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Reopening Forest Areas Stirs Debate in Alaska
Many Question the Need to Aid Timber Industry
By Blaine Harden
Washington Post Staff Writer
Sunday, August 1, 2004; Page A03
TONGASS NATIONAL FOREST, Alaska -- Old-growth hemlock and spruce trees, enough to build a suburban subdivision with 30 homes, have been clear-cut and left to rot here at the northern end of the nation's largest national forest.
The trees -- some of them stripped, stacked beside a new road and awaiting a logging truck that apparently will never come -- are the abandoned tail end of a timber sale that, on the front end, earned the U.S. Treasury about $45,000 but cost American taxpayers about $2 million to set up.
That sale is one of 10 that the federal government, in an attempt to keep the timber industry above water, has this year allowed local companies to walk away from.
"It seems crazy to me," said Floyd Peterson, a commercial fisherman who, as a member of the local Tlingit tribe, can drive his all-terrain vehicle across native land to this otherwise inaccessible corner of the forest. "Why do the politicians want this timber cut when there is no market for it?"
The abandoned sale, known as the Humpback-Gallagher sale, is part of a U.S. Forest Service logging program that, on an annual basis, is costing the federal government between $30 million and $35 million more than it collects in timber sales.
Even with the subsidy, local logging companies are struggling to make a profit in this coastal rain forest that sprawls across nearly 17 million acres on the rugged islands and panhandle of southeastern Alaska.
Having ordered the reopening of huge areas in this forest that had been closed to new logging roads, the Bush administration has become a major actor in a growing national debate about the value of federal subsidies for a shrinking industry in this fragile and slow-growing forest. Republican budget hawks in Congress have joined with environmentalists in questioning subsidized road-building and logging in the Tongass National Forest.
The House, with bipartisan support for a Republican-sponsored amendment, voted in June to ban federal funding for all new logging roads here. The Senate has yet to vote on the matter.
The conservative National Taxpayers Union said recently that if logging is not viable here under market conditions, "then taxpayers should not be expected to fund operations of these private companies."
Environmental groups have long maintained that large-scale logging in the Tongass, the world's largest intact temperate rain forest, is ecologically destructive and economically nonsensical.
Here in the Tongass, this criticism has angered logging company owners and frustrated Forest Service officials. They say the shrinking timber industry in southeast Alaska is at risk of disappearing altogether, not because it cannot produce lumber at a profit, but because decades of environmental lawsuits and fickle federal rules have made it impossible to manage a business that can adapt to the global market.
Referring to the felled and abandoned logs at the Humpback-Gallagher sale, Forrest Cole, supervisor of the Tongass for the Forest Service, said: "It makes me want to throw up. It makes me sick to see the product left behind, but it also makes me sick to see how we got to this point."
How the Tongass got to this point is a convoluted tale, governed by shifting, sometimes contradictory regulations about how to run a federal rain forest.
The story, too, has been shaped by increasingly cutthroat world competition in the forest products industry and by the rise of the lucrative cruise ship business in southeastern Alaska. Tourism and recreation have long since overtaken logging as the region's primary employers and engine of growth.
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AP: Most U.S. Oil, Gas Leases Unexplored
By DAVID PACE, Associated Press Writer
WASHINGTON - Despite soaring oil and gas prices, oil companies and individuals who own nearly 30 million acres of nonproducing federal oil and gas leases have made little effort to transform them into energy producers, federal records show.
An Associated Press analysis of Bureau of Land Management (news - web sites) records obtained under the Freedom of Information Act found that 98 percent of the more than 33,000 leases still considered nonproducing by BLM have never had an exploratory well drilled. Ninety-seven percent have never had a single application for a permit to drill filed with the BLM.
Industry officials argue that those numbers are misleading because many nonproducing leases have been joined with other leases into larger production units where active exploration is under way, and in many such cases the units already are producing oil and gas.
But even after discounting such leases, there is no indication in BLM records of any oil or gas exploration on 26 million acres of federal land currently under lease, or two-thirds of all federal leased acreage. A little over 10 million acres of federal oil and gas leases are listed as producing; another 4 million acres have been explored to some degree, but are still not producing.
Environmentalists say the lack of exploration belies the Bush administration's push to open even more federal land to oil and gas development, particularly in environmentally sensitive areas. A recent Wilderness Society analysis of new BLM management plans in Utah, Wyoming, Montana and New Mexico concluded that 80 percent of the 6 million acres of environmentally sensitive land covered by the plans would be opened to oil and gas leasing.
Pete Morton, a Wilderness Society economist, said the administration's push for more oil and gas leasing of federal lands is more about boosting the financial prospects of oil companies than producing more oil and gas.
"Share prices are based on rational expectations of future earnings potential," Morton said. "If companies can increase that potential, the expectations, and hence share price, by leasing more acres, then it may make economic sense to lease more acres regardless of whether the wells will ever be drilled and/or whether the wells drilled become economically viable."
Industry officials contend that large inventories of undeveloped leases are normal and necessary to protect their investment in energy exploration. And they dismiss suggestions that unproductive leases boost their financial standing.
Oil and gas companies "don't make money and profits by sitting on leases," said William F. Whitsett, president of the Domestic Petroleum Council. "They go after their best prospects. The acreage drilled first is a function of expectation of what they believe they can discover and produce."
Federal leases are good for 10 years and require an annual rent of $1.50 an acre during the first five years, and $2 an acre after that. If the lease is not producing paying quantities of oil and gas by the end of 10 years, it reverts back to the government, unless the owner assigns it to a larger block of leases that include some with productive wells.
Oil companies and other owners of nonproducing leases are paying the government more than $40 million a year in rent.
"They're actively studying those leases and trying to determine the best course of action in terms of timing to develop those leases," said Mark Smith, executive director of the Independent Petroleum Association of the Mountain States. "You wouldn't spend that kind of money just to hold on to them. It doesn't make sense."
Smith said the lack of development is caused by permitting delays, a shortage of skilled labor and equipment, and pipeline infrastructure deficiencies that make it uneconomical to explore in some areas.
Under the Bush administration, however, processing of drilling permit applications has sped up significantly. It took the BLM just 61 days on average to make a final decision on drilling permits filed this year, according to BLM records, compared with 104 days in 2003, 167 days in 2002 and 215 days in 2001.
Some oil and gas analysts say soaring oil prices may dampen exploration because increased production would tend to drive down prices.
"Why should the industry go and risk more capital, bring more oil and gas to the market and risk the much lower price?" said Fadel Gheit, an oil and gas analyst for Oppenheimer & Co.
Michael Scialla, an oil and gas analyst with A.G. Edwards and Sons, said he doesn't think the high prices are stalling exploration on federal leases. But he said a large inventory of unexplored leases can make a company a more attractive takeover target, particularly if the leases are near areas that already are producing.