[Congressional Record Volume 142, Number 88 (Friday, June 14, 1996)]
[Senate]
[Pages S6264-S6267]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
ENVIRONMENTAL IMPROVEMENT TIMBER CONTRACT EXTENSION ACT OF 1996
Mr. MURKOWSKI. Mr. President, I am going to speak on another subject
but it is equally important to my State, and that the introduction by
myself along with Senator Stevens and Congressman Young of a piece of
legislation known as the Environmental Improvement Timber Contract
Extension Act of 1996. I introduced the bill late yesterday, and I did
not have an opportunity to speak on it.
This particular piece of legislation would provide for timber
contract extension. The bill would extend for 15 years the long-term
timber sale contract on the Tongass National Forest between the Forest
Service and the Ketchikan Pulp Corp. which is a subsidiary of Louisiana
Pacific. This extension would provide Ketchikan Pulp with a stable
timber supply over a sufficient length of time to amortize the cost of
a new environmentally improved pulp mill. Improvements and energy
efficiency equipment would be installed at a cost of somewhere between
$150 million and $200 million.
It is interesting to reflect that when this mill was first built back
in the mid-fifties the total cost of the mill was somewhere in the area
of $55 million. In any event, Ketchikan Pulp Corp.'s situation is
extremely unique because all of its timber comes from the national
forest. In my State of Alaska there is no State forest of any
consequence in southeastern Alaska, and the only private timber that is
available is owned by the Native regional corporations.
We also have a unique difference in that we have in the Tongass
people who live in the forest in the towns of Ketchikan, Juneau,
Wrangell, Petersburg, Sitka, Haines, Skagway are all in the forest, and
were in the forest before the forest was created. And the theory was
when the Nation's largest national forest was created there would be
sufficient timber set aside for the modest industry that was in
existence. We have seen some changes in that policy.
So I am introducing this bill as a result of, first, the important
role that Ketchikan Pulp plays in the social, economic, and
environmental vitality of southeastern Alaska; two, the strong
bipartisan support within our State for this action; three, the record
from the two field hearings which I held last month in southeastern
Alaska in Juneau and Ketchikan which overwhelmingly supports the
introduction of this legislation; fourth, the realization that the
performance of the Forest Service strongly indicates that without some
congressional intervention the Ketchikan Pulp mill will not survive
without an adequate supply of timber.
Let me elaborate on each of these factors because they are important.
Let me describe the nature of the southeast forest in the Tongass.
Thirty percent of our timber is dead or dying. It is old growth, virgin
timber. But as with any living thing there is a process of growing,
maturing, and then the death of the trees begin. The theory of
utilizing these trees which have reached their maturity and are in the
process of dying is the forest process of evolution which is associated
with timber development. So what we have is a product that is only
suitable for wood fiber, and as a consequence there is a justification
for the pulp mill. Without the pulp mill, the lumber mill would be less
profitable and the pulp would have to be exported creating virtually no
jobs in my State.
So let me share with you what the forest told us about the evolution
and the importance of the contract with southeastern Alaska as of May
28 at the oversight hearing in Ketchikan:
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
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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, Mr. President. The Forest Service
witnesses recounted the decisions of their predecessors back at the
time right after the war in the late 1940's. Farsighted people
recognized the nature and the importance of the resource and planning
for an environmentally and economically secure future. The Forest
Service recognized that, as a sole owner of land and timber, it
controlled the economic and environmental vitality of the region.
What is the situation today? Why has it changed? Today Ketchikan Pulp
Corp.'s operations directly or indirectly provide about 25 percent of
the total annual employment wages in Ketchikan. Ketchikan Pulp Corp.'s
municipal real estate and sales tax generated about $13.6 million in
revenues in 1992.
More broadly, the southeastern Alaska timber industry is the dominant
contributor to real estate development in Ketchikan. More than 25
percent of all the households are timber dependent, and the typical
timber employee can purchase more than 90 percent of the existing
housing units. Ketchikan Pulp comprises more than 50 percent of the
total borough's industrial assessed valuation.
I might add, Mr. President, that this is the only year-round
manufacturing plant in our State of Alaska. So its importance cannot be
understated.
We have tourism and fishing that are also important to the economy.
But we need all of our basic industries--timber, fishing, and tourism--
in that part of the State to maintain the healthy economy in the
region. Quite simply, without some stability of timber supply, the
economies of the region generally, and Ketchikan specifically, are in
trouble.
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 at this time, and ask it
be printed in the Record.
There being no objection, the resolution was ordered to be printed in
the Record, as follows:
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
overmature 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 major 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 and 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 Stika; be it
Resolved, That the Alaska State Legislature respectfully
urges the Alaska delegation 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 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.
Mr. MURKOWSKI. Further, 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
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
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have introduced today. I will include the Governor's letter for the
Record.
I ask unanimous consent that it be printed in the Record as well.
There being no objection, the letter was ordered to be printed in the
Record, as follows:
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 with
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.
Mr. MURKOWSKI. 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 I might add there were demonstrators who marched
in Ketchikan, as well as in Juneau. Most of them, I am pleased to say,
wanted to extend the contract--a larger portion, of course, in
Ketchikan. 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 and 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. We only have the one.
This situation is absolutely critical. 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. Yet we have the largest of all our national forests.
In its May 28 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--I do not know what that means, but I have an
idea--and, further, 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. I think this 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
inappropriate 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, in their opinion, 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 have introduced and ask respectful consideration of,
the Environmental Improvement Timber Contract Extension Act. A copy of
the bill and a section-by-section analysis was included.
I yield the floor.
The PRESIDING OFFICER. The Senator from New Mexico, under a previous
order, has a period of 15 minutes under his control.
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The Chair recognizes the Senator from New Mexico.
____________________