144 



Meanwhile, the small business mills are forced to pay cash or produce an irrevocable letter of 

 credit from their bank. In order to get such a letter, the small mill must either sign over 

 collateral of equal value or deposit cash of equal value in the bank. 



The combination of up-front contracts costs and up-front field requirements is compounded by 

 the formal p^erwork required by a Forest Service contract. Finally, this is all complicated by 

 contractual timing requirements for wildlife mitigation that limit logging for as much as six 

 months of the year. 



Another practice of the Forest Service is to appraise timber to be sold to towns where lumber 

 mills no longer exist. This allows the agency to reduce the haul-cost allowance made in the 

 timber-sale appraisal. An example of this is the two year old practice of appraising timber sales 

 to the town of Custer, SD where no high capacity mills remain. When WTD sold out to Pope 

 & Talbot m 1991, and the mill was auctioned off, certain timber sales, due to their size and the 

 time allowed for logging, should have no longer been appraised to Custer, SD. 



The next closest mill site to Custer that is capable of manufacturing the sale volume in the time 

 allowed, is the Hill City concern of Continental Lumber. The refusal of the Forest Service to 

 drop Custer as an appraisal point, costs whoever purchases the sale an additional $2.50\MMBF. 

 For the small business mill, this could make a difference in whether or not the sale is purchased. 



Companies with a limited amount of capital cannot afford to purchase more than one or two 

 small sales at a time. These constrains impair the flexibility of most small sawmills in the Black 

 Hills. Most have simply given up on the Forest Service as a viable source of timber. We are 

 down to three small business mills which have the financial ability to participate. One of these 

 mills, McLaughlin's Sawmill from Spearfish is directly tied to the Pope & Talbot operations, 

 since it is the McLaughlin's mill which provides mine timbers for the Homestake Mining 

 Operation. Under the agreement Pope & Talbot made with Homestake Mining Company when 

 they purchased the Spearfish sawmill. Pope & Talbot committed to provide mine timber to the 

 Homestake Mine. This is not a high profit venture, and Pope & Talbot subcontracted with the 



10 



