14 



Mr. Walk. Yes. 



Mr. Miller. Yes, sir. 



Mr. Walk. The process that was implemented is to calculate an 

 average of the prices paid by independent purchasers and then 

 make periodic adjustments to the rates being paid by the long-term 

 contract to become more comparable to independent prices. And 

 those comparable price adjustments are made as we do the calcula- 

 tions periodically through the course of the year. 



Mr. Miller. What would be the impact of the legislation under 

 consideration? Have you had a chance to review that? 



Mr. Walk. We have looked at that. It is our view that the termi- 

 nology in the proposed legislation would remove the periodic — the 

 comparable price adjustment from the process. There would be no 

 comparable price adjustments. 



Mr. Miller. There is language that is on page 8 that says the 

 rate shall be designated at a level that places the purchaser at a 

 competitive disadvantage with similar enterprise in the Pacific 

 Northwest and those rates should be the sole charges the pur- 

 chaser shall be required to pay for timber provided. Do we know 

 what that means? 



Mr. Janik. We have examined that section very thoroughly. 

 Again, if I may defer, I think Mr. Perry from the Office of General 

 Counsel, in that we have received major advice from them on this 

 particular section — Jim, would you please respond. 



Mr. Perry. James Perry, Associate General Counsel. We have 

 some real concerns regarding the comparison between the Pacific 

 Northwest stumpage rates and those of Alaska. While we under- 

 stand the purpose of the clause is to develop some equitability, we 

 believe the clause would result in extensive litigation because the 

 only way to determine some equitability would be to establish some 

 panel of experts and then attempt — have to use a most equitable 

 rate. So based on the past history of similar clauses in the current 

 contract, we view that language as being a guarantee of litigation. 



Mr. Miller. What — well, let us assume — do you have any indica- 

 tion or have you looked at this if you could meet the requirements 

 of the language on page 8, would that take us closer to $2 or closer 

 to $48? 



Mr. Perry. I don't think I can evaluate that. There would be a 

 number of variables in trying to measure equitability between the 

 market in the Pacific Northwest and the Tongass, the type of tim- 

 ber, the type of product that was derived and then the market in 

 which the product would be sold. So I am unable to give a prognos- 

 tication about what the effect on price would be, but the only effect 

 it could have would be a downward adjustment. 



Mr. Miller. Mr. Chairman, if I just might — I know the light is 

 on, but I just would like Mr. Walk to testify or to respond to that 

 if he could, what the impact of that — have you looked at that to de- 

 termine what the impact might be, approximately, on price and 

 stumpage? 



Mr. Walk. Well, as Mr. Perry indicated, it would be very difficult 

 to identify precisely a number. We see three parts of that particu- 

 lar section. One is doing the normal appraisal. The second is a com- 

 parison with the Pacific Northwest, similar enterprises in the Pa- 



