resulted 

from the lack of demand and from unscheduled maintenance shut-downs. 11 

(Emphasis added.) 

L-P does not cite timber shortages in this report and given the description of weak market 

conditions it is dishonest and misleading for L-P to claim timber shortages as the reason for either 

mill shutdowns or financial losses. L-P's problem is not its present long-term contract, timber 

shortages, or contract changes under the Tongass Timber Reform Act. 

L-P's real Problem is very weak international pulp markets. 

There is no shortage oflogs for L-P. and there hasn't been one. (Please see SEACC's Second 

Supplementary Statement to the June 28-29, 1996 hearings at page 2.) From 1989-94, KPC 

logged 96% of their maximum allowable amount under the contract, and actually came within 

35 .6 mmbfofhaving to stop logging. KPC began FY 95 with over a year's supply oftimber--164 

mmbf-- released for timber operations, and at the beginning of FY 96 that cushion had grown to 

180 mmbf. As of April!, 1996, KPC had access to 209 mmbf--including 87 mmbfthat required 

no, or minimal, new roading. (KPC's IS-year annual average cut is !59 mmbf.) 

While complaining of timber shortages, from 1993-95 KPC exported from Alaska an average 

of 26 mmbf per year of cedar logs in the round. KPC could have sawed these logs in its 

sawmill. 

KPC comolained of worse shortages prior to the Tongass Timber Reform Act. Please see 

Attachment 2, a letter from KPC timber manager Owen Graham to the Forest Service prior to 

passage of the Tongass Timber Reform Act. In it , Graham complains about a shortage of timber-

-~the Tongass Reform Law. He claims that KPC's pipeline of released timber had shrunk to 

only 54 mmbf If that was true, then KPC's timber pipeline improved after the Reform Act. 

kP has plenty of timber remaining in its existing contract. L-P has~ of timber 

remaining on its current contract. Subsequently L-P can buy timber from the Forest Service on 

10 td. 11L-P Quarterly Reoon Under Section 13 or l5ldl of the Securities Exchange Act of 1934 for Ouanerly Period 

Ended March 31 1996. 

12 
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the open market--just like every other timber purchaser in the country They can also purchase 

Jogs from private owners 

The Delegation is spreading the myth that the Tongass is the only source of logs in 

Southeast Alaska. But from 1985-1995, private Alaska Native Corporations clearcut and 

exported 4 2 billion board feet of timber--more than half of all the timber cut in Southeast Alaska. 

Over that time, the Tongass timber program cut a yearly average of339 mmbf. Native 

Corporations cut and exported in the round an annual average of 383 mmbf, including 72 mmbf of 

l1l!W logs a year. In 1994, Sealaska Native Corporation sold pulp logs to pulp mills in British 

Columbia. KPC was unwilling to bid for these logs, preferring to wait for cheap, taxpayer 

subsidized timber under their long-term contract. 

L-P has plenty of timber available. What L-P wants is cheap, taxpayer-subsidized timber, 

without competition in the bidding process. 

2. Delegation/L-P Claim: L-P claims it needs this new deal in order to obtain financing to clean 

up the pulp mill 

The Facts: In 1994, L-P was the 24th-largest forest products company in the world. 12 

That year, L-P had the highest return on investment of any forest products company in the 

world. 1' L-P has eight years of timber remaining on its current contract. That is far more 

than many forest products companies have. Clearly, L-P has access to credit. According to the 

March 1996 L-P 10-Q: 

Significant capital has also been expended for environmental projects (such as 

pollution control equipment) and upgrades of existing production facilities. L-P is 

budgeting capital expenditures, including timber and logging road additions, for all 

of 1996 of $275 million to $325 million." 

L-P has invested in facility upgrades and environmental controls elsewhere. L-P's one-year 

capital expenditure is up to $325 million, yet the company is unwilling to undertake a fiveyear15 program to improve KPC, whose purported total expense is $200 million, The 

problem is not L-P's credit-worthiness, but the reluctance of its Board and management to 

commit capital to the KPC pulp mill. L-P and the Alaska Delegation want US citizens to 

commit the capitaiL-P is unwilling to commit. 

L-P told its shareholders that its required environmental upgrades would cost no more 

than $20 million-not $200 million. In the March 1996 10-Q, L-P states, with respect to the 

settlement of the recent civil lawsuit against KPC: 

12Price Waterhouse: ForestProducts Survey 1994-North America at 37. Measured by sales value. 13 Id. at 36. 

' 4L-P March 1996 10-Q at 7 

15According to CEO Suwyn, June 29, 1996 oral testimony before this Committee. 

'1 
184 

KPC also agreed to undenake funher expenditures which are primarily capital in nature, 

including cenain remedial and pollution control related measures, with an estimated cost 

of up to approximately $20 million." 

In testimony before this Committee. L-P sAid it must spend up to 10 times that amount to 

"improve" the KPC pulp mill .. 17 But dearly they'll invest the capital only if the American 

taxpayer repays that investment. 

As the price of staying in Ketchikan. L-P wants the American taxpayer to buy the company 

a mill. In 1995, KPC paid $121 per thousand board feet (mbf) of timber (including "payments" in 

the form oflogging roads built). Independent timber purchasers paid over twice as much-$279 

per mbf. (These rates include the TTRA "comparability" adjustment supposedly making KPC 

timber charges equal to rates paid by independent purchasers.) 

This new contract, and this bill, would provide KPC timber is worth at least $1.23 billion at 

prevailing market rates. Over time and with free-market competition, market rates and 

the total value could be expected to 22...!!1!· 

At the current average stumpage price KPC paid in 1995 under its current contract, KPC would 

pay just SS32 million a difference of S695 million below current market value. pocketed by 

the company. And under the new contract's outrageous pricing scheme, KPC's timber 

payments could go down, dramatically increasing the value of this gift from the American 

taxpayer to KPC. This taxpayer giff to KPC greatly exceeds L-P's purported $200 million 

expense to upgrade the mill. And as discussed below, after getting the new contract L-P is 

not required to spend a dime on these purported improvements. 

3. Delegation/L-P Claim: L-P must have a new contract in order to assure that it has enough 

timber to amonize the investment in cleanup and improvements at the pulp mill. There is no 

timber other than the timber L-P can access under its contract. 

The Facts: The Delegation's bill would in fact allow L-P to shut the pulp mill down. 

The day after this bill becomes effective, L-P could close the pulp miU, not perform the 

improvements to the pulp mill that are the rationale for this bill, and instead completely 

revamp its Ketchikan operation, investing whatever it pleased. Its only obligation would 

appear to be cutting 192 mmbf per year and processing pulp logs in some way--including chipping 

them and exporting chips. The new L-P mill would not have to maintain its current complement 

of jobs, and CEO Suwyn has talked of"increasing productivity"--• code word for fewer 

employees. 

This scenario is not far-fetched. L-P's purponed "improvements" are experimental. Initial testing 

shows that the new "elemental chlorine free" process would~ effluent toxicity in some 

respects. While not using "elemental" chlorine, the process would instead use chlorine dioxide or 

'

6March t996 L-P 10-Q at 9. 

11L-P CEO Mark Suwyn oral testimony, May 29, 1996, Juneau. 

14 
185 

other chlorine compounds, and would still produce toxic, persistent organochlorine pollutants 

such as dioxins and furans. And there is no guarantee that the pulp produced would sell, or at 

what price. 

Thus this bill would allow lrP to obtain a 23-year guaranteed supply of public timber, 

along with a governmental guarantee to price that timber at a rate that kept lrP 

competitive with the Pacific Northwest no matter what L-P decided to do with the timber, 

and an expression of Congressional intent to supply adequate timber for oermanent 

operation of KPC's facilities on a "permanently economical" basis··again, no matter what 

KPC decided to do with the timber. This timber would come to lrP regardless of the cost 

or impact of providing it on the taxpayer or any other Tongass resource or resource user. 

It would come regardless of environmental laws protecting other resources, and the deal 

could never be altered unless KPC agreed. All based on the rationale or improvements and 

investments that KPC is not required to make. and might choose not to make. Mr. 

Chairman, that's a hell of a deal. 

4. Delegation/L-P Claim: Southeast Alaska's economy is dependent on KPC. Without KPC, 

there will be an economic disaster--4,000 jobs are at stake--there is no other major timber 

operator. Senator Murkowski has said, "I can't stand back and watch Ketchikan die." 

The Facts: Every job is important. But giving in to corporate blackmail is not the 

way to safeguard Southeast Alaska's economy. It is especially troubling for the Delegation to 

be making this argument given KPC's history of using its contract to monopolize the Southeast 

Alaska timber industry, illegally driving competitors and industry panicipants out of business." 

The new 23 -year taxoayer-subsidized contract L-P wants is a clear exam ole of a huge 

government program stifling free enterprise. 

Southeast Alaska's largest private employers and its growth industries depend on a healthy 

environment. Government is the largest employer in Southeast Alaska, with 12,3 SO jobs. In the 

private sector, activities associated with salmon produce the most natural resource jobs annually 

in Southeast Alaska. 

Commercial salmon fishing and fish processing is the largest private employer, providing over 

5,000 direct jobs; Commercial salmon fisheries yield 160 million pounds (average annual 

production from the Tongass) wonh about $250 million annually." 

Sport fishing provides another 1,200 direct jobs with over $28 million in earnings and 

250,000 angler-days, and is growing at an average of 10% per year20 The Ketchikan chanerboat fleet doubled in size from 1987-92, to I 57 boats. 21 

18Reid Bros.Logging v. Ketchikan Pulp Co .. 464 U.S. 916 (1981) 19United States forest service, Pacific Nonhwest Research Station and Alaska Region, Anadromous fish Habitat 

Assessment Reoon to Congress Januar)' 1995 at I. 20Jd . Note there may be some overlap between spon fishing jobs and tourism jobs. 

I 5 
186 

Tourism Provides approximately 2.500 direct jobs." From 1990-94, tourism exploded, with 

visitor spending more than doubling to $160 million, 23 and total regional tourism jobs expanding 

by nearly 40"/o, to 3,674 jobs24 Over the same period, annual visitors to Ketchikan rose by 55%, 

annual hotel gross sales rose 33%,25 and visitor spending increased by 88% to $32 million. 

These industries depend on a healthy Tongass old-growthforest-f1Shingfor healthy 

watersheds and tourism for wild lands, unspoiled landscapes, tUUi fuh tUUi wildlife. 

Large-scale clearcutting under the KPC contract thrutens jobs in these indMstries, as 

well as the subsistence economy, community use areas, tUUi the healthy fuh and 

wildlife habitat that is basic to Alaska's quality of life. It also thrutens long-term 

timber jobs and precludes the development of a sustainable timber industry based on 

the free market 

Timber is the fourth-largest industry. In 1995, the timber industry (including private, Native 

Corporation logging) provided 2,002 direct jobs, and Tongass timber accounted for 1,216 direct 

jobs. Region-wide, KPC provides around 1,000 jobs (counting loggers and another sawmill it 

leases in Metlakatla). KPC directly provides just 3% of the region's jobs and 5% af all direct, 

indirect and induced employment 

Recent Alas Dele ation claims of massive · ob loss h v little t with ruli • The 

Delegation claims 4,000 jobs will be lost ifKPC closes. But in 1995, the entire Southeast 

Alaska timber industrv, including ID! direct, indirect, and induced employment on Tongass 

National Forest, State, and private Native Corporation lands produced 3,463 jobs--how could 

4,000 be lost? Independent timber sales and Native Corporation logging will continue. Using 

standard Forest Service multipliers, the 600 jobs at KPC's Ketchikan mills would support an 

additional 438 indirect and induced jobs for a total of! ,038 jobs or 13% of Ketchikan's jobs. 

Please see Attachment 3, The Potential Economic Consequences of a Reduction in Timber 

Supoly from the Tongass National Forest-1996 Revised Report, prepared by ECONorthwest, 

Eugene, OR. This report demonstrates that a reduced timber supply would have a minor impact 

on the regional economy, that timber was not the driving force behind the economy, and that "the 

growth industries are tourism, fishing, and trade, all of which may benefit from reduced 

logging. " 27 

21Economic Development Center, Universicy of Alaska Southeast Ketchikan Campus, Ketchikan Qateway Borpugh 

Economic Indicators. June 1995. 22US Forest Service, Alaska Regional Economist. Southeast Alaska Economy, February 1995 (number listed is 

2,330, presumable referring to 1994). 23Pianned testimony of Alaska Commisioner of Commerce Willie Hensley before Senate Energy Comntitce, S. 

1054, August 9, 1995 at 4. Hearing was downgraded to a workshop due to opposition to the bill. 

24Id. 

2SKetchikan Gateway Borough Economic Indicators 1994 at v. 26Lctter to the Editor of the New York Times, June 25, 19%. 27The Potential Economk: Consequences of a Reduction in TimberSupply from the Thpgass National Forest-1996 

Revised Beoon. Eugene, OR: ECONorthwcst at i. Sununal}' of report attached. 

16 
187 

Ketchikan's economy, and the regional economy, are robust and diverse. and are not 

driven by timber. Contrary to misleading KPC advertisements, KPC's mills are directly 

responsible for only 7.5% of Ketchikan's jobs. In 1995, Ketchikan, a town of 15,000, had 

7,981 jobs producing $255 million in wages and salaries28 There are 515 jobs at KPC's pulp mill 

and around 85 at an adjunct sawmill. Together, these directly account for less than 7.5% of 

Ketchikan's jobs and Jess than I 0% of its total wages. Despite steep declines in timber jobs, 

Southeast Alaska's economy has grown every year for the past eight years, and in 1995 the 

region's jobs base grew more than any other area of the state_29 The region is now one of the 

world's premier cruise ship markets. 

From 1991-95, as Ketchikan's total timber jobs declined by 12%, virtually every other part 

of the Ketchikan's economy grew, indicating that timber does not drive the economy. 

Construction grew by 24%; transportation, communication and utilities also increased by 24%; 

retail trade grew by 23%; services grew 18%.30 Tourist spending nearly doubled.JI From 1988-

94, gross business sales increased by 52%, to $458 million, 32 driven largely by tourism. 

Construction is strong. with conversion of the old Ketchikan Spruce Mill dock into a m~jor new 

residential and commercial development, also linked to tourism. 

There are other steady. year-round employers in Ketchikan. KPC's Ketchikan mills have 

600 employees and a payroll of around $25 million. But government is the largest employer in 

Ketchikan, with 1,783 jobs and a payroll of$68 million . Trade employs 1,625 with a payroll of 

$36 million; Services employs I ,445 and pays $34 million; Transportation, communication and 

utilities 770 with $25 million; Construction employs 432 with a payroll of$22 million; and 

Finance, insurance and real estate employs 319 at $8 million-'' 

These are all year-round employers including many family-wage jobs.J4 In 1993 thcze were also 

322 commercial fish permit holders, holding 543 permits for many different fisheries, earning 18.7 

million." · 

Ketchikan will go through a transition. just as Sitka did. When the Japanese conglomerate 

that owned the Sitka pulp mill closed it for business reasons in October 1993, the mill directly 

accounted for 10% of that city's jobs and around 16% of Sitka's total wages. !.<etchikan is 

considerably less dependent on KPC than Sitka was on its pulp mill when that mill closed. Just 

two and a half years later, Sitka's economy is healthy. Despite the loss of mill jobs, Sitka's 

housing starts, single-family housing prices, and gross business sales were all up through 1994,3• 

211Aiaska Department of Labor. Emplymcnt and Earnings Summary Reports. Kctchj 1

- an G:';:t o¥.1)' Borough.J995 

29Alaska Depanment of Labor, Alaska Economic Trends, May 1996. 

30 Alaska Deparunent or Labor, Employment and Earnings Summaty Repons. 

31Hensley testimony, supra. 32Ketchikan Gateway Borough Economic lndicalors, University of Alaska Ketchikan Ca!T!pus, ~1)94 . 3lAJaska Dept. of Labor, Ketchilw.n Gateway Borough Employment and Earnings .;:,ur:• o~a~ Reports. 

34 Alaska Dept. or labor. Ketchikan Gateway Borough Employment and Earnings Summary RelJO<lS. 

JSKetchikan Gateway Borough E~q1 ic Indicators, University of Alaska Ketchikan C::mpus.. i995. Fishing 

income includes crew salaries. but ttumb.:r or crew members is unknown. 

36Presentation to Moody's Invcs:or '=.~n-ice by Sitka city officials, March 6, 1994. 

17 
188 

and 1995 single-family housmg starts mcreased by 17% over 1994' 7 Sitka's unemployment rate 

is the second-lowest in the region, below the state average.n Sales taxes remain strong, and 

Sitka's Finance Director recently acknowledged that predictions of disaster did not materialize. 39 

While KPC's Ketchikan mills provide around one-third more jobs than the Sitka pulp mill, 

Ketchikan's total economy is around twice the size of Sitka's with its pulp mill.

40 

5. Delegation!L-P Claim: No other timber industry is possible, because 30% of the trees are 

"dead or dying," and suitable only for pulp. Therefore a pulp mill is absolutely necessary. 

Moreover, transportation costs will make it impossible for a secondary-manufacturing industry to 

develop in Southeast Alaska. 

The Facts: The logical conclusion of this argument is that if KPC closes, no one will 

ever cut another Tongass tree on a commercial basis. This conclUsion is not believable, and 

is belied by recent developments. Transition to a high value added, secondary 

manufacturing timer industry based on the free market is both possible and desirable. 

(Please see SEACC's original written comments, May 28 and 29, 1996 at 10-12, and our 

Supplementary Testimony at 7, where we discuss a value-added timber industry for Southeast 

Alaska.) 

Please see Attachment 4. far from being impossible. an estabiished Southeast Alaska sawmill 

owner and operator has just proposed a new remanufacturing plant and wood drying operation 

for Prince ofWales Island . This kind of an operation is an important facet of a secondarymanufacturing industry. This is the kind of operation we'd like to see in our region's future . 

The Alaska Legislature passed, and Governor Knowles just signed, a bill to promote high valueadded manufacturing in Alaska. The provisions of this bill were weakened by the legislature, 

leaving the Department of Natural Resources with increased responsibility to recognize regional 

differences in Alaska's forests and make sure that the bill accomplishes its stated purposes while 

conserving important Alaskan resources. Nonetheless, the Governor and the legislature have 

embraced the importance of secondary manufacturing in the future Alaska timber industry. 

Studies have shown that components of a secondary manufacturing industry can work 

from Southeast Alaska. 

Feasibility Analysis of Alternative Wood-Based Industries for the City and Borough of Sitka 

Alaska. prepared by International Resources Unlimited, Inc. for the forest Service and the 

City and Borough of Sitka (draft 12-1 3-95) showed that a sawmill, a dry-kiln operation, and a 

planer mill could be built from scratch and operated profitably in Southeast Alaska, both 

separately and as an integrated operation. Such a mill, while not necessarily producing 

secondary products in and of itself, produces the raw material--kiln-dried, surfaced lumber--

3? Alaska Department or Labor, Alaska Economic Trends. May 1996. 

3!( Alaska Department or Labor statistics 

39May 10, 1996 radio news stor)". KCAW. Sitka {transcnpt available) 

(J~·k~as ured b.v gross business sales {other measures rcvc!ll a similar relationship) 

18 
189 

for secondary production. Custom kiln-drying of other companies' wood is also an important 

service provided by such a facility to the secondary sector. 

Southeast Alaska Value-added Timber Manufacturing Study, prepared for the Southeast 

Conference by C.L. Cheshire, Jon Galea, and Dubal, Beck and Associates (June 1991), 

examined opportunities in low-grade and small-diameter logs and detennined that fingerjointed moulding and edge-glued boards--both value-added products--could be produced 

profitably in Southeast 

The Forest Service has recognized the potential for a secondary manufacturing industry in 

Southeast Alaska. 

In Charting a Course for Sustainable Development in Southeast Alaska, 41 the authors stated, after 

visiting Southeast Alaska wood manufacturers 

Past efforts to develop the timber-using industry and the timber-based economy have 

partially relied on strategies that encouraged a few, large firms. The current situation 

offers an opportunity for some transition to a large number of smaller firms. Markets 

appear to be more economically accessible to these firms than in the past. (Page 13.) 

Thirty-five of the 42 manufacturing facilities in SE Alaska are on Prince of Wales Island. 

There is considerable interest in new markets .... Another opportunity is installing a regional 

dry kiln and concentration yard on Prince of Wales Island." (Page 16.) 

In Economics of the Southeast Alaska Timber Industry,42 Forest Service Alaska Regional 

Economist Kathleen Morse said· 

Old growth timber still commands a premium price because it is becoming increasingly 

scarce in wood products markets ... A key to the successful future of the wood products 

industry in Alaska lies in recognition of this fact and developing the ability to use this 

wood to its maximum advantage in local manufacture. (Page 4.) 

Value-added wood products could be a key element of the Southeast Alaska timber 

industry in the future .... This would mean a reorientation from the production-oriented 

manufacture of industrial commodities to more market-oriented production of specific 

products. (Page 6 ) 

When you've got a high-cost producing region, like we've got here, you've [sic] simply 

must target higher value end-use products. Fortunately, we have a good supply of very 

valuable trees, that when logged, should have every penny squeezed out of them. To do 

otherwise, would be a true waste of resources (Page 6.) 

4 1Madison, WI Forest Products Lab, Pacific Northwest Research Station and Forest Setvice Region 10, undated 

(approximately January/February 1996) 42 A mid-1994 presentation to the "Ketchikan 2004" conference held at the University of Alaska SoutheastKetchikan 

19 
190 

The high value-added sector is the dynamically growing segment of the Pacific Northwest 

timber industry. According to the Center for International Trade in Forest Products at the 

University of Washington, exports of secondary products through the Columbia-Snake river 

Customs Districts, which includes all of Washington and Oregon, increased 181% between 1989 

and 1993 4 ' 

According to the Evergreen Partnership, a Tacoma-based private non-profit membership 

corporation aiding the value-added sector, there are an estimated I, 400 secondary wood products 

producers in the states of Washington and Oregon, employing 33,000 people. Exports increased 

nearly 200% from 1989 through 1995, reaching $300 million. 44 While banks are reluctant to loan 

money to the primary sector, the Evergreen Partnership and secondary businesses have had 

success with banks by showing them that they are a separate, growing, profitable building 

products industry 4 ' 

Sealaska Regional Native Corporation has shown interest in a new timber industry. At a 

March 20-21, 1996 Wrangell conference on secondary wood product manufacture, Sealaska CEO 

Leo Barlow said that a timber industry based on pulp and cants is a thing ofthe past. Sealaska 

has been considering buying the old APC Wrangell sawmill and running it as a different kind of 

operation, based on markets rather than commodity production. 

Transportation costs are not a bar to secondary manufacturing in Southeast Alaska. 

Barging containerized cargo by water is far less expensive per mile than hauling containerized 

cargo by truck, enabling Southeast Alaska manufacturers to compete with manufacturers closer to 

major transportation hubs 

One manufacturer of knockdown cedar furniture on Vancouver Island46 ships a 40-foot container 

of finished product to Vancouver, B.C for trans-shipment to their customers in Europe. The 

cost of trucking the container from the plant in Port Alberni to Vancouver is approximately 

$700CN or $511 US. Trans-shipment to European ports such as Antwerp, Belgium or 

Bremerhaven costs around $2,500US. Shipping costs are paid by the customer, and clearly the 

transportation costs from the Vancouver hub to the final destination dwarf shipping costs to the 

hub. 

Barging this amount of knockdown furniture from Ketchikan to the hub of Seattle would cost 

approximately $951,47 for approximately 450 pieces. Significantly this quote for shipoing does 

not take into consideration better deals that might be worked out with shippers. This difference 

in shipping cost to the hub would thus result in adding .98 to the cost of each piece of 

furniture. Clearly this is not significant--and shipping costs from Seattle to some 

43Center for International Trade in forest Products (CINTRAFOR), August 1994, Fact Sheet #13. 44Thc Evergreen Partneship, Prosocctus at I 

45Greg Schellberg, Evergreen Partnership Executive Director, workshops sponsored by SEACC in Ketchikan and 

Wrangell, February, 1996. 46Sarita Furniture, Port Alberni. 

·nQuoted price ofS5.37/1001bs, prorated including prorated pickup and delivery of container. This amount does 

not consider more favorable deals that might be worked out with shippers and as such hi overly costly. 

20 
191 

destinations might be lower than costs from Vancouver, thus recapturing initial shipping 

cost differences. 

A similar situation would hold true for many other Southeast Alaskan products. 

A high value-added, secondary manufacturing industry is market driven--based on quality 

and marketing to a far greater extent than is a commodity, production based industry, like 

pulp. Therefore, differences in shipping costs are far less significant. The quality of the 

individual product an :I the needs of the customer are paramount. 

Southeast Alaska received $110 million from Congress last year to help with problems in 

the timber industry. Now is the time to use that funding to effect a transition in the timber 

industry. 

Your bill deprives us of one of our greatest strengths--the genius of the free-enterprise 

system. By decreeing who will get timber, and mandating price controls that have nothing to do 

with fair economic competition. your bill prevents free-market entrepreneurs in timber or other 

industries from establishing the most valuable and efficient use ofTongass resources. and at the 

same time cost American taxpayers a massive subsidy_ This is a clear example of environment and 

development being compatible until distorted by a misguided and heavv-handed government 

subsidized program 

Conclusion. 

By placing the needs of KPC above those of all other forest users, your bill threatens all other 

forest users, and the environment. Although billed as a contract "extension," the new, 23-year, 

taxpayer-subsidized contract L-P wants (and the bill provides) would be devastating for the 

Tongass National Forest. It would stan right now and go at least until the year 2019. It would 

place L-P's corporate needs abr ve the needs of any other forest user; give L-P rights over the 

Tongass it has never had before; threaten jobs in other Tongass-dependent industries. and make a 

mockery of balanced multiple use. 

Your bill would roll back vital balanced-management reforms of the 1990 Tongass Timber 

Reform Act, undermine the National Forest Management Act as it applies to the Tongass, and 

make conservation of fish and wildlife habitat and protection of the world's largest remaining 

temperate rainforest secondary to the commercial exploitation of that forest. The bill rewards a 

major coroorate polluter for violating pollution laws. Because it officially establishes one 

company as the major commercial user of the forest, and commits the government to keeping that 

company profitable, the bill squeic.hes free enterprise and will likely halt the development of a new 

timber industry based on the free market a>.d secondary manufacturing of wood products within 

21 
192 

the region The new timber industry would cut less and employ more Alaskans, while allowing 

fo r conservation of vital forest resources that complement rather than threaten other Tongassdependent businesses 

By contractually enshrining L-P as the dominant user of the Tongass, this bill returns 

Southeast Alaska to the days of the timber barons. It is destructive to the environment and 

future generations. It should be rejected. 

22 
193 

SOUTHEAST ALASKA CONSERVATION COUNCIL 

TESTIMONY BEFORE THE U.S. SENATE 

ENERGY AND NATURAL RESOURCES COMMITTEE 

JULY 10,1996 

ATTACHMENT 

ATTACHMENT 

ATTACHMENT 

ATTACHMENT 4 

LIST OF ATTACHMENTS 

KPC's Threats to Close Its Mill. 1973-Prescnt 

September 21, 1990 Letter from Owen Graham, KPC 

Timber Manager, Complaining of Timber Shortages Prior 

to the Tongass Timber Reform Act 

The Potential Economic Consequences of a Reduction in 

Timber Supply from the Tongass National Forest 

1996 Revised Report--Executive Summary 

"Seley Looks to Re-Open Mill in Thome Bay," article in 

Ketchikan Daily News, June 8-9, 1996 
194 

CORPORATE OUTLAW SEEKS 

~SWEETHEART DEAL 

Since 1954, Ketchik'an Pulp Company (KPq, a wholly-owned subsidiary of Louisiana Pacific 

Corporation, has owned exclusive rights to log timber on a substantial portion of the southern 

Tongass National Forest. In exchange for a guaranteed 50-year pulp timber supply at 

noncompetitive rates, KPC agreed to build and operate a pulp mill in Ketchikan until the 

contract expired by its terms in 2004. 

Currently, KPC is seeking Congressional support for what it calls a 15-year "extension" of its 

monopolistic pulp contract. KPCs proposal, however, is not for an "extension" of its existing 

contract but a request for Congressional approval of a new. monoooly contract. The standard 

provision in Forest Service timber sale contracts permits an "extension" of that contract only if 

"purchasers operations to date have been in reasonable compliance with contract terms." KPC's 

repeated violations of its pulp mill's air and water pollution discharge permits, which endanger 

the health and safety of Ketchikan residents, disqualify it from obtaining a contract "extension." 

KPC claims it needs an "extension" so it can afford to spend the $150 million needed to install 

pollution-prevention upgrades at its antiquated pulp mill. These upgrades are required under a 

1995 criminal plea agreement between EPA and KPC, in which KPC pled guilty to violating its 

water quality permit by intentionally dumping toxic sludge into marine waters adjacent to its 

pulp mill. This criminal plea agreement is the most notorious example of KPCs chronic failure 

to live up to its contractual promise to "conduct its operations under this contract and other 

related business activities in compliance with Federal, State, and local statutes, standards, orders, 

permits, or other regulations." 

Below are several examples of KPC holding local communities hostage by threatening mill 

closures over the last 23 yean. 

In 1973, following the first attempts to implement basic environmental impact statement 

requirements, C. L. Cloudy of the Alaska Loggers Association warned that the requirements 

would cause "complete [pulp] ~ill shutdowns" and "shutdowns of the remaining sawmills in 

Southeast Alaska." (Ketchikan Daily News, April19, 1973). 

On May 4, 1976, the Ketchikan Daily News headline screamed "KPC says it will close July 

1, 1977." But as the paper explained the next day, the announcement "wasn't news. It was 

part of a publicity stunt." The paper criticized the pulp mill for issuing false alarms one 

week before EPA pollution hearings and shortly before employee negotiations were due to 

start. One editorial concluded "Ketchikan Pulp Co. is crying wolf and playing with the faith 

of thousands of people. God help it." (Ketchikan Daily News, May 5, 1976. 

During 1983 EPA hearings, officials from KPC said the cost of installing water pollution 

control equipment would force them to shut down. KPC said it would "consider both legal 

recourse and mill closure if the variance requests" were denied (Sautheastern Log, DecembeF 

1983). 

Southeast Alaska Conservation Couuci 

Senate Bitt t 877 

July 10, 1996 

<\H~rhm nf 1 
195 

In 1984, KPC's comptroller (later president) Martin Pihl claimed that if the Forest Servi"" 

didn't reduce the pri"" of timber and allow larger cl arcuts , "we're all going to paclc up and 

leave. • (Juneau E'!'{Jire, March 29, 1984). 

In 1992, EPA proposed much tighter pollution controls for KPCs pulp mill. KPC's 

President, Martin Pihl, claimed that the new pollution controls "would seriously threaten the 

survival of the mill, or any pulp mill anywhere." (Ketchilcan Daily News, April 17, 1992). 

In early summer of 1993, KPC announced that it would shut down its pulp mill "in August 

for three months because it was running out of wood for pulp. • (Ketchilcan Daily News, 

August 6, 1993). However, KPC "delayed the temporary shutdown of its pulp mill until the 

weelc of Sept. 15 and says it will last just 30 days ... (because of the mill's] aggressive 

logging plan, along with purchases of pulp logs and chips throughout Southeast Alas lea and 

Canada." (Sitka Sentinel, AugustS, 1993). 

On June 26, 1995, the Ketchikan Daily News announced that KPC "says it will close its 

Ward Cove sawmill for an indefinite period starting Friday because it is running out of · 

timber sold by the U.S. Forest Service." The same day it announced the closure of the 

sawmill, the Ketchikan Daily News contained a paid add by KPC, which offered to sell 

"approximately 3,000 board feet of red cedar and 2,000 board feet of Alaska yellow cedar 

during the third quarter of 1995." In fact. the decision to close the sawmill was a business 

decision driven by pulp prices that had more than doubled since 1994. and were then at or 

near thejr hiKhest price ever. While pulp prices were exploding, the average marlcet price for 

sawn timber dropped by 33 percent. 

On March 12, 1996, theKetchikan Daily News reported that KPC would close its sawmills in 

~tchikan and Metlakatla from late March until after Memorial Day because of" a shortage 

of timber. • KPC's problem js nottjmber supply. butt he cyclical. and recentlv volatile. 

nature of the international pulp market. In the same article, the Ketchikan Area Forest 

Supervisor expressed his personal opinion "that the current shutdown has more to do with 

market conditions than supply of logs .... • These shutdowns occurred despite KPC having 

access to 209 million board feet ofTongass timber as of March 24, !996 --well over a year's 

supply -- including roughly 87 million board feet that required no new roading. KPCs 

problem is that its monoooly contract has shielded jt from competition for so ton~: that now it 

has trouble comoeting with modem. lower-cost competitors on the international pulp market. 

KPC has a long history of "crying wotr with closure threats every time their logging operations 

are questioned. KPC has further threatened to pack up and leave unless EPA waived pulp mill 

pollution requirements or relaxed enforcement of water quality regulations. 

KPC does IUI.1 deserve any special treatment from Conaress because it ha$ repeatedly failed 

to act as a responsible corporate citizen. Any "extension" ofKPC's monopoly would 

continue the environmental and economic problems caused by this exclusive, 50-year 

contract, and become one or the biggest heists of public resources since the days of the 

railroad robber barons. 

SEACC 0Sf27 /96 
196 

I fiJ ~:t.c~ikan' Pulp Company 

?+:'c:;·7;:·t·:· 

~cs: O!lice Ba~ 65CO 

K•tc.,u<an. Alaska 3990' U S.:. 

Teleohone- 907-225 -21 51 

Telela:r· 907-225-8260 

September 21, 1990 

Mr. J. Michael Lunn 

Forest Supervisor 

u. S. Forest Service 

Ketchikan Area 

Federal Building 

Ketchikan, Alaska 99901 

Dear Mike: 

"- "'~"'·• Vr>!:::.l :";CO'i ;·.··.o: ~~ . ·ct• "J<.~ : ..:.;.(~.-

RECEIVED 

The five-year allotment of timber the Forest service identified in t he 89-94 EIS for our LTS appears to require about .360 

miles of new construction t o access the 960 mmbf. 

Obviously, the roads must be built early enough in the fiveyear period to allow time for harvest. As you _know, normally 

we consider six months of road constructed ahead of the 

logging the minimum, although two or more years ahead in some 

cases was necessary to keep construction costs (e.g .. mobilization) to a reasonable amount. Indian Point is an example of 

an area where we had to build road two to three years ahead. of 

the logging in order to avoid unreasonably costly remobilization. With relatively few opportunities for alternate means. 

o f mitigation to allow crossing fish streams outside the 

three-month fish timing "window", we now realistically need to 

maintain a m.i.n..i.m.!.lm of 12 months o:f timber .released ahead for 

road construction and six months of timber roaded ahead for 

logging.~ In any case, in order for you to offer the contractually required volume during the five year period the Forest 

Service must release all of the timber (960 mmbf) for construction and logging in not less than the first four years of 

the five year period and those releases must be distributed 

over those four years in a manner that will allow for the 

orderly construction of the roads required and also allow for a reasonably efficient logging operation (e.g., summer logging at high elevation, winter logging at low elevation). 

In the period from October 1, 1989 through September 17, 1990 

the Forest Service released only 139 mmbf for harvest. Our 

pipeline of timber released ahead has fallen from 79 mmbf on 

TL : 264 Southeast Alliska Conservation Council 

Seaat• Bill1877 ,<f#.<tc ft_i>i,..J:J.. 

July 10, 1996 
L 

Mr. J. Michael Lunn 

September 21, 1990 

Page 2 

197 

October 1, 1989 to only 54 mmbf on September 17, 1990. 

Likewise, the volume prepared but not yet released has fallen 

from 73 . 1 mmbf on October 1, 1989 to 26 . 7 mmbf on September 

17, 1.990 (see Attachment "A") . 

The amount of tiinber available for us to harvest has become 

intolerably small. We have only a couple of months of timber 

roaded ahead and only a month of road released ahead of our 

construction crews. Through no fault of KPC, we have been forced to cut back our logging operations at Naukati, 

Labouchere, Coffman Cove and Thorne Bay. Many workers have 

been laid-off, and many . of our construction crews have been 

able to work only intermittently all year. Our harvest costs 

have become unreasonably high this year because of the intermittent shutdowns caused by Forest Service failure to .prov ide 

necessary timber volumes in a timely fashion , t he" reduced 

lev el of operations and the lack of planning opportunities 

available to us. 

All of these operational problems are a result of not having 

sufficient timber prepared ahead to permit proper planning and 

management of our business. We had planned to harvest about 

205 mmbf this year, but it is obvious now that we will not 

come close to that level. It appears more likely that we will 

be able to harvest about 175 mmbf. We have made an effort to replace this fiber loss with outside purchases. We have· paid 

a premium for the additional fiber and we are still Critically 

short. One or both of our sawmills will likely suffer considerable down time which could occur by late 1990 or early 1991. 

Furthermore, if the Forest Service does not get caught up with 

their sale preparation work immediately there is serious risk 

that our pulp mill will be without fiber in the fairly near 

future. 

The Forest Service assured us at our May 10, 1990 meeting they 

would be back on schedule with our Annual Operating Plan by 

September . . Instead, as of September 1990 , the volume released 

was 238 ~bf behind what was approved in the Annual Operating 

Plans for 1989 and 1990 (see Attachment "B"). We request that 

you immediately investigate whatever possible Forest Service 

activities there may be that are contributing to this continuing problem of delayed releases. We request ~ that 

you take the steps necessary to get back on schedule immediately so that our company will not suffer further damages . 

Another related pro blem is the fall-down i n acreage and volume 

and economics from what was approved in the Record of Deci·-

sion. Through September 1, 1990, the new units that hav e been 

TL:264 
Mr. J. Michael Lunn 

September 21, 1990 

Page 3 ' 

198 

released to us (not including residual timber) have averaged 

21.1% less acreage than the ROD (see Attachment "C"). This 

has exacerbated our problem with volume released ahead to 

operate on and it has an extreme impact on our costs (e.g., 

road construction cost per mbf, mobilization cost per mbf, 

etc.) . Further, if this trend is not reversed you may be 

forced to prepare a supplemental EIS to replace the lost 

volume. 

Finally, I still have not been able to locate the source of a 

report to Mike Barton that indicated we are harvesting timber 

that averages better than 40 mbf per acre. The truth is that 

from March 1, 1989 through June 30, 1990, our harvest averaged 

31.3 mbf per acre net + net utility or 28.2 net 

(Attachment 11 0 11 ). If you or anyone else in the Forest Service 

disputes this calculation I would like to hear about it now! 

We are being given a deaf ear in the Juneau office. Perhaps 

updating them with the correct information would help 

alleviate this situation. ' 

Sincerely, 

:;OV~~ 

o. f. Graham 

Timber Division Manager 

:ts 

cc: M. R. Pihl 

TL:264 
199 

The Potential Economic 

Consequences of a Reduction 

in Timber Supply from the 

Tongass National Forest 

1996 Revised Report 

Prepared for: 

The Alaska Raintorest Campalp 

Prepared by: 

ECONorthwest 

99 W. Tenth, Suite 400 

Eugene, OR 97401 

(541) 687-0051 

December 1994 

Revised June 1996 

Southeast Alaska Conservation Council 

Senate Billl877 .4-'L . , 1 July 10, 1996 . rra.cl<."'~"-' 3 
200 

Executive Summary of 

1996 Revised Report 

In December 1994, ECONorthweat studied the economy of Southeast 

Alaska and concluded that a reduced timber supply from the Tongass 

National Forest would have a minor impact on the region's economy, and 

this impact would be confined largely to the timber induatry. Our report 

documented that the timber induatry represent. a relatively •mall fraction of 

the region's total economy and that, since 1990, Southeut Aluka'• economy 

had grown steadily even as the timber induatry wu shrinking. We found 

that the growth induatriea in the region are tourism, fiahing, and trade, all of 

which may benefit from reduced logging. We di.acuaaed the unique 

importance of subsistence in Southeast Alaska, an economic and cultural 

activity which is directly harmed by logging. Finally, we noted that Southeut 

Alaska's experience was consistent with the Pacific Northwest, which has 

experienced significant growth in total employment as employment in the 

timber industry declined. 

One year later ECONorthwest reviewed the latest economic data from 

Southeast Alaska. This data strongly reinforces the findings and conclusio1111 

described above. The region's total employment continuee to climb u 

employment in the timber induatry continuee itl downward trend. Between 

1988 and 1995, total employment in Southeast Aluka increaaed at an 

average-annual rate of 2.2 percent, in refreshing contrast to the averageannual decline of almost 7 percent for employment in the region's lumber, 

wood products, and Jlulp industries. In 1995, those directly employed in the 

timber industry accounted for le11 than 6 percent of the region'• total 

employment, and many of these workers were nonresident.. 

Clearly, Southeast Alaska's economy is diverse and strong enough to 

absorb reductions in timber harvest yet keep growing. In fact, since 1988, 

employment and earnings have increased steadily in every sector of the 

region's economy except timber-construction, transportation, trade, and 

services. to name a few. 

Fishing, tourism, and the quality of the natural environment contribute 

to the regional economy's diversity and strength- Reductions in logging may 

have a positive effect on these driving forces of economic growth- For 

example, in a report to Congress in 1995, the Alaska Region of the U.S. 

Forest Service concluded that existing measures of habitat protection are 

inadequate and greater protection is needed to avoid declines in salmon and 

steelhead runs. AB another example we note that a 1995 report concluded 

that while the number of boat-based tourists in Southeast Alaska is 

increasing dramatically, the number of suitable anchorages has declined, in 

part, due to logging. 

Reduced Timber Supply From Tongass ECONOOil'ftSI Page i 
Page ii 

201 

Thts updated report, like the origrnal, does not attempt to assess the 

impacts of reduced logging on every community in Southeast Alaska. The 

focus of our analysis is on the regional economy of Southeast Alaska. We 

note, though, that much of the concern regarding the economic 

consequences of reduced logging on the Tongass National Forest focuses on 

the communities that derive substantial income from logging. One cannot 

fully describe the consequences to tbese communities, however, by looking 

at each community, or even the entire set of communities, in isolation from 

the regional economy. The economic well-being of every community adjacent 

to the Tongass is tied to, and cannot be separated from, economic activity of 

the regional economy. 

ECONorthwest Reduced Twnber Supply From Tongass 
202 

Ketchikan Dally News. 

saturday-Sunday, June 8·9, 1996 

Seley looks to reopen 

mill in Th~rne Bay 

By CATIIY sr. JOHN 

Daily NN~ Staff Writ.,. 

Seaborne Lumber owner Sieve Seley 

is consi~f.r:ocating his DOW shut· down Ket · operation.s to Prince of Wales Wand as part of a new $5 million 

secondary manufacturing facility. 

Seley is scheduled to present a proposal, which is in the early stages, to the 

Thorne Bay City Council on June 20, he 

said. 

Seaborne Lumber's SS.l million mill 

closed April27 due to a declining timber 

supply. Seley is especially interested in 

locating to the Thome Bay area, u the 

prospects of a Gravina Island indust:rial 

site dim and POW growth continues, he 

said. 

The proposal is to employ 60 work· 

ers, about four from Seley's shutdown 

Ketchikan operation.s. The remainder 

would be local hire, he said. 

The l'lant would be desi"'ed to split its time between Seaborne sand other 

business's needs. Seley i.s looking at a 'good, SOUDd operation' that will aJ. low added investment in the commu· 

nity by offering additional mmufac· tunng for the smaller 'mom·and-pop' 

operation.s, he said. 

Seley would like to begin. con.struc· tion in spring 1997, but there's a lot of 

work aliead, including finding a fiber 

supply, be said. 

He plans on two-thirds of his timber supply cqming from U.S. Forest Ser· vice sales. The remainder would come from state timber sales, he said. The facility will manufacture shop 

lumber, industrial clear boards and 

construction-grade products, which have a market in other parts of the 

POW has always 'atmdedODenarms 

to the ltimberJ iDdustry and .fOilS,. he said. 

'lbelslandhao IIICft beachfront property than Ketc:hihn and will probably surpass Ketc:hihn's population in the next 10 years, he said 

'Thorne Bay is also a good commu· 

nity of primary manufacturers, • he said. 

Seley would relocate his log mer· chandising and primary manufacturing 

equipment and remanufacturing plant. 

He plans to add a dry kiln and planer to the facility. A dry kiln reduces the moisture coo tent of wood in preparation for 

further manufacturing, while the planer 

provides the final cut before sale. 

state. 'There are a lot of usen up north, • he said. 

Seley is scheduled to meet with Gov. Tony Knowles' staff nat week 

to discuss bow the project falls under a Knowles task forte recommenda· tion for a regional facility with valueadded capabilities. 

He i.s considering a site on the east coast of POW because it is strategic to 

the timber supplv and because Thome Bay has shown ihe most enthusiasm, 

said Seley. 

The City of Thorne Bay had previ· 

ously con.sidered constructing a bier 

mass plant to provide power and pos· sible dry kilniilg for secondary manu· facturing. 

Mayor Kay McMaster said the city 

i.s very excited about the pi'OjX>sal. 'The city will do whatever 11 can do 

to accommodate fSeleyj and facilitate 

the project,' she said. 

The city and City Council are also the Goose Creq subdivision in case 

asking the state to create tw. o 20·acre Seley is interestid in those lands, said 

parcels for bid in its next sale of lots at McMaster. 

Southeast Alaska Conservation Council 

Senate Billl877 4~ .hi. 

July 10, 1996 ""i 
203 

of 

PHONE 735· 2202 

• CITY OF PELICAN, ALASICA 

RESOLUTION 1996-31 

FAX 735·2258 

A RESOLUTION FOR THE CITY OF PELICAN, ALASKA, OPPOSING EXTENSION OF THE LOUISIANA PACIFIC'S 

XETCBIXAN PULP COMPANY 50 YEAR CONTRACT WITH 

THE FEDERAL GOVERNMENT 

WHEREAS; the 50 year contract currently enjoyed by Louisiana 

Pacific's Ketchikan Pulp Company ·(KPC) qives that company an unfair advantaqe over competitors and exclusive riqhts to timber resources, and, 

WHEREAS; the terms of that contract were neqotiated in the 1950's and are wholly inappropriate today, and, 

WHEREAS; the City of Pelican is opposed to federal subsidy of the. timber industry in the Tonqass National Forest, (Resolution 1995-22), and, 

WHEREAS; qenuine multiple use of the Tonqasa National Forest that provides for subsistence, tourism, independent timber 

operators, and adequate fish and wildlife habitat protection is incompatible with allowinq KPC timber operations a con- tinued priority, and, 

WHEREAS; areas of Northe~Chichaqof, includinq the Eiqht Fathom 

Timber Sales, which were not in KPC's oriqinal contract area, have already been identified to supply KPC under the oriqinal contract, and, 

WHEREAS; extension of the KPC contract would vastly increase pressure for immediate larqe-scale clearcuttinq on Chichaqof Island, and., 

WHEREAS; in 1995 KPC was convicted of a felony and 13 other charqes related to violations of clean air and water laws, and, 

WHEREAS; the possibility of lonq term economic diversity and stability for our community and the reqion would be harmed by extension 

of KPC's contract; 

NOW THEREFORE BE IT RESOLVED that the City Council of Pelican, Alaska hereby opposes extension of Louisiana Pacific's Ketchikan 

).-.• .. --~ASSEti,. APPROVED AND ADOPTED THIS 17TH DA NE 1 6. , ) 

· ,-, .'·· Pulp Company's 50 Year Contract with the USD z:or t Service. 

t·· ~- " J:t . . . . fU 

Mayor 

s F'_5!!-<;;~E~;-~~~~~~9~R ::'J:' 8'a f.C'<_N8 ~~sn5~'*fRTU"(N'T -p£L, ic"AN HEALTH C L INIC PEL ICAN VO LV :-I TEE~ i=" ~::: ~?~=~'T'-
204 

Oty or Tenakee Sprtnp 

RJCSOLUI'ION H-J7 

A RESOLUl'ION J0R 'J.'ID CITY OJ TENAKEE SPRINGI, ALASKA, 

OPPOSINGEXTENSIONOJ'TlULOUJSIANAPACU'IC'SKITCIIIXANPVUCOMPANY 

5t YEAR CONTRACT Wl1'B TilE nDDAL GOVKllNWI:NI' . .. WHBREAS, the SOy.- -met CWftGiy enjo,ed by LouUilna P.ci6dl ~Pilip~ (LPK) 

ai- IMl ~ 111 Wl8lir -....., - ~ IIIII -.-. ria'* 10 limber 

-;IIIII 

WHEREAS, the terms oflhll-mct-ftiFliatod in tbt 19S<7allld m ~~today; IIIII 

WH!!REAS, puine multiple 111e ot the T~ NltiOIIII Porell tM1 provide~ for lllblillcnoe, tourism, 

inJ.:po:nJcnttimbcr optntors, .,d adequate fllh and wildlife habit.ll protection is incompatible 

with allowiJt! LPK limber IJ!)CIIIlions a continued priority, IIIII 

WHBREAS, .., of Ttnlk .. 1111-. whic!h _. not in LPK'a CJriajnll -met ... '- aJn.dy been 

idallifltd to lllpply lJ'K Wider lhe oriait-1 oantrw:t; llld 

WHERBAS, exrawian of the LPK connct would Willy mer- ..-n far lmmoclille lqMcale 

cl~ in Tetllicolllnl«.llld 

WHEREAS, in 199S LPK - -mted or a feiOI\Y and 13 Olhcr chlrpl rellled 10 Yiollti'* ot doan air 

.nd 'Iiiier laws; nl 

WHBREAS, the poasibility of a. ta:m economic cli.ty llld liability far cu _.uty IIIII the rqpon 

would be hlrmod by .s..ian oC LPK'a cmtr.:t; 

nmREFORB Bli rr RESOI, VBD IMl the Common C'.ouncil of thl City ofT ..... ~ AIMk.a hereby 

oppoea extcnaion of~ Plcific'a Ketd!ibn Pulp Compc~)"s 50 Yw ConiiiCI with the 

USDAF...-Scrvioe. 

Bli rr FUR. mER RBSOI.VIID to dim::t the eit¥ cleric 10 forwmd a copy of this raollllian to lhe llonorable 

Tony Knowlt.1, CJowmar of the Statc of Alub. 

ADOPTED fA Yes, I VMM+Saa+-nus~oAYOF...mYL..t9K 

. ·., \ 

. · ·'.>· ~~ 

Loula S. Heinl . 

,.._ ' . Clly CouDell ~ 

J·. . exotBcloMAYOR 

', . 

~ ~~"' 
Gustavus 

Community 

Association 

June 13, l'i196 

Gonoral Xeetln<;~ • 

205 

Post otfice Box 62 

Gtmaw!, Alaska OOS26 

A Jt&GOUI'UOII 1'011 '1111! CUS'rAYU8 aBIOlii'l'!' MSOC"ITIIW 

OPPOSmG EftEIISiml C. '!II& lOOIS!AM 'PICIFIC'S DftliiiNf l'VLP 

OOM1'U'r 50•1'ZU -CDriUCr lfi'DI '!liB Pllll!ML OOtW 

tii!EREAS, the 50-year eontract curHntly enjoyed by tilo Looldana 

Peciflc's btcbilcan PUlp Ocql!llly (!.Pit) ;ives that ~Y . 

on unfair advantage ovor COII!peti.tors and uo_lusift rivhts to timber resources, and 

~l£aEAS, the te~ of the contract were n~nti~tArl in t.hA 1qso•s and 

a"" wholly inappropriate today, and 

lftllt'RIJ\S, oenuine ~ltipla uce of the ~an 11~tt11n .,nrl'«t th11t 

provides for subsistence, touria, iadependeut tiar 

operaton, end adequate fish lllld wildlife habitat protection 

iJI incolopat.iblo with ellowiov LPI: tillber aporatiolls aod 

extended prior lty, and 

WHKRI!AS, areu uear Gastaw.., which vara not in LPJ:'s oriqinal contract 

area, have alzeady been identificod to aupply LPl under the! 

original contract, and 

liHBIU:I\S, IIIXt:enaion of the LPI: contract would vastly i~~ereue preeiiUl'e 

fgr jmcdicte large-scale clearc:utt1119 in areas near Gustavus, 

and 

llll'RRJ'.AS, the possibility of looq-tem eeoiiCIIli.c divanity and atability 

for our COII'dlnity and the region tiOUl.d be halDecl by the 

extensiou of LPI:'a contr...,t; 

'l'I!ERUOIU: BK IT RESOLVRD that the Gustavus Carcnunity Association hereby 

opposes the extension of Looisiana Pacific's ltetchil<~n Pulp 

Coq>any'e 50-Year Coutract with the US!lll Forest Son:vice. 

'l'hlo ncoolutlon 1\.do"tod Unanimcudy thl ~ l'ltb llAy 
206 

Community of [Hilt C.W. Non-Profit eorpor.tlon 

..,..COil,...- -----

Testimony of Community of Bftn Cove 

For TLMP Revision 

June7,1996 

The Community if Elfin Cove is opposed to: 

Clearcut logging sale levels as proposed by tbe preferred alternative. 

Bftn Cove advocates for a reduced harvest; therefore consequent 

reduced impact on deer and fish habflat. 

The Community of Elfin Cove is opposed to timber sales at EightFathom Bight and Tenakee Inlet. There needs to be further study 

done on the adverse effects of logging on Tenakee Springs' economy 

and the Jmpact of additional clearcuts at Chicken Creek on the 

tourism operaron of Elfin Cove. Gustavus and Hoonah. 

The Community of E1fin Cove is opposed to: 

Renewal or extension of Ketchikan Pulp Company's lang-term 

contract. 

The Community of Elfin Cove believes that the Tongass left unlogged 

will provide the highest possible benefit for the social and economic 

structure of the cOIDIIIWllty. now and in the future. Maintaining tbe 

LUD n designation for the surrounding area Is of utmost importance 

to the community. 

Adopted by unanimous vote at a regular meeting of the COmmunity 

of Elfin Cove on June 7,1996. 

signed by,~ w;JJ 

Iun Wild, secretary for the Community of Elfin Cove 
207 

i 

I 

PORT ALEXANDER FISH AND GAME 

ADVISORY COMMI'ITEE 

llf.D.IntCII !16-1 

, 

i 

I 

I 

A 

~ 

IOlliTIOC FlO! llf JIIRT .IID.IIIER FJSH IIIII M£ amrt aMIITTEE ~JIG 11£ I'IOil'ID ~ltll 

OODISIQI RJt UliiSLWI PIICIFJC'S ICE10IIMI R11 aJt1MY 

IHIIAS, Ule so..,. CDitnct anwtl1111.t 11r Lcarls1n Plc1f1c's r&lllkMI I'Vlp ~ (\JIIC) tt-lJIK .. ...ratr .tet IIMntlge _. Clthr t1lllr ~ 1111 ..:turf.,. r1!11b to ~ 

,..,.; 1111 

IKIDS, tie t1n11 tit bt CICIIItr8ct ..,. ~ tn l9!i4 .-I .,. 111t1rw11 t~ ftr ...,.s .... 1111 Nbnl - cxnlit1- "'~ AJ-.; 1111 

lHJifAS, lllllc11'9 I.Jil tW.. cpentians Ule p-tcr1V fer Ule ...,..n of the T~ llst1CN1 fmst 

dlnllges ott.,- .,ltiple use resaroes ~fer~ Al.st.a's 1KD1J1!f trcllli!J"G Slbs1stera, tar1n. rect"'lftiCII, fish and wildlife hllbtt.t; and 

IKIDS, mst of the t..,.. to ...,11li'K's ,..1nll'9 CD'Itnc;t will blla;pd tn tt1t IIW'ttlrn 

T...-ss, • .,. lilt m the contract fGr 1ts t1nb!r S~Q~ly, tntlclt~ u.t logging tn h ~fled 

1ft CXIItrw:t .,. 1s lilt sustwblllble; IIIII 

'~~~~f.'S. tht K.1IIDik bile m the I'O'tf8'n TC1191S, ll!tcll tntludls -aa1 .m ltiCft ft!Mng, 

ranet1cll, tart.. 11'11 --~~ lu'lti"'J 1111 fllfltlv, will lit -.gad tf lftiiiiUilwble ~"'I tD 

..t l.JIK's Clllltnct Clllt11ll!s; 1111 

VBrAS. l.JII( - CDW1cted of • felCII)' ani 13 odlr dllrg!s lile tD Y1ollt lens af de.lwtllr ani 

cl• air 1M tn IB; IIIII 

~. the 1~ earank dha's~ -.1 ltlbilt\Y of III'UIB'n 5culllllst ~~- n tht ntre 

,....ne regbl will be Mged 1:11 the IJ"GPDSSd ~ ecans!CII of UK's t1ltlr contnct. 

1IDERJif liE n 101m! that the !'1ft A1_.. Fhh IIIII 6loe lciVtsary ea.ittee C111P0S1S II\' 

atnt111 of L.Mstn Alctftc's Kl!tdl1bn Plllp ~·s ~ CXI1tnct with tJe U.S. Fcrest 

Slrvtcz. 

liE IT FIRTifR REne tNt Lcarlsin l'lcfftc's lletdlttlll Pulp ~·s !D-)ILW ar11nct wlttl tht 

u.s. Fcrtst Snlc:e ..,.,'kllle l'IMIU:I ••11&ttl1 .. to lnaclles of ttl cantract. 

IE IT RJmER IDLB ttllt a cqJJ of tt11s resoluttCII shill lie 1811111 to TC~~Y Knowles, liiMnllw' of 

t11e Stat2 of 111.., n ta the T1119U r..ws ~ Plamltv r- of t:hl USDI Fa-est Sln1ce. 

IIQ'IBl .JJE 25, l9.16. ~ /Uc Cnuu.lf Mt. ~~. 0.."-

Serving tbe Alaska Board of F'.ISberiu and A!ad:a Boan:l of Oamc 

-~ -.r.o. """2m6. J-Aiool<af!IIICIUSl6 
.Juae 26, 1996 

llonoreble 8111 Cl laton 

1600 Pennsylvania Avenue 

llulllngton, D.c. 20500 

Detr President Citato.: 

208 

~· Port Alexandar Fish and Clle Advisor, toaNittee would 11te to thank 

1011 for your efforts In blocking the pUSI!Ie of hal"llful lethlltl011 last 

fall and winter concemtng the Tongus llltlonal Forest In Alaska. 

Unfortunately, Sen. Murkowskl has one• again Introduced legislation that 

would cause harm to the Forest. 

~· Port Alexander Fish and Galli Advisor)' toaNtttee Is part of Alaska's 

Dept. of Fish ud Sa• loards systett. lie are all 1-.• 1g-tt• residents of 

Port Alexander, a reaote c011trefal ffslllnt vil~49• tn Sou~east Alaska. 

Ve ara surrounded by tilt Tongau Natton&l Forest. lie are tired of how 

the Forest is being Mnaged, lie have enclosed 1 copy of 1 resolution we 

adopted e•pressiiiCJ opposition to Lou1s1&111 Pacific's letdllkla Pulp 

Coliptll)'' s contrut to lot Ute Tongan National Forest. 

lie arw asking you to oppose I">' btll tllat ....-tes en utens10fl of the 

existing contract with louisiana Pacific's Ketchikan Pulp co.pany or that lnel'eases cuttfll!l to abova a~rrent levels (approx. 150 ~/year). 

FurthertiiOre, we belteve the d ... ,, being done to the longus llattonal 

Forest through current Mlllgllllftt practices should be stopped, e~ If 

it 111eans bruklng the 50-year contract with Ketchikan Pulp COipll!)'. Vhtn considering the cost of breakl.g this contract please be IWirt of 

tM fact thllt the s"bstdt•s to lou1stane Pacific al"ff already costtns 

tlxplYers hundreds of a11Hons of dolllrs. 

We Invito 10u to caae to Southtlst Aloske to , .. for 1ourself the 

terrible raping of the Tongass Katlonal Forest that has oceurred in 

these past 42 years. Paying louisiana Pacific's Ketchikan PUlp Colplny 

to ravage our Matlonal Forest Is wrong and must stop. 

Si~Afc [,u.J{ 

Ml• McConnell. Chairsan 

Enclosure 

Serving the Alaska Boanl of Fisbcries and Alaska Board of Game -s_.-P.O.h3!.<126."'-Aloob--5S26 
209 

TONGASS HUNTING AND FISHING 

COALITION 

PO Box 20637 

Juneau, AK 99802 

Resolution 96-625 

A RESOLUTION FROM Tongaee Hunting and Fiahinq Coalition 

OPPOSING THE ENVIRONMENTAL IMPROVEMENT TIKBBR CONTRACT 

EXTENSION ACT, BILLS S. 1877 & H.R. 3659, OR, THB 15-TBAR 

CONTRACT EXTENSION FOR LOUISIANA PACIFIC'S RETCHIRAN PULP 

COMPANY 

WHEREAS, the 50-year contract currently enjoyed by Louisiana 

Pacific'• Ketchikan Pulp Company (LPR) give• LPR an unfair mar'Ket advantage over other ti11ber businesses 

and exclusive rights to timber resources; and 

WHEREAS, the terms of the current contract vere negotiated in 

1954 and are entirely inappropriate in today'o 

natural resource and aarket conditione in Southeast 

Alaska; and 

WHEREAS, allowing LPR timber operations a priority on the 

Tongaee National Forest i• inconsistent with multiple use principle• that provide for subsistence, touriea, 

independent tiaber operators, and adequate fish and 

wildlife habitat; and 

WHEREAS, the obligatory supply of timber to fulfill LPR's 

remaining contract will be taken from the northern 

Tongaaa, an area not in the original contract area, 

indicateo unsustainable logging practices in the 

specified contract area; and 

WHEREAS, the econoaic baoe of the northern Tongan includes 

commercial and aport fishing, recreation, touria•, 

and subsistence hunting and fishing will be damaged 

if the level of logging allowed under the contract spreads to the northern Tongass; and 

'IIHEREAS, LPR vas convicted in 1995 of a felony and 13 

misdemeanors for violating the Clean Water Act; and 

'IIHEREAS, LPK vas convicted in 1983 of violating civil a~ti-trust, driving 102 emall independent timber 

operatoro out of business in Southeast Alaska; and 

WHEREAS, the long-term economic diversity and stability of 

Southeast Alaska will be damaged .by the proposed 

15-year extension of LPK'a timber contract. · 
210 

THEREFORE BE IT RESOLVED that the aeabership of the Tonqase 

Hunting and Fiehing Coalition, a grassroots orqanization with 

widespread aeabership throughout Southeast Alaska of hunters, 

flahere, touriea operator• and Forest aubaiatenee reaouree gatherers, who feel their ln~resta are not being recognized 

adeguatelr by the Alaska Conqreesional Delegation opposes 

any extension of Louisiana Paeitle•e ll:etehikan Pulp Coapany •a 50-year contract with the u.s. Forest Service. 

Be it further resolved that a eopy of this resolution shall 

be sent to Tony ll:novles, Governor of the state of Alaska, the 

Alaska Congressional Delegation, and other aeabera of 

Congress.~ de#~ 

ADOPTED~--~ ~._;,,{_ 7/2('?p 

fl-~~- Q-~~ 
211 

A RESOLUTION FROM FRIENDS OF SOUlHEASrS FUTURE 

OPPOSING TltE ENVIRONMENTAL IMPROVEMENT TIMBER CONTRACT 

EXTENSION ACT 

BILLS S.1Bn & H.R 3669, OR , TltE 15-YEAR CONTRACT EXTENSION 

FOR LOUISIANA PACIAC'S KETCHIKAN PULP COMPANY 

WHEREAS, the 50-y~r contract curr~tly enjoyed by louisiana PacifiC's 

Ketchikan Pulp Company (LPK) gives LPKa1 unfair mari(et 

advantage over other timber businasses and exdusiVIt rights to 

linber resources: and 

WHEREAS, the terms of the current contract were nagotialed in 1954 and are 

entirely inappropriate in tOday's natural reacuce and mari(et 

conditions in Southeast Alaska; and 

WHEREAS, aAowinQ LPK timber operations a priority on the Tongass National 

Forest is inconsrstent with multiple use prj~ that provide for 

SIA>sistence, tourism, independent timber operators, and adequate 

fiSh and wiklrrfe h.!rbilat and 

WHEREAS, the obligatory supply of timber to fulfill LPK's remai"'ing contract will 

be taken from the northem T ongass, ., .... not in the original 

oontrac1 area and is .-.dicalive of U(ISUStainable loggilg practiCes; 

ln:l 

WHEREAS, the economic base of the northern Tongase inckJdes commercial 

and sport fiShing, recreation, tourism, 1n:1 amsi&tence h~ting and 

fiShing which wil be damaged if the level of logging allowed u• 

the wrrent contract spreads to the northern Tongeaa; and 

WHEREAS, LPK was convicted in 1995 of a falony and 13 misdemeancn for 

vioiatl1g the Clean Water Act; and 

WHEREAS, LPK was convicted in 1983 of violating civil anti-trust laws and 

driving 102 smallndependent tinber operators out of business in 

Southeast Alaska; and 

WHEREAS, the lon(rterm economic diversity and &tability of Southeast A1a6ka 

will be damaged by the proposed 15-year extension of LPK's 

timber contract, and 

WHEREAS, 1,698 Sitkans, out af 3,400 voters, voted In October, 1995, to end 

clearwtting in the Sitka Local Use Area; and 

26-689 - 96 - 8 
212 

WHEREAS. Sitka is the largest subsistence community in Alaska, lind the 

hsveat and lh.-lng oiiUbslllence foods and mMeriala ... vial to 

the CUI!Ure. economy, and we~~g of our communlly; and 

WHEREAS. it is widely believed the inminent logging will caUM negative 

impacts to subsistence and other f0188l UMS that are irr'IMnllle 

within~ span af many~ generations; ancl 

WHEREAS, al the strearnt and lilllatell _, SoulhMet Alalka l"'lppeeanl lha 

riChest hablet for ell CU' fisheries, they deeerYe al .. protec:tign 

-can pnMd&; and 

WHEREAS, abcM 88 peroant ollhe original high-volume timber per acnt tarest 

(which formerty wae habltlll o1 highest irnpottanee far~ 

alblistenca tu~trog and 118hing and OCher forest Ulell) t.s ·~ 

been removed by logging fnlm the Sitka local UN Area; and 

WHEREAS, Friends of Southeast's Future is opposed to clear-cut logging in the 

Sitka 

~ 

Local UN AIM, we am opposing the Poison Cova and 

Baranof Timber SaleS; and 

WHEREAS, old "Oiolllh mUll be left for habitat, slbllstence, tourism, reall8tiol ~ 

· fisheries ano culhnl needs; anc1 

WHEREAS, the "Stika Local Ute ~ hi the eree fnlm Broed CI'Nk and Ulhk 

Bay SOUIP'IWM:I down 1he west aide of Baranaf lllln:l, including 

adjacent i81ands, to Wndy Passage (speclically, Ftnlt SeMce 

ValueComparieon Units 24fl. 279-281,287-290,299-313, 318-

325. and 349-351, 

THEREFORE BE IT REIOLVED that Friends af Soulheast'l Future opposes 

any extension af louisiana Pacific's Ketchlcan Pulp Company' a 50-year contnK:t 

with~O.USF~;: O/ 

~~ f ·)/- '-"7~.....__~----­ ADOP"i€ 
213 

Point Adolphus Seafoods 

P.O. Bo1.6J 

Gustnus, Alaska "826 

(907) 697-2246 

AprilJ, 1996 

To: Governor Tony Knowles 

Fnm: Janws R. Madwvjak 

Re: KPC long-tenn contract e:dension 

J)('llr ('.ovemnr Knowle$, 

..\s a long-timl' resident or snuthcast Alaska, I ha\'e se<'ll ftn«hand thl' damage 

caued-by extensive dearad logging. Near our community, the c:bn:uttlng done on 

the T ongass was done to meet the fo'orat Service's obligation under the tenns of' the 

Alaska Pulp Company's long-tenn contract. 

AMhoqgh they may have been COII!Iideml a JOOd idea half' a century ago, the 

loJIC'Unn timber contracts on the Tenpss have been no less than a blight upon the 

forest. Though we may be connectrd to the lntemet, IOUtiKast Ala.•ka Is, as reganb 

timber, a bona fide member of the "Third World ... 

l understand that much or Alaska's lejtblature. an lnstitutionali&rd 

nnbaiTU!IIlent, ll p~ a resolution to support a fifteen yrar utension to KPes 

lo~enn rontract. This Is the ultimatr in stupidity, and will (Wlr.mtee that the 

Louisiana Pacific: Corpor-.ation prosprn at the UpenR of aouthrast Alaska's future. 

Talle a Bight some day toon and see what il left of the forest on N.E. Chichagof 

Island~ only 10 minutes by air from Juneau. 

Given your common sense and concern for the future or our chlldmt, I 

expect that you wtH not aupport an extension to KPC's long-tenn contract. Your 

onlce should ta~ a leadenhlp position toward ln~ning the sustalnablllty or our 

flltuft. 

nunkyou, 

j"""" R . lrv{~iQ~~ James R. MaC"ko\-jak 
214 

ALASKA DISCOVERY 

Senator Frank MwkowUi 

Committee on Energy and N~ Resouroes 

via fax to' 202-228-0539 .umtion Mark Rey 

May23,1996 

TONG ASS FIELD HEARING, JUNEAU ALASKA. MAY 29, 1996 

Testimony of Ken Leghorn, ~nt aod c:o-<~wner, on behalf oflbe Board ofDi=lon of Alasb. 

Oi$COVecy, Inc. . 

WE OPPOSE THE KPC CONTRACT EXTENSION 

In the 1950s when Tongass limber policy was enacted, there was virtually no tourism industry operating 

on the Tongass, and only a few !11\1)) tour ships plied the IMide Passago:. ID 1972, Alaska Discovay 

wa, the .6Cil tourism COIIIpiUIY t.o receive a pemrit to operate commercial tours using frderal land Oft ~ 

Toogass National Foces!. Today there ue IIDt2Q!I busincsocs uoclcr pcnnil. on dae TIJII&IISL Our 

compsny's major coocem with T~ manaecmeat is lhol the TOQI8$S is quidly bcc:omin& crowded 

with a wide variety ot 1l3Cn, .atilt of which arc mllbJally compatible, ad yd. too ~ prime Jomd fur 

tourism dellelopmm! ia betns committed to the timber indu:slry. 

Although we support !he limber illdusll)' in general and believe there is enough Jand base on lhc T ongass 

to maintain a long term timber industry, we oze opposed to the extension of the KPC contract 

Tourism and timber ue only compatible to the extent that they utilize mutually exclusive area:!. 

Virtually no Ulurism can take place in an aru undergoing major ~!tin& and III06t Alaska tourism 

opportunities are very limited in places after clee.r~tting bas taken place. This is INgely due to 

itnp.cts on scenay and the desires of visitors to come to Alaska to experi<o>co p<istllle D.lllw:e combined 

with a degree of quiet and tranquillity they are no longer able to cxp<:rience ill NatioMI Parl<s or 

Natiooal Forests clsewbeR. 

UnfortUllately, elearcuuing pndice< needed to support the KPC pulp oo.nttact fOrte the Forest Service to 

c:ontinually develop timber sales in new, previously untouched areas. 

We have also seen limb<% sales iii<CeaSCd in size and ..:ope to meet the oeeds of the KPC contract, 

inclU<ting areas of prime tow:ism poteatial such as Honker Divide oo Pti.Du oCWales Island and Port 

Houghton.· For example, whereas a 65 million board f«<t timbel sale was originaily planned for Port 

Houghton, the cllrfent Port Houghton project recommends a sale volwnc of 123 million board feet, with 

a range of alternatives studied tbat only varies between I 00-125 million board feet This three-fold 

increase in sale volume is based entirely on the need to satisfY the pulp mill contract, and suddenly puts 

this timber sale into major conflict with towism and rccceation uses of that area. 

,.....,_., . ..,,,,,, hJ,.., .. ~ 
215 

Wilderness areas on lbc Tonpss arc not adequate to meet the IKlCds of the expandiaJ ,._based 

tourism industry, ancl th..., alU$ are tolally off-liml!S for any 1011r operatlolla thai require .-a simple 

facilities, such u cabins, sbeltus, oc ewn 001 houses or new tr.ls. Wildemeas is 8boo lillliteclto 1J'011P5 

smaller 1bu 12 people, including guides. ADd aldlouBh Wildemcss clesipalion is a areetmad:ctiag tool 

in auracting visi:ton to an area, the Focest Service has dl!lelllli.o.ed that the c:arryiag capacity lbr tbooe 

lour sroups tba1 use Wilderness is quite limited. Furthcnnole, approlCimate!y 70% ofTongus 

Wildmlcn COIISists ofbiah UIOIIDiaills.lec md-ticldl, poocty-«aiDed muak.ep, md low-volume 

forests suppotting low wildlifiJ n'lllllllen. Much oflbe coaatal Wildemels 11M rocky« .-p Dlceliaes 

or coDI&ills no .C.: a.oc:boP&ca. llluefole, mudt of Wl!denleu is of limieocl ~to allll,jority of lbe 

tour induoery, Uld to 1hote COiftlllllics like A1uka Diacovcry Mlb heavily market q. to the IDOft 

-=cessiblc and pi1)ICCIIed coat Wildauess-, these- arc dc:sipcd Mill .......... fer low lewis of 

comm.en:ial use. Thus. we and olbcr c:omplllies look to areas outside or W"L~Mroess, such as mall)' of 

1tw-in the KPC sale .-ea. for fWure tourism opportullitie$. 

The Forest Service estimates in the cwrent draft Ton~s Plan that the demand for semi-primitive 

motorized recreation will exceed the supply witbin a few mas. This rntaru~ that those areas of coastal 

southeast Alaska most accessible by visitors will no longer meet their desired goal of less than 10 1:10up 

enoountcrs p:r day aad C8Diping or IIIIChorillg at aiaJtt witboat beiDa in sight « 110und of other cam pen 

or boats. Tbe KPC COlllrKt exteOSiOII would plly c-'*e this sboluge ofrecratioa and tourism 

places. If Ibis happenf, ooutal solllhcest Allska will no Jontcr provide ..teq1101e opportuaitiel lor 

visiton ~ RSidents alike to ba-..lhe experiences for which tbcy lnn'd to the Tongus. 

Rather than extend tbc COliiiiiCt, and thus tlac bieh lc-..1 of conllicl, ~ prdu to ..,.fedeallllld :liMe 

officials usc the remalning 8 yews of the c:urmll conlract to plaa for a transition to a lower timber 

volume for the Tonpss. Rather than eolllltins timber 'fOiume. -urge offiCials to !wJp t1ac industry 

provide the same number of timber jobs using a lower limber volume via an emphasis on high valueadded secoodaty woods products znanaufllcturing.. Without the pulp tnill contract, this thould be 

possible, tbus representing a win-wi.a situalion forcvCI)'OIIC iJI tbc Tongass. 

' TI.MP UNDERESTIMATES TOURISM S.ECTOk AND DOES NOT ADEQUA 'IE. Y PLAN FOR 

FUTURE TOURISM OEVELOPMilNT • 

We conlinuc to be disappointed in tbc tourism analysis and piiUIIJina contained iJIIbe lalest version or 

the T ongass Land Manasement Plan. Ho-, we do not wish to xc !be ptan de! am! an.v '"""' and 

we tqc the FPR$( Smjc;c: to :stq on jts wrrcn• tjmclinc to mmptac the Plan 

TIMP is clearly a timber plan only, and it does 111 inadequate job of planning for tourism dewloprtlCIII 

over the next tell y~ For example, there is no alternative thlt emphasizes tourism de-..lopmentlllld 

examines the employment that could be generated if tourism development -.,rme a goal In the Plan. 

lnste:!d, tourism is assumed to remain virtually the same in all alternatives. Also. the methodology 

used to determine present net nlue of rectealionltourism on ~ 3-323 is higbly questionable, 

considering no &ood date exista to cstimalc total n:=ation visitor days oo the Tonpss, and the daily 

value of an Average ~tion visit on the Tonpss of$25.73 is umup~ lly ""Y study other than an 
216 

inadequate 1988 Sludy. (Indeed, fish IDd Oame calculations sbow values for sponfuhlng, whicb is one 

of the 1110$1 conunon activities on the Tonsass. of approximately $200/day. Alaska Disoovery sucsts 

spend an &VCRKC of $2SO per person pt!r day on the Tongass, and INIIIY companies charge higher rates 

than we do.) The prime imporWice of tourism and recreation dollars 10 the region as a wbole is 

underscored by the figtllCS shown on p11ge 3-295, which demonstrate tha!lbe regional economy is 

expected 10 grown above 1994 levels 110 matter which timber harvest alternative is cho$cn, 

Ralhcr 1ban d&lay TLMP my further, '1ft m:ommend the agCDey be 1\mded 10 do the first oconomic 

suney to evu clelerJniao, the total eoaln"butioa of the IO<Irism and recrealioll iJ)duslriea to lbc Tongass 

tegion. We abo recommead that the above mortcominp in the ladoeoonomic mJd.y of TLMP be 

lldclrasaf ~now lllld i-oflbc final EIA, and thalaleCOI'd of dcclsloll thalllliairni= 

conllicu between coastal tourism needs and the timber indUSIIy be mdlrd without filr1h« delay. 
:: lJ ·f ... · .. ,; . 

.:.:l:.~ t:J ... 

Alaska 

· Wllderuess 

Recreatioa & 

Tourtsm· Association 

. ~Toay~ 

Dec Oo-nor ltllowlea. 

217 

P.O. 8os U827 

J-a,AK 99802 

ft-. (90'7) 463-3038 

Pas (t07) 463.3280 

1: ....U awrtaOaluka.>Mt 

April 16, 1996 

The AJuta W"lldcmea ~ IDd Touri.m Aaocia1ion (A WilT A)~ oppo1e1 

ny exlleMioD ot Kdchiba Pulp Corporlliaa's (XI'C) dlllbcr ecJa~ng~ 1llllil boosic ft8wt ia 

Tongua Potest limbe: aiaqcmcnt me~ BmDIIq lllc OOIIIIaCt ~ lbMe 

issuea - rooolved would DOt be ill the bcoa u...- ol either !be tcWom !Debby .. the communltics of Soulbeut A1asb. · · · 

Th<: rec:eut hirtary ofTaop~~ Foreec ~ oadcr !be .-.opoly ClOIIIriCts provide~ 

abuodaat -~~~ ~ eDmloo of !be DC cmalnct. 11ac-ba9e faR>ed tbe 

Pacat 

~ 

ScMcc lllia-alipificlllt ~ ., IDIIriml, ftlCialioaal blllltiDI aDd llllllnt. 

lllld iDdepeodtot Joaer$1h11118 dlady iclallified ill tbeir .... IDd .. eavitomDonr&l impKt IIICicmeDis. As you bow, Ibis bas foreed A WR't A IDd other usen 

oflbe Toac- iD&o court kl &d 1bc fcn:1t SavicD 10 CODiidllt oar illlacm. . Tourism il the,_,. powlas ioduiiiJ ill~ Alaska. It cliwlni&s lbc ecaDDIIIiel oC 

CClllllllllllilies in diD .poa.IDd Ilia the~ follipltlclmt pOWih. AI Alma tooriJm 

is eucudally- bUed. d<pendins oaiCfdc bulq,lbuadaut wildlife. IIIII wild p~aca 

to Adsfy our vidUt.. . HoM>-. 'Witbou! 11oDg.-m plm for lllllrimlln the Toapa. our Dll:lllbels baw: DO ..waDCeS tbit tbe ..-IIIey 1118 for tbeirbulh>cucl wiD DOl be loueci adlbclr~lJIIIII~ . -

Tbc T<q-Lad~"-' mviaioa il cboolMclua plocc Ill add.-the_. Or our indbstty lllll odl!lt~~~m oe 111e r.,.... !d8tiYo Ill diD Mlldt of 1M tilllber 

We tdirM> ~it ebould bo ~ ti'rilc lbc public IDd bur._.. • .,._ 111 ' /ICC whit tbc Jlcaat ~ uyelboat ialpM:a of allemltivcs, bdtn .. ~ otlba 

KPC CODIIIct is CCllllidcftcL It iboald iDclade ...Jiobl6 ~ lbod d lllboectlxs of tbe 

talrilm iod!JI!Iy ad dllir lre8lll in the Tcaa-,lllllym the iaJpacca of JogsiDc ODilia 

wllh aa~Ute tourism pan till. IIIC!IIIIIyze 1bc compat'ltiw boMfiu IIICI costt of Jogging 

- protectioa a.eM for tourism. • 

Ulllil dJcse quettiQos aoe moiWld exlleiiJioD of.lbc lD'C ~ wuuJd <lilly <Onlilrue, aDd 

exacert>alle, unwiSe IUid ~ btld man~~ policies. ·Please oppooe emnsioo ol the ¢0111nc(, . . . 

Sincerely, 
218 

Wra.n1ell Resource Council 

P.O. La 1727 W-,.U, Al..ll. 99929 

FL-(907) 87<4.3&CH Fu (907) 87-4~11 

A llf&OLUTION FIIOI,I WRANGEU. RE60~CE COUNCIL OPPOSING THE ENVIIONMENTA~ 

IMPROVEMENT TIM~tR$:0NTRACT EXTBISION ACT, Blll$S.18Tie. H.R. Hlit, OR. THE lli·YENI 

CXIHTRACT EXTPt'.l'.fi FOR LOUISWIA PACIFIC'S Kflctii(AH I'UJ' COMPANY 

WHEREAS. the 50·..- - Qlllently UMd by LIMIIIiiN I'Kitlc'a Ketcnkan 

P,.lo ·:""'P''IY IIJIICI alva IJIIC an unlllit --.....,.._ - 0..., tim.,., Wlinel- IIICI llldiiiMI tiglll& to limlllt -; W 

WHEREAS. 1llo ''"''" ol 111111 ftiiii'ICI _,. neooeilted in 1954 8ftd .. entirely !NIIIot·MN- to< todly'a mwlcet IIICI n.tu.W ,_.. condiliona in 

Sot•t · -u:.st AlMka; •nd 

WHEREAS. ma~ ... .,. LJ'K li-r -ti-lhl priority lor the miRIQelllellt of 'the 

Tongu• Nallonal Fottac dimaotl 0111• mulliple ua m~•• 

""~"'"' tor loulllula Aluka'a _, ~ aun~o-. rou• i ·: ·• ,..,,.,.,.,, Iiiii end wildN111 lllbilal: -

WHliiEAS, ~h -~~~ lhl LPK- 1t11. moat ol lllllimlllr ... , ift1hl w .... .,..-....,. oont ta IJIIC lnltud ollllnlllidnt lhllaQI wr1111111 ~r umy; W 

WHaiEAS. mo$t ut lhl limller ID aupply Ll'lt'a nmlining - wll bltogo•d 

tn lila· not1lllm Tono-aa, 1ft ,,., - in lhl -.IJICl far Ia 1iiiiiMr 

SUPD', lllclicadng 11111 IOOIIi"'l 1ft 1111 apecified IJIIC conuact ., .. is not 

IU:.U. u:l*; and 

WHE~S. 1ho e<n,._;c bualn thl nonhlfn Tongaaa, whictllncludM COIM'olraial one: <1'0<1 !Wiint, ...orudon, 10Ufllm. lnd lllb&IIUIIICI hun1lng lnd 

fisna•~ . ... be .,_.., ~ un-toln- lOgging 10 mMI Ll'tt'a 

cot'tc •:• co,..,_.; end 

WHEI'EAS. LI'O ~•u COIMctild ol 1 felony and 13 _, davn due 10 llialadona 

ol :lror· wallt and Clllfl lit law a ft I HS; tliCI 

WHEREAS. Lf'or w•s e~ in 1983 of viola~ng c:ivi Mli•truotlaw, drlvint 102 ,,..,,, , ··>•P-1 -rotors out of bueln111 in Southeaat Alukl; lnd 

WHEREAS, the IC'IQ·telll\ economic Clivorolry- atlllility of Soudlull Allab will ~ d·•••Qecl by 1111 propoaecl 16 yaw emnllion ol I..PI('a aimblf contr •= l 
219 

• 

Hoonah Indian Association A 

P.O.IIesMZ 

._...., AK ••u 111a 

Phone (9(11) 94S-3S4S Pu. (907) 9of$-3703 

JuaD4,1996 

Testimouy for the TOIIpSI Lud MMI8"""""4 .Plan: 

HOONAH INDIAN ASS()(;IATION OPINION 

Tbe Hoonah Indian Alaoc:iation is the federally rcoognized tribe oftbe Huna 'flillsit. My 

111111e is Jobmma Dybdab1 and lam tbe l'rit.l ~. lllave bem iDitruetecl by the 

Hooaah IDdilll AJsociation Bo.d ofllinlclon to o&r this tellimoay oo bebllC ot our 

tribll~ 

Jn tbe reYited Tons- Land Manaprwnt Plm (TI.MP), the F~ Service wiliiDib 

decisions tlw will suide the IDIIIIplltlll ofthe Tongus fur lbe oeu 10 to IS yan. 

Siuce 1he impaca ofloggiaa <:111 pcnilt tor 100 yan lfta' m-hu bem 1ogedmu: COII8ider 1he aheruativea very Clldillly. For 1he put DiDe IDOdha tbe Hooaah Indian 

AJIOCiatioo has takm tbe polilion of No Hmwit, No Adioollld we awt remain 

ste8dWt that AJteoiatM 1 would be our "preferred altematiYe". Tbe cumulative dfo:ts 

of tbe fur profit corponlioas aad Fewest Service JossiD8 tc:heduled Ill tbe Huna traditional 

and CU$IOmary usage areas wiD 110 doubt eliminate the tnlditillllll IIIII asstomary 

people. 
220 

<:mD:Ied. The KICcbibn .Pulp Co. ia 1 coavic:ted felou for ialadioaally ~toxic 

sludge into Ward . The Timber Luxl Mauagemeat clocmDaa ooaflrml tbll Toop~~ 

timba' baa "-tlutrYelleclas aa untu.Wneble rate. "Tbe harWit tcheclule, fiJr aD 

altcnlliYee,. ildicaleltt.ctbc:R ila dcfic:it oCtimber iD CllilciiiiiiiDIII. Tile KPC Coall'lct * Area iD toWhem Soudleut bas ODiy lbout half cuoup timber b tile OOIIIriCt. 1'be Rill 

willoome ftam Cllllnl IIIII llllftiHm Soulbelll. UDder IIIDdlrda iacorponted .ia 

AttauiM 3, ICPC'• COIIIriCt Ara CCl oaly lllpply 96 r-*loftbe l92lflllilf ooatngt 

volume. Tbe raDiiDiaa 106 mmbflllllt come liom 1be S1ikiDe aad Cbllllam areas. 1bcle 

' i :-llllllet Alurutiw 3, have 145 mmbfa ywr IYiillble, 10 the lllljority aftbas would 

~=~~:=.======: 

r~cizJs proteceioaa tOr ICreiiDI, "-'ll &iapa and rillifo blllitat. We WiDYe the 

propoled Alawlble Sale ~at 357 llllllbt1 ,_.wiD pllce iqlartlar ..... lid 

huntiaa areuas rilk and by-will be lopcl to a.t tbil t11pt. We feel die timber 

iDdusay IIMI CElli« IIICRIIOUIId lisfa valuHdded 1111111 bulillellleCOIIdlry wood 

proceaiDs, wbidl wUcl cnee more joba wbile QIUiaa I-limber". IU'C IIIUit aot be 

rewarded for blataDt mialle ottbe Tongaaa Nldioual Forat. If KPC wiabcl to raDiin 

viable they naJSt coavert to I bipet value-added, ~ &ciity thll JIIUYic* -.e 

jobs with less timbc:t. AI !be presatt operation, ICPC costs the American tapa~ 

tamdreds of millious or doDan iD IUbsides to clear-cut tbe Tonpa old-(:ruwth tree~. 
221 

Under tbc Prc;fc:rred Alternative tbc proteCtion of streamS has been sevctely reduced. The 

Forat Servi« meued in ADidtomoua F'llh Habiut All IITM ia 1995. It (OUIId tbat, 

rurrem JDeUII'el "for anadromous GJb habitat protec:tioa oa the Toogass Naioaal Forac 

- - tblll fidly eirec:tiw, ud ldclitioul proteccioll is Deeded to JJIIIb timb« barvelt 

mon: ~ widi!Jllint.WW..IiP-qullty lib MbiUd llld kJIII ta'lll OOJIIa iilllllioa of 

&.Ia ltoeb". Fllhery earperts wbo revi&wld lbe wrioua optio111 COIIIidered b protcdiaa 

6lh habitat ltr008IY I'CCOIIIIDCIIde "'pcion 1 pro(eetion fbr tbe blgbest value wwnbedl 

ud lllldliag lea tblm Opcioa 2 proWcliollu:rot~ die naaiader oftbe Wltenbeda. We-* 

t1wt tbe Forat Service adopt the IQbat leva of protecUoo fbr ftsb blbitlt. Tbe Prderml 

.AitamJiye &ik to follow the liMN oftbe Report to Coasr- ud die beet .... 

ildi:Jrmldoc awillble oa tile TOQIIII. No IBI mu• bu "-clcx.lx' tbe .Prdemd 

Altsmliye, ODe of the ttroaaat ,_,c_. rlatjcw oldie R.poft to eoa,- wu to 

IJeaja ~ watcntd Ullllylis. Wlhl'lbed IIJilysia 'IIIOUid provide tlak laic 

pa..iDg teams wiah valulble lite-lp«ific iaformlliolllbout bigbly productive 6sberiel, 

potmlill !'Old 1ocatioDI, IJDStlble ad lleqlliopa, ud otbllr impor1IJJl watenbed Vlbll. 

Tla .-Ia to be *"''"'pIithed to JIR"idc GIOR-* iabiiJiiiDou llld protediw 

_... fbr strellliS llld fbla oa me T0111111. We ... the FOI'IIIl Stnice lllo fiiiSeDd 

tbe propoeed IIO-Gil bu8'er lloag tbe ooudinc &om 500 feet to 1,000 c.., wilh-

.tj.am SOO-foot aeiection cuuiJ1a zooe to ~otec:t apiDit blowdawa of'thil belch ftiaae 

buflill£. 

Dem- habitet wiD be IIUbstantia1ly reduoed Ullder tbe Preferred Ahcruativc. Tbe eaJarpd 

beach fiiDge buffa', importiDt fbr cks winter rqe bu been lbaDdoaed. Aft« ICYerll 

dCAda of research biologilts I8J1IC IMt a.trTeot high leveb of loggjug and c:qlllllive road 
222 

buildC!g practices wiD likely cause severe reductioos in deer populazioos o..u tbc loog 

term Although the Forest Service has Ukoo a step in tbc right directioa ill croUiDg 

c:olllleCOng habitat resmes the buffer strips aloog tho coastliDe 1re too small to provide 

adequGe COIIDIICting corridon between ..-v.. Tbeae buffn mwt .aot be reduced to 

provide more wood to tile limber iDdustry. The Preferred Allcmalivc ll8o *0111 tile deer 

hlbitat IWidard al AJtemative 3' wbicll - spec:ificaiJy delipecl to addr-. CODCel1ll al 

subsistmcc and sport bulllcrs of deer. The Forest Sa'vice ia required by law to provide 

for all-. oftbe finellt. We must c:oasides' the other 111e1 u:b a builtin& fiabiu& bikiaa 

and other reaeatiooal uses. We need to consider the dilemma that clearcuttiJig and 

acportiDg has ~. Tbe Fore!t Service needs to be inDoYIIiYe lllld ~pl. 

orientated u we ll)pi'OICb the 2 Jst Ceatury. Tbe key mwt be '""'11!1 .,. of the furelt 

tbr .. 111111. 

The Pre&md Altsutiw does DOt tab in to coosidention tbe llll"a:ta 1hlt filrtber Joaina 

wiB haw 011 the tourilm ild.JIIly. AJJ the Hoonah IDdiaa A.ocialioD. bqpaa to dMnifY 

their eoooomic bae we are &ocd with the pr01peet or beoooia8 a pla,er iD the tourism 

aw.try. Wbcrc will tbe vut untamed laDeS aad its wiklliJb be projoeted. With OOIIIinuai 

road buildiag, tuttiDg of the beach tiiDge and clclrt:utting pnK:ticce we are loft with Yfll'/ 

littloe to olfu the visitor~. 

In conclwlion tbe Hoollah lDdian Association would lib: to go on record u objectiDg to 

the release oftbc Record ofDecition repding tbe Eight Flllbom Tldlc£ s.Je. We fed it 

is somewhat premature c:oosidering tbe Toogaas Land ManagemaJt PIE is ltill out for 

reYiew. We are talkiDg about a submDtial portion of tbc Tongaa and it lboukl rigbtfully 
223 

be included in the managanc11t plan of the forest. Will tbe Eigllt Fllhom Tllllber Sale 110t 

0o bebalf OD the Hoonah Indian Association, I would like to thank )"Dll for tlae 

opponwity to express our views and let us aD considel' ouraelvea mmJ181iR of tbe Forat. 
224 

Taku Conservation Society 

1700 Branta Road 

Juneau,AJaska 99801 

This resolution opposes the Environmental Improvement Timber Contract Extension 

Act, Bills S. 1877 and H.R. 3659, commonly known as the 15-year contract extension 

Cor Louisiana Pacific's Ketchikan Pulp Company. 

RESOLUTION 

Whereas, the SO-year contract currently held by Louisiana Pacific's Ketchikan Pulp 

Company (LPKPC) was negotiated in 1954; and 

Whereas, systemic changes require different management practices today; and 

Whereas, the obligatory supply of timber to fulfill LPKPC's remaining contract will be 

taken from the northern Tongass, an area not in the original contract area and 

an area near Juneau; and 

Whereas, allowing LPKPC operations a priority on the Tongass National Forest is 

inconsistent with current multiple use principles that provide for subsistence, 

tourism, adequate fish and wildlife habitat, and timber operators; and 

Whereas, the long-term economic diversity and stability of Southeast AJaska will be 

enhanced by sustainable management of the Tongass National Forest for 

multiple use by the U.S. Forest Service, not the U. S. Congress. 

THEREFORE BE IT RESOLVED that Taku Conservation Society opposes any extension 

ofLousisiana Pacific's Ketchikan Pulp Company's 50-year contract with the U. S. Forest 

Service by the U. S. Congress. 

s;gnoo~dv~ M Lou King, C 

Date___,~/'--Z---+-7 j_r,_'b __ _ 
225 

ACWA 

ALASKA CLEAN WAIER ALliANCE Cottmvalion filhilll SUbliJICIICC Toarbm Plllllic Heal. 

Bo~ 1441, HaiDe.J Alt 99127 Plloae: ('X)7) 766-a196 Pu: -:n90 B-eall 11Cwaeisc.opc-Df1 

5/24/96 

Senator Frank Murkowslr.:i Chairm&n 

U.S. Senate Committee on Energy aad Nttllral Resoureu 

Fax- 202-228-0,39 . 

Re: Testimony of. Gershon Cohen, Executive Dim:tor of ACWA, on ihe Extc:nsion of 

the Ketchikan Pulp Company Long Term T'lnlbe.r ConllaCt 

Mr. Chairman, and Members of the U.S . Senate Committee on Energy and Natural 

Resources, 

The Clean Water Act has slowly besun to reverse tbe dangerous decline in the 

health of our nation's waten. Yet accordin& to the Natioual Water Quality 

Inventory, half of our nation's rivers, labs, and estuaries are still not tale for 

drinking, or harvesting fish aod shettfish. Althou&h polluted waters and 

sediments often begin by contaminatJag the smallest aquatic organisms; the 

greatest concentration or poisons are eventually found at the top of the food 

chain. In Alaska lhc animals at highest risk are whales, bears, eagles, llld 

people. 

Ward Cove, the site of ·the Ketch.ikan Pulp Compauy mill, has become one of the 

most polluted water bodies in our nation. It is listed as an •impaired water 

body", and. nn~s second out of over 2000 contaminated &ites sratewide. KPC's 

facility consistently tops the EPA's Toxic Release IDventory list, meets the 

federal crileria for Superfund. and last September was assessed the largest 

penalty for water quality violations in the history of the Clean Water AeL 

Ward Cove historically supported a healthy and divene aquatic community -

but fish kills were being recorded as early as 1957, only four years aft~ the 

opening of the pulp mill. Subsequent water quality studies testify to the Cove's 

rapid and continuous decline. The waters and sedimenlli in. Ward Cove arc now 

heavily contaminated after forty years of discharging ~34 million gallons of 

polluted wastewater every day. 

In ' 1994 EPA finally issued a standard industry permit for lhe mill, to replace 

the mill's administratively extended permit. now twelve years old. This new 

Ward Cove permit would have required the mill to comply wilh the mi"imal 
226 

rt!qutr~m~nu of State and Federal law. But lhe company knew that the mill's 

dascharge would not comply_ with even the most minimal of standards. 

Therefore KPC immediately challenged, and continues to challen&e the '94 Ward 

Cove permit; blocking its adoption for lhe past 21 months while it continues to 

discharge toxic waste. In an attempt to preempt the' Ward Cove permit, KPC has 

applied for a new discharge permit to begin the pollution or the adjacent water 

body of Tongass Narrows. 

On May 16th, several citizen's croups including ACWA. filed a lawsuit againlt 

KPC for 283 violations of State aud Federal pollution laws. More lhan a hundred 

or these violations, totalinc over a million . aallona of illegal disebargea, have 

occurred ~inc~ the consent decree settlement lut Fall. The mill's consistent stale 

of non,compliance aa evidenced in our auit undencorea the iiiiDiedilte need 10 

contain and cleanup lhe toxic wute in and 1bout Watd Cove. To ienon the 

connection between toxic pollution and cancer. reproductive disorders, and 

immune dysfunction, shirks our responsibility to the reside~~ts of Ketchikan, 

both present and future generations. 

Why does the mHI continue to have such widespread pollution problems? 

Because KPC's antiquated facility is a dinosaur of the pulp industry. There is no 

guarantee that even a major rebuilding of the mill would allow the operation 10 

meet St1te and Federal water quality 5tandards. 

KPC officials bave stated their intention 10 eliminate the use of elemental 

chlorine. We support this goal. But while eliminating the creation of highly toxic 

organochlorines is 1 positive step towards the protection of public health, these 

same process changes _.,e expected to increase the concentration of other wastes 

in the mill's effluent that rob oxygen from the water, further increuing the 

toxicity of the mill's discharge to aquatic life. 

Every time the gove~nt has demanded the mill clean up its operation, KPC 

has used the peop_le of Ketchiku and their «onomic survival as a shield, spitting 

out reruns ot the "i~l>~ vs. environment" myth. The uutb js a nob-pulp. valueadded timber industry would cut fewer trees and proyjde far more job security 

for the people gf Ketchikan !han KPC's current operation, 

The S II 0 million "Economic Disaster Fund", perhaps more 1ptly named the 

"Economic Opportunity Fund". should be dedicated to 'the construction of 1 state 

of the art, value-added manufacturing plant that can yield 1 · return on 'our 

timber many times greater than the value of pulp, without producing the toxic 

waste. Instead of discussing a fifteen year extension of a contract that Jocks us 

into the past, we should be designing and constructing a new. more efficient 

timber based industry for Southeast Alaska, while establishing a safety net to 

protect the mill workers and their families until the new industry is operationaL 
227 

For lhe past two years·. as a member of the Natural Resources Task Force of the 

Presidenrs Council on Sustainable Development, 1 have me t with community 

leaders from all over lhe Wearun United States, where people are facing the 

same issues we are addressing here in Ketchikan. I can repon to you that more 

and more communities are realizing that sustaining a high quality of life 

depends ~ u'pon economic stabiUty, environmental protection, and social 

justice. This contract, written over four decades ago, fails this test of 

sustainability by every measure; it assumes that our forests can be clear-cut 

forever, it forc:ea ua to manage wilcllife without consideration of habitat, it 

eliminates competition within the industry and eliminates the use of the 

resource by more sustainable industries, and it ignores both the physical and 

financial impacts that highly toxic wastes have on all living thinga . 

Mr. Chairman, we are blessed to have the natural resou~cs. the financial capital, 

and the skilled labor force needed to fulfill the fundamental needs of everyone 

here roday. This community is now at a crossroads - one palh leads to a 

cooperative future, the other a return to the political polarization of the past. 

We sincerely hope you will assist us in moving forward together. 

Thank you for the opportunity to address your Committee. on this most 

important issue. 

Sincerely, 

Gershon Cohen 

Executive Director 

CL_ 
228 

4'nn Canal Conservation, Inc. Post Office Box 964 

Hili-, AWb 99ll7 

RF..SOLUTJON !16-617 

A RFSOLVTION FROM LYNN CANAL CONSERVATION, INC. 

OPPOSING 'DIE PROPOSED IS-YEAR CONTRACT EXTENSION FOR 

LOUJSIANA PACIFIC'S KE1'CHIICAN PULP COMPANY 

WIIEREAS, 

WHEREAS, 

WHEREAS, 

WHEREAS. 

WHEREAS, 

- 50-yaa- aJBtrlld aunady uod by LouWana Pacific's Kelrhilwt 

Pulp Company (LPK) elves LPK.., ~r IMrltd advludap OYC1' 

odlcr ti .... l>.m- ud ea.dtuift ripts to timber ..--....us;-

the- or Chat COJdnl:t were aecoliated In 1!154 and are ellllrely 

Inappropriate for toclay'a Jlllrll:et and aatunl resource colldllions Ill 

Southeast Alaska; and 

mak:inc LPK limber operations tbe priority tor the maaactment o1 

lbe ToDg&S'I Nlltioaal Forest damages oCher multiple u8e l'eiOUI'tleS 

Important Cor Soatheat AlaSa's _, includiJic •Wstace. --.., ncnalioa, tisll and wildlife habitat; and 

.-t ol tbo timber to supply LPK'o rmll'lniiiB Gllllract will be ~Decal 

ill tk DOttbem Tonpss. an ara DOt in the coatnct for ltlllmiM:r 

supply, iDdlcadlJI: that 1oa1nz io the IIPCdfted KPC <IOIItnd ana is not IGICalnable; and 

~ 

the eamomlc bar in tile no1111em To~ wlaldllllducles 

hullliac and 

aad 

t1shing, 

sport ..m 

lillbln&. 

be rlamar;ed ~0 

ifUJII..a.inable 

... tourisaa, Uld 

loatn&to 

~ 

.....,. LPK'o mntrad contimaes; and 

WHEREAS, LPK was mnncllld of a feloay and 13 oCher dulrles due to vi .. atioas 

ol deaD wat« and deaD llir laws Ia lll95; and 

WHEREAS. the l0111·1<nn ""'""'"'* cfiyenlty and stability ofnorlhem Soutll-1 

Alukaaod tile mtire Panh.ndle ~ will be clanlapd. by lbe 

propoltd lS.y....- extemion of LPK s limber contnd. 

THEREFORE BE IT Rl!SOLVED Chat L)'llll CIOUI Consenation, IDe., rer;::nc more Ibm 100 -bers In •rtbenl Soatheaot Alaska, op,-PJ esteMioa ot · na P.atk'• Kdddba Pulp CoiDJNUir's so.,. .... ClOIItracl with lbe US. FOI'Mt Service. 

BE IT FVRTIIER RESOLVED tbat LoulsiaD8 hclk'o KetdUbn Pulp CentpiiDJ'S50· 

you CIOGlnlct with the U.S. Forest Service should Joe revoked irnmedilldy due to ~~reaches 

of ils COIItrac:L 

BE IT FURTilER RESOLVED that a copy of tltU resolntio11 shall be mailed to Tony 

Kno"l<s, Govei'IIM oldie State of Alaska. 

ADOPTIIDJUNE 17,1996. 
229 

ALASKANS FOR JUNEAU 

RESOLUDON 

WHEREAS the Ketcbibu Pulp Cocp(>ratioa bas requmed the United States 

Coop:u to extc:Pd Its ftfty year loo&«m federal timber ale c:ootract for harvest 

of timber 011 federallmdl withiD the TOJIIUI National Poreat, aDd 

WHEREAS De's opention mdcr lbe exiatinl Jon,-term coatract bu resulted in 

laq:e IC&le c~ of the Toapa'a fotesta, to an eXlelll iDcompao'ble with 

otber beneficial uses of the forest, incJudiDJ m:reatioa, fish and 1ame habitat, 

toorism. and timber harvest by smaD n1uHddecl forest products companie~; IDd 

WHEREAS KPC has repeatedly violated federal and state water and air quality 

regulatiom, continues to do so, aDd has little likelihood of an early compliance 

widlsuch laws; and 

WHEREAS a cootinuatioD of KPC'a timber lwvesl levela and its pollution levels 

wiU become even more of a threat to the region's eDYironmental aDd economic 

bcallh U the forest l'eiOW'COI dimiDish in tbe comiQa CCDIWy; and 

WHERE.AS a vilal and &table ecooomy for Soathcut Alub depeDda on a variety 

of usea of tbe Toopss National Forest, iDc:l~ small scale valuo-addod forest 

product manDfacturing, which are DOC compatible with extension of KPC'a loogtenn contract, 

rr IS HEREBY ~L VED by the Board of Directors of Ala.sbns for Juneau 

that Alaskans for Juneau opposes extension of the long-term federal timber sale 

cootract of Ketchibn Pulp COlpOl&tion. 

Dated:~~~ I f'l~ 

attest ~/), C! l:.i~~..,_ p,-~~~4~ .... --t- . 0 
Governor Tony Knowles 

PO Box 110001 

Juneau, Alaska 1111811 

Dear Governor KnOWles, 

230 

Aplfl-4,111118 

Below please find a copy of my testimony regarding HJR. &4, the proposal to extend Ketchikan Pulp 

Company's long term timber contract for an additional 15 years. As as fishety biologist and as a 

represantative of the Juneau Chapter of the National Audubon SOCiety I am opposed to this resolutlon 

and respectfully encourage you to oppose l. · 

Good attemoon, end thanlc )'OU lor this oppodunly to 1/»f/k.. My'*"' II Klihy Ccgr/1 end I am htn 

todey on behalf of 1M Juneeu Chapter o1 1M National Audutlon Sodfi!Y to,..ett 011 pollllon on the 

ptrJI10$8I to extend Ketchlcan PIJp Complny'l lonQ term codr&d for .... 15 )'lift. Al/hout1J WI 

suppott tM preNf!Cfl ole limber lndu#ry In :sodhBNt Alaska. we .. oppOM1 to th/81/f0P0881 (HJR 14) 

lor the following reasOn.:.. . . . 

1. We n no lOnger lv/ng under 1M same condition$ wtiJch INd to s~Qnt~Qtlie otti;nsl oontract In ~1154. · 

011 economy here Is heallhy and (TOwing as we hetldlnto the 21st OIK'Diy. 

2. Extending the contract Is not a good way to aeste or pres«W }ok If IIICW jobs are dtsted, 1M 

emphasis should tocua on ae.tlng a better enWonment lor .mal limber~ end frnletfng v.t.. 

eddad operetioM. · Extending sptldal frMn to KPC wll only trkldtr lilY poallltle movement In tNt dncticn. . . . 

3. The Tongass National Forest wll release its latest revision ol the Tongess LJind MBM{Jt1ment Plan 

within the next month. As a patt of this process, a panel of llsh.,y axpet#s -. sslctld to evaluate. the 

Impacts o1 the alternative plans, on the ha/1/lh and productJvty ot.semon. 7hfW eoti&lstert reSfJOI'*I -

tM 

that 

danger 

roads are 

to trsh 

a serious 

Increases

cauw . We of dBmaga 

dldnY know 

to llsh 

this 

habitat, 

4C )'lllniJ{10

and that 

. We 

as do IIICW 

know 

miN 

I now. 

of road 

How 

are can ~ 

we oonlinue to operate as If roads arelnharenlly good end awarrJ KPC cndls lor aeatJng them? Over the 

/esl.fe )'llln we haw /earned that loflrJinfl roads are IIICW of allll'd«< than an asset If anything. KPC 

shtHJd be paying a penalty for buldlng roads lhat damage tlsharmell'llvelhtJods and cost 1M ForNI 

semoe millions or dt>lars to malrialn. · · · 

.f. The timber Industry Is heavily subsidized In southeast Alaska, Blld the Federal governmtJnt can no 

longs!' atrord this axpensa, particularly when you cons/dar 111at we pay three times for this subsidy. Fht 

we pay with road credits, viltuaHy giving sway the trees In exchBIIQfllor new roads. Then we pay In lost 

opporlunlly lor tourism, fishing, subsistenc., end reaeation. Flnatly we pay lor restoration when the 

logging rotlds get old Blld begin to fall. 

5. KPC has not been a good corporate nei¢bor. In 1~5 KPC pled guilty to 14 aiminal violations lor 

Intentionally polluting the waters of southeast Alaska. 

In closing, 1 want to re-(Jmphaslze that times have changed since 11154, end the sweethealt deal that KPC 

has been enjoying since then Is no longer appropriate. In addition, KPC has repeatedly proven Itself 

irresponsible, negligent, and perticulalty unworthy of special favors. Extsnd'lfl(J the 5() yaar timber 

contract with KPC is not in the best Interest of Alaskans, and In fact it would c/o them a ,eat disSfiiVice. 

Thank you, Governor Knowles, for your careful consideration of this resolution. 

SinceretM.ut" frnlll' /} 

K.th;C~hll~ 
·\v· , \ ~ "-' -r"' ~o." c.r.-- .:_-., f-\:J R «-'i 

}u_• ~c.- , ~'--{{ ~J.>. -, 

231 

Good afternoon, and thank you for this opportunity to speak. My name is Kathy Coghill 

and I am here today on behalf of the Juneau Chapter of the National Audubon Society 

to present our position on the proposal to extend Ketchikan Pulp Com~:any's long term 

contract for another 15 years. Although we support the presence of a timber industry in 

southeast Alaska, we are opposed to this proposal {HJR 64) forth>? following reasons: 

1. We are no longer living under the same conditions which lead to signing the original 

contract in 1954. Our economy here is healthy and growing as we f-tead into the 21st 

century. 

2. Extending the contract is not a good way to create or preserve Jobs. If more jobs are 

desired, the emphasis should focus on creating a better environment for small timber 

contractors, and fostering value-added operations. Extending special favors to KPC 

will only hinder any positive movement in this direction. 

3. The Tongass National Forest will release its latest revis ion of the Tongass Land 

Management Plan within the next month. As a part of this process, a panel of fishery 

experts were asked to evaluate the impacts of the alternative piR•1s, on the health and 

productivity of salmon. Their consistent response was that roads are a serious cause 

of damage to fish habitat, and that as more miles of road ar·e construct<>d, the danger to 

fish increases. We didn't know this 40 years ago. We do know it now. How can we 

continue to operate as if roads are inherently good and award KPC credits for creating 

them? Over the last 40 years we have learned that logging roads are more of a burden 

than an asset. If anything, KPC should be paying a penalty for building roads that 

damage fishenmen's livelihoods and cost the Forest Service rniilions nf doii C~rs to 

maintain. 

4. The timber industry is heavily subsidized in souihea~~ ,\Iaska Jnd the Federal 

government can no longer afford this expense, pariiculaC:y v .• 1en you consider that we 

pay three times for this subsidy. First we pay with read cr: •di\s, vtrrually giving away th'> 

trees in exchange for new roads. Then we pay in lost ('PP"''unily for tourism. fishirvJ, 

subsistence, and recreation. Finally we pay for restoration wi·,,, · the logging road~ qet 

old and begin to fail. 

5. KPC has not been a good corporate neighbor. In 19'::5 i( PC pied guilty to 14 

criminal violations for intentionally polluting ths "'-~ "' .< of ~out h.,<J•! Alaska. 

In closing, I wanl to re-emphasize that times hava changed since 1954, and the 

sweetheart deal that KPC has been enjoying s;nc0 then is no longer appropriate. In 

addition, KPC has repeatedly proven itself ''respo"'sib!e. negligent and oarticul2rly 

unworthy of special favors. Extending the 50 year trmbe' r:ontract with KPC i~ n»t in 

the best interest of Alaskans, and in fact it would do thf>rn 1'1 grPat disservice. 

Thank you for the opportunity to comment 
Governor Tony Knowles 

PO Box 110001 

Juneau, AK 99811 

Dear Governor Knowles, 

232 

TENAKEE HISTORICAL COLLECTION 

Post Office Box 633 

Tenakee Springs, Alaska 99841 

(907-73&-2243) 

June 18, 1996 

As local historians we find ourselves more and more concerned about the 

future dour 1U811. Senators Murkowski's and Rapr-atiw Young's eiYo!ta to 

exlland KPC's con1n1ct to the year 2019 wtn have a tremendous elfec:t on Tenakee 

Inlet's resources. Our major means d survival here (subsistence, commen:ial 

fishing and tourism) are seriously threatened by this move to supply the timber 

industry. 

The cl.-.ges that supply T -kee Inlet have sulllll8d from the impact of 

logging In the past and prM«t. The Impact d the futunt (23 men y.rs tr this 

legislation passes) timber harvwting wiR devllstata the remaining delica ~ 

of lion! and fauna of this.,._ 

T -kee Inlet is home and retreat for many Individuals who an1 strong of 

heart and perseverance. As a community we have coped in the pest with nRnl 

disasters d fire and storm matllllr4..factly and with determination. We are facled 

f't(Ni with a disastrous situation imposed by legislation. 

1vt extension d 15 y.rs to KPC can not allow us to proceed as carlfully 

and cautiously as needed to prevent irreparable damage to one of the few lest 

great places on earth. Please help preserve what is left d this rich and still viable 

Tenakee Inlet. We can't change history, but we can change the future. This is our 

opportunity to use and prot.ct resources responsibly and with 

We beseech you to consider carefully the implications d extension d this 

long term contract and not allow It to happen. 

Sincerely,_ 

Vteki Wisenbaugh, 

v• · w Vf..w"'-

Coordinatof 

J7 ~ Tenakee Historical Collection 
233 

A RESOLUTION 

OPPOSING THE 

ENVIRONMENT IMPROVEMENT TIMBER CONTRACT EXTENSION ACT 

S. 1877 AND H.R. 3659 

WHEREAS: The fifty-year timber contract between the U.S. 

Government and Louisiana Pacific Ketchikan Pulp mill awards 

unfair market advantages to the consignee . 

WHEREAS: The terms of the contract negotiated in 1954 are forty 

years past the date and times in which subsistence, tourism, 

recreation, fisheries and hunting have assumed new and increasing 

social and economic implications and importance relative to 

timber cutting. 

WHEREAS: The contract is inconsistent with multiple-use of the 

forest. 

WHEREAS: The economics of commerical fisheries, sport fisheries, 

recreation, tourist, hunting and subsistence will be irreparably 

damaged. 

WHEREAS: LPK in 1995 was convicted of one felony and 13 

misdemeanors. 

WHEREAS: LPK was convicted in 1983 of conspiring to drive out of 

business 102 small independent timber operators. 

WHEREAS: Movement of forest cutting practices outside of the 

southern working circle into northern southeast Alaska will 

irreparably damage forest resources, including, fisheries, game, 

subsistence, recreation and tourist. 

WHEREAS; In the sense of the members of the United States Senate 

and the U. S . House of Representatives bound under oath to 

support and to up hold the laws of the United States the awarding 

of a contract extension to LPK is inconsisten~ wilh the intent of 

those laws. 

LET IT BE RESOLVED that the JUNEAU GROUP OF THE SIERRA CLUB 

opposes any form 15 year contract extension to I.PK embodied in S. 

18 7 and H.R. 3659. 

en 

Groap of the Sierra Club 

153 members in Juneau, Alaska. 

June 20, 1996 

File Sierra70 
234 

Sitka Conservation Society 

P.O. Box316 

Sitka,Alaska 99835 

, . -· 1 tft'l-7509 Phone 

(907) 747~105 Fax 

The Silb ~ Sociay, amember'*ip arp~~ iD Silb. cliiCIIIIIIII aad pas.d ._. 

followial Re.ollltiaa • a ...... Bolrd tbcclll• an J-23td, 19!16: 

WHEREAS. SCS bas a twwty1ft'CII ,_ldloly o( COIIIaVIIIcia adYoc:acy aod. 

WHEREAS, SCS balan eablitbod rtooid ofiDOIIJI.OriDI AJasb Pulp ~air W 

waser quality violations during this time period aDd lias brougbt violltions to dJe attmtioo of 

Sllle and Fecktal aulboritieuod has give~~ bnul111d i11&:11mal testimony • public mcelinp aod 

llcartaat, and 1llu bas~ ia e~edibilily 11 ac::ili.r pvup llld 11 • OlplliratioD 

~lcdplblc lboullirllld 'nlllrqtality .... lid, 

WHEREAS, SCS bas a~,. ou die praeatCilixa Aclvbory ~ wlaidl is 

ilnOiwd widl DEC, EPA, A7C .t .ia1 Cllilb...., ill die damllpufaic w.- IDIIICJilla 

dctamiJieclto lie pac.c c. Silftf' Blly- die ..... JDiiJ ....... -~ill 

coildDailla ... Cllllalt JllllicipiDoD llild-of tile taD:- by1110duca 8QID die AJIC 

mill8itc.ad, 

WHEREAS, SCS is familiar with llld iaMIMd wid! tiJDbet lllpJIIy ~ Toapa N.lioaal 

Fcnst ludliiC plamliaa. ad Tamber Sale paldicci .ad t!IN!i. dciDoulnd.ed its~ ad 

carreot panicipalioll iD .mowial! IIIII ~ m ~i.-ad, 

'IHEREFOIE, . SCS Bolrd ofDiledlln cloclllca:br Gppole IDy CllllallloD oflbe ltclenltDbCr 

supply caiiUid for Kelcbila Pulp ~ • • iDcluby with alllltocy J*llleiiO 1hal at 

A1Dka Pulp CotpoDiioo: ~ lirllld wllerqulity ........ ~ cleatloaial pr~Ctices.ajoilt OCIIridioa willl APC ftlr8111i-w.t violalio.l, II!UI•c:oavic:UC. iD 1995 

fix- Wlitcr PJillllioa ~-

scs Board fiu:tbcr liJppoJb lbe tmnimDcm of !I» KPC coanclll bciQa Ia dJe beat intm~U of 

die bcallh of~Cc1dliba le5idCIII:I, die belt intaau of.dJe tourism laciaaay- ~small Ale 

users oflbc Tonpsa fomt ecocystem, the belt~~ of wildlife depel!dc:llt oo the'old growtl] 

ecos)'lllllll, and iD the beat illtele1ts oftbc AJnerican people wbo tJuoap t211es ue subsidiz:ilw 

tbe ~'HI ofdlia pollulia& fCdmolosicaiJy ~ puJp JD.ill. 

Jnsad. SCS supportS a tr1111iU011 of tbe K.cu-.lliklll PuJp t.:iJity iato • 11011p01Jutiq val..-ddcd 

indJalry dial U.S tewerum Wbile Cl1lploy\Dg ~ pDOplc. We~ fiiDdilla ache 

traiiSi!ioa of dlls ficlllty llid lbc nmilliA8 of Cllliployols, if i.a:sary. · 

Voces:·Yet-12 No-0 

Worlcir.~ to ronserw tiM> natnral environment of thr Ton~so Fonst and to protect Sitka's qualitY of life. 
235 

TENAKEE HOT SPRINGS LODGE 

P0Boll3 

Temlkee Springe, AK 99841 

April24, 1996 

Ooaemor Tony Knowlet 

POBollliOOOI 

J--, AK 99811 

Dec Ckmcmor Knowlet, 

Q . . 

' 

J implore you,~ support tile extension of Ketchikan Pulp'1long term contract!!! 

1t i1 becoming more evidcmt aD tile time that the SO year OOIIIJ'aet& where a bad idea. They 

locked in a management 5dleme for die T011p81 that is limply DO( wminable. Virtually 

every tciefttiftc study that bas been done 011 the T onpu wiD support the position that the 

loging practice~ of the pu1 canaot be 111mincd ill the tblure. It i.a time we ltep bal:k ud 

__..the level oflosgins the fol'lllt tall tupport • not juat lock in a bad policy for 

IIIOther IS yeara. 

Tho Alub Dept. ofFish and Game IIICI the Forelt Service ICientillla agree that the fim 

llld wilclliie of the Tonpu need more protection ·DOt leta· if they are to mUntain bealthy 

populldons. 

For thole ofu1 in the other industrie8 who depend upon the Tongua for our livelihoodB, 

(filhing and tourism in my cue) it ia absolutely c:ssartial that the forest be m&lll8fd for 

multiple uee. · 

Once again, please, ~ support XPC'1 contract extension !I 

Sincerely, 

v(l'p«-j T )u ~~~ 

Samiel F.. McDeen 
236 

Prtece ef lleles t••••"'•tl•• t .. t•• .......... ti-15 

ltPC lo•l Te .... C•etr8ct leni!IUal 

Wh«eu. it ~·that the US Fc.-eet Senice has olf•ed ~ limb« to fulil the 

50 YM" coond with KPC; 

Wh«eaa. a new eontad wil be dltii!Mf1ta to the tKXIIomic civnific:tllion ol tae 

Wlhd; 

wtweas. w. blhn a IUIIIailllllt limb« incb*y nUit be dllmed • a ,.... addld 

inclJity beNd on a lower ASO ~ mare people wh1e cding....,. .-..; 

Whnal, I:Uu:e of Wlhs leland has ateady been heeviy loggad and lit Ill* of the 

contact abigalian has come tom Prince al w• llllnd; 

Whereas. KPC·e long term contrad has wasted mllions of IBxpilyall' dolin; 

Whereas. KPC hali't-n convicted il n.u.t llila. aushing ~; 

Whlreas, KPC haiiiiYW been il ~ with lillie lnd fiCin! * Wid M1« 

cpally laws; 

Wllereas. the pnnt CXIIIIpiOY LP polled a p-oft in tliCIIII of 370 milan dDIIIn 

(1994). it Is II1CCII1tCicnlb 1111 lllllpeY1f8 eWeic1zA1 flti" enWCIImenlll ClOIIIJIIInc:e 

costs; 

Wh«ees. Senatcr Steven's "110 tMon Oak Economic Dewlopment Fllld" could 

p-cMde tiOIDO of the IIKI1ttY needld lo • the nmition to • vWellcilld lmblr 

irKllsty end ~'I tom ilc1lstial scale log!jng; 

Wh«tu, Honk• Divide is lhe las1 remaring 1J91 vollme dd trowlh sllnd on Prince 

of Wties lllland. and wl be keetened bv 1his c:onhcl; 

Whnu. sjJ&IlterJCirepr...mt a hcllionll WI of lefor Flria al W .. residents. 1hia ccn1rad wll jeoperlbt a tednll'f manadated lleetyle. 

Whereu, the Fc.-est S.vice oontinuee to 9Jcn the c:urrddvo offec:ta aiiWI!J an 

p-ivate and public lands which have heavly impected hh and wlcl1e habitat. 

Whereas. indJ*illl ~ c:le.aj{ loggilg res:nsenta a Bi9t U88 of the fcrest. vAlich 

does not tompl'f with the congressionally rnanadated iltent oiiTIUHPe use of ftderll 

land. 

Now therefae be it rM!ved. the PltK:e of Wa Cons.-vdon leap calls fa the 

t«ni'lallcln of the long 1n1 KPC c:annct. 
237 

nlOMS PlACE Hf·~:HlWNERS ASSOctATION 

P.O. Box 2073 

Wrangell. Ak 999 " 

A R£SOLUTION ' l'OM THOMS PLACE HOMEOWNERS ASSOCIATION OPPOSING THE 

ENVIAONMENT At 1•. !"'10VEMENTT1MBER CONTRACT EXTENSION ACT, BilLS 5.1877. H.R. 3&!19, 

OR. THE 15-VEAR : · · · . TAACT EXTENSION FOil LO~SIANA PACIRC'S KETCHIKAN PUl.P COMPANY 

WHEREAS. lhr ' ;~ . .,.., contrKt cutNntly UMd bv. Louilit,. PKIIIc:'a Ktu:t*an 

Pu'r> r · ,,mpany ILPKI gi'4a LPIC en unhlir INrbt actvii1Qgl owr IMher 

tn• t>or "'utinnMS and ucluliV'I rights to timbw resource~: II1CI 

WHEREAS, tl"- · ::• ·ns ot thlt c:ontm:t were negotiattcl In 18S. .-wt are emnlv imr.·.··~ pr ne tor todiY'• ~at .-1 llltta'll resourc• c:ondltlona In 

Sn.o• , .. ~51 Alaska; and 

WHEREAS. ~ .. ,J LP!(. timber opwationa t1>e priority tor the management of the 

TM ;. ss National Forast dlllllgiS o1her 111uldple uu tiiOUniM 

...,.,.,r:Jnt for SautiMMt Al..ar.'a economy ~ aubsb1ancl. 

tc-. rr•;·•. recnttion, llah end wlldlfe habillll; end 

WH~EAS, th'"'-Jh not In ttle LI'K contrKI .... moat Clf t!l8 tillltltr ..... In till 

W• ~··,;~II ,,.. haw goN to LPK lnlt!Md of btnlfMina th•loc:al Wrangall 

ec .1r -:·mv; end 

WHEREAS. m.,. : ' ! the 11mb8f to 1U11111v I.PIC'a remaining contrKt wll be logged 

ir t: •· notthwn Tongns, an arta not In the contrect for ha timbw 

s•n . '· indic81ing thlt logging in the specifillel LPIC. contrat:t arM ia not 

so,\ ·'·~ble; end 

WHEREAS. ~~ ~ : '''•nomic b111 in the northern T onoau. which includla commercial 

a< ~ ' ;; ~ filhing, recrNdon, toutiem, and subsistlnc. hunting and 

fi:·l'l '1.1 will be damaged II unauatainable logging to meet LPIC'a 

c :·n•.-;;.-t eontinuea; and 

WHEREAS. U 1< • ··•s convicted of 1 felony and 13 othlr· ~· due to viotttlona 

o' , .,. en watar and clean air IIIWI In 1995; lnd 

WHEREAS, L '"" · -.- ~s convicted in 1983 of violating civil ami-trust law, driving 102 

s,.... i• ' ·"dependent ope mora out Clf business In Southaut Alaska; end 

WHEREAS, tt· e •·~ term economic dlv..-oltV and otabllity of Southent AIHka will 

bt '·''"aged by the prnpoaad 15 vear extension of LPK'1 timber 

~-~ r.t::t . 

THEREFORE BE · ·'" SOLVED that Thoma Place Homeowners Auocietion OfiPO&U any extension of 

Louisiana Paciric · ·, •chilean Pulp Company' a 50 VM' cont..ctx:sn:resr Servtca. 

ADOPTED JUN~ · 996. . ~ ~ PrMldlllt 
238 

FRIENDS OF GLACIER BAY 

P.O. Box 135 

Senator Frank Mlrkowski 

Chairman, Resources Committee 

U. S. Senate 

Washington, D.C. 20510 

Dear Seantor Murkowst:i: 

Gustavus, Alaska 99826 

June 20, 1996 

Friends of Glacier Bay strongly oppose extension of the Ketchikan Pulp 

Company's monopoly contract. 

We wait for the day when it becomes possllle to constitute a sustainable 

forest ind.tstry on the Tongass, one that uses less timber to procllce more 

jobs. and provides better protection for the other uses of the forest. 

KPC could certainly decide to become part of this new way of doing 

business, but they have no incentive so tong as their sweeheart deal 

continues at the expense of the taxpayer and the environment. 

Sincerely, 

__A~ . P_J4{ &~g,:,ry) Streveler ' ' t_ -

Board Member 
239 

cc:Mall for: Representative Caren Robinson 

Subj•ct: KPC extens1on 

Fram: aksk•HOalaska .net (Alaska Skiff Charters) at CC2MHS1 04/03/96 7: 19 PM 

To: Representative Caren Robinson at JNU_CAPITOL 

Car en, 

You have our full suwort in preventing the extension of Ketchikan Pulp 

CC~Jl:)a!ly's SO year contract. We believe KPC should not be allowed t o do 

business today if it cannot meet current water and air quality standards and 

the government should not subsidize it arry longer at the expense of other 

Tong ass users. 

They state they need the extension in order to aroortize facility upgrading 

to D"eet water and air quality standards. This is a joke.! Their parent 

coapany, Louisiana Pacific had the largest return on its assets in the 

timber industry in the world in 1993 and 1994. KPC is a convicted felon and 

should not be rewarded. 

The contract must end so the Tongass can be rranaged on a true multiple use 

basis. If KPC' wants t o cont inue doing business, then they s hould conduct 

business within the confines of the marketplace and corcpete a longside 

independent loggers of the Tongass. 

We feel an extension will be harmful to our business in the sense of 

additional logging effects on salmon streams throughout Southeast. Although 

KPC is not logging watersheds arowxl our fishing area, the i..rrl)act they have 

the Southeast stocks has a very direct effect . That being l oss of 

. .abitat leading to less healthy nms arrl possible shifting o f the fishing 

fleet to our fishing grounds. 

Please vote NO on the resolution extending KPC' s ti.n"Oer contract. 

=1f:' an:111ark Kaelke Aluka Skiff Charters 

3 718 El Camino 

Jtmeau, Ill( 99801 

MK 

'o.rt Item 
240 

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244 
245 

ACWA 

ALASKA CLEAN WATER ALLIANCE Conserva1ion Fishing Subsistence Tourism Public Health 

Box 1•41. Haines AK 99827 Phone: (907) 766-2296 Fax : -2290 E-mail acwa@igc .apc .org 

7 I 319 6 

Representative Don Young Chairman 

U.S. House Committee on Natural Resources 

US. Capitol 

Washington D.C. 20510 

Re: Testi'mony of Gershon Cohen, Executive Director of ACW A, on the Extension of 

the Ketchikan Pulp Company Long Term Timber Contract 

Mr. Chairman, and Members of the U.S. House Committee on Natural Resources • . 

According to the National Water Quality Inventory, half of our nation's rivers, 

lakes. and estuaries are still not safe for drinking, or harvesting fish and 

shellfish. Polluted waters and sediments often begin by contaminating the 

smallest aquatic organisms; but the greatest concentration of poisons eventually 

reachs the top of the food chain - in Alaska the animals at highest risk are 

whales, bears, eagles, and people. 

Ward Cove, the site of the Ketchikan Pulp Company mill, is one of the most 

polluted water bodies in our nation. KPC consistently tops the National Toxic 

Release Inventory List. KPC ~ exceeds the criteria to be classified as a 

Superfund pollution site. KPC was recently ranked as tlie second most polluted 

site in Alaska out of over two thousand evaluated sites, with a score nearly lL!J 

Wl1ll the level necessary to be placed in the highest priority category. Last fall 

KPC received the largest Clean Water Act fine ever imposed; plea bargaining 

down to one felon¥ and thirteen misdemeanor convictions. 

Ward Cove historically supported a healthy and diverse aquatic community -

but fish kills were being recorded as early as 1957. only four years after the 

opening of the pulp mill. The waters and sediments in Ward Cove are now 

heavily contaminated after forty years of discharging -34 million gallons of 

polluted wastewater every day. 

On May 16th, several citizen's groups including ACWA, filed a lawsuit against · 

KPC for 283 violations of State and Federal pollution laws. More than a hundred 

of these violations, totaling over a million gallons of illegal discharges, have 

occurred since the consent decree settlement of KPC's felony conviction. The 
246 

not! !'; co nsiS tent ; lat e of no n-comp li a nce as e videnced tn o ur suit unde rscores 

the ;mmed! ate ne ed to conta in and d eanup the tox ic wa ste in and abou t Ward 

Cove. To ignore the connection between toxic pollution and cancer. reproduc ti ve 

diso rde rs. and immune dysfunction. shirks our responsibility to both the present 

and future generations of the re sidents of Ketchikan. 

KPC has routinely used the people of Ketchikan and their econt>mic survival as a 

shield from compliance with environmental laws. KPC consistently operates in a 

manne r that violates the Toxic Substances Control Act, the Resource Conservation 

and Recovery Act, the Rivers and Harbors Act, the Clean Water Act, the Clean Air 

Act, the Comprehensive Environmental Response/Compensation and Liability 

Act. the Alaska Solid Waste Regulations, the Alaska General Safety Codes. and 

the Al as ka Water Quality Standards. 

As yo u know these laws were passed to protect public health , maintain healthy 

fish populations, and allow diverse economic and recreational use of PUBLIC 

wate rs. If you or I conducted our daily business as KPC has and doe s, we 'd 

probabl y be in a federal prison. 

In ! 994 EPA finally issued a standard industry permit for the mill , to replace 

the mill's administratively extended permit, now twelve years old. This new 

Ward Cove permit would have required compliance with the minimal 

requirements of State and Federal law. But KPC knew that they could not 

comply with even the most minimal of standards. KPC has blocked the adoption 

of the '94 permit for nearly two years; while it continues to discharge toxi c 

waste . In an attempt to preempt the Ward Cove permit, KPC has applied for a 

new discharge permit to begin the pollution of the adjacent water body of 

Tongass Na rrows. 

KPC officials have stated their intention to eliminate the use of elemental 

chlorine. We support this goal. But while eliminating the creation of highly toxic 

·o rganochlorines is a positive step towards the protection of public health, these 

same process changes are expected to increase the concentration of other wastes 

in the mill's effluent that rob oxygen from the water, further increasing the 

toxic ity of the mill:s discharge to aquatic life. 

Eve ryone agrees that KPC's antiquated facility is a dinosaur of the pulp industry. 

Bu t there is no agreement that even a major rebuilding of the mill would allow 

the o pe ration to meet State and Federal wa ter quality standards. 

Instead of discussing a fifteen year extension of a contract that locks us into the 

past. we should be designing and constructing a new, more efficient timber 

based industry for Southeast Alaska, while using the $110 million Economic 

Disaster Fund to establish a safety net to protect the mill workers and their 

fa milies until the new industry is operational. 
247 

For the past two years, as a member of the ,..;atural Re sources Task Force of the 

President's Council on Sustainable Development, l have had the opportunity to 

speak with many people in the western United States on the sustainable 

development of natural resources. There is a growing understanding worldwide that maintaining a high quality of life depends ~ upon economic 

stability. environmental protection, and social justice. This long term timber 

contract, written over four decades ago, fails the test of sustainability by every 

measure . It assumes that our forests can be clear-cut forever, it forces us -to 

manage wildlife without consideration of habitat, it eliminates competition · 

within the industry and eliminates the use of the resource by more sustainable 

industries, and it ignores both the physical and financial impacts that highly 

toxic wastes have on all living thi!lgs. 

Mr. Chairman, ACW A does not work on timber allocation issues and defers to 

other individuals and organizations on such matters; however. we could not 

begin to consider supporting extensions to the KPC timber contract unles.s four 

conditions were met: (I) suspension of KPC's opposition to the 1994 EPA permit; 

(2) a complete cessation of KPC's discharge of toxic materials to the waters of S.E. 

Alaska ; (3) the timely completion and implementation of a site remediation plan 

for Ward Cove, and (4) an immediate initiation of the refitting of the facility to 

allow the company to operate in compliance with all State and Federal pollution 

laws. 

Thank you Mr. Chairman for this opportunity to address your Committee on this 

most important issue . 

Sincerely, 

~L~ a__ 

Gershon Cohen 

Executive Director 
248 

STATEMENT OF MARY A. MUNSON 

PUBLIC LANDS ASSOCIATE 

DEFENDERS OF WILDLIFE 

ON 

H.R. 3659-THE ENVIRONMENTAL IMPROVEMENT 

TIMBER CONTRACT EXTENSION ACT OF 1996 

FOR 

THE HOUSE RESOURCES COMMITTEE 

TilE U.S. HOUSE OF REPRESENTATIVES 

JULY 11, 1996 

ON BEHALF OF 

DEFENDERS OF WILDLIFE 

Mr. Chairman and Members of the Committee: 

My name is Mary Munson, Public Lands Associate for Defenders of Wildlife. On behalf 

of Defenders, a national conservation organization with over 150,000 members 

nationwide, I thank you for the invitation to provide testimony on H.R.3659, the 

Environmental Improvement Timber Contract Extension Act. Defenders has been a 

leading proponent of the protection of wildlife and wildlife habitat in the Tongass 

National Forest, and is a member of the steering committee of the Alaska Rainforest 

Campaign. 

H.R. 3659 would modify the Ketchikan Pulp Company's 50-year logging contract in 

Tongass National Forest by extending it an additional 15 years. It would also establish 

minimum annual volumes of timber for the company, and guarantee that rates paid 

reflect those assessed in forests of the Pacific Northwest. We strongly oppose H.R. 3659 

because of the damaging impacts the existing Ketchikan Pulp Company (KPC) contract 

is already having on wildlife, and the fact that KPC has a long record of violating federal 

environmental laws. We also believe that H.R. 3659 would undermine an essential 

forest plan revision process now taking place on the Tongass. 

The Tongass National Forest is owned not only by Alaskans, but by all Americans, and 

the issues involved with the Ketchikan Pulp Company's performance are of national 

significance, and are not simply parochial economic or jobs issues. The Tongass is the 

world's largest intact temperate rainforest, home to over 300 wildlife species, many of 

which depend on old-growth forest habitats. Sustainable management of this beautiful 

and unique resource is properly a matter of national concern. All Americans have an 

interest in making sure Tongass wildlife thrives, so that current and future generations 

will benefit from the recreation, beauty, and resources of this jewel in the National 

Forest System's crown. As protector of this national interest, Congress has a duty to 

oversee its management by allowing only sustainable and responsible logging at a level 

consistent with habitat protection. Extending the KPC contract would be a violation of 

this duty. 
249 

2 

H.R. 3659 would essentially hand an additional 15 years of dominance over one of our 

country's premier wildlife habitats to KPC. The area yielding the bulk of the timber 

already promised to KPC is on Prince of Wales Island, which sustains the river otter, 

Prince of Wales flying squirrel, Vancouver Canada goose, and two species of special 

concern: the marbled murrelet and Queen Charlotte goshawk. Prince of Wales also has 

a distinct population of Franklin's spruce grouse. More common residents include the 

Sitka black-tailed deer and some of the largest black bears in the nation. H.R. 3659 

does not provide for maintaining the viability of these populations, and will undermine 

efforts to do so. 

The timber wolf is also at risk. Prince of Wales Island contains a stronghold of the 

Alexander Archipelago wolf. Although hunting and trapping occurs in the Tongass, 

logging and roadbuilding remain the major threats to these animals. The wolf survives 

largely on predation of deer. Deer depend on the diverse plant community fostered by 

the multi-layer canopy of the old-growth rainforest. Stands with large trees are critical 

for deer in hard winters because the crowns intercept the snow, making travel and 

feeding easier. Post-logging clearcuts not only hinder deer movement in snow, but also 

cause forage to become less nutritious. For a short while after clearcuts, forage is 

healthy because seedling regeneration is good in logged Sitka spruce and western 

hemlock forests. But some 25-30 years after clearcutting, the overlapping branches of 

the new trees completely shade the forest floor, and although the deer can use the 

stands for cover against snow, there is little or no forage. It takes 200 to 250 years for 

clearcuts to resemble old-growth conditions conducive to these deer. 

If H.R. 3659 becomes law, KPC will be allowed to continue clearcutting at increased 

rates. This will have grave impacts on the wildlife already mentioned, particularly in the 

region of the roadless areas of Honker Divide and nearby Elevenmile. Named for the 

resonant call of migrating Canada geese following this natural flyway up the center of 

Prince of Wales, Honker Divide is a misty reach of moss-covered forest studded by a 

chain of lakes that stretches from the mouth of the Thorne River at Thorne Bay over 

the low divide to Hatchery Creek and again to the sea. It boasts a 30-mile canoe trail 

and is the source of the Thorne River, known for its steelhead trout runs. The trees in 

this area are generally smaller, with the biggest trees being found on hilltops separated 

by sparsely timbered muskeg. If the area were open to logging, many miles of roads 

would be necessary to reach the denser stands. Honker Divide and Elevenmile are 

simply the best of what's left of unprotected wildlife habitat on Prince of Wales Island. 

Pressure to fulfill the high-volume requirements of the extended contract would surely 

put those areas in jeopardy. Logging could cause significant reduction of deer and 

wolves in the area. Increased logging would not only harm the forage, it would also 

provide better access for hunters. Due to this potential logging, the Thorne was named 

by American Rivers as one of the nation's ten most endangered rivers. 
250 

3 

The National Forest Management Act (NFMA) requires that the Forest Service provide 

for the diversity of plant and animal communities. Maintenance of ''viable populations 

of native vertebrate species" is required in implementing regulations. The Tongass Land 

Management Plan (TLMP), which is now undergoing revision, is the blueprint for 

ensuring that logging a·ctivities in the Tongass are consistent with those legal 

requirements as well as other legitimate purposes of the National Forest. 

Activities taking place under the existing KPC contract, including the guaranteed supply 

of 192.5 million board feet per year, are certainly those which must be governed by the 

forest plan blueprint. So why isn't this proposed contract renewal taking place within 

the context of the TLMP revision process? We believe that if the effects of the KPC 

contract are legitimately assessed through the revision process, it will be found to harm 

the Forest Service's ability to maintain viable populations of native species. In fact, we 

are convinced that the TLMP revision team should not just reject the KPC contract 

extension, but should cancel the existing contract immediately, based on KPC's black 

track record and the effects of mandated logging on the wildlife habitat. This bill would 

ride roughshod over the TLMP process, and force the Forest Service to provide a high 

volume of trees regardless of the environmental, economic, recreational, social, and 

ecological costs. 

For over 40 years, KPC, owned by Louisiana-Pacific, has been operating under a 

contract unique to the national forest system. Based on its record, there is no 

justification for contract renewal, let alone the sweetheart deal that H.R. 3659 entails. 

As representatives from local Alaskan groups have pointed out, the Environmental 

Protection Agency's most recent reports show that KPC is one of the biggest toxic water 

polluters in the Pacific Northwest, and has failed to comply with a host of federal clean 

air and Willer laws. The record of KPC over the past 20 years includes a felony and 

thirteen misdemeanor pollution convictions, millions of dollars in criminal and civil 

penalty fines, hundreds of other pollution violations and citations, and numerous 

breaches of its contract. Most importantly, the existing KPC contract guarantees a 

timber volume of 192.5 million board feet per year. Based on our analysis, we believe 

the Forest Service simply cannot guarantee KPC this volume, provide timber for 

independent operators, and still meet the requirements of NFMA to maintain welldistributed, viable populations of wildlife on the Tongass. And significantly, viable 

population levels only meet the criteria that there are enough individuals for the 

populations to continue to exist. There is no assurance that enough individuals will be 

left for subsistence, hunting, viewing, or other uses of wildlife upon which Alaskans and 

other Americans depend. As long as the KPC contract is in existence, timber will be 

first priority, and wildlife, along with all other forest resources, will take a back seat. 

Defenders of Wildlife has sympathy for anyone whose livelihood would be affected by 

the non-extension of the KPC contract. But there are thousands of employers 

throughout the country which also depend on timber supplies, but are not given this 

unprecedented control over a national forest, nor the subsidies which amount to millions 
251 

of dollars. And many of these employers are dependent upon resources that do not 

have fraction of the ecological importance and national significance that the Tongass 

has. As discussed by other panelists at today's hearing, there are plenty of alternatives 

for providing jobs which would be much less resource-intensive, and run by companies 

without abysmal records of pollution and contract violations. The argument that the 

company needs this contract in order to make necessary improvements to comply with 

environmental laws is outrageous. KPC has had years to make the necessary changes, 

but declined to do so in favor of increased profits. For this, they should not be 

rewarded by a bail-out, as represented by H.R. 3659. 

4 

Logging in one of the American people's most valuable and productive forests is a 

privilege, and it is important that it be done through the accepted forest planning and 

management process. Comments on the proposed Tongass Land Management Plan are 

due in August, and this is the appropriate forum for discussions about increased logging 

and guaranteed timber supplies. The KPC contract must be considered as part of the 

TLMP, not as a separate initiative which ignores the scientific analysis, ecological effects 

and years of public input. For that reason, as well as the incalculable adverse effects on 

wildlife and wildlife habitat in affected areas, we strongly oppose H.R. 3659. 
252 

AFFIDAVIT OF MARK F. HARTLEY. D.B.A. 

BEFORE THE U.S. HOUSE SUBCOMMITTEE ON NATIONAL PARKS 

& PUBLIC LANDS 

JULY 18. 1996 

PERSONALLY appeared before me, MARK F. HARTLEY, D.B.A., who being duly 

sworn makes the following statement under oath: 

Mr. Chairman and members of this honorable committee, I was born on November 

30, 1956, in West Palm Beach, Florida. I am presently an Associate Professor of Business 

Administration at the College of Charleston in Charleston, SC, where I have been a member 

of the teaching faculty for the past eleven (II) years. I currently hold the National 

Association of Purchasing Management Chair in the School of Business and Economics at 

the College. I hold a Doctor of Business Administration degree from Louisiana Tech 

University, with a major in quantitative analysis and a minor in economics, and have taught 

business statistics for over fifteen ( 15) years. Attached to this Statement is my curriculum 

vita, academic credentials, employment history, and membership in professional and 

academic organizations. as well as a list of 34 recent quantitative research studies I have 

coordinated or performed, and a list of 63 academic publications I have authored or coauthored. 

I have been requested to state my professional opinion as to whether the methodology 

required by a National Park Service (NPS) written guideline, known as NPS-48, is consistent 

with generally accepted statistical, accounting and business practices and consequently 

appropriate for calculating franchise fees payable by Concessioners, or that such 

methodology is defective. invalid and unreliable for such a purpose. 
253 

In order to develop an adequate basis for my opinion, I thoroughly reviewed and 

became familiar with the written franchise tee determination process set forth in the NPS-48 

guideline. Believing it would be helpful to learn precisely how the NPS actually implements 

this guideline, I used the NPS calculation for Fort Sumter Tours, Inc., (FST) as a case study, 

assuming that the same methodology would be used for all concessioners nationwide under 

similar circumstances. As a part of the case study, I became familiar with a franchise fee 

analysis prepared by the NPS for FST dated February 27, 1992, as well as the facts and 

issues involved in Federal Case Number 94-1570, Fort Sumter Tours, Inc. vs. Bruce Babbitt, 

etc. Also, because of my educational background and previous experience, I am thoroughly 

familiar with, but have again reviewed. the annual Dun and Bradstreet Publication. Industry 

Norms ("D&B !nduslly Norms") for "Standard Industrial Classification .. (SIC) codes 

generally, and particularly code number 4489. Water Transportation, Not Elsewhere 

Classified, for the years 1988-1989. I also have reviewed the D&B Industry Norms data tor 

each SIC code, which includes any water transportation services for the years 1985 -1987. 

I am also familiar with and have reviewed the Robert Morris and Associates publication. 

1990 Annual Statement Studies (""RMA Statement Studies·:; . Also because of my experience. 

I am thoroughly familiar with the content, sampling procedures and methodology employed 

in producing these two publications. I am aware of the professional use and limitations of 

the data contained therein. I am also thoroughly familiar with the SIC code system. along 

with its usefulness and limitations. As a brief explanation, the Office of Management & 

Budget (OMB) has developed and publishes an SIC code manual. \Yhich contains an SIC 

code classification number to r every known type of business operation nationwide. such as 

hotels. barber shops. restaurants. auto manufacturers. drug stores. water transportation 

services. etc. For purposes of franchise fee calculations. pursuant to its guideline. the NPS. 

in its discretion. assigns each concession operation a SIC code number. thus placing the 

concession operation within a SIC code classification of all other related businesses. The 

NPS then concludes or assumes that a particular concessioner is comparable to all other 
254 

business with the same SIC code classification, in every respect, including the relationship 

between gross income. operating expenses and net profit. 

A thorough understanding and review of the above clearly demonstrates that the NPS, 

in accordance with its predetermined objective, attempted to set FST's franchise fee at a level 

that would cause its profitability, if any, to fall at or near the average profitability for all of 

the other unknown businesses classified under the same SIC code. The NPS assigned FST 

to SIC code #4489 for the years 1988-1990. For the years 1985-1987, there was no SIC code 

4489; therefore, deponent reviewed any and all other SIC codes involving any type of water 

transportation service for the years 1985-1989. In the FFA, the NPS stated that it applied 

SIC code 4489 to FST for the years 1985-1989. However, this is a clearly obvious and 

undebatable error because the 4489 code did not exist until 1988. Therefore, by using this 

methodology, the entire franchise fee determination process for FST was predicated upon a 

completely invalid assumption. That is, that the net profitability levels reported in the D&B 

Industry Norms for SIC code 4489 is a proper yardstick to measure the net income 

profitability level of FST, simply because the NPS has assigned FST the SIC code number 

4489. In my professional and academic opinion, the NPS's most basic assumption, described 

above, is fatally flawed and therefore fee calculations based thereon are also flawed. This 

renders the NPS calculations concerning fST statistically invalid, as it would any other 

concessioner when this process is similarly applied. Absolutely, no statistically valid 

inferences regarding any particular one or all other businesses classified under SIC 4489, can 

be drawn from the data reported in the D&B Industry Norms or the RMA statement studies. 

Specifically, it is totally invalid for the NPS to infer that any data contained in the D&B 

lndustn· .Vorms or the RMA Statement Studies properly reflects the financial statement 

information. including profitability. for all other businesses, or any particular business 

classified under the same SIC code number. Drawing any such inferences from this 

published data clearly violates fundamental principles of statistics, and constitutes a flagrant 
255 

misuse of the data for the NPS 's purpose. All knowledgeable statisticians, after even a 

cursory analysis of this particular process, would agree with this conclusion. 

Because, as indicated above, the fundamental inference upon which the NPS based 

its FFA is statistically invalid. the conclusion based thereon, that a twelve (12%) percent 

franchise fee will cause FST's profitability to equal or approach the average profitability of 

all other businesses nationwide classified under the same SIC code classification. is also 

statistically invalid and completely inaccurate and unacceptable procedurally. In fact. no 

valid inferences regarding the general population of businesses, or any particular business. 

including any concession operation classified according to any SIC code, may be drawn 

from the D&B Indus II:\· Norms or the RMA Statement Studies discussed above. 

Additionally. the D&B Jndusu:\· Norms data simply has well known deficiencies 

which are both irrctutable and insurmountable statistically, including the following: 

a. The samples of businesses from which the D&B information is drawn arc not 

random samples. According to the most basic statistical principles, if one is 

to draw any inference about a national population of businesses classified 

under the same SIC code. based upon samples received only trom a relatively 

small number of businesses who voluntarily submit their financial data. any 

such inference is basically tlawed because the sample businesses are not 

randomly selected. The voluntary convenience samples so used are 

fundamentally not considered representati ve of all other businesses classified 

under the same SIC code number. and information gathered in this manner is 

thereti.wc considered invalid and unreliable for such purposes as those used by 

NPS. This well known D&B lndustJ)' Norms data deliciency is either 
256 

overlooked or disregarded by NPS, but this data deficiency is clearly based 

upon well known and basic principles in the field of statistics. 

b. Additionally, I call into question the method of data collection employed by 

the compilers of D&B Industry Norms. According to reliable sources inside 

D&B, much of the data is collected through telephone interviews by 

transcribers, rather than through more standard acceptable procedures such as 

thorough financial statement analysis, detailed corporate personal 

interviewing, and/or rigorous data collection through financial audit. I 

therefore question the reliability of the D&B Industry Norms data because it 

is improperly collected and potentially inaccurate on its face for this purpose. 

or any purpose in which a rigorous statistical methodology is employed and 

the D&B Industry Norms data is utilized as the underlying foundation for the 

analysis. 

c. Moreover, based upon information I consider reliable, the entire population of 

businesses which could be properly classified under SIC number 4489, is 

approximately 3,000 nationwide. The sample sizes reported by D&B Industry 

Norms under SIC 4489, for FST, were 16 in 1988 and 56 in 1989, and the 

sample size employed in the RMA Statement Studies used by the NPS was 10. 

Clearly, even if these samples had been randomly and properly selected as 

required, they are too small to draw any valid inference about the larger 

population of other businesses under the same SIC code, because the sample 

siLes are too small relative to the vast number of other businesses classified 

under the same SIC code. 
257 

Based upon the above, clearly the NPS's methodology is statistically unreliable. due 

to the nonrandom nature of the samples reported, the small sample numbers, and the 

complete absence of other data essential to properly test the statistically validity of the D&B 

Industry Norms and the RMA Statement Studies. Because of this unreliability, the validity 

of any inferences drawn form the D&B Industry Norms and the RMA Statement Studies 

cannot successfully withstand normal statistical validity testing. It is thus fatally flawed for 

the purposes employed by the NPS. 

There is a standard and fundamental procedure in the field of quantitative statistical 

analysis known for measuring the degree of confidence one may place in inferences about 

an entire population. when those inferences are based upon such information contained in 

D&B Jndustrv Norms. The D&B Industry Norms and the RMA Statement Studies data is 

clearly and simply beyond the reach of such fundamental statistical evaluation because of its 

incomplete nature and because of the unreliable statistical techniques employed. And D&B 

itself acknowledges as much in disclaimers it publishes along with its information. The only 

possible conclusion is that the data has absolutely no validity for the purposes employed b;. 

the NPS. 

In my professional opinion. even if the D&B Indus/l~v Norms and RMA Statemem 

Studies were based upon data properly collected in accordance with established statistical 

standards, the NPS clearly and fundamentally misuses such data in its NPS-48 process. It 

is fundamentally inappropriate to usc any data classified by SIC codes for the purpose of 

setting a predetermined anticipated prolitability level of any particular business based upon 

SIC code classifications. Generally. tour digit SIC codes. such as those employed in the 

D&B Industry Norms and RMA Statemem Studies. include too many varied businesses to be 

properly utilized for this singular purpose. In other words. rarely does a particular business 

sufficiently ··tit'" into any four digit SIC code to enable anyone, including the NPS. to 
258 

accurately utilize such profitability data as an accurate indicator of a desirable level of 

profitability for any other particular business. In my professional opinion, this is clearly the 

case with regards to FST and the NPS 's attempt to determine what FST's level of 

profitability "should be". The NPS compared FST's audited financial statements, after 

adjusting same to fictitiously increased net income levels, to net profit information classified 

by SIC code in the D&B Industry Norms and RMA Statement Studies, which is neither 

audited nor adjusted by D&B or NPS. This procedure is akin to comparing apples to 

oranges and is clearly a flagrantly flawed process. Without question this NPS-48 process, 

of necessity, would, with complete certainty, produce invalid franchise fee calculations for 

every concessioner, based upon such a fundamentally flawed process. 

Based upon the above observations alone, it is clear that the NPS-48 process should 

be discontinued because it is inherently flawed, unreliable and completely inconsistent with 

generally accepted statistical, accounting and business practices. There are compelling 

reasons why this NPS-48 guideline, as it pertains to franchise fee calculations, should be set 

aside forthwith. along with any and all franchise fee increases based thereon. Upon basic 

equitable principles, those in authority within our government, should immediately require 

this most appropriate and proper action. 

SWO RN TO BEFO RE ME THIS 

_l!:j_ day of July, 1996. 

Not ry Public l(lr the State of South Carolina 

My Commission Expires: "'UAY ~~~L= CAIIOI.-

IofY C~ EXPIIIES.SEI'T. u,-
School of Business and Economics 

College of Charleston 

Charleston, SC 29424 

(803) 953-5955, (803) 953-1797 fa~ 

Education: 

259 

CURRICULUM VITA 

MARK F. HARTLEY 

Doctor of Business Administration (D.B.A.), 1986 

Louisiana Tech University, Ruston, LA 

PO Box 1822 

Mt. Pleasant, SC 29465 

(803) 971-9425 

hartleym@cofc.edu email 

Major field of study: Quantitative Analysis Minor fields of study: Marketing, Economics 

Dissertation Title: Income Concentration in the United States: Measurement. Trends. and Stabilitv of 

Correlates. 1950-1980. 

Master of Business Administration (M.B.A.), 1979 

Columbus College, Columbus, GA 

Major field of study: Administration 

Bachelor of Business Administration CB.B.A.l, 1978 

Columbus College. Columbus. GA 

Major field of study : Marketing 

Employment: 

Associate Professor, 1994 -present. Assistant Professor. 1985 - 1994. 

Department of Management and Marketing, School of Business and Economics 

College of Charleston, Charleston, SC. 

Tenured August. 1988. 

Holder, National Association of Purchasine Mana2ement- CarolinasNirginia Chair, 1993 to present. 

Courses taught at the College of Charleston: 

Production and Operations Management. Purchasing and 1\laterials \1anagement. Business Statistics 11. 

Marketing Research. Quantitative Methods and Decision Making, lntem10dallnfommtion Systems 

Assistant Professor. 1982- 1985. 

School of Business Administration 

Columbus College. Columbus, GA. 

Teaching Assistant. 1980 - 1982. 

College of Administration and Business 

Louisiana Tech University. Ruston. LA. 

Honor Societies and Recognitions: 

Beta Gamma Sigma (Business Honorary Organization) 

Omicron Delta Epsilon (Economics Honorary ( )rganization) 

School of Business and Economics Dean's Spec ial Service .- \ ward 
260 

Publications in Academic Peer Refereed Journals: 

"The Adoption of Document Imaging Processing Systems in the Small Business Commwlity." Accepted 

for publication in Coastal Business Review ( 1996). (with Gregory B. Turner). 

"Purchasing's Role in Corporate Strategic Planning." International Journal of Physical Distribution and 

Logistics Management, XXVI (4), (1996) 51-62. (with Wade Ferguson, Gregory B. Turner, and 

Edward M. Pierce). 

"Ethics, Gratuities, and Professionaiization of the Purchasing Function." Journal of Business Ethics, 

XIV, (1995) 751-760. (with Gregory B. Turner and Stephen Taylor). 

"Developing Ethical Policy Statements in Purchasing Departments." T.S.U. Business and Economic 

Review, XIX (2), (1995) 2-6. (with Gregory B. Turner and Charlie Cook). 

"Ethics Policies and Gratuity Acceptance by Purchasing Agents." International Journal of Purchasing and 

Materials Management, XXX (3), (1995) 42-47. (with Gregory B. Turner and Stephen Taylor). 

"Are You Taking Advantage of the Productivity Incentives in the Tax Reform Act of 1986?." Industrial 

Management, XXXV (2), 22-24. (with J. Michael Alford and B. Perry Woodside). 

"Income Concentration in South Carolina: How Much and Why." Lander College Business Review, li 

(2), 5-9. (with Tom S. Sale and John D. Jackson). 

Other Publications and Academic Professional Program Presentations: 

"Ethical Issues in Global Purchasing: A Buyer's Guide to Gifts and Bribes Worldwide." Under Review, 

National Association of Purchasing Management, for Presentation and Proceedings of the 1997 

Annual Conference. (with Gregory B. Turner and Wade C. Ferguson). 

"Public Sector Attitudes Toward Gratuities and Gift Acceptance." Proceedings of the 8lst Annual 

National Association of Purchasing Management International Purchasing Conference, 390-395. 

Presented in Chicago, lL at the Annual Conference, April, 1996. (with Gregory B. Turner and 

Wade C. Ferguson). 

"Regional Variations in Ethical Standards and Conduct Among Purchasing Managers." Proceedings of 

the 81 st Annual National Association of Purchasing Management International Purchasing 

Conference, 362-366. Presented in Chicago, IL at the Annual Conference, April, 1996. (with 

Gregory B. Turner and Wade C. Ferguson). 

"Designing for the Japanese Market. " Proceedings of the 1996 Southeast Decision Sciences Institute, 

231-234. Presented at Charleston, SC at the Annual Meeting, February, 1996. (with J. Michael 

Alford and Gregory B. Turner). 

"Purchasing's Role in the Development of Corporate Ethics Statements." Ethics Policy Statements for 

Purchasing, Supply, and Materials Management, 137-141. Tempe, AZ: National Association of 

Purchasing Management, 1995. Also in Proceedings of the 80th Annual National Association of 

Purchasing Management International Purchasing Conference, 266-271. Presented at Anaheim, 

CA at the Annual Conference, May, 1995 (with Gregory B. Turner and Wade C. Ferguson). 

"Uncertainty, Effort and Risk Aversion in Sales Force Compensation: What Does Agency Theory 

Offer0 " Proceedings of the 1994 Southeast Institute of Management Science, 319-321. Presented 

in Myrtle Beach, SC at the Annual Meeting, November, 1994. (with Gregory B. Turner and 

Wade C. Ferguson). 

"Group Decision Support Systems: An Application in the Participative Budgeting Process." Proceedings 

ofthe 1994 Southeast Institute of Management Science, 222-224. Presented in Myrtle Beach, SC 

at the Annual Meeting, November. 1994. Winner, Best Paper Award, (with Gregory B. Turner, 

Mark MitchelL and Ron Berry). 
261 

"Purchasing's Involvement in Corporate Strategic Planning." Proceedings of the 1994 Atlantic Marketing 

Association, I87-I92. Presented in Atlantic City, NJ at the Annual Meeting, October, I994. (with 

Gregory B. Turner, Wade C. Ferguson, and Ed Pierce). 

"Purchasing Planning for Disaster - Are You Prepared?" Proceedings of the 79th Annual National 

Association of Purchasing Management International Purchasing Conference, 259-263. Presented 

in Atlanta, GA at the Annual Conference, May, I 994. (with Wade C. Ferguson). 

"A Content Analysis of Ethical Policy Statements in Purchasing Departments." Proceedings of the 1993 

Southern Marketing Association, I 7 I -173. Presented in Atlanta, GA at the Annual Meeting, 

November, I 993. (with Gregory B. Turner). 

"The Impact of Inbound Shipment Tracing Systems on the Expediting Function." Proceedings of the 

1993 Atlantic Marketing Association, 435-437. Presented in Orlando, FLat the Annual Meeting, 

October, 1993. (with Stephen LeMay, Paul T. Nelson, and Gregory B. Turner). 

"The Acceptance of Gratuities by Purchasing Agents: Toward the Development of Effective Control 

Methods." Proceedings of the I 993 Association of Marketing Theorv and Practice, 522-525. 

Presented in Hilton Head. SC at the Annual Meeting, March, I 993. (with Gregory B. Turner and 

Steve Taylor). 

"Teaching Styles and Methodologies: Pitfalls and Suggestions." Symposium for the Graduate Student 

Workshop of the Southeast Decision Sciences Institute. Presented in Chattanooga, TN at the 

Annual Meeting, February, I993. (with Ronald M. Zigli and Robert L. Andrews). 

"An Empirical Examination of the Diffusion of Document Imaging Processing Systems." Proceedings of 

the 1993 Southeast Decision Sciences Institute, 179-181. Presented in Chattanooga, TN at the 

Annual Meeting, February, I993. (with Gregory B. Turner). 

"Symbiosis: A Theoretical Foundation for the Development of Strategic Procurement Alliances." 

Proceedings of the I 993 Southeast Decision Sciences Institute, 204-206. Presented in 

Chattanooga, TN at the Annual Meeting, February, 1993. (with Gregory B. Turner and Mark A. 

Mitchell). 

"An Examination of Political Campaign Pricing Decisions: A Multi-Stage Approach." Proceedings of 

the 1992 Atlantic Marketing Association, 419-423. Presented in Greensboro, NC at the Annual 

Meeting, October, 1992. (with Gregory B. Turner). 

"Take It Or Leave It? ..... The Ethics of Gift Acceptance by Industrial Purchasing Agents." Proceedings of 

the 1992 Atlantic Marketing Association, 233-237. Presented in Greensboro, NC at the Annual 

Meeting, October, 1992. (with Gregory B. Turner and Mark A. Mitchell). 

"Studying Ethics Within the Purchasing Function: Let's Start by Building Some Theoretical 

Foundations." Proceedings of the I 992 Southeast Institute of Management Science, 360-364 

Presented in Myrtle Beach, SC at the Annual Meeting, September, 1992. (with Gregory B. 

Turner). 

"Inbound Shipment Tracing Systems: A Perspective From the Purchasing Department." Proceedings of 

the 1991 Southeast Institute of Management Science, 255-256. Presented in Myrtle Beach. SCat 

the Annual Meeting, October, 1991. (with Paul T. Nelson). 

"Discrimination Awards." Symposium on Forensic Evaluations for the 1991 Southeast Institute of 

Management Science. Presented in Myrtle Beach. SC at the Annual Meeting, October. 1991 

(with B. Perry Woodside and Bill Hardy). 

"An Update of Statistical Applications in Age Discrimination Cases." Symposium on Forensic 

Evaluations for the 1989 Southeast Decision Sciences Institute. Presented in Charleston. SC at 

the Annual Meeting, February, 1989. (with B. Perry Woodside). 

"A Review and Applications of Statistical Methodologies Appropriate for Evidence in Age 

Discrimination Litigation." Symposium on Forensic Evaluations for the 1988 Decision Sciences 

Institute. Presented in Las Vegas, NV at the Annual Meeting, November. 1988. (with B. Pen: 

Woodside). 
262 

"Testing for Model Specification Errors in Income Distribution Research." Proceedings of the 1988 

Southeast Decision Science Institute, 99-101. Presented in Winston-Salem, NC at the Annual 

Meeting, February, 1988. (with John D. Jackson and TomS. Sale). 

"The On-Line Case: A 'Bottom Line' Approach to Statistical Pedagogy." Proceedings of the 1988 

Southeast Decision Science Institute, l 05-l 07. Presented in Winston-Salem, NC at the Annual 

Meeting, February, 1988. (with James Hawkes). 

"Age Discrimination: Statistical Evidence and Measurement of Damages." Proceedings of the 1987 

Southeast Institute of Management Science, 34-36. Presented in Myrtle Beach, SCat the Annual 

Meeting, October, 1987. (with B. Perry Woodside). 

"An Empirical Investigation of Income Concentration in the South: 1950-1980." Proceedings of the 1987 

Southern Regional Sciences Institute, 25-29. Presented in Atlanta, GA at the Annual Meeting, 

March, 1987. (with John D. Jackson and TomS. Sale). 

"The Direct Mail Simulation Game: Teaching Marketing Research for 'Bottom Line' Results." 

Proceedings of the 1987 Southwest Institute of Decision Science, 233-235. Presented in Houston, 

TX at the Annual Meeting, March, 1987. (with James Hawkes and Robert N. Carter). 

"Experiment Shows Entrepreneurs Can Benefit from Maturity Training." Proceedings of the 1987 

Southwest Small Business Institute, 65-68. Presented in Houston, TX at the Annual Meeting, 

March, 1987. (with Robert N. Carter). 

"Training Retail Computer Sales Personnel." Proceedings of the 1987 Southwest Small Business 

Institute, 82-84. Presented in Houston, TX at the Annual Meeting, March, 1987. (with Robert N. 

Carter). 

"Level of Personal Maturity Seen as Fuel for Entrepreneurial Spirit." Abstract reprinted in The Journal of 

Private Entemrise, ~(I), 56. Presented in San Antonio, TX at the Association of Private 

Enterprise Education Meeting, April, 1986. ('A'ith Robert N. Carter). 

"The Possible Effects of Firm Size on Case Writing: A Preliminary Investigation." Proceedings of the 

1986 Mid-Western Case Writers Association, 53-59. Presented in Chicago, IL at the Annual 

Meeting, March, 1986. (with Robert N. Carter). 

"The Family Medical Center: Marketing Research and Strategic Planning." Proceedings of the 1985 

National Decision Sciences Institute, Case Supplement, 39-45. Presented in Las Vegas, NV at the 

Annual Meeting, November, 1985. (with Robert N. Carter). 

"State of Individual Maturity Advanced as Key Determinant of Successful Retail Sales Training." 

Proceedings of the 1985 Academv of Marketing Science Association, 195-197. Presented in 

Charleston. SCat the Annual Meeting, October, 1985. (with Robert N. Carter). 

"Gap Exists in Manufacturing-Sponsored Training for Retail Computer Sales Personnel: Combined 

Training in Fundamental Techniques and Skills and Beyond Motivation Concepts Holds 

Remedy." Proceedings of the 1984 Academy of Marketing Science, 4 73. Presented in Niagara 

Falls, NY at the Annual Conference, May 1984. (with Robert N. Carter). 

"Advancing the Small Business Computer Marketing Channel Through Training the Retail Salesperson." 

Proceedings of the 1984 Southwest Small Business Institute, 54-66. Presented in Houston. TX at 

the Annual Meeting, March, 1984. (with Robert N. Carter). 

"Respondent Samples in Marketing Research: A Comparison Study." Proceedings of the 1984 Southeast 

Decision Sciences Institute, 177-179. Presented in Savannah, GA at the Annual Meeting, 

February, 1984. (with Albert J. Taylor). 

"Salesmanship and Motivation Training: A New Direction." Proceedings of the 1983 Mid-Atlantic 

Marketing Association, 1-14. Presented in Valdosta. GA at the Annual Meeting, October, 1983. 

(with Robert N. Carter). 

"Predicting Sales Performance: A Literature Review." Proceedings of the 1983 Southwest Decision 

Sciences Institute, I 07-109. Presented in Houston, TX at the Annual Meeting, March, 1983. 

(with C. Richard Huston and Albert J Taylor). 
263 

Other Research Published in Professional Trade Journals: 

"Customer Satisfaction Surveys." Golf Business, II (4), 22-25. (June 1996). (with Gregory B. Turner and 

Jack Kendree). 

"Ethical Behavior is No Gimme." Golf Business, 1! (2), 56-58. (March 1996). (with Gregory B. Turner 

and Wade C. Ferguson). 

"A Comparison of Ethical Standards and Conduct: Purchasing Professionals ofPMA-Philadelphia Versus 

Those of Other Regions." P.M . News. 2§:1 3-4. (March 1996). (with Gregory B. Turner and 

Wade C. Ferguson). 

"Gift and Gratuity Acceptance: Ethical Standards and Conduct Among PMA-Philadelphia's Purchasing 

Managers." P.M. News, 96-2, 4-6. (February 1996). (with Gregory B. Turner and Wade C. 

Ferguson). 

"Ethical Standards and Conduct Among PMA-Philadelphia's Purchasing Managers." P.M. News. 96-1 , 

5-6. (January 1996). (with Gregory B. Turner and Wade C. Ferguson). 

"Salary Gender Gap Continues to Narrow Among Carolinas-Virginia Purchasing Professionals: Results 

of the Third Annual NAPM-CV Salary Survey." Southern Purchaser, XXVI, (!), 9-1 I, (JanuaryFebruary 1996). (with Wade C. Ferguson and Gregory B. Turner). 

"Purchasing Planning for Disaster- Are You Prepared?" NAPM Insights. Y. (II), 42-44. (November 

1994). (with Wade C. Ferguson and Gregory B. Turner). 

"Carolinas-Virginia Purchasing Salaries Continue to Outpace National Averages: Results of the Second 

Annual NAPM-CV Salary Survey." Southern Purchaser, XXIV, (6), 22-24, (NovemberDecember 1994). (with Wade C. Ferguson). 

"Keep Purchasing Functioning in Disaster's Wake." Supplier Selection & Management Report, 94-9, lOll, (August 1994). (with Wade C. Ferguson). 

"How Do Carolinas-Virginia Purchasing Professionals Measure Up in Today's Economy: Results of the 

First Annual NAPM-CV Salary Survey." Southern Purchase r, XXIII (4), 20-24. 31, (July-August 

1993). (with Wade C. Ferguson). 

"Gratuity Acceptance: Views of Future Purchasing Agents. " Southern Purchaser, XXIll (4), 26-3L 

(July-August 1993). (with Gregory B. Turner). 

"Careful There Partner ... They May Be A Gunnin' For You." Southern Purchaser, XXII (5). 20-24, 

(September-October 1992). (with Gregory B. Turner). 

"Let's Compare Ethics Policy Statements: . A Study of Purchasing Practices in the PMAC-V Region." 

Southern Purchaser, XXII (4), 18-21, (July-August 1992). (with Gregory B. Turner). 

"Gifts and Favors From Suppliers: A Study of Purchasing Practices in the PMAC-V Region." Southern 

Purchaser, XXII (3), 18-22, (May-June 1992). (with Gregory B. Turner). 

"What's Happening on the Home Front: A Study of Purchasing Ethical Practices in the PMAC-V 

Region." Southern Purchaser, XXII (2), 38-40, (March-April 1992). (with Gregory B. Turner). 

"An Agricultural Product to Bank On: Trees." The Louisiana Banker, XLIX (10), 3-8. (with Lyndon E. 

Dawson). 

"From Pulpwood to Paper: The Channel of Distribution for Louisiana-Produced Paper. " The Louisiana 

Economv, XV (l), 6-8. (with Lyndon E. Dawson). 

"The Louisiana Timber Industry: Marketing Channels and Pricing Practices." The Louisiana Economv, 

XIV (4), 5-8. (with Lyndon E. Dawson). 
264 

Memberships, Offices Held, and Activities in Professional Organizations: 

Coordinator and Publisher, The NAPM-CV Purchasing Manager's Report, published monthly since 

March 1993 and extensively disseminated throughout the print and electronic media nationally 

and in the Carolinas-Virginia region. Funded through a yearly grant from NAPM-CV. 

Member, Past Professional Development Chainnan, Past Board Member, Purchasing Scholarship 

Coordinator, National Association of Purchasing Management- Carolinas/Virginia (NAPM-CVl 

Coordinator, The College of Charleston Purchasing Professional Development Seminar Series 

Monthly Meeting Speaker, numerous Local Chapters of the NAPM-CV 

Speaker and Participant, The NAPM Annual International Purchasing Conference 

Speaker and Participant, The NAPM-CV Annual Purchasing Educators Conference 

Annual Convention Speaker, The South Carolina Association of Government Purchasing Officials 

Member, Past Vice President for Planning & Development (1992-1993), Past Convention Host and Local 

Arrangements Coordinator (1989 and 1996), Track Chair, Session Chair, Manuscript Reviewer, 

Paper Discussant, The Southeast Decision Sciences Institute 

Track Chair, Session Chair, Manuscript Reviewer, Paper Discussant, The Southeast Institute of 

Management Science 

Session Chair, Manuscript Reviewer, Paper Discussant, The Southwest Decision Sciences Institute 

Session Chair, Manuscript Reviewer, Paper Discussant, The Southern Marketing Association 

Session Chair, Manuscript Reviewer, Paper Discussant, The Atlantic Marketing Association 

Personal Employment, Consulting: 

Consultant, 1995, Kiawah Prooertv Owners Group, Kiawah Island, SC 

Consultant, 1994, Trident's B.E.S.T. Committee, Charleston, SC 

Consultant, 1993-present, Fort Sumter Tours, Charleston, SC 

Consultant, 1992-present, The Patriot's Point Development Authority, Mt. Pleasant, SC 

Consultant, 1991-1992, Advertising Services Agency, Charleston, SC 

Consultant, 1989, Gamble, Givens, and Moody CPA Finn, N. Charleston, SC 

Co-Owner, 1992-present, Power Alley Sports Cards. Inc., Mt. Pleasant, SC 

Involvement in Extension and Public Service Activities: 

Vice Chairman of Commissioners, The Charleston County Housing and Redevelopment Authority 

Member, The Public Housing Authority Director's Association 

Member, Carolinas Council of Housing, Redevelopment. and Codes Officials 

Chainnan, The Charleston County Republican Party 

Sponsor and Volunteer, The Juvenile Diabetes Foundation Walkathon 

Volunteer, The American Red Cross Trident Chapter 

Volunteer, The Charleston Interfaith Crisis Ministry 

Site Coordinator, The South Carolina Adopt-A-Highway Program 

Member, Ducks Unlimited, East Cooper Chapter 

Speaker, The East Cooper Public Schools After School Adventure Program 

Doctoral Dissertation Committee Assignments: 

Committee Member, An Evaluation of Participation by the Purchasing Function in the Corporate 

Strategic Planning Process, a dissertation by Wade C. Ferguson, Purchasing Manager, Santee 

Cooper, Moncks Comer, SC, for Nova University, 1993. 
265 

Major College and Department Committee Assignments Held: 

Member, BNECON Faculty, Student, & Alwnni Issues Committee 

Member, BNECON Computer Utilization Committee 

Past Member, College of Charleston Judicial Board 

Past Coordinator, The College of Charleston Career Festival 

Administrator, The NAPM-CV Purchasing Scholarship Program 

Administrator, The National Collegiate Business Merit Award Program 

Assistant to the Dean, AACSB Accreditation and Reaccreditation Studies 

Faculty Advisor, The College of Charleston Varsity Baseball Team 

Faculty Advisor. The College Republicans 

Recent External Research Activities Coordinated: 

"A Customer Profile and Opportunity Assessment for the Sports Rock Cafe," performed for the 

management of the North Charleston based operation, 1995. 

"An Awareness Assessment of the Charleston Area Arts Council," performed for the Director of the local 

agency, 1995. 

"A Feasibility Study of Opening an All-Natural Products Store in Americus, GA. " performed for a client 

interested in entering this industry, 1995. 

"A Feasibility Study of the Piggly Wiggly Carolina Company's Centralized Bakery," performed for the 

Vice President of the corporation, 1994. 

"An Assessment of the Charleston Trident Business Education Partnership Program," performed for the 

Trident Chamber of Commerce, 1993. 

"A Study of the Ethnic Greeting Card Industry," performed for a client interested in entering the industry, 

1993. 

"Summary of Light Manufacturing\Distribution Operations in South Carolina," performed for a local 

business brokerage company, 1992. 

"South American lmport\Export Study." performed for a local group of future importers. 1992. 

"A New Product Development and Current Product Line Expansion Study." performed for a local book 

retailer, 1991. 

"A Temporary Employment Services Anitudinal Survey," performed for a regional temporary 

employment services company. 199 1. 

"Medical University of South Carolina Purchasing Department Assessment.'' performed for the Director 

of Procurement at the Medical University of South Carolina, 1990. 

"A Needs Assessment for the Charleston World Trade Center." performed for the Trident Chamber of 

Commerce and the Council of Trade. 1990. 

"A Peninsular Charleston Fitness Facility Feasibility Study," performed for clients interested in 

developing such a faci lity, 1990. 

"A Study of the Need for Mortgage Information Services in the Trident Market." perfom1ed for clients 

interested in the start-up of such a business, 1990. 

"A Dealership Satisfaction Survey," performed for a local power boat manufacturing company. 1989. 

"A Feasibility and Location Study for U-Bake-lt Pizza." performed fo r clients interested in bringing this 

concept to the Charleston market. 1989. 

"A Home Furnishings Consumer Preference Study," ·performed for a notional home fumishings concern. 

1989. 
266 

Recent Institutional Research Activities Coordinated: 

"A Program Assessment of the College of Charleston's Center for Entrepreneurship," performed for the 

Dean of the School of Business and the College's Entrepreneur in Residence, 1995. 

"An Assessment of the College of Charleston's Department of Public Safety," performed for the Director 

of the Department, 1995. 

"An Analysis of Student Interest in the Field of Arts Management and Administration", performed for the 

Dean of the School of the Arts and the Senior Vice President at the College, 1994. 

".An Assessment of the College of Charleston's Maymester and Summer Sessions Program," performed 

for the Director of the Program, 1994. 

"The 1994 Student Budget Survey," performed for the Office of Financial Aid and Scholarships at the 

College, 1994. 

"Assessment of Attendance at Men's Basketball Games at The College of Charleston," performed for the 

Athletic Department at the College, 1994. 

"A Risk Management & Insurance Curriculum Program Feasibility Study," performed for the Dean of the 

School of Business and Economics at the College, 1993. 

"An Assessment of the Office of Financial Assistance and Scholarships," performed for the Director of 

the Office of Financial Aid and Scholarships at the College, 1993. 

"An Assessment of the Office of Career Development," performed for the Interim Director Office of 

Career Development and Placement at the College, 1992. 

"The 1992 Student Budget Survey," performed for the Office of Financial Aid and Scholarships at the 

Coiiege, 1992. 

"The TQM Initiative: A Study to Determine the Integration of TQM into the Business and Economics 

Curricula," performed for the School of Business and Economics, 1992. 

"The J 991 Studer.t Expenses Study," performed for the Office of Financial Aid and Scholarships at the 

College, 1991. 

"The Feasibility of a Major in Communications at The College," performed for the Office of the Vice 

President for Academic Affairs and the English Department Faculty, 1991 . 

"1l1e Masters of Accountancy Program Feasibility Study," performed for the Accounting Faculty in the 

School of Business and Economics, 1989. 

"The 1989 Student Budget Study," performed for the Office of Financial Aid and Scholarships at the 

College, 1989. 

"A Feasibility Study of Off-Campus and Weekend Programs at the College of Charleston," performed for 

the Office of the Vice President for Academic Affairs, 1989. 

".An Internal Audit of the College Campus Shop," performed for the College Bookstore, 1988. 
References: 

Howard F. Rudd, Jr., Ph.D. 

Dean, School of Business and Economics 

College of Charleston 

Charleston, SC 29424 

(803) 953-8110 

Rhonda Mack, Ph.D. 

267 

Chairman, Department of Management & Marketing 

School of Business and Economics 

College of Charleston 

Charleston, SC 29424 

(803) 953-6566 

Gregory B. Turner, D.B.A. 

Assistant Professor of Marketing 

Wall School of Business Administration 

Coastal Carolina University 

Conway, SC 29528 

(803) 349-2688 

Wade C. Ferguson, D.B.A., C.P.M. 

Past President ofNAPM - CarolinasNirginia 

Santee Cooper 

PO Box 2946101 

Moncks Corner, SC 29461 

(803) 761-8000, ext. 5498 

V. Gilbert Snyder, Jr., C.P.M. 

Executive Vice President 

NAPM - CarolinasNirginia 

5601 Roanne Way, Suite 312 

Greensboro, NC 27409 

(91 0) 292-9228 

Henry D. McMaster, Esq. 

Chairman, South Carolina Republican Party 

c/o Tompkins and McMaster Law Firm 

PO Box 7337 

Columbia, SC 29202 

(803) 799-4499 

Montez Martin 

Executive Director 

Charleston County Housing and Redevelopment Authority 

21 06 Mt. Pleasant Street 

Charleston, SC 29403 

(803) 722-1942 
268 

Southeast Alaska Conservation Council 

Katie McGinty 

Chair, Council on Environmental Quality 

360 Old Executive Office Building 

17th Street and Pennsylvania Avenue, NW 

Washington, DC 20500 

July 15, 1996 

Dear Katie. 

SEACC 419 6th Street, Suite 32M, Juneau, AK 99HOI 

(907) 5811 -6942 phone (907) 463-3312 fax 

email: seacc@alaska.nf:l 

As you know, the topic of granting an extension to Ketchikan Pulp Company ha; be.n a 

hot one in July. SEACC strongly opposes this legislation 

At the July I Irh hearing on H.R. 3659 Congressman Don Young challenged SEACC's 

statement that the Governor of Alaska does not support H R 3659 and that the bill 

~ml even corn~~ to including the m~cif11; minimum conditions set fonh by the 

Governor in his letter to Mark Suwyn, CEO of Louisiana Pacitic Corporation 

Although Governor Knowles has expressed his support form extension. it is absolutely 

clear that there has llQ! been a single written word from Governor Knowles, stating that he 

supports the proposed HR 3659 extension or the Senate Companion bill 

Please see the attached Anchorage Daily News article which confirms our views We are 

requesting that Congressman Young make this article part of the hearing record 

,.;;;;~Y-~ 

~r Executive Director 

SEACC 

~ Buck Lmdekugd 

Conserva1ion Jlireclur 

SEACC 

LYNN CANAL CONSERVATION, Haines • FlUENDS Of GLACIER BAY. GlloSaa vw.s • FR~NOS OF Uf:kNERS UA. Y, J.,nwu 

WRANGEU.RESOURCECOUNCIL • ALASKASOCIETYOI-' AMf:lliC ........ FORt=STl.IWf:I.I.U.S. l'oiol U .. lr.tr • rEI WAN HUn.STRY ((U INCII 

AI..A.~KANS fOR JUNEAU • NARROWS CONSERVA.TIONCOALJTION, P~kl\b\1'1 • l'ONGA.SS CONSEM.\'A TIIJ~ SOCIEI'\' . ..:c~o.: tlnUII 

CHJCUAGOFCONSEI\VATION COUNCil., Tt~hc •JlJN'I:AU GitOI/PSIERRACI.lnl •SITtv\ CONSt ~tvAll11N SOCII·."CY ' "'' --··---·• · - -·· -~ ... ...-. • .. ..,,.,..,. ,..... , . '" • • .,.,. ,....... • • ,.,.,., . , .,...,....., • "• • ' ' n r • • • • v • vo r ••o •o· ..., ,., .,., '"' •1: ,.,., '-JI;I:ll\ 1,\ '11fu., f 'o 11 11;, U 
, IClosure tnreatenea 1 as hearings begin \ 

WED~ESI>A Y. July 10. 1 9')(, 

;J,~~r. 

~ ti/ew; 

ntract · extension to save 

ture bu passed a resolu- stakes 1ambit eomes 

ti011 bacldDc the contract oompany is staueril 

extensioo.. der mOIIIltiDC lbaes 

• ODY les met its pulp operation: 

with Suwyn this spring battllnc baek from a 

and then smt him a letter holder revolt over lt 

baekln& a 15-year exten- r::1 of pollutloD and 

sioD.. Tbe congressional del- probl.eiQS. '1'he revol 

eptiOD bas cited the eow:r- year forced out tbe c nor's letter as an ny•s top ex.eeutive. 

endorsemellt o:t its legisla- Kerio. 

ti.OD. . Accordlnl to 

But aa:ordlDa to John sj,okesm•n Troy Ref 

Katz. the covemor's top tbe ~ of 1 aide in Washib.lton, tema1 l'I!'V'Olt bas be 

Knowles ODly supports ex- enviromnental reaal tens1Gn of the contract, DOt iD the company. 

teluatlca of the 1990 ccz. 

tract refoi'IDL "We're not 

beeomiD& involwclill tbe5e 

other matters ot contract 

m~rtl~ said. lila I hiifi--

t-:) 

$ 
270 

GEORGE M. LEONARD 

Honorable Don Young 

Chairman 

Committee on Resources 

United States House of Representatives 

Washington. DC 20515 

Dear Mr. Chairman: 

July 25. 1996 

This letter responds to your request at the hearing last week that I submit my suggestions 

for changes in the Environmental Improvement Timber Contract Extension Act of 1996. My 

suggestions follow: 

Section 2 (a) (1) is not technically correct in that it applies the Scribner Log Rule to 

utility log volumes. The Scribner Rule is a log rule which measures the portion of a log which is 

suited for the manufacture of lumber. By accepted definition, utility logs are those not suitable 

for lumber production. Further, as written the provision would effective preclude a reasonable 

charge for utility logs. A better approach \vould be to specify the volume requirements of 

sections 2 (c) (3) and 2 (e) as 192.500.000 board feet net ""ribner long-log scale for all logs per 

year. This would make it clear that the Forest service can charge for utility logs on an 

appropriate scale. 

Section 2 (a) (4) confuses the concept of appraising timber with the concept of offering 

timber which meets mid-market criteria. The timber offered to KPC under the contract should 

meet mid-market criteria. However, the appraisal of all timber offered under the contract should 

be done using normal Forest Service appraisal methods in use on the Tongass. I recommend 

that section 2 (a) (4) be rewritten to separate and clarify these concepts. 

Section 2 (c) (4) should be revised to make it clear that the Forest Service can collect 

Knutson-Vandenburg (K·V) funds or other agreed deposits. In addition.! would recommend 

striking the word independent from the appraisal requirement. As noted above, the timber in the 

long-term contract should be appraised using normal Forest Service appraisal methods in use on 

the Tongass National Forest. 

Section 2 (c) (5) needs to be revised to make it clear that all contiguous management 

areas are being grouped to measure proportionality. Subsections (B) and (C) should reference 

the maps and rotation periods used in the current Tongass Land Management Plan. 

I 0909 Paynes Church Dr.. Fairfax, VA 22032-2920 
271 

Page 2 

Section 2 (c) (6) needs to set a reasonable time period for conversion or replacement of 

the pulp mill if the company elects to do so. It should also specify what activities under the 

contract are permitted during the conversion or replacement period. 

Finally, KPC has a number of outstanding and potential claims against the Govermneni 

arising from past contract operations and the Tongass Timber Reform Act. I believe it is 

appropriate to condition the contract extension on the waiver of these claims, at least as they may 

accrue from future contract operations. 

Continued operation of a pulp mill or other facility to permit economic utilization of 

utility logs and low quality sawlogs is essential if the timber resource on the Tongass is to 

continue to contribute to employment and the economic well-being of the communities in 

southeast Alaska. Please let me know if I can be of further assistance. 

Sincerely, 

k¥./ff-' .. r. t:( Geor!l" ~,;{,d • ""' ' 
272 

Southeast Alaska Conservation Council 

The Honorable Don Young 

Chainnan of Committee on Resources 

U.S. House ofRepresenlatives 

1324 Longworth House Office Bldg. 

Washington, D.C. 20515 

Dear Chairman Young: 

SEACC 419 nih S1ree1, Suile 328, Juneau, AK 99Hil I 

(907) 586-6942 phone (907) 41\3-33 12 fax 

email: seacc@alaska.ntl 

July 23, 1996 

This letter follows up on your July 11, 1996 hearing in Washington D.C. regarding H.R. 

3659, the so-called "Environmental Improvement Timber Contract Extension Act." 

Instead of improving the environment, this bill only serves to improve the bonom line for 

Louisiana Pacific Corporation, the Ketchikan Pulp Company's parent corporal ion, at the 

expense of the other Tongaas-dependent industries, forest resources, and the American 

taxpayer. After pocketing years of profit from repeated violations of Slate and federal 

environmental laws, the Ketchikan Pulp Company now wants the American taxpayer to 

pay it to cleanup its act. The Ketchikan Pulp Company was also found guilty in 1983 of 

anti-trust violations including price fixing. collusive bidding, and conspiring to monopolize 

the Tongass logging industl)l by driving independent timber operators out of business. 

During my oral statement at the July 10, 1996 hearing, I submitted for the record a 

number of resolutions and letters from Southeast AJaska communities, businesses and 

organizations opposing your bill. Since the hearing. we have continued to receive 

resolutions and letters opposing your bill. We request that you iadude the eadosed 

package of 117 ftSOiutioas and letten iato the offi<ial, writlea heariag record for 

ll.R. 3659. 

We again ask you to stop this outrageous piece of special interest, corporate welfare 

legislation right now. 

Best Regards, 

f:ttl~/ Conservation Director 

LYNN CANAL CONSERVATION, llaines • FRIENDS OF GI.ACil!R UAY, Gll:iLIIVII.O • HUENDS OF BI.:RNI:ItS IJA.Y Jijll~""" 

WRANGEll. RESOURCE COUNCIL • AlASKA SOCIE1Y Of AM.I:!RlCAN FORBT DWIJJJ:KS, l'uinrlM.tr • l'l:Ul'AN Hli'ESTKY COUNl '/1. 

ALASKANS FOR JUNEAU • NARROWS CONSERVATION OOAU nON,I'o:k~Wr.: • TONOASS C'ONSiiRVATION SOCihTY, K~h:bi k..iu 

CII/CilAGOFCONSERVATION COUNCIL., TuU:c.c • JUNEAU GltUUI'Sil:I<KA CI.IJIJ • SITKA (lJNSEMVATICJN StX 'II:TY 

TAKU CONSERVA110N SOC! ElY, h~~qu • PRJNCEOF WALES CONSERVATION l..EAGUL'. C!iill • YAI.alrAT RESOURCE (..'ONSI:RVA'OONCOUI"Cil 

lllllrluri OIIfw :yi:lu•JI III/)'il 0 
273 

Resolutions and Statements From Alaskan Communities, Clvie 

Groups, Businesses and Associations Opposed to Eiteadiag 

Louisiana Pacific's KPC Long Term Contract 

Pardallbt • Curm~t -Inn Icy llrlll AdvonlutM -otfcnotSenrloe 

713G196 -Mortoec:- -Loclge&C:h ..... e • ...._,...e.-- Ec:llyot-

---·- DoueJoololond~ -.couocaofTrout _.., ... Kapb 

- llallowlllocl Cllrof"-' 

c:llyotT.-Sprtago ~alllllocl&- _<:h.,...._ 

SOc:loly Elllfl <:ow filii.-· 

Mv'-Y eono .. - -C:O.owunlty AloolloUpC:IGeo llooldwolklllght 

Aa- ,.... Flallortel- Ton-llpllngofloll& 

--Kaylll& 

C:O.OIIIIIIIy of !lllol C:0W COMIIIIJot, ..-.. a BluRonlol -· Advloofy eo..-

Dwolopo!OIIt Thoflcldlollold-· Polt-C:0.01UIIIty -.en- --- 8-.y 

-. ... WoltonRid•M- Mocllunnall'o Ull. Port- Flab. Olmo lMwl ~-... 

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274 

Resolutions and Statements Opposed to Eitending 

Louisiana Pacific's KPC Long Term Contract 

Page2 

T-C-Pnojoct/ 

"""""' 

~~ 

ollhe National F-- Tbe Oboorvolory, A8AA 

/Colo -·-colllno/-

~ 

Chlc:Nigol eono.vDue to the high cost of printing, 

copies of all 117 resolutions are 

included in the official Committee 

files. 

0 

ISBN 0 - 16-053778 -9 

Al•lra Fly 'N' flob CllarWw -&-

26-689 - 96 (280) 

90000 

9 780160 537783