182 



every day of 1996'" KPC personnel commonly blame "timber shortages" for periodic mill 

 shutdowns 



The Facts: This is not what L-P is telling its shareholders. In its most recent SEC 

 quarterly report, the company states: 



Pulp sales dropped 47 percent in the first quarter of 1996 over first quarter 1995. 

 Prices decreased an average of approximately 11 percent while volume decreased 

 approximately 41 percent. World-wide pulp inventories were high at the beginning 

 of 1996 and remained high through the first quarter, creating very weak pulp 

 markets . Production volume was 60 percent of capacity in the first quarter of 1996 

 compared to 90 percent in the first quarter of 1995. The decreased volume resulted 

 from the lack of demand and from unscheduled maintenance shut-downs." 



(Emphasis added ) 



L-P does not cite timber shortages in this report, and given the description of weak market 

 conditions it is dishonest and misleading for L-P to claim timber shortages as the reason for either 

 mill shutdowns or financial losses L-P's problem is not its present long-term contract, timber 

 shortages, or contract changes under the Tongass Timber Reform Act. 

 L-P's real problem is very weak international pulp markets. 



There is no shortage of logs for L-P. and there hasn't been one . (Please see SEACC's Second 

 Supplementary Statement to the June 28-29, 1996 hearings at page 2 ) From 1989-94, KPC 

 logged 96% of their maximum allowable amount under the contract, and actually came within 

 35 6 mmbf of having to stop logging KPC began FY 95 with over a year's supply of timber— 164 

 mmbf— released for timber operations, and at the beginning of FY 96 that cushion had grown to 

 180 mmbf As of April 1, 1996, KPC had access to 209 mmbf— including 87 mmbf that required 

 no, or minimal, new reading (KPC's 15-year annual average cut is 159 mmbf) 



While complaining of timber shortages, from 1993-95 KPC exported from Alaska an average 

 of 26 mmbf per year of cedar logs in the round. KPC could have sawed these logs in its 

 sawmill 



KPC complained of worse shorta2es prior to the Tongass Timber Reform Act . Please see 

 Attachment 2, a letter from KPC timber manager Owen Graham to the Forest Service prior to 

 passage of the Tongass Timber Reform Act In it, Graham complains about a shortage of timber- 

 - before the Tongass Reform Law He claims that KPC's pipeline of released timber had shrunk to 

 only 54 mmbf If that was true, then KPC's timber pipeline improved after the Reform Act. 



L-P has plenty of timber remaining in its existing contract. L-P has eight years of timber 

 remaining on its current contract Subsequently. L-P can buy timber from the Forest Service on 



'"Id 



" L-P Quarterly Report Under Section 13 or IS(d) of the Securities Exchanse Aclof 1934. for Quarterly Penod 



Ended March 31. 1996 



