41 



If the pulp mills had to close the rest of the industry to a large 

 degree would collapse. This is because 49 percent of the harvestable 

 material is good only for making pulp. A lot of people do not un- 

 derstand that, Mr. Chairman. It is wood fiber. About 49 percent of 

 timber has no other market. It cannot be used in the saw mills. It 

 simply is old, and in many cases in a state of decay. Half the wood 

 fiber goes to the pulp mills, and half of the timber supply goes to 

 the saw mills, and the saw mills sell their chips back to the pulp 

 mills. We have an integrated industry built up around the pulp 

 mills, and they are a critical component. 



When the United States signed the pulp mill contracts a commit- 

 ment was made to the people of Southeastern Alaska who have 

 relied on the 1947 Tongass Timber Act. It was more than enabling 

 legislation for two pulp mill contracts. It was a federal commit- 

 ment to the people of Alaska. 



Entire communities believed in and in fact were built on this 

 commitment. Many people have located their families and invested 

 in their homes and businesses believing that the United States 

 would live up to its end of the bargain. I know because I watched 

 this take place. I grew up in Ketchikan, Alaska. I worked in Wran- 

 gell as a banker. I have been in Southeastern Alaska a good por- 

 tion of my life. 



The two pulp mills have lived up to their end of the bargain. 

 Both pulp mills used the long-term timber supply as collateral to 

 obtain financing and made substantial investments in facilities. A 

 year-round timber industry grew up around the pulp mills, includ- 

 ing the saw mills, logging camps, stevedoring operations, air taxi 

 services and so forth. Sure, they have had their ups and downs 

 when markets have been poor as they were from 1981 to 1985. 



The pulp mills did not break their contracts with the United 

 States and close their doors on the people of Southeastern Alaska. 

 Instead, they used the 50-year timber contracts as collateral to fi- 

 nance for long operating losses, and I would enter some of their 

 annual statements in the record, Mr. Chairman. 



Let us take the Sitka pulp mill. It represents a really extraordi- 

 nary commitment on the part of the Japanese government. The 

 Japanese-owned mill accumulated a staggering debt during the 

 market depressions of the mid-1980s but did not close its doors, 

 treating the upholding of its commitments to U.S. as a matter of 

 commitment. This past year Japanese officials have worked long 

 and hard to restructure the past debts of Alaska Pulp, and I would 

 remind my colleagues that there is entire U.S. labor in that mill. 



The pulp mills have weathered bad times but are prospering 

 again. In 1988 the pulp mills have had their best year ever, export- 

 ing over $160 million in production in addition to their domestic 

 sales. The Southeastern Alaska forest products industry as a whole 

 exported $475 million in products during 1988. This is up from $327 

 million in 1987, a 45 percent increase. 



Employment in the industry is up 17 percent from 1987. In 1988, 

 3,447 people were employed at the saw mills, pulp mills and log- 

 ging camps, but that does not tell the entire employment story. An 

 additional 976 people were employed in stevedoring, towing, road 

 construction and the Forest Service. 



