Judge sides with Alaska Pulp Co.

Posted: Wednesday, May 31, 2000

A federal claims court has ruled that the U.S. Forest Service acted improperly when it ended Alaska Pulp Co.'s 50-year timber contract in the Tongass National Forest.

The ruling is a major victory for Alaska Pulp, which owned a Sitka pulp mill that was one of the city's largest employers.

Judge Lawrence M. Baskir issued a 14-page ruling that said Alaska Pulp did not violate its Forest Service contract by closing its Sitka mill in 1993. That was the reason given for canceling the contract, which was to run through 2011.

Alaska Pulp also claims that the federal government made damaging, unilateral modifications to the company's timber contract through the Tongass Timber Reform Act, a law passed in 1990.

Alaska Pulp is seeking $1.4 billion in damages it says it suffered as a result of the contract changes and cancellation.

The 50-year contract, signed in 1957, required the company to install the $60 million pulp plant in Sitka by 1961 to process lower-quality logs. Processing requirements are intended to promote industry within a region.

Judge Baskir ruled from Washington, D.C., that the contract specified Tongass timber had to be processed before export, but not indefinitely at the Sitka mill.

``This does not necessarily mean that the pulp mill was to be the sole means of processing the wood 36 years later,'' Baskir wrote.

The contract said operations would be conducted on a competitive and commercially sound basis. Baskir said that allowed flexibility as economic conditions changed. He called the requirement to operate the mill for 50 years ``a tremendous leap.''

Alaska Pulp sued in 1986, claiming the Forest Service failed to provide economically viable timber. The two sides reached a settlement in 1990. Later that year, however, Congress passed and President George Bush signed the timber reform act, which removed provisions the company had negotiated with the Forest Service.

In 1993, in a weak pulp market, Alaska Pulp announced it would suspend operations indefinitely while exploring other uses of the mill. While APC continued other timber operations, the Forest Service determined it breached the contract and issued a termination notice in 1994.

Forest Service spokeswoman Sheila McLean said the agency had no comment on last week's court ruling because it is part of an ongoing case. Department of Justice spokesman Charles Miller said the government will review the ruling. It has 90 days to appeal.

Alaska's congressional delegation welcomed the court ruling.

``The government should not go around breaking deals,'' said Rep. Don Young. ``We all told the government decision-makers that five years ago when they broke this deal. The court told the government the same thing in this ruling.''

Sens. Ted Stevens and Frank Murkowski said the actions by the various administrations have had a devastating effect on Southeast Alaska.

Murkowski said employment in Ketchikan, Sitka, Petersburg, Wrangell and Haines has declined by 7 percent since 1993 with the loss of 1,100 direct timber jobs.

Marc Wheeler, a spokesman for the Southeast Alaska Conservation Council, said Alaska Pulp repeatedly polluted air and water in Sitka.

``We still think the Clinton Administration did the right thing by canceling the contract,'' he said.

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