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In 1982, Alaska Lumber and Pulp Company — now called Alaska 

 Pulp Corporation — requested a rate redetermination of its 1981- 

 86 price schedule. It was granted effective July '1, 1982. 

 Under the new schedule the price of spruce sawlogs, for example, 

 was reduced form $215.98 per thousand board feet to $2.26 (see 

 Table 1) . On December 1, 1981, Louisiana Pacific was granted a 

 rate redetemiination on its 1979-84 price schedule. Under the 

 new schedule, prices were reduced on spruce sawlogs from $114.96 

 per thousand board feet to $2.87, and on hemlock sawlogs from 

 $30.97 to $1.97. 



Recently, the Forest Service obtained a stumpage rate 

 escalator clause for the Louisiana Pacific-Ketchikan long-term 

 timber sale contract. This provision operates similarly to the 

 emergency rate redetermination clauses in both contracts, 

 allowing increased stumpage prices to be imposed when market 

 prices improve substantially during a five-year operating period. 

 This sounds good on its face, however, the reality is something 

 quite different. 



In fact, the cost of this accord to the federal government 

 appears to be exceedingly high. First, the federal government's 

 loss of $63 to $81 million in stumpage revenues between 1959 and 

 1975 caused by the preclusive/collusive bidding and other anti- 

 trust practices of the long-term contract holders was exchanged 

 for a single cash payment of $1 million collectable in 1990. 



Second, unlike any other timber sale contract in the 

 national forest system, Louisiana Pacific-Ketchikan can apply its 

 "ineffective purchaser road credits^" accumulated during the 

 previous five-year operating plan to offset future stumpage 

 charges. The company acquired its large "backlog" of ineffective 

 purchaser road credits as a result of the emergency rate 

 redetermination obtained on December 1, 1981 when the company's 

 stumpage was reduced by more than 95 percent. The net result of 

 this change will not increase the actual payments to the 

 Treasury. The ineffective purchaser credits will cancel out any 

 paper increases in stiimpage claimed by the Forest Service or the 

 company . 



^. Louisiana Pacific-Ketchikan (LPK) agreed to undertake 

 the necessary new road construction to harvest national forest 

 timber. In exchange, the price LPK paid for timber would be 

 offset by the estimated cost of road construction to access the 

 stands. In this arrangement the federal government traded one 

 asset — timber — for another — roads. When the estimated cost 

 of road construction exceeded the amount owed for timber, these 

 so-called purchaser credits could not be offset and were 

 considered ineffective. 



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