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to the mills here? That is my understanding, the timber on native 

 lands with access to your mills, is that a fact? 



Mr. PiHL. For the lower pulp grades we do buy the pulp but the 

 higher grades are exportable and the export market pays the 

 higher value for it and that is where it goes. It's a simple matter of 

 economics. 



Senator Wirth. That poses the other question of economics, 

 which is one we have not talked about here and I am sure we will 

 at some point; it is the economics and the subsidies that occur on 

 the forest, which again is of great concern to many of our col- 

 leagues and has been mentioned by a couple of the witnesses this 

 morning, an issue to the continuing subsidy of timbering and why 

 that is necessary that the American taxpayer would be subsidizing 

 timber, especially in a situation where you pointed out, Mr. Pihl, a 

 lot of that timber is being exported to Japan. 



There are a lot of people for example in organized labor, Mr. Bu- 

 koskey, who had been very concerned about the fact that a lot of 

 America's economic practices has been unfairly or largely subsizing 

 the Japanese and Mr. Burns mentioned earlier we are subsidizing 

 the Japanese with very significant amounts of military presence. 

 How should we be doing that further or should we be looking at 

 the economics of the situation in such a way that American tax- 

 payers no longer — if they are — are subsidizing those up here. 



Mr. Pihl. Senator, I would like to correct one impression I heard 

 you say, we established our operations here on the primary manu- 

 facturing rule that we established and developed our shore jobs 

 and we are processing the timber to the fullest extent possible on 

 shore, creating the jobs in this area. 



Senator Wirth. The product I thought we established earlier and 

 the product of one of these companies is almost exclusively going to 

 Japan. 



Mr. Pihl. That is a pulp product or a lumber product; it has gone 

 through a mill in the vicinity. Alaskan Forests here are operated 

 under primary manufacturing, the jobs are created on shore here. 

 We are not frankly dealing with the problem that Oregon and 

 Washington are wrestling with today over exports of federal 

 timber. That is a settled question in Alaska. 



Senator Wirth. So none of the timber is exported? 



Mr. Pihl. A very minor percentage of the cedar for which there 

 is no local market is exported but 



Senator Wirth. Where do all the logs that are cut down go? 



Mr. Pihl. Off the National Forest? 



Senator Wirth. I was led to understand, I was told last night if 

 we were to build a house in Ketchikan you would import a lot of 

 that timber for doing that because the logs are going elsewhere, is 

 that right? 



Mr. Pihl. The logs are not going elsewhere, the National Forest 

 timber is processed here in southeast Alaska in the sawmills. 



Senator Wirth. Where does the product go? 



Mr. Pihl. The pulp mill product goes to Japan. 



Senator Wirth. I just want to understand where it goes, it does 

 go to Japan. Well I guess we are getting a little bit circular here. 



Senator Murkowski. Let me establish this, I think we are sensi- 

 tive to, and rightly so, as I said several times during this conversa- 



