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McLaughlin Mill. Thus, smne doubt exists related to McLaughlin's ability to independently act 

 in the open market. 



Timber Supply Adversely Affects Small Business Operators 



During the 1960's and 70's, the Black Hills National Forest encouraged purchasers to hold large 

 amounts of timber under contract. This added stability for companies and a comfort level for any 

 banker asked to loan money to the sawmills. 



During the middle 1980's Federal managers decided that less volume under contract would help 

 increase the price paid for Federal timber, and began efforts to reduce volume under contract. 

 They encouraged the harvest of this timber and shortened the timber-sale contract life to reduce 

 the volume under contract held by most companies. Additionally, they reduced the amount of 

 timber being sold on the Black Hills. As a result prices jumped dramatically as did 

 downpayment and other financial security requirements. Today it is not uncommon for the Forest 

 Service to demand a $200,000 to $300,000 up-front payment simply to be allowed to bid on a 

 timber sale. The total deposits required for a 5 to 10 MMBF timber sale can be as high as a 

 million dollars or more 



This situation is exacerbated by the Agency's failure to meter out the timber sales over the twelve 

 months in the year. This year is a very good example, most of the volume sold on the Black 

 Hills will be sold in the fourth quarter. It is incredibly difficult for a small business purchaser 

 to find adequate financing to cover the up-front costs of eight to ten large timber sales. Thus, 

 the small business mills are forced to purchase the set-aside sales before even considering 

 competing for the large open sales. The practice of loading up sales in the fourth quarter only 

 benefits those with blanket-payment bonds As stated earlier, it is very difficult for small 

 business mills to purchase payment or performance bonds. 



Even though clear demand exists for timber volumes sold off the Black Hills National Forest, the 

 Forest Service continues to reduce timber-sale levels on the Black Hills. This factor alone has 



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