Date: 1984-10-01
Speaker: ROBERT F. SMITH (republican)
Chamber: H

I thank the gentleman for yielding this time to me. Mr. Speaker. I rise today to urge that you join me in approving H.R. 2838. This bill carries a badly needed plan to relieve the American timber industry of potentially devastating contract commitments. made in the hours of deep economic uncertainty. By way of background. allow me to be brief and to reiterate some of the points made so well by my Oregon colleague last week. For generations. our Government has helped build income to the Treasury while managing and prudently controlling our national lands through the sale of selected stands of timber to private concerns. U.S. Government timber sales are done by competitive bid. The Forest Service offers a stand of trees and opens the auction block at minimum appraised prices and sells to the highest bidder. While this system has brought significant income to the treasury. it allowed the entire process of timber sales to be distorted by national. economic forces. Those forces were the high inflation. then high interest periods of the late seventies. Auction prices of raw timber. spurred by outofcontrol inflation. skyrocketed. In our Pacific Northwest. timber from public lands Is the natural resource which maintains countleis lumbering businesses. large and small. Wood products concerns ranging from huge. multinational corporations down to 30. 50 or 100 employee mills. depend on public timber sales to stay in business. Mind you. I didnt say that they depended on the profitible sale of their product. Profit is certainly a motive. but the fact is thatlike any other manufacturing concernmills first need the natural resource to process. Without it. they must simply cost their doors. In order simply to assure themselves of continued natural resources to keep their mills open. small and large mill operators were forced to compete in the buildup of prices at auctions. Mill operators were often faced with the prospect of foi iting all expected profits to keep people on the job. When interest rates followed inflation. the bottom fell out of this Nations housing and construction industry. So. too. the bottom fell out of lumber prices. The result was a devastating prospect for the future for many producers. especially the smaller ones. Today. they hold the contracts to harvest Governmentowned timber at prices that are frequently four times the anticipated market sales price. In other words. they cannot live up to original bid priced without forcing themselves into bankruptcy. And without harvesting. they have no raw product for mill workers. Without some relief from the onerous bid contracts. it wil be the end of the line for many. many northwest producers. Before us today. in H.R. 2838. is a way out of the predicament. This legislationItself the product of 3 years worth of barter and compromiseprovides a path out of this situation. Using a carefully constructed formula. this legislation strikes a middle ground between the needs and capabilities of producers and maintenance of the promises made to the public treasury. It suggests that a comparison of the bidding companys net worth and the anticipated damage of present contract enforcement be used to determine the relief a firm may receive from its original contract. Simply stated. it allows all bidders to return to the Government a share of their original purchase under a buyout provision. calling on larger firms to pay a larger share of their original contract. While this legislation is far less generous than the original version of contract relief proposals that were submitted to the Congress. it is not less important. This legislation can save an American timber industry now burdened with as much as an estimated $4 billion in project contract losses. In doing so. it serves a higher purpose by saving countless thousands of Jobs. You may hear arguments opposing this bill based on the anticipated losses to our Federal Treasury. Indeed. Uncle Sam will receive less cash from timber sales contracts if this bill is approved than as theoretically would have been received if all contracts were harvested. But in return. hell receive $400 million in buyout payments. plus the capital asset or the standing timber to be resold. In reality. the full contract payfients could never be received because the contiicts simply cant be operated. Some Stihds purchased during the frenetic auctions of that time today represent more than the successful Mr. WHITLEY. Mr. Speaker. I yield TI bidders net worth. To meet the price. 1 minute to the gentleman from tim that. producer would have to sell the Washington (Mr. Foley] Ove mill in a transaction that amounts to (Mr. FOLEY asked and was given are your selling your car to buy gasoline. permission to revise and extend his re- Ore except that buyers will be scarce. marks.) cau The alternative in many cases is a Mr. FOLEY. I thank the gentleman tion default on the contracts. In that in- for yielding this time to me. trac stance. the Federal Government could Mr Speaker. I rise In strong support ther end up holding title to mills and its of the motion to suspend the rules and pro original timber. pass the bill H.R. 2838. the Federal T The price would be a chase of bank- Timber Contract Modification Act. Fed rupt and defaulting purchasers I want to express my appreciation to pre through courts for years: While the the leadership ofthe Committee on Thl cost would at best amount to a few Agriculture and the Committee on In- Sion cents on the dollar. less than antici- teror and Insular Affairs for. their pus pated buyout prices under the bill. willingness to allow this bill to come to out Consider also that if this bill doesnt the floor today. tun pass. Government will be forced to pay I am particularly grateful to the dis- und billions in transfer costs to maintain tinguinhed floor manager of the bill. Ing families that depend on the mills for Congressman WHITLzy. for his pa- VI( their livelihood. even while it loses tax tience and understanding over the mes income normally earned while the past 2 Years during which his subccin- ly t mills are open and operating. .mittee held extensive hearings on thin This Is in addition to the impact on complex and difficult subject. the cities and counties which depend heav- Mr. Speaker. this bill has the unani- tro 1ly on timbersometimes on one or mous. bipartisan support of the north- the two millsfor the foundation of their west delegation. The constituent dus economic base. Income losses to groups are essentially united in sup- rep schools and other essential public rerv- port of Its Immediate passage. *on ice functions that rely on timber The legislation In its current form is income could be equally substantial. the product of long and difficult nego- sup This plan can keep those mills open. tiations between the senior Senator the It can keep those milworkers on the from Oregon . and the virc job. In exchange for artificially bloat- Senator from Ohio (Mr. METZZNBAUMI. ed prices on the books. Treasury will The Senate. acting with extraordireceive a realistic percentage of those nary bipartisan support. approved this a contract prices. It will assure itself of a bill on Wednesday. September 26 continued stream of income from 1984. by a vote of 94 to 2. As passed by of timber concerns that are today threat- the Senate. this legislation contains a ened with extinction. number of provisions that significant- 1 If Government loses anything with ly reduce the potential cost to the na this agreement. it is only what Oov- Federal Government. serve to focus ernment hasnt yet received andin relief to those companies truly I pe practical termswould probably never need. provide some order that will m get. enable this administration to adminis- I Maybebest of allGovernment will ter the buyout program In an equita- for have returned to it those stands of ble manner. and establish a reasonable N timber which cannot be realistically basis by which the Department can ma purchased under the former bid prices. act to prevent this type of situation the They. of course. may be resold at from reoccurring. a c workable prices. It is. Mr. Speaker. compromise legis- be This bill is not. in any sense of the lation that Is essential in my view if b word. a "bailout" for the American the Northwest in to avoid further eco- thu timber industry. It is. rather. a redefi- nomic dislocation and significant to nition of the terms under which our socal costs associated with contracts con Government and an industry which in going into default. mills closing. and thl vital to the national wellbeing work in people going out of work. Fdr bes productive partnership for the long- I believe that It Is important to point sit term benefit of both. out for the record that the problemA There would be only one reason and that faces the Northwest is very real. nu one explanation for Cor -tress refusal As of September 5 1984. 220 timber int to allow this plan to go Into action: contracts were In default. with a com- era cold. heartless greed. Ibined volume of 338.6 million board ma Most of the concerns which will feet of timber. Except for pending liti- th stand to benefit by this agreement are gation. this figure would be much th smaller. independent harvesters and higher and projections indicate that te mills. this is only the beginning of the verY IN I dont believe that any Member of real problems that will occur without are this body would choose their death. passage and enactment of this bill. tra and the resultant ripple in. Govern Mr. Speaker. while the Northwest Go ment~m welfare responsibilities. over a stands to suffer the immediate conse- c cooperative. viable solution. quences should this bill not be en- th I urge you to Join with meand with acted. the problem is actually national vie every member of the delegation from In scope. and I am pleased to note the pr my home State of Oregon. regardless support for this bill from our col- 283 of political affiliationin voting In leagues from the south and from the not favor of this important bill forest industry In that region. thi If 10548 here is a tremendout amount of ber under contract at this time. r 19 billion board feet of timber under contract In Washington and gon alone. This situation exists be se of the general economic situain the country. Simply. the conts are not being operated because *e is no market available for the cessed timber. hus. there is a huge overhang of eral timber that has a downward isure on domestic timber prices. s billunlike the Presidents extenprogram. which only serves to h this overhang further into the yearsprovides an equitable oppority to reduce the timber inventory er contract and an orderly marketmechanismthrough the cap proonsthat is designed to -allow dotic timber prices to respond direct. o demand pressures. r. Speaker. the legislation before House is not the bill originally inluced in the House and Senate at request of the forest products intry. It is not the bill as originally orted from the Senate Committee Energy and Natural Resources. is consensus legislation. strongly ported by the diverse elements of timber industry. It is. I believe. enonmentally sound. r. Speaker. it is essential that we favorably and that we act now. urge our colleagues to vote in favor H.R. 2838. r. WHITLEY. Mr. Speaker. I yield inute to the gentleman from Arizo.