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Enactment of S. 346 cannot and should not extinguish the two 

 Alaskan pulp mills' right to esteOilish jurisdiction in the Claims 

 Court. However, their claims for damages may not succeed. In 

 fact, since the Civil War the "sovereign act" doctrine has held 

 that the United States cannot be held liable for damages on 

 breach of contract when breach results from its actions in the 

 national interest and public and general application. Again, the 

 courts will look behind the law to determine whether it is 

 directed at a broad public purpose. Because S. 346 is directed 

 at improving the management of an important public resource, it 

 clearly fits the court's criteria of the "sovereign act" 

 doctrine. Therefore, it is reasonable to conclude that the 

 United States will not incur any liability for its actions in 

 protection the national interest in Alaska. 



Finally, it is appropriate to review the unlikely 

 possibility that the courts will find that congressional 

 modification or termination of long-term timber sale contracts is 

 not in the broad public interest. As stated previously, an 

 adverse determination is improbable, because of the extensive 

 public record documenting the counter-productive effects of the 

 long-term contracts. Notwithstanding this reservation, we have 

 reviewed the precedents to determine what, if any, damages might 

 be recoverable against the United States under a worst case 

 scenario. 



The case of Hedstrom Lvimber Co. v. United States . 7 CI. Ct. 

 16 (1984) , provides the best evidence of how the Claims Court 

 would compute compensation, if any, for modification or 

 termination of long-term timber contracts in Alaska. Here, 

 Congress voluntarily directed compensation to timber companies 

 affected by the passage of the Boundary Waters Canoe Wilderness 

 Act. 



But the Claims Court construed that direction so that 

 compensation was still severely limited. The court rejected just 

 compensation formulas based on anticipated or lost profits as 

 compensation. Instead, the court awarded Hedstrom the 

 replacement value for the timber under contract. To determine 

 replacement value, the court used the difference between the 

 contract stumpage price — the price paid for the right to 

 harvest standing trees —  and average bid price for replacement 

 timber. The court also awarded actual road construction costs 

 and the costs of additional transportation. 



Applying the Hedstrom approach to the two long-term timber 

 contracts in Alaska is difficult, because of uncertainties 

 surrounding harvest rates and other factors that may influence 

 the calculation. However, a reasoneible estimate of the 

 compensation can be calculated by determining the difference 

 between the stumpage rates available under long-term sales and 

 the cost of replacement timber. This additional compensation 



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