In the first review of federal timber sales in the Pacific Northwest under a new, sealed-bidding law aimed at preventing collusion, the U.S. Forest Service has found that it produces more money for the government than the traditional system of oral auctions.
The study would appear to undercut a major contention of the Western timber industry, which has been lobbying intensively for repeal of the sealed-bidding rule.
The review covered timber sales from all 20 national forests in Oregon and Washington for the first six months of 1977. It was completed by the Forest Service's regional offices in Portland last week. A copy was obtained by The Washington Post.
According to the study, sealed bidding for federal timber in the coveted Douglas fire region on the west side of the Cascade Mountains produced $274.7 million - $115.9 million more than the Forest Service's appraised prices.
Timber sold at oral auctions on the west side brought bids totaling $51.1 million - only $19.2 million more than the minimum prices fixed by the Forest Service.
Industry pressures have already forced the Forest Service to cut back sharply on the sealed bidding prescribed by the 1976 law, but most of the national forest sales in the two states for the first half of the year were carried out by sealed bid. [TEXT OMITTED FROM SOURCE] prices.
A total of 1.485 billion board feet of timber was sold by sealed bids on the west side of the Cascades at an average bid price of $184.99 per 1,000 feet, $78.05 above the appraised price. By contrast, 296.6 million feet were sold at west side oral auctions at an average bid price of $172.42 per 1,000 feet, $64.66 above the appraised price.
On the east side of the Cascades, while ponderosa pine and other types predominate, sealed bidding produced $49.9 million, or $14.3 million more than the supposed "fair market value" appraisals of the Forest Service. Oral auctions yielded $26.7 million, or $5 million more than a appraised.
A total of 437.3 million board feet was sold by sealed bids on the east side of an average bid price of $114.03 per 1,000 feet, or $32.67 more than the appraised value. By contrast, 236.6 million board feet were sold in west side oral auctions for an average bid price of $112.98 per 1,000 feet, or $21.18 above the appraised price.
Thus sealed bidding produced an average of $13.39 more per 1,000 feet in the Douglas fir region west of the Cascades and an average of $11.49 more for each 1,000 feet of timber sold on the east side.
In all, according to several extrapolations, the government would have lost between $20 and $25 million for the first half of 1977 if the Forest Service had continued to use oral bidding on 99 per cent of its sales in the two-state region.
The National Forest Products Association, which has been leading the drive to repeal the sealed-bidding law, has repeatedly insisted there was "no evidence" that sealed bidding produces more auctions. Instead, the association ("Your forest industry voice in Washington") has contended in one position paper after another that "the reverse may well be true," especially in the Pacific Northwest.
The new Forest Service study, however, reinforces preliminary indications from an earlier nine-year review of national forest sales that, while based on scantier data, suggested that sealed bidding yielded higher prices.
"We didn't really have enough data before this, but it's beginning to pile up," said one Forest Service expert.
Sealed bidding has been the rule, rather than the exception for decades in the South and the East. Oral auctions became customary in the West, especially in Oregon and Washington, following World War II, ostensibly to give local lumber mills a chance to bid more than once, offer a higher price and protect their traditional timber supply from outsiders.
Oral bidding also provides an opportunity to buy government timber at the lowest possible price (the Forest Service appraised value), which is all that need be offered if no one else shows up at the auction.
The Forest Service has agreed that sealed bidding is "a greater deterrent to possible collusive practices," but despite several ongoing federal grandjury problem. The campaign for repeal of the sealed-bidding rule, meanwhile, has been mounted in the name of the "little sawmills" and the small "dependent communities" that need nearby national forest timber to survive.
But according to a study for Sen. Edward M. Kennedy (D-Mass.). Forest Service regulations that have been on the books for decades provide ample protection for unsuccessful bidders and local communities.
he chairman of the Senate Antitrust Subcommittee, Kennedy, who is seeking to uphold the sealed-bidding rule, pointed out in a recent floor statement that under one key safeguard "an unsuccessful bidder or a community which believes that it is dependent" may protest the award of a timber sale to the high bidder, whatever the method of the bid.
The rule can be invoked even if loss of the timber will simply "materially lessen" job opportunities, but it apparently has been used only once since 1960, to block the bid of a Canadian firm for timber in Montana's Kootenai National Forest.
"The right to protest the award because job opportunited will be lessened or a mill will be forced to close . . . is a valuable privilege that dependent communities have had for 30 years and have not used," Robert E. Wolf, a forestry expert for the Congressional Research Service, advised in a recent memo to Sen. Dale Bumpers (D-Ark.), another defender of the sealed-bidding law.
Another Forest Service regulations in effect for years permits the rejection of high bids that might result in a "monopoly" situation, but this rule has apparently never beens used.
Kennedy wound up his recent floor statement with a series of 1975 and 1976 memos from Forest Service files. In one, regional forester T.A. Schlapfer of Portland (now retired) strongly recommended "judicious use of a mixture of sealed and oral auction" in light of various Justice Department investigations under way. He alluded to the 1975 convictions of Champion International Corp. and six others for collusive bidding in violation of the Sherman antitrust act on timber from Oregon's Willamette national forest.
"We cannot afford to be caught without having taken any action in [the] event there is another conviction," Schlapfer wrote. But he went on to complain: "Generally, industry has not made any constructive suggestions. They do not recognize that here is a problem."