[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.

                          ____________________