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taxpayer losses on national forest commodity programs. The 

 problem is a general one for the National Forest System. 

 According to the Office of Management and Budget, "Forest Service 

 costs for timber and mineral activities exceeded the federal 

 share of receipts by $621 million in 1985." 



The Tongass is simply the most egregious example of this 

 supply-side commodity policy. Through the timber supply goal and 

 the Tongass Timber Supply Fund, Congress has given the agency a 

 "blank check" to pursue its institutional interests regardless of 

 the costs to the taxpayer or the regional economy. 



What these supply-side incentives have created are vested 

 interests on the part of the Forest Service and two large pulp 

 companies in perpetuating current policy. These interests now 

 impede the process of change needed to achieve a sustainable 

 regional economy and to protect the environment. 



S. 346 represents bona fide reform by repealing Section 705 

 (a) and Section 705 (d) removing supply-side incentives from 

 Tongass management saving both taxpayer dollars and precious 

 natural resources. 



Timber Mining 



It is apparent that there is no reasonable possibility of 

 "managed" tree farming — in the economic sense — in southeast 

 Alaska. The region is simply not economically suited for 

 sustained, large-scale timber production because trees grow 

 slowly compared to other timber producing regions, production 

 costs are very high, and markets for southeast Alaska's wood 

 products are likely to remain weak in the foreseeable future. 

 Under such unfavorable conditions, the rate of return on timber 

 investments over the planned rotation of 100 to 120 years is 

 unequivocally negative. 



The uneconomic nature of large scale timber harvesting is 

 exacerbated by the hidden losses imposed by the pick and choose 

 method of harvesting currently practiced by the long-term 

 contract holders. This practice allows the contract holder to 

 harvest only the most valuable timber stands, thus taking the 

 better quality timber than was actually paid for in its appraisal 

 of timber by the Forest Service. This practice allows the long- 

 term contract holder access to the most valuable stands — and, 

 incidentally those stands with the highest value for wildlife and 

 fishery habitat protection — in quantities that are far in 

 excess of their natural occurrence by volume class per acre and 

 species mix in the Tongass commercial forest land base. This 

 "high-grading" of the forest allows the long-term purchasers to 

 retain the unharvested low volume timber, using these stands to 

 reduce future timber appraisals. 



