[Congressional Record Volume 142, Number 87 (Thursday, June 13, 1996)]
[Senate]
[Pages S6237-S6241]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. MURKOWSKI (for himself and Mr. Stevens):
  S. 1877. A bill to ensure the proper stewardship 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; to the Committee on 
Energy and Natural Resources.


  THE ENVIRONMENTAL IMPROVEMENT TIMBER CONTRACT EXTENSION ACT OF 1996

  Mr. MURKOWSKI. Mr. President, today along with Senator 
Stevens and Congressman Young, I am introducing the Environmental 
Improvement Timber Contract Extension Act of 1996. This bill would 
extend for 15 additional years the long-term timber sale contract on 
the Tongass National Forest between the Forest Service and the 
Ketchikan Pulp Corp. [KPC]. The extension would provide KPC with a 
stable timber supply over a sufficient length of time to amortize the 
cost of new environmental improvements and energy efficiency equipment. 
KPC's situation is unique because all of its timber comes from the 
Forest Service. There is no State or private timber available to the 
company.
  I am introducing this bill as a result of: First, the important role 
that KPC plays in the social, economic, and environmental vitality of 
southeast Alaska; second, the strong, bipartisan support within the 
State for this action; third, the record from field hearings I held 
last month in southeast Alaska which overwhelmingly supports 
introduction; and fourth, the performance of the Forest Service which 
strongly indicates that, without congressional intervention, the KPC 
mill cannot survive. Let me elaborate on each of these factors.
  First, let me describe the nature of the forest in southeast Alaska. 
Thirty percent of the trees are dead or dying. The fiber is suitable 
only for pulp. Without a pulp mill, lumber mills would be less 
profitable and the pulp would have to be exported, creating no domestic 
jobs. Let me also share with my colleagues what the Forest Service told 
us about the evolution and importance of KPC's long-term contract to 
southeast Alaska. Here is what the Agency told us at a May 28 oversight 
hearing in Ketchikan, AK:

       The long-term contracts in Alaska which required the 
     construction and operation of manufacturing facilities such 
     as sawmills and pulp mills facilitated the establishment of a 
     timber industry in southeast Alaska.
       Prior to the 1950's, economic conditions in southeast 
     Alaska were characterized as boom-bust. Federal Government 
     employment, mining and salmon processing were the economic 
     mainstays. After World War II, mining was essentially gone, 
     leaving a small local timber industry and commercial fishing 
     in the natural resources sector. Both the timber and 
     commercial fishing industries were subject to market swings 
     from year to year and were seasonal in terms of employment. 
     The United States favored the expansion of the timber 
     industry through several long-term timber sales on the 
     Tongass National Forest to stabilize employment in southeast 
     Alaska.
       Making the best use of the timber on the Tongass required 
     having suitable markets for both high and low quality timber 
     and species. The markets were largely export markets in the 
     Pacific Rim and were somewhat limited by the need to use most 
     of the timber for pulp. The Forest Service advocated the use 
     of long-term sales to establish a pulp industry that would 
     bring greater economic diversity to the region and more year-
     round employment. If successful, more service and trade 
     establishments were expected to follow--creating greater tax 
     bases, which would provide opportunities for improved 
     services, such as schools, water, fire protection, and the 
     like. For all of this to come together, however, the Forest 
     Service had to guarantee a long-term, stable timber supply to 
     attract outside capital investment.

  I found this testimony compelling. The Forest Service witnesses 
recounted the decisions of their predecessors--far-sighted people 
recognizing the nature and importance of the resource and planning for 
an environmentally and economically secure future. The Forest Service 
recognized that, as the sole owner of land and timber, it controlled 
the economic and environmental vitality of the region.
  Well what is the situation today? Today, KPC's operations directly or 
indirectly provide 25 percent of the total annual employment wages in 
Ketchikan. KPC's municipal real estate and sales taxes generated $13.6 
million in revenues in 1992.
  More broadly, the southeast Alaska timber industry is the dominant 
contributor to real estate development in Ketchikan. More than 25 
percent of all households are timber dependent, and the typical timber 
employee can purchase more than 90 percent of the existing housing 
units. KPC comprises more than 50 percent of the total borough's 
industrial assessed valuation.
  Tourism and fishing are also important to the economy of Ketchikan 
and southeast Alaska. We need all three of our basic industries--
timber, fishing, and tourism--to be healthy if we are to have a healthy 
economy in the region. But quite simply, without some stability of 
timber supply, the economies of the region generally, and Ketchikan 
specifically, are doomed.
  Perhaps that is why the proposal to extend the KPC contract has 
received broad, bipartisan support from elected officials throughout 
the State. Earlier this year, the Alaska Senate voted 18 to 1 to 
support a resolution urging the Congress to extend the contract. The 
Alaska House voted 34 to 3 to support the same measure. These are 
extraordinary margins of support. I will submit the resolution for the 
record.
  Then, the Governor joined in, offering his support for congressional 
action to extend the contract. In a May 23 letter to me, Gov. Tony 
Knowles informed me that:

       The State of Alaska supports a KPC contract extension, 
     contingent on KPC's agreement with the following five 
     principles: To protect the environment, Alaska jobs, and

[[Page S6239]]

     other forest users; and to utilize the Tongass Land 
     Management Planning [TLMP] process and value-added processing 
     techniques.

  I am pleased to say that these conditions have been agreed to by KPC 
and are included in the compromise legislation I am introducing today. 
I will include the Governor's letter for the Record.
  After receiving these views from the legislature and the Governor, I 
scheduled two oversight hearings on May 28 and May 29 in Ketchikan and 
Juneau, respectively. What I heard at these hearings was overwhelming 
support for the legislature's resolution, the Governor's action, and 
the extension of the KPC contract. I heard from tourism interests, 
bankers, and fishermen who supported the contract extension. While not 
unanimous, the preponderance of testimony offered over the 2 days--and 
all of the demonstrators who marched in Ketchikan, as well as most or 
them in Juneau--called for congressional action to extend the contract. 
These people recognize that there is no alternative source of timber 
available.
  Last, I am introducing this legislation today because I have finally 
lost confidence in the ability of the Forest Service to provide a 
stable and sustainable supply of timber for southeast Alaska. Over the 
past few years, the agency has fallen further behind in keeping a 
working timber sale pipeline. This problem has worsened despite the 
efforts of Senator Stevens to provide the agency with additional 
funding for timber sale preparation. Consequently, more than half of 
the operating mills in southeast Alaska have closed their doors during 
the last few years during this administration's watch. KPC is the last 
remaining pulp mill in the State.
  This situation is absolutely tragic. The Tongass is our Nation's 
largest national forest. Yet the level of economic activity associated 
with the production of forest products is very small, and sinking. We 
have only one pulpmill and a few scattered sawmills left. Employment in 
the industry has fallen 40 percent since 1990. New Yorkers burn more 
wood in their fireplaces and stoves than we harvest in southeast Alaska 
each year.
  In its May 25 testimony, the Forest Service acknowledged that ``the 
contract with Ketchikan Pulp Co. [KPC] has played an important role in 
the development of Alaska's resources in southeast.'' Given this 
admission, one would think that the Forest Service would want to see 
the mill stay. One would expect the Forest Service to weigh-in in favor 
of a contract extension. But not so.
  In very disappointing testimony, the agency maintained that ``the 
terms of the existing contract provide that all obligations and 
requirements of the long-term contract must be satisfied on or before 
June 30, 2004.'' In response to questions about any future obligations 
past that date, the agency insisted that it has none--none. This 
testimony was offered even though the preamble to the contract 
discusses a commitment to a permanent economic base.
  On the question of whether Congress should extend the contract, the 
Forest Service testified that ``a long-term commitment of resources 
through a timber contract could further affect the flexibility of 
management on the Tongass,'' and that ``we are committed to completing 
the Revision of the Tongass Land Management Plan before we begin any 
discussion of future long-term commitments to timber related industries 
in Southeast.'' Yet, in response to questions, the agency witnesses 
could not tell me: First, whether such commitments could be made within 
the latitude provided by the range of alternatives in the draft TLMP; 
second, whether additional National Environmental Policy Act analysis 
would be required; or third, whether such commitments would actually be 
precluded by the selected alternative of the final plan. The testimony 
was extremely unsettling. It convinced me that either the Forest 
Service and/or the administration would like to see the KPC mill go 
away.
  They have apparently no interest in seeing KPC invest $200 million to 
pioneer chlorine-free manufacturing technology that could benefit 
environmental control efforts nationwide. That is also tragic.
  Mr. President, the simple facts are that--without the contract 
extension--KPC will be unable to amortize the required capital 
investments for environmental improvements, and it will go away. The 
company's new CEO also testified on May 28. He was refreshingly, if not 
reassuringly, frank. He said:

       In the very near future, we have to decide whether to 
     continue the large investments required to make KPC viable or 
     whether the losses currently being inflicted by the 
     appropriate implementation of the contract can be carried any 
     longer. Now, we are going to make that decision relatively 
     soon. This is not an issue for the year 2003. This is a 1996 
     issue and decision.
       We will make that decision, first of all, based on just to 
     keep running today we must have the Forest Service meet the 
     intent of the long-term bilateral contract, including the 
     volume and pricing provisions. And, then, secondly, to 
     continue to invest at the rapid rate that we are right now, 
     millions of dollars per quarter, this revised version of the 
     long-term contract must be extended a minimum of 15 years at 
     an offering level of 192 million board feet per year.
       The people of KPC and the thousands of people who have 
     worked with us have met its--their contractual obligations to 
     develop the economy and provide permanent, year-round 
     employment for southeast Alaska. We want the government to 
     meet its contractual obligation to provide a sufficient 
     volume of economically viable timber in a timely fashion.

  Some in southeast Alaska suggest that the region does not need the 
KPC pulpmill to have a successful and sustainable timber industry. What 
is needed they opine, is to eliminate the monopoly contract and develop 
more small, value-added manufacturing facilities.
  This is wishful thinking. The independent mill witnesses at our 
hearings indicated that the lack of a stable timber supply will 
preclude any additional investments in southeast Alaska. The 
manufacture of pulp is a higher value added process than any of the 
alternatives suggested by opponents of the pulpmill. The loss of the 
pulpmill will destabilize the industry and the infrastructure of the 
region, and have a chilling effect on future industry investments. 
Available capital will migrate to other regions.
  Mr. President, I cannot stand idly by and watch the town of Ketchikan 
die. I will not. I am introducing, and ask respectful consideration of, 
the Environmental Improvement Timber Contract Extension Act.
  Mr. President, I ask unanimous consent that additional material be 
printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                S. 1877

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Environmental Improvement 
     Timber Contract Extension Act.''

     SEC. 2. MODIFICATION OF LONG-TERM CONTRACT REGARDING TONGASS 
                   NATIONAL FOREST.

       (a) Definitions.--In this section:
       (1) The term ``board feet'' means net scribner long-log 
     scale for all sawlogs and all hemlock and spruce utility 
     grade logs.
       (2) The term ``contract'' means the timber sale contract 
     numbered A10fs-1042 between the United States and the 
     Ketchikan Pulp Company.
       (3) The term ``contracting officer'' means the Regional 
     Forester of Region 10 of the United States Forest Service.
       (4) The term ``mid-market criteria'' means an appraisal 
     that ensures an average timber operator will have a weighted 
     average profit and risk margin of at least 60 percent of 
     normal in a mid-market situation, representative of the most 
     recent 10 years of actual market data.
       (5) The term ``proportionality'' means the proportion of 
     high volume stands (stands of 30,000 or more board feet per 
     acre) to low volume stands (stands of 8,000 to 30,000 board 
     feet per acre.)
       (6) The term ``purchaser'' means the Ketchikan Pulp 
     Company.
       (b) Findings.--Congress finds the following:
       (1) On July 26, 1951, the Forest Service, on behalf of the 
     United States, and the purchaser entered into a contract to 
     harvest 8,250,000,000 board feet of timber from the Tongass 
     National Forest in the State of Alaska. While the contract is 
     scheduled to end June 30, 2004, it acknowledges an intention 
     on the part of the Forest Service to supply adequate timber 
     thereafter for permanent operation of the purchaser's 
     facilities on a commercially sound and permanently economical 
     basis. This legislation is necessary to effectuate that 
     intent.
       (2) A pulp mill or similar facility is necessary in 
     southeast Alaska to optimize the level of year-round, high-
     paying jobs in the area, to provide high value added use of 
     low-

[[Page S6240]]

     grade wood and by-product material from sawmilling 
     operations, and to maintain a stable regional economy.
       (3) The purchaser plans to make environmental and 
     operational improvements to its pulp mill, including 
     conversion to an elementally chlorine free bleaching process, 
     expansion of wastewater treatment facilities, relocation of 
     the existing wastewater outfall, and improvements to chemical 
     recovery and power generation improvements to chemical 
     recovery and power generation equipment. Total capital 
     expenditures are estimated to be $200,000,000, $25,000,000 of 
     which the purchaser has already invested.
       (4) Extension of the contract for 15 years is the minimum 
     reasonable extension period to allow amortization of these 
     environmental improvement and energy efficiency projects.
       (5) Ketchikan is the fourth largest city of Alaska. Its 
     economic and job base are extremely dependent upon the 
     continuation of the contract, which provides the principal 
     source of year-round employment in the area. The purchaser 
     has stated among its goals and objectives the following:
       (A) Continuation of a long-term commitment to Ketchikan and 
     southeast Alaska, including maintenance of a stable Alaskan 
     workforce, utilization of Alaskan contractors, vendors, and 
     suppliers to permit those businesses to hire and maintain 
     Alaskan employees.
       (B) Participation in the Forest Service's land management 
     planning process with other users so that the process may be 
     completed expeditiously with maximum information.
       (C) Adherence to sound principles of multiple-use and 
     sustained yield of forest resources providing for the 
     production of sustainable contract volumes for the purchaser 
     and the other timber operators in southeast Alaska and the 
     protection and promotion of other forest uses, including 
     tourism, fishing, subsistence, hunting, mining, and 
     recreation.
       (D) Protection of air, water, and land, including fish and 
     wildlife habitat, through compliance with applicable Federal, 
     State, and local laws.
       (E) Commitment to continue to explore new processes and 
     technology to maximize the use of timber harvested and 
     increase the value of products manufactured in southeast 
     Alaska.
       (6) The national interest is served by a policy that 
     accomplishes the proper stewardship of publicly owned assets 
     in the Tongass National Forest, a fair return to the United 
     States for public timber in the Tongass National Forest, and 
     a proper balance among multiple use interests in the Tongass 
     National Forest to enhance forest health, sustainable 
     harvest, and the general economic health and growth in 
     southwest Alaska and the United States in order to improve 
     national economic benefits. The national interest is best 
     achieved by fostering domestic forest product markets and by 
     modifying the terms of the contract pursuant to subsection 
     (c).
       (c) Contract Fairness Changes.--The contract is hereby 
     modified as follows:
       (1) Extension.--The term of the contract is extended by 15 
     years from June 30, 2004.
       (2) Sale offering plan.--The contract shall include a plan 
     describing the amount of volume, location, and the schedule 
     by which the purchaser shall receive the timber required by 
     paragraph (3) for the remainder of the contract term. The 
     plan shall be coordinated with the Tongass Land Management 
     Plan.
       (3) Volume requirements.--The volume of timber required 
     under the contract shall be provided in 5-year increments of 
     962,500,000 board feet, which the purchaser shall be 
     obligated to harvest in an orderly manner, subject to the 
     following:
       (A) Until March 1, 1999, when the next 5-year increment is 
     provided to the purchaser, the Forest Service shall provide 
     the purchaser with at least 192,500,000 board feet per year 
     of available timber at a date certain each year and shall 
     maintain a supply of timber adequate to insure the purchaser 
     can reasonably harvest 192,500,000 board feet each year.
       (B) To ensure harvest in an orderly manner, the contracting 
     officer shall provide for the construction by the purchaser 
     of roads in portions of the 5-year increment area of timber 
     in advance of the 5-year operating period by including such 
     roads in the environmental impact statement prepared for the 
     5-year operating period.
       (C) Timber selected for inclusion in the 5-year increment 
     shall meet the mid-market criteria.
       (4) Appraisals and rates.--The contracting officer shall 
     perform appraisals using normal independent national forest 
     timber sale procedures and designate rates for the increments 
     of timber to be provided. The rates shall not be designated 
     at a level that places the purchaser at a competitive 
     disadvantage to a similar enterprise in the Pacific Northwest 
     and those rates shall be the sole charges the purchaser shall 
     be required to pay for timber provided.
       (5) Measurement of proportionality.--The Forest Service 
     shall measure proportionality using the following criteria:
       (A) Measure for groups of all contiguous management areas.
       (B) Measure proportionality by acres.
       (C) Measure proportionality over the entire rotation age.
       (6) Conversion or replacement of pulp mill.--The purchaser 
     may convert or replace, in part or in whole, its pulp mill 
     with a facility that manufactures any other value added 
     product that utilizes pulp logs as a raw material component.
       (7) Unilateral termination.--The unilateral termination 
     clause of the contract is eliminated.
       (8) Subsequent modifications.--Any clause in the contract, 
     as modified by this subsection, may be further modified only 
     by mutual agreement of the Forest Service and the purchaser 
     and may be so modified without further Act of Congress.
       (d) Effective Date for Contract Modification.--
       (1) Effective date.--The modifications made by subsection 
     (c) shall take effect 45 days after the date of the enactment 
     of this Act.
       (2) Ministerial duty to modify the contract.--Not later 
     than such effective date, the contracting officer shall 
     revise, as a ministerial function, the text of the contract 
     to conform with the modifications made by subsection (c) and 
     implement the modified contract. The contracting officer 
     shall make conforming changes to provisions of the contract 
     that were not modified by subsection (c) in order to ensure 
     that the modifications made by such subsection are 
     implemented.
       (e) Transition Timber Supply.--Timber volume available or 
     scheduled to be offered to the purchaser under the contract 
     in effect on the day before the date of the enactment of this 
     Act shall continue to be offered and scheduled under the 
     contract as modified by subsection (c) along with such 
     additional timber volume as is necessary to satisfy the 
     timber volume requirement of 192,500,000 board feet per year.
                                                                    ____


   Senate Joint Resolution No. 40 in the Legislature of the State of 
                                 Alaska

       Whereas, for the last 40 years, the timber industry 
     operating on national forest land in Southeast Alaska has 
     been the largest private employer in Southeast Alaska; and
       Whereas the United States Forest Service strategy for 
     creating permanent year-round employment through a timber 
     industry in Southeast Alaska has been to offer long-term 
     contracts to attract pulp mills to use, and add value to, 
     low-grade and by-product materials from timber harvesting; 
     these pulp mills serve as a market for pulp logs and chips 
     from the sawmills in Southeast Alaska; and
       Whereas pulp mills assure full utilization and protect 
     forest health by using that significant portion of the 
     Tongass National Forest that consists of dead, dying, and 
     over-mature timber; and
       Whereas, since passage of the Tongass Timber Reform Act of 
     1990 (TTRA), a pulp mill and a major sawmill have closed, and 
     more than 40 percent of the timber industry has been lost 
     due, in part, to the failure of the United States Forest 
     Service to make available the approximately 420,000,000 board 
     feet per year needed to meet the jobs protection promises 
     made by those who sought passage of the TTRA, all of which 
     has created severe social and economic harm to the timber 
     industry, its workers, and timber-dependent communities in 
     Southeast Alaska; and
       Whereas another of the reasons for the closure of the Sitka 
     pulp mill was the adverse economic impacts of unilateral 
     changes to its long-term contract made by the TTRA, those 
     unilateral changes also adversely impact the economics of the 
     Ketchikan Pulp Company (KPD) contract; and
       Whereas KPC, which obtained a long-term contract to help 
     create year-round jobs in Southeast Alaska, is the sole 
     remaining pulp mill in Alaska, a mjor employer in Southeast 
     Alaska, and the market for pulp logs and chips from all the 
     other sawmills in Southeast Alaska; and
       Whereas the loss of the KPC pulp mill would lead to the 
     loss of the entire industry now operating on the Tongass 
     National Forest with devastating social and economic effects 
     on families and communities throughout Southeast Alaska; and
       Whereas, KPC pulp mill faces an uncertain future, not of 
     its own making, as a result of the continuing log shortage 
     created by the failure of the United States Forest Service to 
     meet its volume requirements under KPC's contract and the 
     TTRA, as a result of the adverse economic impacts to its 
     long-term contract caused by the unilateral TTRA changes, and 
     as a result of the requirement that more than $155,000,000 in 
     capital expenditures be made over the next few years to meet 
     new and ever changing federal environmental standards and 
     operating needs; and
       Whereas, as a matter of economic common sense, KPC cannot 
     make all the necessary expenditures without the federal 
     government extending its contract for a sufficient period to 
     amortize those expenditures, without an adequate supply of 
     timber, and without modifying those portions of the 
     unilateral TTRA contract changes that have adversely impacted 
     the contract's economics; and
       Whereas the legislature finds that an additional 15 years 
     is a minimum reasonable period to extend the KPC's timber 
     sale contract to allow such amortization and to provide 
     opportunities for value-added alternatives that maximize the 
     number of jobs and assures environmentally sound operations; 
     and
       Whereas the legislature finds that sufficient timber must 
     be made available to maintain the KPC contract, to provide 
     100,000,000 board feet for the contracts to small business, 
     and to reopen the Wrangell facility and a by-product facility 
     in Sitka; be it
       Resolved, That the Alaska State Legislature respectfully 
     urges the Alaska delegation

[[Page S6241]]

     in Congress and the Governor to take all steps necessary, 
     this year, to extend the Ketchikan Pulp Company long-term 
     contract for an additional 15 years and modify those portions 
     of the contract which the TTRA unilaterally impacted, because 
     such an extension and modification are critical to the 
     environmental, social, and economic well-being of the Tongass 
     National Forest timber workers, their families, and timber-
     dependent communities in Southeast Alaska and because such an 
     extension is in the public interest of the State of Alaska; 
     and be it further
       Resolved, That the Tongass National Forest should be 
     managed for a healthy and diversified economy for the benefit 
     of all users, including value-added forest products, 
     commercial and sport fishing, seafood processing, tourism, 
     subsistence, sport hunting, and local businesses that provide 
     goods and services; and be it further
       Resolved, That the Alaska State Legislature also 
     respectfully urges the Alaska Congressional Delegation, the 
     Governor, and the United States Forest Service to take action 
     this year to assure that sufficient timber be made available 
     as part of any revision of the Tongass Land-Use Management 
     Plan to maintain the Ketchikan Pulp Company contract, to 
     provide 100,000,000 board feet for small business contracts, 
     and to reopen the Wrangell facility and a by-product facility 
     in Sitka.
       Copies of this resolution shall be sent to the Honorable 
     Bill Clinton, President of the United States; the Honorable 
     Daniel R. Glickman, Secretary of the U.S. Department of 
     Agriculture; the Honorable Bruce Babbitt, Secretary of the 
     U.S. Department of the Interior; the Honorable Newt Gingrich, 
     Speaker of the U.S. House of Representatives; the Honorable 
     Strom Thurmond, President Pro Tempore of the U.S. Senate; and 
     to the Honorable Ted Stevens and the Honorable Frank 
     Murkowski, U.S. Senators, and the Honorable Don Young, U.S. 
     Representative, members of the Alaska delegation in Congress.
                                                                    ____

                                                  State of Alaska,


                                       Office of the Governor,

                                     Washington, DC, May 23, 1996.
     Hon. Frank Murkowski,
     U.S. Senate, Washington, DC.
       Dear Senator Murkowski: On behalf of Governor Tony Knowles, 
     I hereby submit, for the hearing record, the attached letter 
     from the Governor to Mr. Mark Suwyn, Chairman of Louisiana-
     Pacific Corporation, concerning a possible contract extension 
     for the Ketchikan Pulp Company (KPC).
       As the attached letter indicates, the State of Alaska 
     supports a KPC contract extension, contingent on KPC's 
     agreement with the following five principles: to protect the 
     environment, Alaska jobs, and other forest users; and to 
     utilize the Tongass Land Management Planning (TLMP) process 
     and value-added processing techniques. The State's support 
     for a contract extension, however, leaves for the federal 
     public process to resolve the issues of volume, contract 
     duration, and pricing structure.
       With respect to the TLMP process, which we understand you 
     are also having hearings on, the State continues to provide 
     information and comments to the United States Forest Service 
     in an effort to develop a management plan for the Tongass 
     that is based on sound science, prudent management, and 
     meaningful public participation.
       In addition to this letter for the record, the State plans 
     to be represented at the hearings by Veronica Slajer, of the 
     Department of Commerce and Economic Development, who will be 
     in attendance to listen to the testimony of the witnesses. As 
     we informed your staff earlier, Ms. Slajer will not be 
     testifying at the hearings, but the State is interested in 
     learning about what others think about these issues so that 
     the State can incorporate these thoughts in the formulation 
     of State policy.
       Thank you for considering the State's views.
           Sincerely,
                                                     John W. Katz,
       Director of State/Federal Relations and Special Counsel to 
     the Governor.
                                                                    ____

                                                  State of Alaska,


                                       Office of the Governor,

                                           Juneau, April 26, 1996.
     Mr. Mark Suwyn,
     Chairman and CEO, Louisiana Pacific Corporation, Portland, 
         OR.
       Dear Mark: Thank you for our recent discussions about the 
     future of the Kctchikan Pulp Company (KPC).
       As you know, my Administration has consistently supported a 
     sustainable timber industry in the Tongass, including a 
     predictable timber supply to meet the terms of the KPC 
     contract and 100 million board feet for small operators 
     through Small Business Administration sales. Thousands of 
     Alaskan families depend on the Tongass for their livelihoods, 
     subsistence hunting and fishing, recreation, and other uses.
       With this letter, I want to inform you my Administration 
     supports a KPC contract extension, contingent on the five 
     principles outlined below. As you mentioned during our recent 
     meeting, a decision to extend KPC's current contract is a 
     federal one. While the state has no authority to grant an 
     extension, the long-term partnership between the people of 
     Southeast Alaska and the timber industry and between the City 
     of Kctchikan and KPC gives us an important interest in the 
     extension issue. This partnership has benefited the jobs and 
     families of Southeast Alaska and has helped maintain healthy, 
     safe, and stable communities.
       Inherent in this long-term partnership are five principles:
       1. Environmental Protection. Protection of air, water, and 
     land, including fish habitat through compliance with 
     applicable federal, state, and local laws. This means KPC 
     should develop a plan to achieve full compliance with 
     environmental laws within three years. This would include a 
     meaningful public process that resolves public health and 
     environmental issues.
       2. Commitment to Ketchikan. A long-term commitment to 
     Ketchikan and the maintenance of a stable workforce, 
     including the hiring and training of resident Alaskans and a 
     willingness to hire Alaska contractors. KPC should have 
     longer terms contracts with Alaska timber businesses to 
     provide them the certainly to hire permanent employees from 
     Alaska. KPC should support a policy for directing 50 percent 
     of the timber from SBA sales to in-state secondary processing 
     through contracts with SBA timber businesses.
       3. Multiple Use. Adherence to sound principles of multiple 
     use and sustained yield of forest resources. This means the 
     production of sustainable contract volumes for KPC and the 
     small timber operators in southeast and the protection and 
     promotion of other forest uses and users, including tourism, 
     fishing, subsistence, hunting, mining, and recreation.
       The planning process is of little value if individual sales 
     remain mired in controversy and litigation. Therefore, timber 
     offerings in areas of high community interest and important 
     fish habitat, such as Cleveland Peninsula, Honker Divide, 
     East Kuiu, and Poison Cove, should be avoided. In addition, 
     every effort should be made to bring about a transition from 
     the harvest of old growth to second growth timber.
       4. TLMP Process. The Tongass Land Management Plan, 
     including full participation by the timber industry and other 
     forest users, must be completed expeditiously. The timber 
     volume available for harvest must be determined through the 
     TLMP planning process.
       5 Value-Added. The timber industry should continue to 
     explore new processes and technology to maximize the use of 
     timer harvested and increase the value of products.
       As we discussed, the matter of volume, contract duration, 
     and price must be determined by the federal public process.
       I look forward to our continued cooperation.
           Sincerely,
                                                     Tony Knowles,
                                                Governor. 
                                 ______