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Bumpers Q&A 4/3 



ANSWER: Not necessarily; as with pulp and other forest product mills elsewhere, continued operation 

 is a corporate decision usually based on availability of reliable raw material sources at costs which will 

 enable profitable operation. 



QUESTION 4. If you had a clean slate In the Tongass today, would you enter into these same 50-year 

 contracts again? 



ANSWER: A decision as to whether to enter Into 50-year contracts would have to be based on the 

 situation at the time and a view of the future. 



With respect to the current contracts, during the 1950's, the economy of Southeast Alaska, based 

 primarily on salmon and gold, was in serious decline. With outspoken support from local residents, the 

 Alaska Territorial Government and the Federal Government agreed to promote the economic potential 

 of Southeast Alaska through the development of a timber industry. 



Establishment of the long-term contracts and the requirement for local manufacturing were two 

 methods used to stabilize and diversify the economy of Southeast Alaska. To a large extent, these 

 efforts were successful. Between 1954 and 1974, timber industry employment grew from 29 to 54 

 percent of the total employment in natural resource industries in Southeast Alaska (fisheries, timber, 

 minerals). During the depression of world timber prices from 1982 to 1985, the percent of timber 

 industry employment in natural resource Industries fell but was still significant. Recent State of Alaska 

 and Forest Service information indicates timlier related employment is again on the rise. Markets are 

 improving and with them timber industry employment 



Whether a similar decision would be made today if we 'had a clean slate in the Tongass" is difilouK 

 to determine, but as in the 1950's, it would be based on a careful assessment of the public policy 

 objectives which would be advanced Ijy such action. 



QUESTION 5. I understand Alaska Pulp is suing us In the Court of Claims for at least $80 million dollars, 

 claiming they have a right to log wherever they want and claiming we owe them a profit. Are these claims 

 based on the provisions of their 50-year contract? 



ANSWER: The claim is based on the company's interpretation of the contract provisions. We do not 

 agree with APC's positions and claims. 



QUESTION 6. Do you agree with the Congressional Research Service's use of the Boundary Waters Canoe 

 Area Wilderness Act case (Hedstrom Lumber v. United States) as a good measure of "just compensation" for 

 the 50-year contract holders? What is your estimate of the compensation that would be due if the contracts 

 were cancelled? 



ANSWER: There are some differences between the Hedstrom Lumber case contracts and the 50-year 

 contracts to Alaska Pulp Corporation and Ketchikan Pulp Company. Hedstrom involved short-temn 

 timber sales that were to harvest and pay for the timtier included in those sales. There were no 

 requirements to build and operate processing facilities, nor to harvest a minimum amount of timber 

 in a specified period, regardless of market demand or price of the product being produced by the 

 required facility. However, the Hedstrom case appears to provide a defensible guide to elements 

 required for just compensation for National Forest timtjer sale contracts in general, comparable to the 

 measure contained in 36 CFR 223.116(a)(5). 



Thus, we would expect compensation due for cancellation of the long-term contracts to include any 

 additional cost to the companies to replace the timber remaining available for harvest under the 

 contracts with other timber. The Congressional Research Service estimated this cost to be about $1 50 

 million. In addition, as in the Hedstrom case, we would expect costs which the companies have 



