184 



KPC also agreed to undertake further expenditures which are primarily capital in nature, 

 including certain remedial and pollution control related measures, with an estimated cost 

 of up to approximately S20 million.'^ 



In testimony before this Committee. L-P said it must spend up to 10 times that amount to 

 "improve" the KPC pulp mill. '^ But clearly they'll invest the capital only if the American 

 taxpayer repays that investment. 



As the price of staying in Ketchikan, L-P wants the American taxpayer to buy the company 

 a mill. In 1995, KPC paid $121 per thousand board feet (mbf) of timber (including "payments" in 

 the form of logging roads built) Independent timber purchasers paid over twice as much-$279 

 per mbf (These rates include the TTRA "comparability" adjustment supposedly making KPC 

 timber charges equal to rates paid by independent purchasers ) 



This new contract, and this bill, would provide KPC timber is worth at least $1.23 billion at 

 prevailing market rates. Over time and with free-market competition, market rates and 

 the total value could be expected to go up . 



At the current average stumpage price KPC paid in 1995 under its current contract, KPC would 

 pay just $532 million— a difference of S695 million below current market value, pocketed by 

 the company . And under the new contract's outrageous pricing scheme, KPC's timber 

 payments could go down , dramatically increasing the value of this gift from the American 

 taxpayer to KPC. This taxpayer gift' to KPC greatly exceeds L-P's purported $200 million 

 expense to upgrade the mill. And as discussed below, after getting the new contract L-P is 

 not required to spend a dime on these purported improvements . 



3 Delegation/L-P Claim: L-P must have a new contract in order to assure that it has enough 

 timber to amortize the investment in cleanup and improvements at the pulp mill There is no 

 timber other than the timber L-P can access under its contract 



The Facts: The Delegation's bill would in fact allow L-P to shut the pulp mill down. 

 The day after this bill becomes effective, l^P could close the pulp mill, not perform the 

 improvements to the pulp mill that are the rationale for this bill, and instead completely 

 revamp its Ketchikan operation, investing whatever it pleased . Its only obligation would 

 appear to be cutting 192 mmbf per year and processing pulp logs in some way— including chipping 

 them and exporting chips The new L-P mill would not have to maintain its current complement 

 of jobs, and CEO Suwyn has talked of "increasing productivity"-a code word for fewer 

 employees 



This scenario is not far-fetched L-P's purported "improvements" are experimental Initial testing 

 shows that the new "elemental chlorine free" process would increase effluent toxicity in some 

 respects While not using "elemental" chlorine, the process would instead use chlorine dioxide or 



"March 1996 L-P 10-Qat9 



'^L-P CEO Mark Suwyn oral lestimony. May 29. 1996, Juneau 



