Idaho Wilderness Hearings

Statement:

INLAND FOREST RESOURCE COUNCIL Mr. Blasing. Thank you. I'm Larry Biasing. I'm acting exeuctive director for the Inland Forest Resource Council. There have been a lot of statments over the last three hearings about whether or not the industry is being subsidized by the Government through the timber-sale process. I would like—including statements by Senator Dobler. I would like to attempt to dispel that myth and point out that these statements actually have no foundation. In fact, the appraisal that the timber process that the Forest Service goes through where they advertise timber sales is simply a place to start the bidding. The market value that's established for these timber sales is established after the bidding process takes place. I would like to just briefly run through the process that the Forest Service goes through. First they determine an estimate of volume and quality of the timber they're going to sell. And then for this they establish an end-product value. After establishing that value, they then subtract the cost for manufacturing, for logging, hauling, and the other operational costs that exist. After that's done, then they make an allowance for profit and risk. And what's remaining is essentially stumpage. And that's a very simplistic example. After the stumpage is valued, the timber-sale contract requires the purchaser to build roads. And for that they get stumpage credit. Now, a deficit sale is a timber sale where the estimated value of the timber is such that the Forest Service or that the purchaser has estimated that he will get less than 75 percent of the normal profit ratio that he should expect from the sale. The Government gets stumpage. They get minimum stumpage. They get this by law. As a part of this process in the building of roads and management of this, the timber sales, the Forest Service completes a part of their long-term management program. They have residual values that they gain from building roads. And, in addition, they receive a long-term asset in the form of the roads that are built. The risk is entirely with the industry. The Forest Service tells us when we bid on these timber sales, look fellows, you're probably going to get less than your normal profit ratio. But if you want to go ahead and build the—bid on these timber sales, feel free to do so. In most cases, timber sales are bid far and above the break-even point to where there's a positive product margin. 428 So the risk is entirely with the industry. There is no risk to the Government. And if there is the unlikely event that there is any subsidy, it is actually the industry that is subsidizing the Government and not the other way around.