this, that they certainly must stand ready to fill in the breach, because I believe that is particularly important for them, the people in Oregon, to bear in mind.

Mr. BROOKS. Thank you, Senator Neuberger, and I will tell Senator Morse of your kind thoughts.

Senator NEUBERGER. Thank you very much, Mr. Brooks. Particularly important and pertinent, because we have just been discussing the State of Oregon's possible responsibilities which may occur in this matter, our next witness will be a representative of the State of Oregon, a member of the legislative interim committee on Indian affairs, one of the legislative members, the Honorable Sam Wilderman, State representative from Multnomah County. Mr. Wilderman was one of the members of the legislative interim committee who were with us at Klamath Falls and in touring and seeing the profoundly impressive assets of the reservation. Mr. Wilderman, we are very pleased to have you with us today.

STATEMENT OF SAM WILDERMAN, MEMBER, OREGON STATE LEGISLATIVE INTERIM COMMITTEE ON INDIAN PROBLEMS

Mr. SAM WILDERMAN. Thank you, Senator. Mr. Chairman, all 5 of the 7 members of the Oregon State interim committee on Indian problems who attended the hearings conducted by your subcommittee at Klamath Falls October 2 and 3 as to the possible future plans for the Klamath Indian Reservation are unanimous in their opinion that the termination of Federal control over the reservation presents a grave problem to the Federal Government, the State of Oregon, and to the people involved.

Members of our committee are particularly interested in the many plans presented at the Klamath Falls Indian hearings for the possible solution to this problem.

After a meeting of the State interim committee at Klamath Falls Thursday, it was the consensus of the committee that the only solution to the problem is the purchase of the reservation by the Federal Government. Our committee has been instructed to work toward that end.

Members of the State interim committee who attended the meeting of the committee at Klamath Falls included the following: Leander Quiring, State senator from Umatilla County, acting chairman; David Epps, Sweet Home; Roy Geinger, Chiloquin; John Kerbow, State representative Klamath County, and Sam Wilderman, State representative Multnomah County.

The committee wishes to thank Senator Neuberger and his staff for their utmost cooperation with and assistance to the State interim committee.

Senator NEUBERGER. One thing disturbed me, and I am sure you may share my feeling in this respect. In the bill before us, S. 2047, which I am so pleased that the legislative interim committee has endorsed, we are asking the United States Government to appropriate somewhere between a hundred and a hundred and fifty million dollars for the purchase of this reservation, and I have been disturbed to note that your interim committee, which is considering this important matter from the aspect of the State of Oregon, has been allowed only

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$10,000 for its expenses by the Oregon State Legislature. And it does seem to me that that is certainly an insignificant amount for the State to study this urgent question, and it is my hope that perhaps you can induce the forthcoming special session or the emergency board to add to the machinery for you to handle the State's end of this very urgent responsibility.

Mr. WILDERMAN. Senator, I might mention that we didn't know the importance of the problem until we got down to Klamath Falls Wednesday and Thursday. I mean, we didn't realize the significance, what it would mean to the State of Oregon, what it would mean to the people from Klamath County and the people on the reservation. We just didn't realize how tremendous the problem is, but we certainly realize it now.

Senator NEUBERGER. I hope you can present those facts to some of your colleagues.

Mr. WILDERMAN. I certainly will, and thank you very much. Senator NEUBERGER. Thank you very much for coming and thank you again for your earlier cooperation.

The next witness will be Mr. George Weyerhaeuser, representing the Weyerhaeuser Timber Co. Mr. Weyerhaeuser, we are pleased

to have you here with us today.

STATEMENT OF GEORGE WEYERHAEUSER, REPRESENTING

WEYERHAEUSER TIMBER CO.

Mr. WEYERHAEUSER. Thank you very much, Senator Neuberger. I would like to say that our company appreciates the opportunity to present our opinions on this very important matter.

Senator NEUBERGER. If I am not mistaken, I think-correct me if I am wrong on this-isn't the Weyerhaeuser Timber Co. the largest timber company operating in the area where the Klamath Indian Reservation is located?

Mr. WEYERHAEUSER. Yes, I believe that is correct.

Senator NEUBERGER. And you have the most extensive operations and timber holdings in that area, if I am not mistaken, of any private company.

Mr. WEYERHAEUSER. That is correct.

Senator NEUBERGER. Thank you.

Mr. WEYERHAEUSER. I would like to say before I begin my remarks that with regret I am replacing our manager of forestry land and timber, Mr. Dave Weyerhaeuser, because of illness, and if in the questions or throughout the testimony any pertinent questions arise that I can't answer, we will attempt to get our expert witness' opinion on that matter.

Senator NEUBERGER. If there are questions which you cannot answer, you will have an opportunity to answer them later on in writing before the hearing record closes, and I hope you will extend to Mr. Dave Weyerhaeuser our best wishes for a complete and early recovery. Mr. WEYERHAEUSER. I certainly will.

Senator NEUBERGER. Please go ahead with your statement.

Mr. WEYERHAEUSER. As a longtime neighbor and customer of the Klamath Indians, Weyerhaeuser Timber Co. is interested in the effects of the prospective termination of Federal supervision over the prop

erty of the Klamath Indians. We appreciate the opportunity to express our views about the disposal of the Indian timber. We hope that what we have to say may contribute to the solution of a problem of paramount importance to our Northwest timber economy.

By way of background, we should like to describe briefly our own operation in the Klamath Basin. We have owned lands and timber in the basin for more than half a century. Since 1929 we have operated a sawmill and related manufacturing facilities.

We manage our timber in accordance with sustained-yield principles so that we will have a continuous and permanent supply of raw material for our mills. This involves selective cutting of mature pine stands and management of residual stands so that growth equals cut. This supply is about half of what we need to operate our Klamath mills at their full capacity of 200 million feet per year.

In recent years we have reduced our production rate to about twothirds of capacity to conform to the allowable cut on our own lands and the limited amount of timber available for purchase from public agencies. While reducing the amount of lumber we produce, we have substantially expanded our facilities for remanufacturing and finishing rough lumber, some of which we purchase from others. Also, we have built a hardboard plant that utilizes defective white fir and sawmill waste for which there is no other use. In this way there has been a substantial increase in the number of jobs, based upon a given quantity of raw material. For example, in 1942, our peak production year, we employed an average of 1,176 persons. Today, in producing less than two-thirds as much lumber as in 1942, we employ 19 percent more people, or a total of 1,396. Thus the level of employment has increased while the drain on local resources has been decreasing. Because of our adherence to sustained-yield forest management, it has been possible to increase the stability of this higher level of employ

ment.

The importance of the Indian timber to the general area can be appreciated only if we consider briefly the timber resources and utilization facilities in the general area. (We define the general area as Klamath, Lake, and Deschutes Counties.) The commercial timberlands in this area are owned as follows:

The mills in Klamath County require about 365 million board-feet of logs annually to maintain their present level of operations, which is less than capacity. Those in the 3-county general area now use more than 600 million board-feet of logs annually.

Half these requirements are met by the present allowable cut from all Federal lands, including the Indian lands, which comprise about three-quarters of the total commercial-timber acreage. The annual allowable cut from Federal-agency lands, including 80 million feet

on Indian lands, is 175 million board-feet for Klamath County and 325 million board-feet for the 3-county area. Thus, non-Federal lands, with 26 percent of the total acreage, are now supplying 50 percent of the logs. Since they cannot do this indefinitely, it is obvious that there already exists milling capacity substantially in excess of the timber available. A substantial overcutting of most private lands has resulted. Because of this overcutting, the problem of excess capacity may get worse in the next few years.

We seem to have come to a turning point in the history of the tribal timberlands. The Klamath Indians are beneficiaries of a policy of sustained-yield management that has been practiced since 1913. This policy has preserved a going business of great value. The latest report of the Management Specialists shows that tribal lands will support an allowable cut of 90 million feet through 1964, and, after that, 76 million feet in perpetuity (Tentative Plan of Management, August 1957, p. 22). This 76 million cut would produce annual net revenues of about $2,250,000 for the Indians. By ironic analogy to the widely publicized situations where people take over a business and then liquidate it, this going timber business appears to be worth more dead than alive. This results from the greater value of timber available for immediate cutting, assuming that a market exists. Consequently, pressures have been building up over the years to liquidate, rather than to continue, the tribal timber operations. This would involve cutting mature stands down to the minimum required by law. A significant part of this current pressure appears to be the widespread belief that the timber must be disposed of in order to permit the Indians to achieve emancipation from their wardship.

On the assumption that the timber will be disposed of, we believe that whatever method is adopted must satisfy the following basic objectives:

1. Sustained yield management of the timber must be continued in the interest of sound conservation, protection of the entire economy, preservation of watershed values, and for all the other reasons that have induced many forest owners, both public and private, to adopt this principle of forest management.

2. A "boom and bust" cycle for the basin area should be avoided. Mill capacity already exceeds the timber supply. Consequently, the basin may, like other timber-dependent communities, anticipate a moderate decline in forest employment. The Federal Government should not take any action that will inevitably aggravate this decline.

3. There are many small mills in the basin entirely, or almost entirely, dependent upon timber from outside sources. The timber must be disposed of in a way that will preserve for these mills an opportunity to use it in the future.

The achievement of these objectives has been complicated by the widespread disregard of the basic economic premise that is well stated in the old adage that "a bird in the hand is worth two in the bush." In fact, it may take several birds in the bush to equal one in the hand, when we are comparing the value of dollars to be received in the future with dollars in hand today. For example, if we discount future payments at 6 percent, it would take $10 payable 40 years from now-or less than halfway through the cutting cycle-to equal

$1 received today. Likewise, it would take almost $2 to be received in 10 years the shortest period over which the Indian timber could be liquidated-to equal $1 in hand today. Nevertheless, great expectations have been based upon the multiplication of 4 billion feet of timber by the current average retail price of $30 to $35 per thousand.

We assume that this timber will be marketed in an orderly manner, and that during this period the allowable cut from other Federal lands will be offered for sale. On this premise it is our opinion that it would take close to 15 years for the existing mills to liquidate the timber. We can only speculate about the amount of new milling capacity that might be attracted to the basin by the unrestricted sale of the Indian timber. Some new companies might buy timber in the expectation of liquidating it over a 10- to 15-year period. Such an operation would almost inevitably be based upon a limited investment. The number of man-hours per thousand feet of logs would be proportionately small. Following the short boom would be the inevitable "bust.

A dollar payable at the end of 15 years, the period over which the timber might possibly be liquidated, is worth only 48 cents at a 5 percent discount, or 43 cents at a 6 percent discount. Yet this is more than twice as much as the value of a dollar payable at the end of 30 years. This highlights the difference between the value of the timber sold without restriction on the one hand, and timber sold with sustained-yield restrictions on the other.

Whoever purchases the timber cannot afford, as a timber owner, to practice sustained-yield forestry if he is required to pay the present liquidation value of the timberlands.

There are two basic questions that must be answered with respect to the disposal of the Indian timber: (1) How should it be sold? and (2) to whom should it be sold? In order to answer these questions we must distinguish the various capacities in which the Federal Government is operating. The failure to do so has, in our opinion, been the source of much confusion. Let us look briefly at the separate roles in which Government is acting.

First, the Government is the guardian of the property of the Indians. As such, it has a narrow and unqualified duty to try to get everything it can for the Indians without regard to the interests or welfare of any other group. In discharge of this duty, it should sell the tribal timber in a manner that will produce the largest aggregate price for the Indians. Since it will take at least 15 years to cut the timber, the aggregate sales price, reflecting the deferment in recovery of costs, will be substantially less than an amount determined by multiplying retail prices paid over the last 2 or 3 years by the total volume of timber. Moreover, if the timber is sold in a short period, the excess supply will depress prices further. The prices that would be received, or the liquidation value, would probably not be materially greater than the sustained-yield value.

The second capacity in which the Government is acting is as the sovereign. As such it is the Government's function to propound and carry out policies that will be beneficial to all segments of the economy. It is in its sovereign capacity that the Government has spent billions of dollars to protect and build up other areas and other watersheds