102 



REPORT CONCLUSIONS 



The Icy Cape No. 2 timber sale was plagued by litigation, 

 widespread noncompliance with contract conditions, unpaid 

 stumpage fees, and recently, a lack of cooperative effort 

 between two of the State's major resource agencies. 



Faced with a collapsing timber market and an operator who 

 owed the State more than $600,000 In stumpage fees and 

 interest, the State reached a legal settlement. Rather than 

 suspending the sale and seizing the operator's $500,000 

 payment bond, the settlement allowed the operator, who was 

 often unresponsive to meeting the conditions of the sales 

 contract, to continue. As a result, the State sold Its 

 timber resources relatively cheaply, at a greatly reduced 

 economic return to the treasury. 



The most glaring aspects of the history of the Icy Cape No. 

 2 timber sale involve: 



1 . Gubernatorial direction that was contrary to good 

 manai^ement and forestry practice" ! Former Governor 

 Shefrield directed the former commissioner of the 

 Department of Natural Resources to settle with the 

 logging operator rather than suspend operations for 

 nonpayment of stumpage debt. This direction was given 

 after the Division of Forestry (DOF) had already began 

 taking steps to suspend operations. 



2 . A settlement aijsreement that permitted the logger to 

 continue operations while paying significantly less for 

 the timber harvested and promising more state timber to 

 the operator. After the settlement, the operator 

 repeatedly failed to comply with conditions and speci- 

 fications of the timber sales contract and habitat 

 protection permits. 



Not considering the value of road Improvements In the 

 area, the State essentially has had to settle for less 

 than 20 cents on the dollar for the more than $600,000 

 stumpage debt and interest owed at the time of the 1986 

 settlement. 



3 . Receipt of less than $1 million In total stumpage fees , 

 on a Did that originally promised that the State would 

 collect almost $6 million. As set out in the Revenues 

 and Expenditures section of this report, we estimate 

 that the State spent almost as much In dealing with 

 various aspects of the sale as it collected in stumpage 

 receipts. 



As discussed further in the Findings and Recommendation 

 section of this report, DOF must reevaluate the way in which 



STATt or ALASKA "5" Ol V ISIOK O F Cf C l»l. A Tl 



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