40 



Senator Daschle. Thank you, Mr. Riley. Thank you again, Mr. 

 Francis. 



Let me call George Leonard and David Hessel back to the table 

 now, for the discussion period. I thank you both for staying and ap- 

 preciate your schedules. 



Let me begin by asking a question related to something Mr. 

 Riley just said with regard to flexibility. That has been a concern 

 of mine and I think others as we get into this issue. 



You mentioned that South Dakota has experienced an opportuni- 

 ty over the last 7 years to take what has been a below-cost timber 

 sale area and, with flexibility in management, turn it around to an 

 area where we are now making a profit. His argument in his testi- 

 mony was that we are precluding that more and more today. I 

 would be interested in either of your response to that concern. 



Mr. Leonard. I believe there is a substantial opportunity to 

 make at least half and maybe two-thirds of the sales of the forests 

 that have been identified as below-cost forests positive, based both 

 on potential economies that the Forest Service can achieve, but 

 also rising stumpage prices that are coming about because of the 

 shortage of stumpage that is available throughout the country. 



We are seeing a general increase in stumpage values of a magni- 

 tude sufficient to make these programs positive in every section of 

 the country, most predominantly in the West, where the major re- 

 ductions in supply have occurred, but even in the eastern hard- 

 wood forests, we are seeing substantial increases in bid rates. 



So I think there is substantial opportunity to increase the 

 number of these forests that are operating above the board. There 

 are a few of the very small forests with very large losses that it is 

 difficult to see how you can get their programs above the board, 

 but I think as much as 50 percent and perhaps as much as two- 

 thirds certainly can be operated above the board based upon what 

 we see happening in the market and some opportunities for effi- 

 ciencies on behalf of the Forest Service. 



Senator Daschle. Mr. Riley, how do you respond to that? 



Mr. Riley. I think George is looking primarily at the price in- 

 creases and some efficiencies within the Forest Service. I concur 

 with that assessment. 



I think beyond that, Mr. Chairman, if that is the objective is 

 making money off these forests, there are ways that I think all of 

 the below-cost forests can design highly profitable timber sales. 

 Now, those ways are not always consistent with, and have not been 

 consistent in the past in some cases with, the instructions from this 

 committee and others to look at ecosystem management, multiple 

 use, and oftentimes they are not consistent with our discussions 

 with the State fish and game agencies and what they want to do. 

 But you can't have it both ways. 



I am not here to advocate that we go back to, or that you put in 

 place, profit-maximizing timber sales. But with these diametrically 

 opposed criteria, Mr. Chairman, I am at a bit of a loss as to what to 

 do next. 



Senator Daschle. Mr. Francis. 



Mr. Francis. Mr. Chairman, the research that The Wilderness 

 Society has done shows that on most forests, even though the forest 

 may show up as below cost, there are sales there that do indeed 



