Judge rules again for Alaska Pulp in timber contract dispute

Posted: Sunday, February 18, 2001

ANCHORAGE (AP) -- Alaska Pulp Co. has won another round in its ongoing claim of damages over the loss of its timber contract with the U.S. Forest Service.

The U.S. Court of Federal Claims ruled Wednesday that the forest service erred in modifying the company's 50-year timber contract, due to run through 2011, following passage of the Tongass Timber Reform Act in 1990.

The decision follows an initial ruling favorable to the company by Judge Lawrence Baskir in May. Next up could be a further hearing to determine damages if the government does not appeal to the U.S. Supreme Court.

Alaska Pulp Co. is seeking $1.4 billion in damages.

The decision this week awarded summary judgment to APC for its claim that the Forest Service violated the company's 50-year timber contract in 1990 by unilaterally changing the method by which the agency priced timber offered to the company.

APC claimed the new calculation method made the price too high for economical operation of the mill.

The judgment last May addressed what happened after the pricing change.

The original contract, signed in 1957, required the company to install the $60 million pulp plant in Sitka by 1961 to process lower-quality logs.

In 1993, in a weak pulp market, APC was running the pulp mill at a loss. APC announced it would suspend pulp operations indefinitely while exploring other manufacturing uses of the Sitka mill, such as medium density fiberboard.

APC continued to operate a sawmill and logged at maximum levels allowed. Though the sawmill could not process lower-grade pulp wood, the company claimed it had already satisfied the minimum cut and processing requirements under the contract for that five-year period and had no requirement to process pulp.

But after a six-month period, the Forest Service told the company that closing the mill had breached the contract by shutting down the pulp mill. The Forest Service terminated the contract in 1994.

Judge Baskir ruled in May that the Forest Service acted improperly. Baskir said the company had fulfilled its contractual obligation by building the mill but was not obligated to operate the mill for all 50 years of the contract.

He said the contract specified that Tongass timber had to be processed before export, but not indefinitely at the Sitka mill.

U.S. Sen. Frank Murkowski, who closely monitors the case, said Thursday that he predicted the latest ruling.

''This ruling is another nail in the government's coffin,'' Murkowski said in a release. ''I argued in 1990 it was wrong for the government to unilaterally change the terms of the long-term contracts for Alaska's two pulp mills. This decision simply proves I was right.''

Murkowski said he remains upset that no one in the Clinton administration ever took responsibility for canceling the contract. He said it disrupted the lives of thousands of Alaskans dependent on logging.

Pamela Finney, spokeswoman for the forest service's Alaska region office, said the agency could not comment because there has been no final judgment on an amount of liability and the lawsuit is ongoing.

A spokesman for the Southeast Alaska Conservation Council called the ruling ''disturbing.''

''First we gave away old-growth forests for the pulp. Now we're going to pay for the privilege of doing it,'' said Matthew Davidson, a SEACC grass roots organizer.

Davidson said the legal dispute did not address the best use of the trees in the contract, as recognized by the Forest Service when it canceled the contracts.

''The legal question didn't change the fact that there is a higher value for these trees than pulp,'' he said. ''The truth is, this is the right thing for the forest.''

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