26 



rule was developed to indicate the portion of a log that is suitable 

 for the manufacture of lumber. And it is just not really applicable 

 to utility logs, which by definition are not suitable for lumber. A 

 better approach would be to define the volume requirements of the 

 section in Section 2(c)(3) and 2(e) as 192.5 million board feet. That 

 is the scribner per year. And this would make it clear that the For- 

 est Service could then use whatever log rule or method was appro- 

 priate for charging them for the utility logs. Historically they have 

 been charged on a gross basis. 



The Chairman. The Forest Service charge isn't here, but the For- 

 est Service shouldn't object to that suggestion, would they? 



Mr. Leonard. I would hope not, because it clearly gives them au- 

 thority to charge for the utility logs. 



The Chairman. OK, go ahead. 



Mr. Leonard. Section 2(a)(4) confuses the concept of mid-market 

 test with timber appraisal. In Alaska the mid-market test was de- 

 veloped to try to define that portion of the timber that is economi- 

 cally available and should be charged to the company. It is a test 

 of economic feasibility. 



The question of appraisal is a separate issue when you appraise 

 to most current market where the mid-market test looks back over 

 a longer period of time. I think that the language in this section 

 should be clarified so that you apply the mid-market test to deter- 

 mine what timber may be released to the company and then you 

 separately apply a normal appraisal to appraising and establishing 

 the value that the company will pay — the price that the company 

 will pay for that timber. 



As written. Section 2(c)(4) does not permit the Forest Service to 

 recognize the unique requirements associated with this long-term 

 sale. The requirement that they maintain and operate that pulp 

 mill has some implications that aren't applicable to an independent 

 sale. And I think the appraiser on that sale ought to be able to rec- 

 ognize those unique requirements. But also, it is important that 

 the language there be rewritten so that the Forest Service can con- 

 tinue to collect KV, Knudsen-Vandenburg Act, funds to do any nec- 

 essary reforestation work in the area or collect coop scaling depos- 

 its advise-its if that is requested by the government. Both these 

 funds contribute significantly to the acceptability of operations 

 under the contract and I believe they need to be maintained. 



And finally. Section 2(c)(6) authorizes the company to replace the 

 existing pulp mill or convert it to other uses. I believe this is a de- 

 sirable section, but I think experience has shown that the law and 

 ultimately the contract need to be clear on what that process is. 

 How long does the company have to replace that mill? They can't 

 simply close the mill and say sometime 15 years from now we will 

 replace it. And the contract needs to be clear as to what obliga- 

 tions, what contractual operations are acceptable during the period 

 when the mill is being replaced. Is it permissible for them to con- 

 tinue logging? What happens to the utility logs? 



And then finally, there has been several references to the claims 

 that are pending, potential claims coming out of the Tongass Tim- 

 ber Reform Act. In my judgment, most of the claims associated 

 with the Tongass Timber Reform Act are claims that will be proved 

 in the future sometime. I believe that there should be language re- 



