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and the Native corporations are eager to sell the pulp logs they 

 harvest. Since Louisiana-Pacific and Alaska Pulp are the only 

 potential buyers of pulp logs in the region and since these 

 companies are guaranteed log supplies on favorable terms from the 

 national forest through long-term contracts, they are able to 

 virtually dictate prices and terms of pulp log sales in the 

 region. 



During the early years of the pulp mill operations, several 

 small logging companies bid on Forest Service timber sales on the 

 Tongass. These independent loggers would, in turn, sell logs to 

 the pulp mills and sawmills. In 1975, the Reid Brothers Logging 

 company, one of the few surviving independent loggers at that 

 time, filed suit against the two pulp companies, alleging 

 concerted actions in restraint of trade. In 1981, the United 

 States District Court in Seattle, Washington, determined that 

 Louisiana Pacific and Alaska Pulp had violated the Sherman Anti- 

 trust Act. The court awarded the plaintiff damages of $1.5 

 million. 



The Reid Brothers suit called attention to the possibility 

 that the federal government might have suffered reduced timber 

 receipts due to the anticompetitive practices of the two pulp 

 companies. In fact, in 1982, a timber appraisal expert concluded 

 that potential government losses between 1959 and 1980 ranged 

 from $76.5 million to $81.5 million. 



Timber Pricing 



Regardless of competitive behavior in the marketplace, it is 

 inevitable that the Tongass timber program will lose taxpayer 

 dollars under the Forest Service's obsolete timber pricing 

 system, called residual value pricing. Nationwide, the Forest 

 Service sets minimum bid prices at a level the agency determines 

 a reasonable efficient operator can pay and still make a fair 

 profit. Whether or not the government itself can expect a fair 

 return on the sale — or even recover its costs for managing the 

 stand, building roads, and administering the sale — does not 

 enter into the equation. 



In addition to residual value pricing, the owners of the 

 long-term timber contracts on the Tongass enjoy certain special 

 provisions. One such provision is the downward adjustment of 

 stumpage fees. When the 50-year timber sale contracts were 

 negotiated in the 1950s, the Forest Service established "base 

 rates" for the various classes of timber. These long-term timber 

 prices are reappraised by the agency at five-year intervals. 

 Within each five — year interval, the pulp companies may petition 

 for a reduction in timber prices (a process called "rate 

 redetermination") if market conditions worsen. These 

 retdetermined rates are retroactive to the beginning of the five- 

 year operating plan. 



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