47 



that the forest supervisor, Hugh Thompson, put out that I referred 

 to earHer when we had Mr. Unger in front of us. You are very fa- 

 mihar with the Dixie 



Mr. Matson. Yes. 



Mr. Hansen, [continuing] — and that area, probably more so than 

 about anybody. What do you think the real reason is that Hugh 

 Thompson has to send out a letter like this? 



Mr. Matson. The combination of things between appeals, the 

 Southern Utah Wilderness Alliance, the Friends of the Dixie pres- 

 sures, and I mentioned in my testimony the concerns the Forest 

 Service has had previously about low cost timber sales. The com- 

 bination of those things where the Forest Service had an expecta- 

 tion for prices for dead spruce timber with helicopter logging. 



At one point, that far exceeded the market and our company's ca- 

 pability at that time to participate in that sort of thing. And so we 

 told them, "Unless this thing works itself out, straightens itself out, 

 and you can get something down that is priced in the arena that 

 we can afford with nothing else available, our companies will be 

 forced to go out of business." And that is essentially what hap- 

 pened. So the lesson is that they didn't believe us until we were 

 gone. 



And as the infestation continues to spread and go beyond the 

 areas that it was in three years ago, now they fmd themselves with 

 no capacity. The install capacity in that forest to handle logs of 

 that sort is probably 150,000 logs a year. 



Kaibab Forest Products Company could have handled a million 

 of those logs, and we could have had that project worked out and 

 dealt with in a three-year period if it simply would have been 

 priced properly and had gone through the appeals process. So their 

 rate lesson and awakening of this is tragic. 



Mr. Hansen. Do you think there is a possibility that places like 

 Fredonia will come back? 



Mr. Matson. The Fredonia mill and all of that location is subject 

 to a court order in Arizona because of the Mexican spotted owl 

 under Judge Mickey's Court. And any clearances of that issue 

 would then, I think, bring a smaller kind of operating style to the 

 area. More family, more small business oriented than what the 

 Kaibab had at the time. 



It definitely is a possibility, but, once again, if you are looking 

 at putting in investments of $5 to $8 to $10 million, you would like 

 to have at least a horizon to amortize that kind of investment. Oth- 

 erwise, it is very risky. And this issue here today on appeals is a 

 key part of finding a solution to some of that. That material is 

 going to be available. 



It is a question of whether we want to have it, you know, killed 

 by insects and rot or burn or all the rest of that or harvest it, and 

 let some entity like a well managed forest products company pay 

 the government for the opportunity to satisfy a customer's needs 

 and end up with a positive cash-flow out of it. Otherwise, these 

 kinds of problems are going to cost our Federal Treasury and the 

 American taxpayer a lot more money than we can afford. 



Mr. Hansen. We have had a lot of people tell us — I don't know 

 if there is any truth in it — that one of the reasons for many of our 



