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.

Cheap timber from Russia and South America has conspired to make logging in this forest -- always saddled with labor and transport costs that are among the world's highest -- even less competitive as a market commodity.

Meanwhile, cruise ships have made the forest an eco-destination for tens of thousands of summertime tourists. Marketing studies have found that tourists spend about $100 each, whenever they get off a boat. They come to watch brown bears, view humpback whales, fish for wild salmon and buy knick-knacks -- not to see clear-cuts striped with logging roads.

As one of its final acts, the Clinton administration closed about 60 million acres of federal forestland to new roads, effectively preventing new logging or mining. That order fenced off 9.4 million acres of the Tongass, depriving the Forest Service of three-quarters of the land it had been managing for logging.

The roadless rule punctuated a dismal decade for logging in southeastern Alaska. Global competition forced the closure of two antiquated pulp mills that had been the driving force for most year-round, high-paying logging jobs. Those jobs all but disappeared, falling from 3,500 in the early 1990s to no more than several hundred now.

Logging volume also plummeted, from 500 million board feet a year in the early 1990s to about 50 million board feet last year. Only three sizable lumber mills are still operating in southeast Alaska, along with a handful of mom-and-pop operations.

The rules of the forest are again changing, thanks to the Bush administration, with the enthusiastic support of Alaska Gov. Frank H. Murkowski (R) and the state's all-Republican congressional delegation.

The administration exempted the Tongass from Clinton's roadless rule last December -- and on July 12 it proposed overturning the rule in all federal forests. Agriculture Secretary Ann M. Veneman has said the abolition of the roadless rule would end litigation and encourage cooperation between state and federal officials.

The Forest Service says the changing regulations have played havoc with long-term plans for logging.

"We have gone from a full pipeline of timber sales down to absolutely nothing," Cole said. "We are working frantically to make new sales. How much economical wood do I have to offer now? The answer is less than sufficient to keep the two mills operating."

But if wood is in such short supply, why were felled logs left to rot this year at the abandoned Humpback-Gallagher sale?

Cole and logging company owners say that abandoned sale and the nine others abandoned since January were put together by the Forest Service at a time when the federal government was trying to discourage logging. They said those sales are "uneconomic" because they are on inaccessible terrain with thin tree cover and are too far from sawmills.

"We should never have bid on them," said Steve Seley, president of Pacific Log and Lumber, the largest operator in the Tongass. He cancelled a purchase of 17 million board feet of federal timber this year, after concluding that it was too far away from his mill to be cut profitably. "We were too optimistic. We wanted to keep our people employed."

Sen. Ted Stevens (R-Alaska), chairman of the Appropriations Committee and a champion of logging in the Tongass, made these contractual escapes possible by attaching a rider to last year's appropriations bill. The Bush administration then endorsed the measure.

Environmental groups -- and budget hawks critical of public subsidies to private companies -- have a much different take on the latest round of rule changes in the Tongass.

"There is more than enough timber available from existing roads to fully supply the timber industry at levels they have been cutting in recent years without building new roads," said Tom Waldo, a staff attorney at Earthjustice, which is suing the Forest Service in federal court in Alaska.

The suit claims that the Forest Service, in part to justify its own large payroll in southeast Alaska (about 500 employees), chronically overstates market demand and wastes money preparing timber sales that are not needed. It says that much of the most valuable -- and economically logged -- timber in the forest was cut down decades ago.

"This is driven by an ideological agenda and pressure from the timber industry to maximize profits," Waldo said. "People like Governor Murkowski and Ted Stevens still remember the glory days of logging, and they think we can go back to that time."

Environmentalists point out that the governor, in his state of the state speech last year, said the amount of timber cut in the Tongass should jump to 360 million board feet a year, a sevenfold surge over the 2003 number.

Yet, the governor's own Department of Labor said, in its 2003 report on forest-industry trends, that the "economic realities of the early twenty-first century point toward less expensive sources" of timber than what Alaska can provide on a "glutted market."

Logging company owners and timber industry groups say the governor is right and his Department of Labor is wrong. They say the market is not glutted and that they have found a profitable specialty market in the Lower 48 states for doors, moldings and windows.

To exploit this market, the industry needs timely access to a million more acres of old-growth timber in the Tongass, much of it in areas that are now without roads, said George Woodbury, president of the Alaska Forest Association, a trade industry group.

"The rest of it can stand untouched," he said.

Environmental groups describe this request for 1 million more acres of land as unnecessary, given world markets and the shrinking local logging industry. One million acres is more than twice the total timber harvest in the Tongass in the past 100 years.

Floyd Peterson of the Tlingit tribe poses by abandoned timber in Tongass National Forest.