Influential members of Congress and the Reagan administration are drawing up legislation that would excuse the timber industry from contracts which now obligate it to cut more than $1 billion worth of wood in the public forests.
The companies have no way to sell the wood in today's depressed markets, so if they are not let out of the contracts many will go bankrupt.
The rescue operation is being mounted to save hundreds of timber firms, including some of the country's biggest, from defaulting on federal contracts signed in the more prosperous late 1970s, when timber prices were high.
According to informal estimates by the Department of Agriculture's U.S. Forest Service, the contract terminations could cost the Treasury approximately $1.3 billion that had been anticipated in sales.
The legislative approach, engineered by Sens. Mark O. Hatfield (R-Ore.) and James A. McClure (R-Idaho) with an assist from the administration, would go considerably beyond present policy, which has been to extend contracts on a short-term basis.
Following an industry blueprint, Hatfield and McClure and Rep. James Weaver (D-Ore.), chairman of a forestry subcommittee, have agreed to support a bill that would allow the loggers to terminate up to 40 percent of their contracts.
"People complained about the Chrysler bailout, but this could cost more, although it would be spread among many companies," a USDA official said.
John B. Crowell Jr., the assistant secretary of agriculture who oversees U.S. Forest Service operations, has estimated that about one-third of the 35 billion board-feet of USDA timber under contract cannot be cut at today's prices.
The Forest Service and the Department of Interior's Bureau of Land Management have adopted a policy of short-term extensions of the contracts, in anticipation of a renewed demand for lumber that has been slow in developing.
The alternative to contract extensions would be either to cut the timber at a loss at today's depressed prices or to default on contracts and pay penalties to the government. The latter course, according to McClure and Weaver aides, could add to economic woes in the Northwest by forcing many of the smaller firms out of business.
Weaver and Rep. Les AuCoin (D-Ore.) have introduced legislation that would terminate all of the contracts and permit the companies to bid anew on the same tracts at today's lower prices, a move they contend would keep companies solvent and improve prospects for cutting timber. Weaver now is backing the Senate approach.
Weaver's Oregon district, the most heavily forested in the country, is suffering from what he describes as economic depression. Lagging demand for wood products has pushed unemployment to over 20 percent in his district.
The McClure-Hatfield proposal, drafted by industry representatives and now under review in the administration, would go well beyond Weaver's simple contract annulment plan. It would permit termination of up to 40 percent of a contract without penalty, plus a five-year extension on the remainder.
Then the companies could bid--presumably at lower rates--on the same tracts. Current USDA policy prohibits the holder of a defaulted contract from bidding on the same tract when it is put on sale again.
In a speech this week to the National Forest Products Association, Interior Secretary James G. Watt announced that he soon would extend troubled BLM timber contracts for 18 more months. USDA has been extending contracts under a policy announced last fall.
The Forest Service is now attempting to calculate an additional federal revenue loss which would come from another provision of the bill that would allow timber purchasers to transfer so-called "effective road credits" between national forests.
That transfer provision, according to industry and congressional sources, was demanded by some segments of the forest-products industry as their price for supporting the contract-termination approach.
Under current policy, timber cutters get a credit for construction of roads into areas where they are logging timber under federal contract. In some instances, their road costs exceed their timber sales, so they are given "road credits" that can apply to other contracts.
Such transfers, however, can occur only within the same forest. The new legislation would allow transfers between forests, a feature that Robert E. Gillespie, a timber-management official at the Forest Service, predicted would vastly complicate accounting procedures at Agriculture.